The Iran war’s economic pressure campaign has produced its most visible physical evidence yet. At Kharg Island — the narrow Persian Gulf island that processes 90% of Iran’s crude oil exports — there is no longer enough storage space to absorb the oil that the blockade is preventing from reaching markets.
What TankerTrackers Confirmed
To prepare for the possibility of running out of oil storage space at Kharg Island, Iran has brought the NASHA out of retirement. She’s a 30-year-old VLCC that’s been anchored empty for the past few years; currently spending 4 days on a trip that should take 1.5-2 days.
TankerTrackers, the maritime intelligence agency, said that at Kharg Island, to prepare for the possibility of running out of oil storage space, Iran has brought an old tanker named NASHA out of retirement. The vessel is being repositioned as floating storage to absorb crude that still has to move out of the system.
A Very Large Crude Carrier — the class of ship the Nasha represents — can hold approximately 2 million barrels of oil. That is a substantial buffer, but it is not unlimited. And the fact that Iran is using a 30-year-old vessel that has been idle for years as its emergency solution indicates it has exhausted its more conventional storage options.
The Well Shutdown Risk
If wells are forced to shut down due to lack of storage, this could cause permanent damage and render the wells unusable in the future. Recovery is expensive and difficult. If the current data is accurate, then Iran has approximately two more weeks before their economy is destroyed. Loss of $430 million per day in export revenues aside, permanent damage to their oil fields would result in a long-term economic disaster.
Muyu Xu, a senior crude oil analyst at Kpler, told Al Jazeera that the current enforcement environment is expected to slow future Iranian loadings and exports, adding pressure on Iran’s onshore inventories and eventually forcing production cuts. “However, given there is still available storage capacity onshore, we expect any production reduction to be gradual over the coming week, with a higher likelihood of acceleration into May,” she said.
“Acceleration into May” — that phrase, from a senior crude oil analyst, means the production cuts and well shutdowns are now a May event, not a hypothetical. Two weeks from today, Iran’s oil infrastructure faces the kind of damage that a ceasefire and a deal cannot quickly reverse.
Iran’s Only Alternative
The regime’s only other option is to divert the oil away from Kharg to the Jask Oil Terminal at Kooh Mobarak using the Goreh-Jask pipeline. But this storage is limited and may already be full. There are also limited reports that Iran is increasing flaring at wells to burn off excess.
Flaring — burning off associated gas to relieve pressure — is a last-resort measure that wastes resource, generates environmental damage, and signals an operational system under extreme stress. Iran’s wells are flaring because they have no other way to relieve the pressure building from a blockade that has cut off their only outlet to markets.
The danger of well shutdowns is probably the reason why the regime has offered new proposals every few days to open the Strait of Hormuz. The regime is trapped between a rock and a hard place, and will have to decide soon if their oil wells are more important to them than their uranium.
