Iran’s Energy Crisis: Rising gasoline imports, gas  shortages & the nuclear stand-off Centre for Global Energy Studies

Iran’s Energy Crisis
ISBN 978-1-905845-06-4 (printed)
ISBN 978-1-905845-07-1 (electronic)
© 2007, Centre for Global Energy Studies.
All rights reserved. No part of this study may be
reproduced or transmitted in any form or by any
means without the prior written permission of the
Centre for Global Energy Studies (the author).

TABLE OF CONTENTS
 

Executive Summary...................................................................................................................................................      1
Introduction..................................................................................................................................................................     7
Chapter One – Iran’s Oil Production ..................................................................................................................       11
Iran's decline rates ...........................................................................................................................................................13
Factors behind the decline in production.................................................................................................................14
Iran’s ‘decline’ and ‘strict’ depletion rates ...............................................................................................................15
Iran’s oil field operations ...............................................................................................................................................17
Iran’s oil fields & the country’s future production potential................................................................................17
Chapter Two - Iran's Burgeoning Domestic Oil Consumption.....................................................................      21
A serious challenge...........................................................................................................................................................23
Consumptions trends.......................................................................................................................................................23
Energy prices and subsidies..........................................................................................................................................28
Gasoline and gasoil consumption and the refining challenge............................................................................30
Gasoline............................................................................................................................................................................   31
Gasoil ................................................................................................................................................................................  32
Can the challenge be met in the coming years? ...................................................................................................33
Refining ............................................................................................................................................................................. 33
Domestic consumption .................................................................................................................................................36
Other challenges .............................................................................................................................................................38
Chapter Three – Demand for Electricity & Iran’s Production, Consumption & Shortages
of Natural Gas ...........................................................................................................................................................      41
Electricity demand and the economy........................................................................................................................43
Increasing use of gas for electricity generation ...................................................................................................43
Gas production and reserves ......................................................................................................................................44
Gas usage in Iran ............................................................................................................................................................46
Shortage of gas in the Iranian winter .......................................................................................................................48
Exporting Iranian Gas.....................................................................................................................................................48
Overuse of gas? ..............................................................................................................................................................49
Gas injection into oilfields.............................................................................................................................................50
The main disagreement on gas injection into oilfields .......................................................................................51
Some technical considerations ..................................................................................................................................51
Other considerations......................................................................................................................................................53
Simple computations for Iran’s future gas requirements....................................................................................54
Centre for Global Energy Studies
Iran’s Energy Crisis ii
Chapter Four – Nuclear Energy and the International Dispute ...................................................................    57
An argument for nuclear energy.................................................................................................................................59
Establishing a nuclear industry....................................................................................................................................60
Iranian public opinion on the nuclear issue ............................................................................................................60
Iran, the IAEA, the UN Security Council and a lack of trust...............................................................................61
A brief review of Iran’s political system and governance ..................................................................................62
The ups and downs of Iranian Politics .....................................................................................................................64
Role of the electorate.....................................................................................................................................................65
A young population: liability or asset? ....................................................................................................................66
Iran’s foreign policy and its relationship with the United States......................................................................67
Iran’s nuclear standoff and the oil market ..............................................................................................................68
Chapter Five – Concluding Remarks....................................................................................................................     71
Iran’s oil production .......................................................................................................................................................73
Rampant growth in domestic oil consumption......................................................................................................74
Electricity demand and Iran’s usage of natural gas..............................................................................................76
Nuclear energy and Iran’s international standoff .................................................................................................77
Impact on the oil market...............................................................................................................................................78
The United States and Iran ..........................................................................................................................................78
How could the nuclear dispute end? ........................................................................................................................79
A pragmatic outcome.....................................................................................................................................................80

LIST OF FIGURES
1.1 History of Iran’s oil production, 1913-2006
2.1 Iran’s consumption of petroleum products
2.2 Final consumption of petroleum products in different sectors
2.3 Final consumption of main petroleum products
2.4 Iran’s crude oil input to refineries & consumption of gasoline and gasoil
2.5 Capacities of Iran’s refineries
2.6 Iran’s actual & forecast annual growth rate of gasoline consumption (% per year)
2.7 Iran’s actual & forecast annual growth rate of gasoil consumption (% per year)
2.8 Nominal prices of gasoline, gasoil, electricity and natural gas
2.9 Real prices of gasoline, gasoil, electricity and natural gas
2.10 Iran’s actual and forecast gasoline production, consumption, imports & exports
2.11 Iran’s actual and forecast gasooil production, consumption, imports & exports
3.1 Iran’s growth rates of GDP and electricity generation
3.2 Energy consumption for Iran’s electricity generation
3.3 Iran’s natural gas production by region (as delivered to NIGC)
3.4 History of Iran’s natural gas production
3.5 Iran’s historical natural gas record
3.6 Iran’s natural gas exports and imports
3.7 Annual change in Iran’s production and consumption of natural gas
3.8 Computed future gross natural gas production of Iran (based on different annual growth rates)
4.1 Formal government structure (schematic representation)

LIST OF TABLES
1.1 Simplified aggregate estimates of oil reserves and production
A – Iran
B – Some other countries
1.2 Iran’s total produced oil compared with reserves
1.3 Production rates of some of Iran’s onshore oil fields
1.4 Production rates of some of Iran’s offshore oil fields
2.1 Iran’s estimated energy subsidies, year to 20th March 2005
2.2 Iran’s estimated subsidies per unit final energy consumption, year to 20 March 2005
2.3 Iranian refineries – nominal and actual performance
2.4 Improvement in Iran’s refinery configuration, 2000-2004 (percentage production of main products)
2.5 Iran’s major refining projects – planned / being implemented
2.6 Summary of refinery sector plans
2.7 Securing financial resources for the refinery projects under execution
2.8 Energy wastage in different sectors
2.9 Annual increase (%) in domestic consumption
3.1 Iran’s reported remaining gas reserves, end-2006
3.2 Simplified break down of Iran’s gas use in 2005
3.3 Annual percentage growth of gas
3.4 Cumulative gross gas production assuming various growth rates (trillion cubic metres, starting in 2006)
4.1 (A) Share of nuclear electricity generation in some countries in 2005 (% of total electricity
      (B) Quantity of nuclear electricity generation in some countries in 2005 (billion kwhs)