Review of Iran's oil & gas sector in 2013

Review of Iran's oil & gas sector in 2013

By Dalga Khatinoglu

With 18 percent and 9.4 percent of the world's total proven gas and oil resources respectively, Iran ranks as the largest in gas and fourth in oil reserve holdings among all nations.

But inefficient projects, huge domestic consumption and lack of technology and finance as well as imposed sanctions aimed at curbing its disputed nuclear program have diminished Iran's role in energy markets.

According to the latest estimates released by the International Energy Agency on Dec.11, Iran's November total crude oil and gas condensate export was 850 thousand barrels per day. The figure was 2.5 mbpd in 2011.

Iran's oil output decreased from 3.628 mbpd in 2011 to 2.7 mbpd, but there is not any concrete information on Iran's current oil production capacity.

Iran has shut down some oil fields due to a decline in oil exports, while the domestic refining capacity decreased during 2012 to 1.68 last years. On the other hand, most of Iran's active fields are in their second half-life and their productivity decreases by 8-13 percent annually, making it quite difficult to distinguish the exact share of closed down wells and the high natural decline rate in oil output cut.

Recovery rate likely remained unchanged

Iran's oil recovery rate is around 20 to 30 percent, the U.S. Energy Information Administration said in March.

In early January 2012, Iran announced that the oil recovery rate increased to an average of 29 percent. But after some critical reports published in Iranian media outlets raised doubts, Abdol-Mohammad Delparish Manager of Integrated Planning in National Iranian Oil Company (NIOC) said that the recovery rates of liquid hydrocarbons, crude oil and gas are 29 percent, 25 percent and 70 percent respectively on average.

According to Fourth and Fifth Development Plans (2005-2009 and 2010-2015) Iran should increase the oil recovery rate by 1 percent during the period of each plan, but the recovery rate remained unchanged during the Fourth Plan.

The former head of NIOC, Ahmad Qalebani said in 2012 that Iran needed a $79.094 bln investment to reach a one percent increase in the crude oil recovery rate.

However, Ex-President Mahmoud Ahmadinejad's government announced that during 2011 and 2012 the crude oil recovery increased by 0.28 percent, which raised the doubts about the credibility of the claim again.

During this period, the total of investment put in Iran's both upstream oil and gas projects was roughly about $30 bln, so reaching a 0.28 percent crude oil recovery rate growth was impossible.

On the other hand, Iran needed to inject 200 mcm of gas into old oil fields to boost the output, but Iran injected only 70 mcm into fields in the Iranian calendar which ended on March 2012 due to a gas shortage, Fars News Agency reported on January 2, 2013.

During the last two years, Iran's domestic gas consumption increased, while production level increased as well, then the injected gas volume into oil fields has not experienced increase.

Details of disputed statistics announced by Qalebani on August 2012 about recovery rates:

Offshore oil fields

Onshore oil fields

Offshore gas fields

Onshore gas fields

18.6 percent

26.97 percent

77.49 percent

65.22 percent

Oil Consumption

On the consumption issue, OPEC's annual report released on July 29 based on direct communications said that Iran's oil refining capacity decreased from 1.772 mbpd in 2011 to 1.681 mbpd in 2012.

Refineries

2011 (tbpd)

2012 (tbpd)

Abadan

390.0

399.0

Arak

230.0

242.0

Tehran

240.0

245.0

Isfahan

370.0

275.0

Tabriz

110.0

110.0

Shiraz

56.0

56.0

Kermanshah

21.0

22.0

Lavan

35.0

48.0

Bandar Abbas

320.0

284.0

During 2013, some new plants were inaugurated officially at the Arak and Bandar Abbas refineries, while some plants shut down for months due to damages, including explosions.

However, based on National Iranian Oil Refining & Distribution Company's statistics, Mehr News Agency reported on Dec.20, during the last 8 months of the current Iranian solar year (March 20 to Nov.20), the country's gasoline consumption increased by 7.5 percent to 70 million liters per day, oil-gas consumption increased by 8 percent to 100-105 million liters per day, while kerosene consumption experienced a 12 percent drop to 8 million liters per day. Fuel oil domestic usage remained unchanged at 51 million liters per day, compared to the same period last year.

Reuters quoted an Iranian oil official on Nov.12 as saying that Iran exported 135,000 bpd of fuel oil on average in 2013. This indicates a increase in the first half of the year, but fuel oil exports decreased due to more liquid fuel usage in domestic power plants after September and the onset of colder weather.

Iran hasn't significantly increased other refined fuels exports and imports about 7 million liters of gasoline in a day as well.

By this measure, Iran's oil refining level has increased a little compared to 2012, but less than in 2011.

Gas Consumption and Petrochemicals export

According to BP annual statistics published in June, Iran's dried gas production level in 2012 was 160.5 billion cubic meters, while the consumption level was 156.1 bcm, indicating a 5.4 percent and 1.4 percent increase respectively compared to 2011.

In 2013, official statistics indicate that the total gas consumption of the current solar year is expected to rise to at least 160 bcm.

The Iranian deputy oil minister Hamidreza Araqi said on Dec.13 that the country's total gas refining capacity including gas imports from Turkmenistan equaled 500 mcmpd together. It is expected the consumption level would reach about 700 mcmpd in the winter from current 420 mcmpd level.

During 2013, Iran's gas output reportedly began to increase after September.

"The daily gas production of Iranian Central Oil Fields Company (ICOFC) on Dec. 5 increased by 3.1 mcmpd and surpassed 301 million cubic meters, the managing director of company Mehdi Fakour said on Dec. 6.

Recently, Iran said that refined gas output also increased by 12 mcm per day in South Pars as well.

According to the latest official statements in mid-November, the South Pars's total gross gas output reached 285 mcmpd, of which only 200 mcm is refined and pumped to the national gas network.

Iran exported 7.5 bcm of gas to Turkey, while its imports of 4.5 bcm from Turkmenistan, remained unchanged compared to the last year's figures.

Iran's petrochemical products export has also decreased by 13.8 percent to nine million tons in the fırst 8 months of current Iranian solar year.

Iran's petrochemical products export during last solar year was about 14.492 million tons, indicating a 27.99 percent decrease compared to the previous year.

Dalga Khatinoglu is Trend Persian Service head

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