Ministry of Petroleum of Iran

From Wikipedia, the free encyclopedia

Iran
This article is part of the series: Politics and government of Iran

Constitution Assembly of Experts Ali Meshkini Supreme Leader Ali Khamenei President Mahmoud Ahmadinejad Majlis of Iran (Parliament) Gholam Haddad-Adel Supreme National Security Council Ali Larijani Guardian Council Ahmad Jannati Expediency Council Hashemi Rafsanjani City and Village Councils Military of Iran Mostafa Mohammad-Najjar Judicial system of Iran Mahmoud Shahroudi Ministry of Intelligence and Security Gholam Hossein Mohseni-Ejehei Central Bank of Iran Ebrahim Sheibani Ministry of Petroleum of Iran National Iranian Oil Company Kazem Vaziri Hamane Elections Recent: Experts (2006), Local (2006) Administrative Provincial Divisions Political parties Foreign relations
Other countries · Politics Portal view • talk • edit

The Iranian constitution prohibits the granting of petroleum rights on a concessionary basis or direct equity stake. However, the 1987 Petroleum Law permits the establishment of contracts between the Ministry of Petroleum, state companies and "local and foreign national persons and legal entities." Buyback contracts, for instance, are arrangements in which the contractor funds all investments, receives remuneration from the National Iranian Oil Company (NIOC) in the form of an allocated production share, then transfers operation of the field to NIOC after a set number of years, at which time the contract is completed.

NIOC controls huge deposits of crude oil from which over 130.798 billion barrels can be exploited in the form of primary and secondary recoveries.

The huge reserves of natural gas put Iran in the second place, in terms of the natural gas reserve quantity, among other countries, only next to the Russian Federation, with an estimate of proven reserve quantity close to 23 bcm. There are, at present, eight refineries —with a potential capacity of 950,000 barrels per day and one refinery complex in the country with a total refining capacity of over 1,5 mb/d (in Tehran, Tabriz, Isfahan, Abadan, Kermanshah, Shiraz, Bandar Abbas, Arak and Lavan Island). Abundance of basic material, like natural gas, in the country provide favorable conditions for development and expansion of petrochemical plants.

Thus National Iranian Petrochemical Company (NIPC) has succeeded in the recent years in producing a wide range of petrochemicals and increasing its production, in terms of quantity, to a new level.

During 2005, Iran produced about 4.24 million bbl/d of total liquids. Of this, 3.94 million bbl/d is crude oil, roughly 5 percent of world crude production. Iran's current sustainable crude oil production capacity is estimated at 3.8 million bbl/d, which is around 310,000 bbl/d below Iran's latest (July 1, 2005) OPEC production quota of 4.110 million bbl/d.

PROVEN OIL RESERVES
Country	Billions of Barrels
Saudi Arabia	262.7
Canada	178.9
Iran	133.3
Iraq	112.5
United Arab Emirates	97.8
Kuwait	96.5
Venezuela	75.6

TOP OIL PRODUCERS
Country	Millions of Barrels
Saudi Arabia	9.5
Russia	9.2
United States	7.6
Iran	4.0
China	3.5
European Union	3.4
Mexico	3.4

1 Major Developments
2 Oil subsidies
3 Subcompanies
4 References
5 See also
6 External Links

[edit] Major Developments

Iran holds 10% of the world's proven oil reserves and 15% of its gas. It is OPEC's second largest exporter and the world's fourth oil producer.

Since the 1979 revolution in Iran, the country has been under constant US unilateral sanctions. “The first U.S. sanctions against Iran were formalized in November of 1979, and during the hostage crisis, many sanctions were leveled against the Iranian government. By 1987 the import of Iranian goods into the United States had been banned. In 1995, President Clinton issued Executive Order 12957 ^[1], banning U.S. investment in Iran's energy sector, followed a few weeks later by Executive Order 12959 ^[2] of May 9, 1995, eliminating all trade and investment and virtually all interaction between the United States and Iran.”

Despite the sanctions Iran continued to attract foreign investment and technical cooperation for its energy sector. Countries such as France, Japan, Italy, Norway, UK, Brazil, Malaysia, Spain, Holland, China, Russia, and others took advantage of absence of the American competition and tried to fill the gap. However, the threat of American retaliation kept the investment way bellow the desired levels. It only allowed Iran to continue to keep its oil export at its OPEC determined quota level.

According to the Oil and Gas Journal, as of January 1, 2006, Iran held 132.5 billion barrels of proven oil reserves. This figure, which includes recent discoveries in the Kushk and Hosseineih fields of Khuzestan province, means Iran holds roughly 10 percent of the world's total proven reserves. The vast majority of Iran's crude oil reserves are located in giant onshore fields in the south-western Khuzestan region near the Iraqi border. Overall, Iran has 40 producing fields – 27 onshore and 13 offshore. Iran's crude oil is generally medium in sulfur and in the 28°-35°API range.”

Iran currently produces about 4 million barrels of oil per day, of which only 2.5 million barrels are exported with the remaining 1.5 million barrel being consumed internally. According to the latest report (26 Dec 2006) by the National Academy of Sciences of the United States (NAS), if the current increase in local Iranian oil consumption continues and the current decline in oil production is not stopped, then by 2015 Iran’s oil export will decline to zero. [3] According to this and other reports Iran needs to invest about $2.5 billion a year just to stand still. Iran is not running out of oil, but needs money to maintain old fields and bring in the new fields online.

In 2006, China signed oil and gas contracts worth over $100 billion with Iran. China is heavily involved in developing the huge Yadavaran oil field. “If completed, the deal will allow China to buy 150,000 barrels of Iranian crude a day at market rates for 25 years as well as 250 million tons of liquefied natural gas (LNG). Under an initial agreement signed by the Sinopec Group in October 2004, China could pay Iran as much as $100 billion for the stake and the purchases of oil and gas over 25 years.” [4]

Russia is also very interested to create a gas cartel, similar to OPEC^[3]. Recently a senior Russian parliamentarian called for creation of a producers’ cartel to “stand-up” to the consumers’ cartel. "It is necessary to form a gas alliance, which could be joined by Turkmenistan, Kazakhstan, Uzbekistan, Russia, Ukraine and Belarus," the head of the Russian parliament's energy committee Valery Yazev said, RIA-Novosti reported. "Tomorrow, with the removal of the problem of Iran's nuclear program, I would also see Iran in this alliance," Mr Yazev said, speaking at a meeting of the Russian Gas Union industry group, which he also heads. [5]

[edit] Oil subsidies

Iran has one of the cheapest gas prices in the world (33 cts per gallon/8 cts per liter) while mineral water sells for 13 cents a liter, because the government subsidies many basic commodities, including gasoline, totalling more than 30 billion dollars (7 billion dollar worth of gasoline imports as of 2006). Coincidently, Iran has also one of the highest gas consumption per capita in the world because of contraband with neiboring countries and public waste.

[edit] Wastage & Pollution

Furthermore, experts agree that oil is a pollutant and that its usage should be made as efficient as possible and not wasted, because encouraged/incentived through subsidies. The same holds true for electricity (power wastage hit $1.1 billion in 2006), water, wheat^[4], pharmaceuticals and other commodities like cement and steel and for the same set of reasons. Consequently, Iran has become a net importer of gasoline (1/3 of Iran's daily 70 million litres of gasoline consumption is imported)^[5].

These subsidies also create an environment in which manufacturers become complacent and not only do not conserve energy in their production activities, but also do not try to build energy efficient appliances and machines; simply because their consumers do not pay attention to the product's energy consumption. Based on energy consumption, Iranian made cars, freezers, refrigerators, etc. will not be able to compete with the similar sized Japanese, American or European products.^[6]

[edit] Contraband

Also contributing to the problem greatly, arbitrage opportunities, resulting from the difference between Iran's subsidized price and the market price abroad, through smuggling with other countries, has considerably aggravated the shortage of gasoline in Iran, diminished its exports of crude oil, and illegally drained/stolen huge financial resources (counted in billion dollars per year) from the government coffers (treasury, people's money that is) into private bank accounts abroad^[7]. No arrests have been made public to this day by the judiciary regarding the identity of the peoples responsible for this massive theft of the public property.

Besides, studies have shown repeatedly that subsidies for gasoline mostly benefit the higher income strata of the population because they are the ones who can afford to drive cars ^[8]. Therefore, it is advisable to ban gasoline subsidies altogether and transfer the subsidy amounts directly to the entire population equally or to the population who needs it. A census is currently under way but, strangely, statistics regarding income levels have been discarded in the questionnaire. This precious information regarding who needs help in Iran can still be collected while the government distributes "justice shares", which are shares of state-owned enterprises being privatized) given to low income Iranians, because they will have to justify (prove) their low income levels to the authorities at that time.

[edit] Proposed solutions

On January 24, 2007, Iranian President Ahmadinejad called high petrol consumption as "the main problem facing national economy", but at the same time, told the press that after making necessary preparations such as a development of public transportation system the government will free up petrol prices after five years (only).^[9]

In response to this situation, the Government of Iran has also envisaged to implement a two-tier payment system for the purchase of gasoline through the use of smart cards, whereby each car is allotted 2.5-3 liters a day at the subsidized price of 8.7 cents per liter (domestic price), with consumption beyond that at 60-65 cents per liter (imported price), starting on March 21, 2007. Iran has also plans to ration fuel after March 2007.^[10]

It must be noted that even if the government does not plan to traget low-income Iranians for the subsidies, experts agree that in the worst case senario (the present situation that is), it would make more sense to distribute the same total amount of subsidies budgeted (if not more) to the entire population equally and directly through cash payments instead of implementing a two-tier payment system that can be technically defrauded, so as to avoid the cost incured by the government because of contraband, waste and over-consumption among the other things cited above ^[11]. This, to say it is not even a problem that the measure would be unpopular for the rulers, if things are explained properly to the population (quite the opposite). These subsidies are, de-facto, a massive and illegal transfer of wealth - counted in billions of dollars per year - from the people of Iran to a ruling class/mafia, but disguised as "economic help/assistance" to the Iranian people and this is the only real reason why they are kept in place.