Lecture on Oil & Gas Investment Planning in Iran and Energy Subsidies

SUMMARY:
Iran's Deputy Minister of Oil in Charge of Planning said by the year 2024, Iran hopes to maintain its rank as OPEC's second largest oil producer and to become the world's second largest gas producer.  (It is now the fourth.)  Dr. Akbar Torkan also said Iran hopes to rise from second place to first in the region's petrochemical industry and technological and scientific field.
    
To help Iran reach these goals, the government is considering how it can use oil and gas as a base for the country's development.  Iran's government has planned to invest around $500 billion in various energy sectors within the next 20 years.  Roughly $150 billion of this amount will be for the oil sector, and around $50 billion for the petrochemical industry.
  
Approximately $310 billion will be for upstream and downstream gas.  Iran's most important focus for future investment will be in the gas sector, with an emphasis on pipeline over Liquefied Natural Gas (LNG).

Dr. Mohammad Ali Emadi, NIOC Board Member and the head of the National Iranian Oil Company's Research and Development Department, then explained that Iran hopes to improve its gas production by taking various steps.  For example, Iran wants to increase its recovery factor, which is now on average around 24 percent.  The government is focusing on gas injection.  It is also improving its research and development.  This year's R&D budget increased 40 times over last year's.

Dr. Torkan then spoke about the need to improve the energy efficiency of various sectors in Iran's economy.  For example, he said, 34 percent of energy in power plants is converted to electricity, while the rest is wasted.  Inefficiencies like these will force Iran to import around $12 billion of gasoil and gasoline products in the current year to meet domestic consumption needs.  The total subsidy the government is paying to sell these products domestically is $155 billion.  It is impossible for Iran to continue this practice, Dr. Torkan said, but changing it will inevitably affect different parts of the economy.  One effect could be that the inflation rate would increase to 40 percent or 64 percent according to the option models of subsidy reduction.  Government committees are studying various possibilities to determine which ones would incur the least costs to Iran's economy.