Iran's multiple-faceted cost of energy projects

Photo: Iran's multiple-faceted cost of energy projects / Iran

By Dalga Khatinoglu

Several years have passed since the withdrawal of giant international companies from Iran's oil and gas projects due to sanctions. The situation was welcomed by the Mahmoud Ahmadinejad Administration, calling this an opportunity for self-sufficiency.

However, the current statistics show counterproductive results from what Iranian officials expected or announced.

Emad Hosseini the deputy of oil minister said on Jan.14 during an international energy exhibition held in Kish Island that the costs of energy projects in Iran has increased 3 to 4 times, Fars News Agency reported.

An outstanding example of increasing costs is the joint South Pars gas field.

The first five phases of the Iranian side of South Pars field have come on stream since 2005. Phases six to 10 were developed 60 percent until 2005.

But, Iranian companies have been unable to complete any new phases (phases 10 to 24) since 2009 in spite of investing $46 billion, and while the total costs of the phases were estimated at $40 billion.

Current situation of South Pars phases

Starting date

Progress

Phase

-

0 percent

11

67 months

92 percent

12

44 months

64 percent

13

44 months

50 percent

14

79 months

92 percent

15 and 16

79 months

82 percent

17 and 18

44 months

60 percent

19

44 months

51 percent

20 and 21

44 months

63 percent

22, 23 and 24

Now, the Iranian government says the completion of the remaining phases will take five years and $25 billion to $30 billion in new funds.

Therefore, the costs of the uncompleted phases of South Pars nearly doubled, and the indirect costs due to delays are even more.

Iran produces 285 million cubic meters (mcm) of gross gas and 320 thousand barrels of gas condensate in the South Pars fields per day.

With completion of the remaining phases of South Pars, Iran targeted production at 700 mcm of gas and 1.2 million barrels of condensate per day.

The giant joint South Pars is the world's biggest gas field, holding eight percent of the globe's proven gas reserves.

Most of Qatar's total gas production is from this joint field. Iran's southern neighbor exports 345 million cubic meters of gas per day from South Pars -or what Qatar calls "North Field".

Roknaddin Javadi the head of National Iran Oil Company said in August that delays in South Pars completion has cost $36 billion in profit lost for Iran annually.

Besides the profit lost to delays, Iran recently has had to reduce gas supplies to 21 private power plants and use more fuel oil instead. Bijan Namdar Zanganeh said in August that Iran burnt about $18 billion worth of fuel oil last year.

The official statistics released last week indicate that Iran increased diesel and oil fuel burning in its power plants to 135 million liters per day.

On the other hand Iran was forced to cut liquid gas (LNG) supply to stations, which led to an increase in gasoline consumption by 7.5 percent to 77 million liters per day.

Iran has had to import five to seven million liters of gasoline due to gasoline shortages.

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