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With the world’s fourth largest oil reserves and second largest gas stocks, Iran’s role as an oil exporter has continued to grow in importance in 2012. Meanwhile, the government has […]

With the world’s fourth largest oil reserves and second largest gas stocks, Iran’s role as an oil exporter has continued to grow in importance in 2012. Meanwhile, the government has worked in parallel with private players to develop the country’s natural energy resources to not only meet domestic demand for electricity, but also shift to become a net energy exporter to the region.

Under the supervision of the Ministry of Petroleum, state-owned National Iranian Oil Company (NIOC) regulates oil and gas production, consumption, and exports. Currently, the country is estimated to contain over 150 billion barrels of proven oil reserves, which is 9.3% of the world’s total, and over 12% of OPEC’s collective stockpile.

According to the Paris-based International Energy Agency (IEA), Iran saw robust production levels of 4 million barrels per day (bbl/d) in 2012. Despite the closing of European markets, the country’s hydrocarbon production remained largely unaffected over the medium term due to the entry of new markets in Asia, with Far East clients claiming the lion’s share of oil and gas imports from Iran as of October 2012. Iran is also placing emphasis on strengthening hydrocarbon trade ties with India and the Middle East.

In terms of energy supply for the Iranian population, the Ministry of Energy is responsible for the management of water, electricity, and wastewater services. In 2012, the Ahmadinejad administration encouraged the Ministry to seek alternative energy resources through the approval of a $650 million plan to develop renewable energy projects. Sponsored by the National Development Fund of Iran (NDFI), the plan is designed to support the Ministry of Energy as it explores the possibility of the country’s wind and hydro potential.

FDI for future projects in the energy sector is welcomed through partnerships with local players. Since the Iranian constitution prohibits foreign or private ownership of natural resources, it is recommended that international oil companies conduct E&P activities through an Iranian affiliate.

OIL & GAS

Although oil production continues to be the country’s most secure resource, with estimated reserves lasting approximately 100 years if no further oil resources are discovered, natural gas discoveries are driving the energy sector forward. Since the discovery of the South Pars gas field in 1971, gas companies have been enthusiastic to unearth huge proven gas reserves that now total 29.61 trillion cubic meters, or 15.8% of the world’s total stock. Production levels have continued to increase by up to 10% annually for the past two decades.

Seeking to secure more oil and gas resources to bolster the economy, the Ministry of Petroleum has taken steps to ramp up E&P and support ongoing projects in the country in 2012. Looking to the future, the Ministry of Petroleum is working toward increasing crude oil production up from 4 million bbl/d in 2012 to 4.83 million bbl/d in 2013. In addition, the organization seeks to boost natural gas production from the 554 million cubic meters per day (mcm/d) recorded in 2012 to 973 mcm/d, of which 125 mcm/d will be exported.

To achieve its short-term E&P goals, “More than $4.5 billion is forecast to be invested in the exploration of hydrocarbon reserves through the fifth Five-Year Development Plan [FYDP] covering 2010-2015,” Minister of Petroleum, Rostam Qasemi, explained to TBY. Much of the funding will be also be used to develop 16 new onshore and eight offshore blocks over the same period. One new field in particular, Yadavaran, has moved into focus as early production level estimates reach as high as 20,000 bbl/d. Fully developed, producers can expect 180,000 bbl/d from the Yadavaran oil field, which is being developed in partnership with Sinopec.

The largest gas field in the world, with an area of 9,700 square kilometers, the South Pars field is expecting huge additions to its production capacity in the coming years. The field currently produces 57 mcm/d of rich natural gas, 2.1 mcm/d of ethane, 80,000 bbl/d of condensate, and 3,000 tons of LPG, in addition to 400 tons of sulfur on a daily basis. Once the final eight phases of the project are completed, the field is expected to produce 320,000 bbl/d of gas condensate and 4 million tons of sulfur annually. To this end, the Ministry of Petroleum has been allocating approximately $90 billion in funds toward the project since 2011. By 2015, the annual revenue of the field will soar to $100 billion, raising Iran’s gas output to 1.1 billion cubic meters (bcm) per day.

Increased activity at South Pars and a variety of other proven reserve sites has presented significant opportunities for investment in pipeline projects that will eventually pump crude oil and gas reserves to the surrounding region. According to Ali Khayrandish, President of Iran Liquefied Natural Gas Co., “It is more economic to use pipelines as the primary export method. The government has plans to export gas to Iraq, Syria, and Lebanon in this way, as well as to Turkey and Pakistan.” The Ahmadinejad administration is also looking to begin exporting LNG to its neighbors in the Middle East via pipelines. In November 2012, the Deputy Minister of Petroleum announced plans to build a pipeline to deliver gasoil, jet fuel, and gasoline to Afghanistan.

Currently, the Strait of Hormuz is Iran’s main transport corridor for oil and gas products. At just 33 kilometers wide, an estimated 17 million bbl/d flowed through it in 2011, which comprises 35% of all seaborne traded oil and 20% of oil traded worldwide. In addition to oil, liquefied natural gas (LNG) volumes are also transported through the strait, with about 70 million tons of LNG delivered between January and October 2011.

As the country shifts to depend less on crude exports, nine oil refineries operated by the National Iranian Oil Refining and Distribution Company (NIORDC) currently boast a production capacity of 1.76 million bbl/d. In 2013, these refineries are seeking to achieve production totals of 82 million liters of gasoline and gasoil per day, 34 million liters of which will be exported by 2015, according to the Ministry of Petroleum.

ELECTRICITY

Since 1984, Iran has experienced steady domestic energy consumption growth, becoming one of the most energy-intensive countries in the world, with per capita energy consumption 15 times that of Japan and 10 times that of the EU. Although the country is still heavily reliant on traditional thermal energy sources of electricity, new hydroelectric projects are paving the way to cleaner generation produced by 541 dams around the country. Furthermore, the country’s development of nuclear energy got underway in 2012, with the launch of operations at the Bushehr Nuclear Power Plant.

Iran’s installed capacity for electricity generation was expected to reach the 70,000 MW mark at the end of 2012, up from the 60,000 MW recorded in 2011. Currently, 93% of electricity in the country is generated by thermal power and fossil fuels, with a growing amount generated by hydro energy. The Ministry of Energy has indicated that between 15,000 MW and 20,000 MW of capacity should be added in the next 20 years to meet domestic demand. However, Iran seeks to become a major regional exporter of electricity and has attracted more than $1.1 billion in investments for the construction of three new power plants to meet this goal.

The country has also put greater emphasis on FDI in the electricity generation sector, with projects underway to increase Iran’s electricity generation capacity by 5 GW in 2012. In addition, 10 GW of additional generation capacity in hydroelectric and thermal power plants will be added by August 2013.

In terms of nuclear energy, Iran plans to install the capacity to produce 23,000 MW of electricity through nuclear technology by 2025. Leading generator Bushehr Nuclear Power Plant reached its full capacity of 2,000 MW in August 2012, marking the start of what is expected to be a 4.43% annual supply growth for non-hydro alternative energy producers.

SHIFT TO RENEWABLES

According to S.H. Ataei, CEO of Sadid Industrial Group, “there is potential to produce 40,000 MW of energy through wind turbines” in Iran. His company is seeking to encourage local players through the creation of Saba Niroo, the only wind turbine factory in the country. With its support, “5,000 MW of electricity should be produced by wind turbines by the end of 2015.” This initiative complements activity in the hydropower segment of the energy sector, where production has increased by 5% from 5,794 GWh to 6,052 GWh in March 2012. Iran has a combined total hydropower capacity of 9,246 MW.

The Renewable Energy Organization of Iran (SUNA) has outlined goals to contribute to the stabilization and diversification of energy resources, the development of increased renewable capacity, and the minimizing of long-term expenses associated with energy generation. In addition, the government is seeking ways to preserve the environment and promote the non-renewable energy resources of Iran, such as wind and hydropower. By mid-2012, the Ministry had granted permits for the construction of several private-sector renewable energy power plants, with a combined production capacity of 12 GW, according to Yousef Armodeli, the Managing Director of SUNA.

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