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Forecasted Iranian Oil Production

by marco Tue Feb 13th, 2007 at 08:14:09 AM EST

An article in New York Times makes very clear how despite Iran's immense oil and gas reserves, its native supplies will most likely not be enough to keep its economy afloat and its people "content".

Pressure Increases on Iran's Fragile Energy Industry

"The domestic energy situation is as big as the international issue, and feeds into it in a very significant way," he [Robert Murphy, an analyst at PFC Energy, a consulting firm in Washington] said. <...>

To curb runaway demand that has been driven in part by subsidies that keep the price at the pump a mere 35 cents a gallon, the government plans to begin rationing gasoline in March, a measure so unpopular, and potentially explosive, that ration plans have been put off several times in the past. <...>

At home, meanwhile, Iran has had to appease a population historically prone to unrest. So it spends about $20 billion each year, or 15 percent of its economic output, to keep consumer prices low for gasoline, natural gas, electricity and other energy products, according to the International Monetary Fund and other estimates. Those subsidies -- one of the lowest in the world -- have prompted double-digit growth in consumption in this country of 70 million people. <...>

Iran's refining capacity lags far behind its domestic needs, so the country is forced to import 40 percent of its gasoline. <...>

Iran's leadership says it wants to develop nuclear power generation to free up its petroleum resources for domestic use or for exports.

I have two questions, which no doubt can be very simply answered.

From he diaries -- whataboutbob

There is a single graphic on the page:

How is it that oil production increases steeply from 2002 to 2005 (after crooked yet overall growth since 1981) but is projected to start declining suddenly from 2005 to 2020?

Has production in 2006 borne out this projection?

Michael Hirsh in a Newsweek article describes PFC Energy chairman J. Robinson West as "a former Reagan administration official (and friend of Dick Cheney's ...)" and quotes him as follows:

Welcome to the age of energy insecurity.  Worldwide production will peak. The result will be skyrocketing prices, with a huge, sustained economic shock. Jobs will be lost. Without action, the crisis will certainly bring energy rivalries, if not energy wars. Vast wealth will be shifted, probably away from the U.S. For the last 20 years, U.S. policy has discouraged production and encouraged consumption. If we dither any more, we will pay a terrible price, the economic equivalent of a Category 5 hurricane. Katrina was Category 4.

Truth unfolds in time through a communal process.
by marco on Mon Feb 12th, 2007 at 09:50:38 PM EST
it can't.  But it's probably reasonable.

IIRC the times correctly, the Shah was overproducing what was optimal for maximum extraction in order to fund his police state.  After the fall, they've never had top class investment so their production may have been somewhat artificially limited by incompetence and lack of investment.  And part of that rise for 20 years was simply opening up old taps that had been shut down when prices and the call on OPEC crashed from 81-->87.

From here forward it is possible they have capacity up their sleeve or if they let in competent operators they could increase production.  Or they can just keep stubbling along and decline from here.  They've been having trouble actually reaching their quota so all the old taps are probably wide open.

by HiD on Mon Feb 12th, 2007 at 10:14:47 PM EST
After the fall, they've never had top class investment so their production may have been somewhat artificially limited by incompetence and lack of investment.

That is in line with what the article says:

"Iran needs to invest more than it does," said Manouchehr Takin, an Iranian energy analyst at the Center for Global Energy Studies in London. "It needs foreign companies to bring expertise, capital and technology."

But oil companies complain that the rewards are limited. Under Iran's stringent buyback contracts, oil companies basically operate as contractors for the government for a limited time. They are not allowed to book the reserves as their own and gain little in extra profits when energy prices go up.

I also just realized that the the translucent cloud around the forecasted oil production projection represents the range of possible severity in the decline.  Nevertheless, consumption seems certain to increase steadily, and so even if production remains (at the most optimistic extreme) more or less flat, Iran's situation seems bound to become more desperate.

Truth unfolds in time through a communal process.

by marco on Tue Feb 13th, 2007 at 12:43:42 AM EST
[ Parent ]
growing population, 35 cts/gallon gasoline and oil fields that have been in production since before Saudi was found is a bad hand.  Of course, if my idiot govt bombs a few of their refineries, they'll have plenty more crude to export.....Maybe they can get UOP to put their hydrocrackers back together afterward or will it be Brown and Root?
by HiD on Tue Feb 13th, 2007 at 05:36:36 AM EST
[ Parent ]
Of course, if my idiot govt bombs a few of their refineries, they'll have plenty more crude to export....

Yours and mine.  Complete madness.

Truth unfolds in time through a communal process.

by marco on Tue Feb 13th, 2007 at 09:32:37 AM EST
[ Parent ]
The Iranian government is playing this the wrong way. Instead of rationing, it should engage in the same temporary overproduction the Shah used, in order to delay the crisis until the US or Israel bombs. Then it could do anything and call it a necessary wartime sacrifice. The US would then wait it out if it were smart, but it's not, and Bush's bombing instincts would trump elementary common sense.

Oh well. If Ahmadinejad wants to get toppled before the US has the chance to lob missiles at him, it's all for the best.

by Alon (alon_levy1@yahoo.com) on Tue Feb 13th, 2007 at 09:59:48 AM EST
Do you realise quite what a managerial vacuum there is in Iran these days?

There is as much chance of Iran jacking up their crude oil production to pre-Shah levels as there is of them making nuclear weapons within 5 years ie vanishingly small.

The country is paralysed in terms of making decisions and practically unable to implement the few they do make: that's the reality I've been on the wrong end of for the last six years, since convincing them of the requirement for a Middle East crude oil price benchmark price aka the mythical "Iran Oil Bourse" project.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Feb 13th, 2007 at 07:47:30 PM EST
[ Parent ]
tinfoil alert...

ahminajad seems like a sockpuppet, same as bush...  could they both be stooges, acting out a drama whose sole objective is to raise world oil prices?

suits the mullahs, suits cheneycorp...

plus all this huffing and puffing is a headline-grabbing distraction from the iraq bloodbath and the domestic problems of both countries.

what's not to love?

alcoa sombrero?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Feb 13th, 2007 at 08:35:27 PM EST
might be sockpuppets but I don't think either one is aware of the hand up their nether eye.  Bush is too stupid to be able to ACT that stupid.
by HiD on Thu Feb 15th, 2007 at 05:11:37 AM EST
[ Parent ]

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