Enerdata has just released the Iran energy report with 2006 data.
How is the energy sector structured in Iran ?
Iran is an important member of OPEC and the country relies strongly on its energy resources, in particular oil. It owns large oil and gas resources (respectively around 10% and 20% of World total).
Two large public companies control the sector of fossil fuels : NIOC for oil and NIGC for gas, both controlled by the Ministry of Oil, which is itself topped by the Supreme Energy Council (SEC).
The electricity sector is under the control of the Ministry of Energy (supervised by the SEC). The company Tavanir controls the production capacities (thermal power plants are managed by its subsidiary IPDC and hydro-electricity capacities by IWPPC).
What is the weight of Iran on international oil and gas markets ?
Iran is a large crude oil producer : it ranks 4th in the World (behind Saudi Arabia, Russia and the USA) and is the 2nd largest OPEC producer. It exports 65% of its production towards Asia, Europe and Africa. It is thus an important actor on the World oil market.
Regarding oil products, the refining capacity is 1,65 Mbl/d, ensuring only 60% of the domestic needs. Despite its very large reserves Iran was a net gas exporter in 2006 (imports from Turkmenistan exceeding the exports towards Turkey and Armenia). Indeed, the production has trouble to catch up with the national consumption : many projects have problems to get commissioned (unattractive conditions for foreign companies, international pressure regarding the nuclear issue spilling over large scale energy projects in the country, difficulty to sign deals), while the needs for gas keep increasing for : oil production, use in the power sector and direct use in industry and buildings.
It must also be noted that the main gas field, South Pars, is common with Qatar (where it is called North Field) which creates some tensions and raises some questions on its future exploitation.
How is the domestic market evolving ?
The domestic market is very dynamic, partly due to the very low prices set by the Iranian government.
The electricity consumption has been multiplied by 5 since 1990, reaching around 150 TWh in 2006. The gas consumption has been multiplied by 4, from 20 Gm3 in 1990 to 86 Gm3 in 2006. The power sector is a key driver of this growth, representing 41% in 2006 of the total consumption from 35% in 2000.
Finally the consumption of oil products has been growing at an impressive rate of +8%/year since 2000 (from 24 Mt to 38 Mt). This situation has led to a growing need to import oil products because of the insufficient refining capacity, contributing to some significant budget stress for the State (which buys oil products at international market prices and sells them at heavily subsidized levels). The situation is particularly severe for motor gasoline for road transport (in 2006 Iran imported more than 45% of its consumption), and thus the government has decided to regulate the consumption through the rationing of gasoline use.
What are the prospects for oil ?
Iran plans to increase its crude oil production, which will require a development in the Caspian Sea currently being disputed with Russia, Turkmenistan, Azerbaijan and Kazakhstan (Iran claims a 20% share, while the others agree on the equidistance principle which would give Iran only 13%).
Furthermore, the investment conditions in the country do not appear very attractive for foreign companies, and many projects are postponed or slowed down, even though Iran has eventually signed an agreement with the Chinese company Sinopec in December 2007 on the Yadavaran field (185 000 bl/j until 2014) after years of negotiations. Finally, the future development of oil fields will certainly require a growing use of injected gas, which will further increase the pressure on gas projects.
Various projects of refineries should help Iran supplying its growing domestic market.
What are the coming challenges on gas ?
Many production projects are planned on the South Paris gas field, the largest in Iran. However, most have not been completed yet because of difficulties to finalize deals on gas price (for instance the talks with Pakistan and India have been going on for years without final agreement yet on this specific issue) and an unfriendly investment climate, all the more as Iran still hesitates for some projects on their final allocation, either towards exports or for its dynamic domestic markets.South Pars is shared with Qatar, which is currently undertaking ambitious development plans. Iran fears these will reduce its own amount of resources.
What are the projects for other energy sources, in particular nuclear ?
The electricity capacity should reach 60 GW by 2015 (against 50 GW in2006) : about 15 projects of hydraulic (13% of total capacity in 2006) and gas plants should be commissioned by then.
In parallel, Iran set significant targets for nuclear development (7700 MW in 2022) despite the international pressure on this issue. The power plant of Bouchihr, originally planned in 2004, should be commissioned in 2008 at best.
There is no specific policy for other energies, despite the likely potential for solar development.
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