Protests in Iran are threatening to disrupt the country’s upstream sector and highlighting a deeper economic crisis, according to Rystad Energy analysis

Iran has restored output and exports despite sanctions, but at a rising cost: deeper discounts to China, expensive ‘shadow’ logistics and shrinking fiscal buffers, including the running down of its National Development Fund (NDF).

Iranian crude production is expected to remain stable at around 3.2mn bpd this year, according to Rystad, with limited short-term disruption to upstream operations, despite significant financing and redevelopment hurdles. The greater risk currently is the geopolitical risk premium as tensions rise and uncertainty persists. With the US administration of President Donald Trump exerting maximum economic pressure on Iran’s trading partners and threatening military intervention, the Middle Eastern oil giant will likely entrench itself even further.

“Iran’s familiar tactics, such as closing the Strait of Hormuz, banking on its trade with China and threatening nuclear escalation, are still on the table, yet must be weighed by their own potential for backfiring on the regime. Economically, Iran has been cornered by heavy sanctions, yet the country has managed to protect what limited revenue remains. Although the US has announced that it will impose a 25% tariff on countries that trade with Iran, China’s crude buying patterns are expected to remain stable. China has an established practice of sourcing discounted barrels from sanctioned producers, and Iran has a proven ability to sustain exports through sanctions evading trade networks. For the status quo to be truly disrupted, external intervention would have to take place,” said Aditya Saraswat, MENA research director at Rystad Energy.

Amid the backdrop of international pressure, Iran’s economy has faced enormous constraints, with inflation standing at 40% as the government’s total budget only nominally increased from US$98bn to US$111bn in the past year. National Iranian Oil Company (NIOC) is officially entitled to 14.5% of total oil and gas exports, which stood at 1.85mn bpd in the current budget. However one-third of oil exports were handed over to the Islamic Revolutionary Guard Corps (IRGC), and expected oil exports have now dropped to 1mn bpd, while the benchmark oil price has been lowered to US$57 per barrel from US$63 per barrel, reducing NIOC’s total receivables.

In addition, many of Iran’s core producing assets are in late life and experiencing steep natural declines. Underinvestment in maintenance, workovers and pressure support will accelerate the decline rates of these legacy fields. Many gas fields have complex structures and low recovery rates that pose challenges for local contractors. With assets under pressure, Iran’s NDF, which was designed to preserve a share of oil and gas revenues for future generations, continues to be treated as a source of near-term financing.

“From the regime’s point of view, the only redeeming factor in this situation is China’s role as the key driver of export revenues. As it stands, China accounts for 90% of Iran’s oil exports, with even a portion of cargoes booked for ‘unknown’ destinations ending up in China. Although the current export model looks feasible in the near term, its sustainability is becoming more conditional,” Saraswat said.

The recovery of Iran’s exports has been driven mainly by discounting, with additional costs incurred by measures required to evade sanctions, such as operating a shadow fleet. Without access to conventional banking channels, Iran relies on yuan-denominated accounts, barter arrangements or circuitous money-laundering pathways that extract substantial commissions. These structural inefficiencies mean Iran receives only two-thirds of benchmark oil, threatening Iran's ability to make a profit, even amid low upstream breakevens of US$20 to US$25 per barrel.

“Iran’s survival under sanctions reflects a mix of sustained upstream investment, strong trade relationships and covert workarounds. The continued brownfield redevelopment of mature fields has helped keep output stable, while contracts awarded to local players have added incremental volumes. However, a heavier reliance on China has drawbacks for Iran. Its margins will weaken as shadow logistics and intermediaries are priced in, and demand could be volatile as quotas and refinery runs change,” Saraswat concluded.

Oil and gas operators face a number of challenges this year. (Image source: KBR)

Paul Bansil, director of KBR’s international consulting business, outlines five major trends that will shape how oil and gas operators navigate the year ahead, as project developers allocate capital more selectively, face growing regulatory scrutiny and tackle the challenges of decarbonising existing assets

2026 will be defined by bankability, repurposing of existing infrastructure, lifetime planning and geopolitically driven divergence, Bansil says.

“In 2026, what the industry needs is certainty and bankability. This presents a firm footing to turn good ideas into investable, technically sound projects. The time pressure has always been there, but the current fiscal and geopolitical uncertainty makes timely decision-making an order of magnitude more challenging for operators, whether they are investing in new opportunities, modernising, repurposing or retiring assets.”

1. Bankability the decisive success factor

Bansil expects disciplined early-stage development planning to be one of the strongest determinants of project viability in 2026.

“Many energy transition schemes, including hydrogen, ammonia, fertiliser modernisation and refinery decarbonisation, continue to stall at the pre-FEED or FEED stage because owners have sometimes moved too quickly into engineering without first proving and stress-testing the commercial, regulatory and financial aspects of the business case,” he says.

Suitable fit-for-purpose early-phase opportunity screening will enable operators to focus valuable time and resources on those prospects most likely to progress through project sanction and into execution.

2. Sanction of undeveloped oil and gas projects

Continued responsible development of oil and gas projects is emerging as a recognised necessity if an orderly and prosperous energy transition is to be realised.

“We have seen a re-focus towards energy security in a number of areas. This will continue in 2026 as the demand for hydrocarbon fuels and petrochemical feedstock remains a fundamental cornerstone of our society in a global context,” comments Bansil.

“This is not about one thing versus another, but rather a pathway towards an orderly and sustainable transition built on confidence.”

3. Existing assets will act as a bridge to energy transition

A strong emphasis on repurposing and progressive decarbonisation of existing oil & gas, LNG, refining and petrochemical infrastructure is expected as operators seek practical and scalable transition pathways. This will allow affordable production while enabling development of emissions-reducing technologies for further cost-effective reductions in the future.

This includes adapting terminals to become multipurpose new energy molecule import terminals to handle a variety of energy carriers including ammonia for import and cracking to hydrogen as well as handling carbon dioxide for sequestration.

Modular LNG and FLNG solutions will remain a key building block in the gas supply chain.

At the same time, brownfield decarbonisation is growing across refineries and petrochemical sites, where operators are prioritising retrofit and circularity over greenfield developments. Operators are increasingly turning to lighter feedstocks, recovered gases, recycled hydrocarbons and low-carbon hydrogen options.

“Gas remains central to system stability and affordability,” Bansil adds. “But the real shift is the industry’s focus on making today’s assets cleaner and more flexible, rather than waiting for perfect conditions for new-build projects.”

4. Master planning and end-of-life responsibilities come to the fore

2026 will be the year when structured master planning takes centre stage, encompassing clear consideration of uncertainty. Investors and operators now expect integrated assessments of market outlooks, emissions pathways, technology options, CAPEX and OPEX priorities, and an understanding of regulatory requirements to support investment or re-investment decisions.

With hundreds of assets globally approaching critical decision points of life extension, repurposing or decommissioning, in many cases these decisions have become major strategic issues.

“Historically, there has been a perception that an asset simply stops producing and decommissioning begins, but the reality is far more complex,” Bansil says.

“If repurposing is not an option and decommissioning is the only path remaining, preparing wells, understanding waste streams, managing ageing equipment, many of which are hazardous, and sequencing work safely takes years, not months. The companies that plan early will be the ones who control cost and protect value.”

5. Geopolitically shaped pathways accelerate regional divergence

Transition pathways are expected to fragment further across regions.

The Middle East will continue to rely on fossil fuels for system resilience, with some forays into energy transition. Africa’s progress in LNG, gas-to-power and infrastructure development remains slower than its potential.

Europe is pressing ahead with green regulation, but many operators are struggling to keep pace with the rate of policy change. It is expected that investment in renewables will be maintained, but having a diverse energy portfolio that includes oil and gas production alongside low carbon technologies will allow a cost-effective method for successful emissions reduction in the future.

In North America, tariff pressures, sanctions and shifting trade patterns are influencing investment decisions across fuels and fertilisers. It is expected that there will be a decline in clean energy investments driven by a lack of incentives. Instead, extending asset life and tiebacks to existing facilities will be prevalent along with investment in previously undeveloped hydrocarbon opportunities.

“Across every major market, geopolitical forces now shape what is possible and at what pace,” Bansil concludes. “Our role is to bring clarity, grounded feasibility and practical pathways that assist clients in making the right value-accretive long-term decisions.”

H.E. Ali Khalifa Al Shamsi, chief executive officer Emarat (left) and H.E. Khamis Al Mazrouei, chief executive officer, Sharjah National Oil Corporation.

Emirates Petroleum Company PJSC (Emarat), , and Sharjah National Oil Corporation (SNOC) have signed a Memorandum of Understanding (MoU) to cooperate on developing new business opportunities within the Liquefied Petroleum Gas (LPG) industry sector

Under the MoU, the parties will work to advance the LPG sector, strengthen market resilience, and support the continued evolution of the UAE’s energy sector through commercially focused collaboration and long-term value creation. This agreement also provides a platform for Emarat and SNOC to align capabilities, explore mutually beneficial growth opportunities, and reinforce energy resilience through a future-ready approach that supports national priorities and market demand.

H.E. Ali Khalifa Al Shamsi, chief executive officer, Emarat, said, “This MoU reflects a UAE-first approach to building a more resilient and future-ready LPG gas ecosystem. Together with SNOC, we will pursue high-impact opportunities that strengthen continuity, expand market capabilities, and support the evolving needs of industry and communities. We see this collaboration as a long-term platform to deliver smarter energy solutions with measurable national value.”

H.E. Khamis Al Mazrouei, chief executive officer, Sharjah National Oil Corporation, said, “This MoU creates a strategic pathway for SNOC and Emarat to collaborate on pragmatic, growth-oriented opportunities in the LPG sector. By aligning capabilities and market intent, we aim to support stronger energy security, smarter infrastructure utilisation, and a more agile platform for the next phase of the UAE’s LPG gas development. Through this partnership, we intend to convert shared ambition into tangible outcomes that strengthen Sharjah’s and the UAE’s energy framework over the long term.”

Dr. Sultan Al Jaber receiving the award from Energy Institute CEO Dr. Nick Wayth. (Image source: Energy Institute)

The UK's Energy Institute (EI) has awarded an Honorary Fellowship to His Excellency Dr. Sultan Ahmed Al Jaber, in recognition of his leadership in the energy-AI nexus, while driving international collaboration to strengthen global energy systems 

Dr. Al Jaber currently serves as UAE Minister of Industry and Advanced Technology, Managing Director and Group CEO of ADNOC, chairman of Masdar and executive chairman of XRG. He was presented with his Honorary Fellowship, by Dr. Nick Wayth FEI, Chief Executive of the Energy Institute, during Abu Dhabi Sustainability Week 2026.

Honorary Fellowship is awarded by the Energy Institute to individuals who have made a significant and lasting contribution to advancing the Institute’s mission – creating a better energy future through a just, secure, and low-carbon energy transition. The award acknowledges Dr. Al Jaber’s role in building dialogue between producers, consumers, and across the public and private sectors as global energy demand rises, while delivering relatively low cost and low carbon-intensive hydrocarbons, and scaling renewables.

Energy Institute chief executive, Dr Nick Wayth FEI, said,“Dr. Sultan Al Jaber has been at the forefront of some of the most important developments in the energy sector over the past two decades across both ADNOC, Masdar and now XRG.

“Reflecting the UAE’s inclusive approach, he is advancing a pragmatic strategy that recognises rising global energy demand, the continued role of hydrocarbons, and the need to make every molecule cleaner, more efficient and lower carbon.

“In recognising Dr. Al Jaber with an Honorary Fellowship, we acknowledge not only his contribution to reshaping the global energy agenda, but also his continued commitment to dialogue and practical action that can deliver a more secure, sustainable and prosperous energy future for all.”

HE Dr. Sultan Al Jaber Hon FEI said, “It’s an honour and a privilege to be made an Honorary Fellow of the Energy Institute. At a time of rising global energy demand – driven by the growth of emerging markets, AI and advanced technologies – it’s essential to deliver a diverse mix of reliable, affordable and lower-carbon energy options.

“This balanced, pragmatic approach championed by the UAE remains key to building a secure, sustainable and prosperous future for all."