Iran pumps more crude but energy sector still faces challenges

20 June 2011

BP statistical review of world energy highlights increase production

There were a few surprises in UK oil major BP’s Statistical Review of World Energy, released on 8 June. China has overtaken the US as the world’s largest energy consumer in 2010, with energy consumption growing by 11.2 per cent. Its share of global consumption is now 20.3 per cent, although this includes coal.

The US remains the world’s premier crude oil consumer, with 19.1 million barrels a day (b/d) compared with China’s 9 million b/d. It looks like it will hold this position for some time to come.

On the production side, the BP statistics also highlight another surprise. Despite the array of problems facing its energy sector, Iran successfully increase crude oil and natural gas production in 2010.

Crude oil production in 2010 totalled 4.245 million b/d – up 46,000 b/d from its 2009 production of 4.199 million b/d – an increase of 1.1 per cent.

Iran oil and gas production
B/D=Barrels a day. BCM=Billion cubic metres). Source: BP

Gas production also climbed 5.6 per cent to 138.5 billion cubic metres from 131.2 billion cubic metres in 2009.       

According to the report, the Islamic Republic produced 5.2 per cent of the global oil output, the fourth-largest producer after Russia, Saudi Arabia and the US. With 4.3 per cent of natural gas production, Iran was also ranked fourth in gas production behind the US, Russia and Canada.

Despite announcements of rising crude oil reserve estimates from both Iran and Iraq in 2010, BP stuck with its own estimates. Iran’s 2010 proved reserves were 137 billion barrels, unchanged from the 2009 figure and representing 9.9 per cent of total global reserves. State-owned National Iranian Oil Company (NIOC) increased its own reserves estimate for the second time in a year to 155 billion barrels in April. In October, Iran lifted its crude oil reserves estimate to 150.31 billion barrels from 138 billion barrels, as a response to increases in neighbouring Iraq (MEED 15:10:10).

On the eve of the October Opec meeting in Vienna, Iraq’s oil ministry announced an increase in its estimate of its crude oil reserves to 143 billion barrels, up from 115 billion barrels, pushing it past Iran as the world’s second-largest holder of crude reserves after Saudi Arabia.

Analysts have been sceptical of the new figures, coming shortly after neighbouring Iraq increased its own reserves. Nonetheless, Iraq too saw its reserves figure of 115 billion barrels unchanged in BP’s review. 

That Iran has managed to increase production under the circumstances is quite a feat. Some analysts say investment in the Iranian oil and sector is down as much as 35 per cent due to sanctions and international isolation. This is at the heart of Iran’s energy challenge. However, despite the encouraging 2010 figure, Iran continues to face the prospect of production declines without an injection of foreign investment.

Masoud Mirkazemi, Iran’s former oil minister issued a stark warning in May 2010 that the hydrocarbons sector requires investment worth between $150bn-200bn over the next five to six years to arrest declining production rates. Without it, Iran risks becoming a net oil importer if output rates continue to fall.

In 2010, Tehran set a requirement for $150bn in investment for the period 2010-15, as it plans to increase production to 4.7 million b/d by 2015. Mohsen Khojasteh, Iran’s deputy oil minister, warned that production could drop as low as 2.7 million b/d if the numbers are not realised.

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