Iran to fight cheap oil&gas

Oil&Gas Materials 11 October 2011 09:00 (UTC +04:00)
Iran says attempting to keep oil production ceiling at OPEC meeting and discussing the gas price at the upcoming Gas Exporting Countries Forum (GECF) are Iran's top agenda
Iran to fight cheap oil&gas

Head of the Trend Persian service Dalga Khatinoglu

Iran says attempting to keep oil production ceiling at OPEC meeting and discussing the gas price at the upcoming Gas Exporting Countries Forum (GECF) are Iran's top agenda.

The 160th OPEC meeting, headed by Iran, will be held in the Austrian capital, Vienna, on December 14 and the 11th ministerial meeting of GECF will open in Doha, Qatar on December 2.

Iranian oil minister Rostam Ghasemi says maintaining OPEC output due to stable oil prices is major topic to be reviewed in OPEC.

Iran's pale clout on international oil market

According to the U.S. Energy Information Administration (EIA) report, OPEC members' oil income was $780 billion in 2010 and this figure would hit up US $1 trillion in 2011.

The International Energy Agency released 60 million barrels of oil from its 4 billion emergency stocks four months ago to decrease the oil price.

Opposing this action by the IEA Iran came out with a strict statement, accusing the western countries of setting 'unfair oil price'.

But what does Iran's "unfair oil price" statement imply and how can Iran make it fair?

The 12-member OPEC holds 80 percent of the world's proven oil reserves, but its production meets only 35 percent of the global demand. So, OPEC's role in fact is not so great in price formation in the world.

Meanwhile, OPEC's annual report indicated that Iran's oil production has downed from 4.07 to 3.54 million barrels since 2006 and Nigeria surpassed Iran as OPEC's second major oil export in 2010.

Executive director of the National Iranian South Oil Company Hormoz Ghalavand said earlier Iran's oil production reduces by around 300,000 barrels per year because about 80 percent of oil wells in the country are in their second half-life.

According to OPEC's report, Iran's active oil wells decreased in number by 10 wells to 2064 in 2010.

Iran has the world's third largest proven reserves (after Saudi Arabia and Venezuela) in the amount of 137.6 billion barrels, but produces about 11 percent of OPEC's output and 5 percent of world's oil production because of lacking investments and withdrawing two to third foreign companies from Iran's oil projects due to UN, EU and U.S. sanctions.

Iran must inject about 280 million cubic meters of gas to old oil wells to keep oil production level, but it is able to inject only 60 million cubic meters of natural gas per day.

Saudi Arabia with 2.5 million barrels of excess oil production capacity is producing around 9.8 million barrels per day (1.8 million barrels per day more than its quota), which has raised OPEC output to 30.13 million barrels per day since August.

Therefore, Iran's call on reducing OPEC output to keep oil prices up is just a noise, without any effect. Iran wants to keep OPEC output unchanged because Tehran's oil production capacity is under its quota determined by OPEC and because of probable $15 billion shortage in general budget with the oil price below $100.

Iran to raise international gas price

Iran as the world's second gas-holder with 33 trillion cubic meters of gas reserves is unable to export gas. Iran's gas production is about 138.5 bcm with a consumption rate of 136.5 bcm.

However, Iran's oil minister Rostanm Ghasemi says the gas price will be GECF's first topic at December meeting.

At the same it is almost impossible to define a protecting package for gas prices because gas price depends on oil price, the gas contracts are regional and long term (20-30 years), and there are various types of gas (LNG, CNG, natural gas and etc

LNG (liquid natural gas), which is the only type of "blue fuel" similar to oil, has the price differing from the region to region. For instance, the LNG price in Japanese market differs from Pacific basin.

So, could Iran defeat the giant participants on the global in its ambition to set new prices for the world number strategic natural resources - oil and gas? Let's be patient by the end of the year.