Iran's nuclear stance may reflect oil declines

Nick Snow
Washington Correspondent

WASHINGTON, DC, Dec. 27 -- Iran may need to develop nuclear power plants to meet domestic energy requirements because its crude oil operations are seriously declining, a Johns Hopkins University researcher suggests.

Recent analyses by former National Iranian Oil Co. officials project that the country's oil exports could disappear in 12-19 years, according to Roger Stern, a graduate student in the Geography and Environmental Engineering Department at Johns Hopkins's Whiting School of Engineering in Baltimore.

"It therefore seems possible that Iran's claim to need nuclear power might be genuine, an indicator of distress from anticipated export revenue shortfalls. If so, the [Iranian] regime may be more vulnerable than is presently understood," he said in an article published online in the Dec. 26 Proceedings of the National Academies of Science (www.pnas.org).

Stern said that most of Iran's oil export revenue comes from monopoly rents derived from the difference between the market and competitive prices. In Iran and other producing countries that subsidize domestic demand, pressure on exports can occur when demand grows more quickly than supplies, he said.

"This is what happened to Iran. Since 1980, energy demand growth (6.4%) has exceeded supply growth (5.6%), with exports stagnant since a 1996 peak," Stern said.

The country's recent oil production decline and resulting failure to meet its Organization of Petroleum Exporting Countries quota in all but 22% of the months since the Iran-Iraq War ended may signal that exports already are dropping, he said.

Stern said that Iran's 8% oil depletion rate, which is higher than the 5-6% global average, can be combined with the country's 5% oil demand growth to determine a 10% export decline rate. He said a former petroleum minister has suggested that Iran's oil depletion rate is closer to 10%, which implies a 12% export decline rate (EDR).

"Both 10% and 12% EDR estimates are conservative. These estimates ignore offshore production, where depletion is higher, and assume refinery leakage and depletion to be linear, whereas depletion recently increased," said Stern.

Investment's role
Foreign investment in Iranian oil and gas operations may be falling short of what is needed to arrest declines in production and exports, he continued. Such investment has averaged $2.1 billion/year since 2000, which exceeds the $1.6-1.9 billion/year amount he estimated was necessary to halt export declines. "However, Iran's post-2004 production decline is inconsistent with this expectation," he said.

Stern said that Iran itself makes it harder to extrapolate further what effect lagging investments will have on its oil exports. In 2006, it withheld oil production data, which it previously routinely reported to comply with an annual International Monetary Fund certification, although it issued forecasts that seven new projects due to come on stream in 2006-10 would add as much as 990,000 b/d of production, he said.

Some of the projects face problems, Stern said. Reports in the oil trade press and from Iranian and Japanese sources suggest that the Azadegan project, which is scheduled to add 125,000 b/d of production by 2009, doesn't have a contract. "Therefore, the project cannot produce by 2009 or even 2010 unless a contract is agreed [to] almost immediately, which seems unlikely," Stern said.

Negotiation problems have been compounded by Japan's displeasure with Iran's apparent violations of the nuclear nonproliferation treaty, he continued.

Stern said that another project, the Ahvaz expansion, which is scheduled to add another 255,000 b/d of production in 2009, is equally questionable. NIOC, which is building the project alone, has not led a major project since the 1978 revolution, he said.

"We would expect that if a project of Ahvaz's great size were proceeding without foreign help, it would be a cause for national pride and, therefore, well reported. We find no reports, however," he said.

"Of course, Ahvaz could be proceeding with reportage only in Farsi, which we do not read. This would be atypical, given that English, French, or Italian reporting exists for all other [Iranian] projects. Hence, we believe that neither Ahvaz nor Azadegan will be built on schedule," said Stern.

Iran's ability to attract foreign investment for oil and gas projects may be restricted further by a unique buyback investment vehicle, he continued. In most petroleum exporting countries, foreign exploration and development firms offer capital, technology, and management in exchange for a share of the extracted resource, he explained.

"Iran's constitution considers such arrangements as foreign ownership, which it prohibits. This prohibition has affected disinvestment and deterioration in Iran's petroleum infrastructure, most of which was built before the Iranian Revolution. Compounding the problem is NIOC's inability to lead major project construction," Stern said.

Contact Nick Snow at nsnow@cox.net.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

Quicksilver Canada gets LNG export approval

07/02/2015 Quicksilver Resources Canada Inc. has received approval from the National Energy Board of Canada to export 20 million tonnes/year of LNG from a pos...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected