Update on Iran’s oil industry problem
We wrote about this below. Business Week has some numbers to consider:
The country’s 137 billion barrels of oil reserves are second only to Saudi Arabia’s, and its supply of gas trails only Russia’s, according to the BP Statistical Review of World Energy. Getting it all out of the ground, though, is another matter. Iran has been producing just 3.9 million barrels of oil a day this year, 5% below its OPEC quota, because of delays in new projects and a shortage of technical skills. By contrast, in 1974, five years before the Islamic Revolution, Iran pumped 6.1 million barrels daily.
The situation could get even tougher for the National Iranian Oil Co. (NIOC), which is responsible for all of Iran’s output. Without substantial upgrades in facilities, production at Iran’s core fields, several of which date from the 1920s, could go into a precipitous decline. In September, Oil Minister Kazem Vaziri-Hamaneh suggested that with no new investment, output from Iran’s fields would fall by about 13% a year, roughly twice the rate that outside oil experts had expected…
Iran’s looming crisis is the result of years of neglect and underinvestment…It allocates only $3 billion a year for investment, less than a third of what’s needed to get production growing again…Iran will import about $5 billion in gasoline this year, or about 40% of its needs. The government is planning a $16 billion refinery building program to boost capacity by 60%. But unless Iran raises fuel prices, the new plants will just mean more consumption.
An oil squeeze could spell trouble for President Mahmoud Ahmadinejad. The populist leader has won backing at home through generous handouts. Ahmadinejad has ratcheted up public spending this year by 21%, to $213 billion…
Iran badly needs fresh foreign investment to shore up the oil industry…new investment has largely dried up in recent years…Outsiders are offered contracts only to drill wells–rather than operate fields–and get just a small share of profits from output…
Endless haggling and delays have set back some of Iran’s biggest oil initiatives. One top priority had been the Azagedan field in southern Iran, which is expected eventually to produce 260,000 barrels a day. But in October, Tehran scrapped a $2 billion contract, agreed to in 2004, with Japan’s Inpex to develop the project. And Shell’s $800 million Soroush/Nowrooz project in the Persian Gulf has been plagued by cost overruns and technical glitches. In January, meanwhile, Statoil wrote down the entire $329 million book value of its South Pars project because of “productivity and quality problems” with a local contractor.
Would it be surprising if some of the “endless haggling and delays” were the result of US influence, as well as Iranian internal politics and paranoia?