(EnergyAsia, April 30 2013, Tuesday) — Iran’s crude oil export revenues plunged 27% last year as sales fell to their lowest level since 1986, the result of tighter Western trade sanctions, said the US Energy Information Administration (EIA).

The agency estimated Iran took in US$69 billion in net oil export revenue last year, compared with US$95 billion the previous year. Oil accounts for 80% of Iran’s total export earnings and up to 60% of its government revenue, according to the Economist Intelligence Unit.

Iran’s exports of crude oil and lease condensate fell from 2.5 million b/d in 2011 to 1.5 million b/d last year. This 39% decline in exports was coupled with a 17% drop in crude oil and condensate production and a 1% decline in liquid fuels consumption.

While the world’s supply of oil increased by about 2%, or 1.8 million b/d in 2012, Iran’s production declined by nearly 700,000 b/d from the 2011 level, said the EIA.

Source: US Energy Information Administration (EIA)

The EIA attributed the bulk of last year’s production decline to tightened sanctions. A smaller decline in 2011 resulted mainly from declining production in aging fields. Iran remained the second-largest OPEC crude oil producer on average during 2012, but it exceeded Iraq’s production only narrowly. Last August, Iran’s monthly crude oil production fell below Iraq’s for the first time since 1989.

The EIA said the EU implemented a new set of sanctions on April 1, 2013 that bar EU insurance companies from providing coverage to any refiner and refinery operators that process crude oil of Iranian origin.

The new provision will mostly affect refiners in South Korea and India, which rely heavily on European insurance providers. The new sanctions may further affect Iran’s exports and production over the next few months as refiners try to find alternative suppliers of insurance.

The US and European Union (EU) have also tightened sanctions affecting investment in Iran’s oil sector, forcing international companies to cancel new investments and slowing down existing projects.

“Following the implementation of sanctions in late-2011 and mid-2012, Iranian oil production dropped dramatically. Although Iran had been subject to four earlier rounds of United Nations sanctions, these much-tougher measures passed by the US and the EU have severely hampered Iran’s ability to export its oil, which directly affected its production of petroleum and petroleum products,” said the EIA.

The latest sanctions have banned large-scale investment in Iran’s oil and gas sector, and cut off its access to European and US sources of financial transactions.

Further sanctions were implemented against the Central Bank of Iran, while the EU imposed an embargo on Iranian oil and banned European protection and indemnity clubs (P&I Clubs) from providing Iranian oil carriers with insurance and reinsurance. The implementation of insurance-related sanctions was particularly effective in stemming Iranian exports, which affected not only European importers but also Iran’s Asian customers who were forced to temporarily halt imports.