CHAPTER 4: A REVIEW OF THE ENERGY ECONOMY IN IRAN AND OTHER COUNTRIES

Transcription

1 CHAPTER 4: A REVIEW OF THE ENERGY ECONOMY IN IRAN AND OTHER COUNTRIES 60

2 Nowadays, energy is the lifeblood of modern civilization. The shortage of energy that can be one of the issues related to the economy of every country denotes the importance of the energy in the world. Evidently, the natural energy reservoirs are limited and will no longer be capable to satisfy the intensive energy demand of the world. Therefore the proper use of energy is a matter of concern to every nation. The present section gives a view on energy sectors in Iran, India and some other countries. We will focus on oil productions, consumptions and reservoirs. Furthermore, natural gas and electricity are considered as well. Meanwhile, calculations of daily energy consumption, annual energy growth rate and the total share of oil products are presented. This chapter has provided some indices like per capita consumption, energy intensity and energy coefficient which are used for comparative study of energy consumption. The basic energy includes oil products, natural gas and electricity that totally cover per cent of total energy consumption in Iran. Oil products contain liquid gas, petrol, aircraft fuel, kerosene, gasoil and fuel oil covering 61.8 per cent of total energy consumption (Flow chart 4.1). 4.1 Oil Producers Iran s Oil Production Oil production of Iran reached its peak of 6 Mbbl/d ( m3/d) in 1974, but it showed a considerable decline after Iran revolution in 1979.This was due to some reasons such as political unrest, the war with Iraq, limited investment, US sanctions and etc. The mature oil fields need enhanced oil recovery (EOR) techniques such as gas injection to maintain production. With the current technology in Iran, only 25% of oil recovery is possible which is 10% lesser than the world average oil recovery. 61

3 Flow chart 4.1: A general view of energy evaluation in Iran Iran economy Agricultural sector Energy sector Industry sector Energy standard Demand Supply Energy price Energy loss Oil Non commercial fuels Production relative advantage Energy intensity Water electricity Solid fuel Opportunity cost in GDP Annual consumption Electricity Solid fuels and Oil products Natural gas Commercial Fuel oil Petrol Kerosene Gasoil Liquid gas Aircraft fuel 62

4 Crude Oil Production (Million Barrels per Day) Table 4.1 and figure 4.1 show the production changes of crude oil in Iran during some specific years ( ). Average crude production was 3.5 Mbbl/d and 3.8 Mbbl/d in 2002 and 2003 respectively. In 2004, Iran was the world's fourth largest producer of crude oil of about 4.1 million barrels per day (Mbbl/d). The table and figure below show how the oil production is increasing in Iran during these two decades. Table 4.1: Crude Oil Production in some specific years in Iran (Mbbl/d) Iran Source: Energy Information Administration, Iran s Oil Production Figure 4.1:Crude Oil Production in some specific years in Iran OPEC s Oil Production Table 4.2 and figure 4.2 show the top OPEC oil producers in 2004.Member of the Organization of Petroleum Exporting Countries (OPEC) include: Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. Members share some key characteristics that allow them, as a group, to have a significant influence on world oil markets, despite their lack of monopoly over world oil production. The OPEC members are important oil exporters in the entire world. Member s oil industries are mostly nationalized, allowing OPEC member s political establishments to increase or decrease oil production. Through managing the world oil supply, OPEC can work to increase or decrease world oil prices to help meet the group s economic and political goals. Member governments 63

5 rely heavily on oil revenues. Production or lifting costs are far lower in OPEC countries than in most non-opec countries. Prolonged periods of low oil prices make the world more reliant on cheaper-to-produce OPEC oil. Iran has a huge crude oil production among OPEC countries, and, after Saudi Arabia, is the second- largest crude oil producer in OPEC countries. This is an indication of importance of Iran in world oil product market. Table 4.2: Top OPEC Oil Production (Mbbl/d) in 2004 Rank OPEC Countries Production (Mbbl/d)) - Total OPEC Saudi Arabia Iran Venezuela United Arab Emirates Kuwait Nigeria Iraq 2.0 Source: Energy Information Administration, OPEC s Oil Production Figure 4.2:Top OPEC Oil Production in 2004 Iraq Nigeria Kuwait United Arab Emirates Venezuela Iran Saudi Arabia 10.5 Total OPEC OPEC Oil Production(Million Barrels Per Day) World s Oil Production Oil is one of the fundamental consumable products in all countries. The top 15 producing countries provide over 80 percent of total world oil. Production by the largest producers is shown in Table 4.3 and figure 4.3 as well. Iran is the fourth-largest oil producer (4.2 Mbbl/d) after Saudi Arabia, Russia and United States in

6 Oil Production(Million Barrels Per Day) Table 4.3: Top World Oil Producers (Mbbl/d), 2006 Rank Country Production(Mbbl/d) 1 Saudi Arabia Russia United Stated Iran China Mexico Canada U A E Venezuela Norway Kuwait Nigeria Brazil Algeria Iraq 2.0 Source: Energy Information Administration, Oil Production Sector Figure 4.3:Top World Oil Producers, Saudi Arabia Russia United States Iran China Mexio Canada United Arab Emirates Venezuela Norway Kuwait Nigeria Brazil Algeria Iraq 4.2 Oil Consumers Iran s Oil Consumption Energy consumption is a major problem in the most of developing countries. Domestic consumption is increasing in Iran due to the growing population and high governmental subsidies on energy, which reduces the amount of oil availability for export and contributes to more government budget deficit. High oil prices in recent years have enabled Iran to amass nearly $60 billion as foreign exchange reserves, but still the economic problems such as high unemployment and inflation rates are remained unsolved. 65

7 Iran Daily Oil Product Consumptions and Oil Product Shares Table 4.4 shows daily oil product consumptions and the individual oil product shares of the total oil consumption in some specific selected years in Iran. As this table shows, daily oil products consumption was million liters in 1984, and it increased to million liters and million liters in 1994 and 2004, respectively. Daily gasoil consumption was 41 million liters in 1984 and showed an increase to 62 million liters in 1994 and 74.9 million liters in Daily fuel oil consumption was 31.4 million liters in 1984 and amounted to 38.2 million liters in 1994 and decreased to 37.6 million liters in Daily petrol consumption was 18.1 million liters in 1984 but increased to 31 million liters in 1994 and 60.7 million liters in Furthermore, the table shows that daily kerosene was 21.2 million liters in 1984; it was 28 million liters in 1994 but 21.2 million liters in Daily liquid gas was 4.4 million liters in 1984, increased to 8.5 in 1994 and 11.5 in And finally daily air craft fuel consumption was 1.7 million liters in 1984, 2.1 million liters in 1994 and 3.4 million liters in This table shows the percentage of oil products consumption in 1984 and 2004,too.The oil product consumptions,in 1984, such as gasoil, fuel oil, kerosene, petrol, liquid gas and aircraft fuel were 34.8 %, 26.6%, 18.1%, 15.4%, 3.7%, and 1.4% respectively. The highest consumption share of 36% belonged to gasoil; petrol was a second one (28.4%), fuel oil (18.1%), kerosene (10.3%), liquid gas (5.5%) and aircraft fuel (1.7%), in In general, the consumption of oil products is increasing dramatically in Iran. Petrol consumption showed a great increase of 15.4% in 1984 and 28.4% in 2004.The following reasons can be counted for this enhancement: Increase number of cars, vehicles, etc. Low price of petrol. Deficiency of public transportation system management to persuade people to use it. Lack of any appropriate substitution for petrol as a fuel. 66

8 Table 4.4: Consumption Share of Individual Oil products and their Daily consumptions in Iran Year Daily Products share/total Products share / total Products Consumption Million liter oil consumption (1984) % oil consumption (2004)% Liquid gas Petrol Air craft Kerosene Gasoil Fuel oil All Products Source: Energy balance sheet of Iran Management Energy Office, Power Ministry. Calculated by author 67

9 Average Growth Rate of Oil Product Consumptions in Iran Table 4.5 indicates average growth rate of oil product consumptions in Iran. Three categories are selected, , and Petrol had the highest annual growth rate of 10.9%, 6.8% and 9.3% in , and respectively. One of the low growth rates belonged to kerosene that is 0.56%, -2.9% and -3.4%, in the three categories respectively. The average consumption growth rate of liquid gas was 6%, 4.9% and 2.6% in the three respected categories. In , and , the growth rate of air craft was 3.9%, 5.4% and 4% respectively. The share of gasoil consumption was 3.4% in the first period that decreased to 2.1% in second one, but, again increased to 3.5% in the third period. And finally growth rate of fuel oil was 1.6%, -0.02% and -0.58% in selected periods respectively. Generally, the reasons for reduction of oil products consumption are firstly because of replacement of natural gas instead of oil products and secondly due to increasing of the nominal price of oil products. Average growth rate of oil product consumption was 4.4% during 1984 to The growth decreased to 2.7% during 1994 to 2004 and 2.6% in One of the main reasons for such decreasing is substitution of oil products by natural gas. 68

10 Average of annual growth rate(%) Liquid Gas Petrol Air Craft Kerosene Gasoil Fuel Oil All products Table 4.5: Average of oil product consumptions growth rate in Iran (Percentage) Oil Products Average consumption growth rate ( ) The average of annual growth rate ( ) The average of annual growth rate ( ) Liquid gas Petrol Air craft Kerosene Gasoil Fuel oil All products Source: Energy balance sheet of Iran Management Energy Office, Power Ministry. Calculated by author Figure 4.5:Average Growth Rate of Oil Product Consumptions during the selected Years in Iran(Percentage) World s Oil Consumption This study investigates the pattern of energy consumption with respect to growth and development in Iran and the top- oil-consuming countries. The analysis is extended to examine how to improve the energy conservation and its efficiency in energy sectors of Iran. Results from the analysis are further utilized to develop policies to enhance government s energy consumption strategy. Table 4.6 is the lists of 15 top - oil-consuming countries and their respective consumption. In total, the top 15 countries consume over 72 69

11 Oil Consumption(Million Barrels per Day) percent of the average daily production. In the Middle East, Saudi Arabia and Iran are the major sources of growing oil demand, average of both currently consuming over 1.9 Mbbl/d each. 4.6: Top World Oil Consumers (Million barrels per day), 2006 Rank Country Consumption(Mbbl/d) 1 United States China Japan Russia Germany India Canada Brazil South Korea Saudi Arabia Mexico France UK Italy Iran 1.7 Source: EIA, Oil Consumption Sectors Figure 4.6:Top World Oil Consumers(Mbbl/d)in United States China Japan Rusiia Germany India Canada Brazil South Korea Saudi Arabia Mexico France United Kingdom Italy Iran 70

12 4.3 Oil Reserves Generally the concept of reserves is complicated. Reserves is an estimate of the amount of oil in a reservoir that can be extracted at an assumed cost. Thus, a higher oil price outlook often means that more oil can be produced, but geology places an upper limit on price-dependent reserves growth; in well managed oil fields, it is often percent more than what is available at lower prices. Reserves estimation is a matter of gauging how much extractable oil resides in complex rock formations that exist typically one to three miles below the surface of the ground; inherently limited information is used for this estimation. Specialists who estimate reserves use an array of methodologies and a great deal of judgment. Thus, different estimators might calculate different reserves from the same data. Some aspects of reserves include production history, understanding of local geology, available technology, oil prices, etc. This concept is important because satisfying increasing oil demand not only requires continuing to produce older oil reservoirs with their declining production, it also requires finding new ones, capable of producing sufficient quantities of oil to compensate for shrinking production from older fields and to provide the increases demanded by the market, too Iran s Oil Reserves Table 4.7 shows the reserves of oil during the selected years in Iran. In 2004, oil reserves increased to Billion Barrels per Day, which is almost 1.4 times greater than the oil reserves in the previous year. One of the recent implemented policies in oil products is to make a balance between oil production capacity and oil reserves. Conservation of the oil reserves, completing the injection gas projects, enforcing new technologies in oil extraction process and developing appropriate research work to enhance the production capacity and crude oil exportation are some examples of these policies. 71

13 Oil Reserves(Billion Barrels) Table 4.7: Oil Reserves in some specific years in Iran (Billion Barrels) Year Oil Reserves) Source: Energy Information Administration, Iran s oil Reserves Figure 4.7:Oil Reserves in some specific years in Iran OPEC s Oil Reserves The reserves of oil in OPEC countries in 2004 are shown in table and figure 4.8.The OPEC countries have major oil reserves in the region and the world as well. Iran has the second oil reserves (125.8 Billion Barrels) after Saudi Arabia (261.9 Billion Barrels). According to the oil reserve estimation, 80% of the world s proven reserves are located in OPEC member countries. Table 4.8: Top OPEC Oil Reserves in 2004(Billion Barrels) Rank Country Oil Reserves(bbl/d) 1 Saudi Arabia Iran Iraq Kuwait UAE Venezuela Libya Nigeria 25.0 Source: Energy Information Administration, OPEC s Oil Reserves 72

14 Figure 4.8:Top OPEC Oil Reserves in 2004 Nigeria Libya Venezuela United Arab Emirates Kuw ait Iraq Iran Saudi Arabia OPEC Reserves(Billion Barrels ) World s Oil Reserves Iran had the world's third largest oil reserves of about 136 billion barrels ( m3) in the year of Iran oil reserves are almost half of reserves of the first ranked country, Saudi Arabia, as shown in the table. Iran oil reserves roughly, are equal to 10% of the world's total proven petroleum reserves. Table 4.9: Top World Proved Oil Reserves (Billion Barrels), 2006 Rank Country Reserves (Billion Barrels) 1 Saudi Arabia Canada Iran Iraq Kuwait United Arab Emirates Venezuela Russia Libya Nigeria United States China Qatar Mexico Algeria 11.3 Source: Energy Information Administration, World s Oil Reserves 73

15 Algeria Mexico Qatar China USA Nigeria Libya Russia Venezuela UAE Kuwait Iraq Iran Canada Figure 4.9:Top World Oil Reserves (Billion Barrels) in Saudi Arabia Oil Reserves(Billion Barrels) Oil Exporters Iran s Oil Export The amount of the net exports is one of the major factors which indicate the economic power and ability of the country. Iran's economy relies heavily on oil export revenues, around 80% of total export earnings and 40%-50% of the government budget. High oil prices and revenues can help Iran s economic situation and attribute a strong trade and current account surpluses in the world. Because of higher oil prices and net oil exports, Iran's net oil earnings during 2004 rose by 35% ($32.2 billion). It is expected that Iran oil exports earnings would be around $41 billion and $43 billion in 2005 and 2006, respectively. Iran is expected to have an average net oil export of around 2.7 and 2.5 million barrels per day in 2005 and 2006, respectively. Export rates continue to grow despite of increased domestic oil consumptions. 74

16 Iran Oil Exports (Thosand Barrels per Day) Table 4.10: Top Importers of Iran s Crude Oil (Thousand Barrels per Day), 2006 Country Iran s Oil Importers (Thousand bbl/d) Japan 448 China 335 India* 302 South Korea 204 Italy 191 Turkey 179 France 135 South Africa 127 Taiwan 117 Greece 117 Other 345 Total Exports 2500 *India s imports are reported for April, August 2006 Source: IEA Monthly Oil Data Service, March 2007; Global Trade Atlas Figure 4.10:Top Importer of Iran Oil (Thousand bbl/d), Japan China India South Korea Italy Turkey France South Africa Taiwan Greece Other Total Exports Table 4.10 shows the top countries which import crude oil from Iran in Japan is the main importer (448 thousand Barrels per Day), China is the second one(335 thousand Barrels per Day) and the lowest ranked importers are Taiwan and Greece (117 thousand Barrels per Day).Iran net crude oil exports, primarily to Japan, China, India, South Korea, Italy, and some other countries, averaged 2.5 Mbbl/d in This caused that Iran became the fifth-largest exporter of crude oil in the world. 75

17 4.4.2 World s Oil Exporters OPEC countries more strongly represent the top world s net exporters. Out of twelve OPEC members, nine exported more than one million barrels per day of oil products in 2001; while, Russia, Norway, and Mexico have been the world s largest non-opec exporters. Iran has the fifth- rank among the oil exporter (2500 thousand barrels per day) that is very close to the Norway oil exports (2557 thousand barrels per day) in 2006.Nowadays, domestic consumption is increasing in Iran due to the growing population and large government subsidies on energy. This reduces the amount of oil availability for exportation which leads to a large government budget deficit. Table 4.11: Top World Oil Net Exporters, 2006 (Thousand Barrels Per Day) Rank Country Exports 1 Saudi Arabia 8,525 2 Russia 6,866 3 United Arab Emirates 2,564 4 Norway 2,557 5 Iran 2,500 6 Kuwait 2,340 7 Venezuela 2,134 8 Nigeria 2,131 9 Algeria 1, Mexico 1, Libya 1, Iraq 1, Angola 1, Kazakhstan 1, Qatar 1,033 Source: Energy Information Administration, Oil Net Exporter 76

18 Oil export(thousand Barrels per Day) 4.5 Oil Importers Figure 4.11:Top World Oil Net Exporters (Thousand Barrels Per Day), 2006 Saudi Arabia Russia United Arab Emirates Norway Iran Kuwait Venezuela Nigeria Algeria Mexico Libya Iraq Angola Kazakhstan Qatar While United States, Japan and China are the largest importers in the entire world; some countries like Belgium and Thailand are among smaller net importers. Due to a lack of refinery capacity, Iran is the second biggest gasoline importer in the world after the United States. Table 4.12: Top World Oil Net Importers (Thousand bbl/d), 2006 Rank Country Imports 1 United States 12,357 2 Japan 5,069 3 China 3,356 4 Germany 2,540 5 Korea, South 2,162 6 France 1,910 7 India 1,718 8 Italy 1,578 9 Spain 1, Taiwan Netherlands Singapore Turkey Belgium Thailand 594 Source: Energy Information Administration, Oil Net Importer 77

19 Oil Net Importers (Thousand Barrels per Day) 14,000 12,000 10,000 8,000 6,000 4,000 2, Natural Gas Figure 4.12:Top World Oil Net Importers,2006 United States Japan China Germany Korea, South France India Italy Spain Taiwan Netherlands Singapore Turkey Belgium Thailand Natural gas is fast emerging as the most important energy source for the future. Natural gas is found in abundance globally and domestically. This abundant supply of natural gas along with its environmental soundness and multiple applications across all sectors make it the most important source of energy to meet soaring demand for energy world over. Natural gas also is important as a major source for electricity generation through the use of gas turbines and steam turbines. Environmentally, natural gas burns cleaner than other fossil fuels, such as oil and coal, and produces less greenhouse gases. With regard to natural gas resources in Iran and by supplying necessary conditions to entry to market, Iran can develop by developing natural gas resources. Iran economical and geographical situation is an advantageous variable in international exchanges, comparing to other countries. Iran is a bridge between Caspian Sea, the middle Asia, Persian Gulf, India, Pakistan, Turkey and Europe. And Iran is considered as an economical route to Russia, Ghafghaz and international markets. It creates a peaceful relation in frame of economical and social programs to other countries (Ghafghaz and middle Asia) which can help to perform great trade activities. 78

20 Natural Gas Production(BCF) Iran extensive gas network transfer system contributes as a supplementary transfer route for Russian gas to the north and west- north markets. Using northsouth network, gas would be transferred to middle Asia and east southern countries.evaluations show that Middle East has an effective role in supplying gas to the world ;Therefore, Iran, has a specific situation to meet the world market demands due to its geographical position and resources Natural Gas Production Iran s Natural Gas Production Natural gas is an important factor for Iran s development and it is one of the principle sources of energy for many of our day-to-day needs and activities. Natural Gas is a vital component of the world's supply of energy. It is one of the cleanest, safest, and most useful of all energy sources. In table 4.13 and figure 4.13, the production changes of natural gas in Iran during some specific years ( ) are presented. As indicated in table 4.13, natural gas production increased during the selected years. Table 4.13: Iran Natural Gas Production (Trillion Cubic Feet) during the selected years Iran/ TCF Source: Energy Information Administration, Iran Natural Gas Production Figure 4.13:Iran Natural Gas Production(TCF)

21 OPEC s Natural Gas Production Iran is the first natural gas producer (2.96 TCF) and Algeria is the second one (2.83 TCF), while Nigeria (0.77 TCF) and Kuwait (0.34 TCF) are small producers among OPEC countries. Table 4.14: Top OPEC Natural Gas Production (TCF) in 2004 Rank Country OPEC NG Production(TCF ) 1 Iran Algeria Indonesia Saudi Arabia UAE Qatar Venezuela Nigeria Kuwait 0.34 Source: Energy Information Administration, OPEC Natural Gas Figure 4.14:Top OPEC Natural Gas Production in 2004(TCF) Kuwait Nigeria Venezuela Qatar United Arab Emirates Saudi Arabia Indonesia Algeria Iran Natural Gas Production World s Natural Gas Production The following table and figure depict the region wise classification of production. Top producers in the year 2006 were Russian federation (23% of total production) and the United States (18%of total). The other major producers include Canada, Iran, Norway, Algeria and United Kingdom. U.S and the Russian Federation together contributed to almost 40% of the world total. 80

22 Natural Gas Production(TCF) Table 4.15: Top World Natural Gas Production (TCF), 2006 Rank Country World NG Production(TCF) 1 Russia United States Canada Iran Norway Algeria United Kingdom Netherlands Saudi Arabia Turkmenistan Uzbekistan Malaysia China Indonesia Qatar 1.79 Source: Energy Information Administration, World NG Production Figure 4.15:Top World Natural Gas Production(TCF)in Natural Gas Consumption Russia United States Canada Iran Norway Algeria United Kingdom Netherlands Saudi Arabia Turkmenistan Uzbekistan Malaysia Iran s Natural Gas Consumption China Indonesia The consumption of natural gas is a very important factor because reduction of the consumption, can improve the export of this product. Table 4.16 and figure 4.16 show the consumption changes of natural gas in Iran during some specific years ( ). Average natural gas consumption was 2.8 and 2.9 TCF in 2002 and 2003 Qatar 81

23 Natural Gas Consumption(TCF) respectively. In 2004, Iran was the world's third largest consumer of natural gas of about 3.0 trillion cubit feet. Table and figure below show how the natural gas has increased in Iran during these two decades. Natural gas consumption is expected to grow around 7 percent annually for the next decade in Iran. Table 4.16: Iran Natural Gas Consumption in some specific years (Trillion Cubic Feet) Iran Source: Energy Information Administration, Iran Natural Gas Consumption Figure 4.16:Iran Natural Gas Consumption (Trillion Cubic Feet) OPEC s Natural Gas Consumption As in Table 4.17 and figure 4.17 is shown, Iran is the highest natural gas consumption (3.0 TCF) among OPEC countries. After Iran, Saudi Arabia and United Arab Emirates are the highest consumers in OPEC. 82

24 Table 4.17: Top OPEC Natural Gas Consumption (TCF) in 2004 Rank Country OPEC NG Consumption(TCF) 1 Iran Saudi Arabia UAE Venezuela Algeria Kuwait Nigeria Libya Iraq 0.06 Source: Energy Information Administration, OPEC NG Consumption Figure 4.17:Top OPEC Natural Gas Consumption(TCF) Iraq Libya Nigeria Kuwait Algeria Venezuela United Arab Emirates Saudi Arabia Iran Natural Gas Consumption(TCF) World s Natural Gas Consumption The world has slowly diversified to the varied uses of natural gas since the oil crisis of In 1973, about 54 per cent of natural gas was utilized in the industrial sectors, 5.3 per cent was utilized by the transport and non-energy sectors and the remaining (40.7 per cent) was consumed by other unspecified sectors. The industrial use of natural gas at present has declined to 35.1 per cent while this has increased to 48.5 per cent in unspecified sectors. The other major growth of the natural gas consumption has been in non-energy and transport sectors, which these two sectors are now consuming 10.7 per cent and 5.7 per cent, respectively. The top natural gas consumers are US, Russia, Iran, Germany, Canada, Japan, the UK, Italy and Saudi Arabia in

25 Table 4.18: Top World Natural Gas Consumption (TCF), 2006 Rank Country World NG Consumption(TCF) 1 United States Russia Iran Germany Canada Japan United Kingdom Italy Saudi Arabia Ukraine Mexico China Uzbekistan France Netherlands 1.7 Source: Energy Information Administration, World NG Consumption Figure 4.18:Top World Natural Gas Consumption(TCF),2006 Netherlands 1.7 France Uzbekistan China 2 Mexico Ukraine Saudi Arabia 2.6 Italy 3 United Kingdom 3.2 Japan 3.2 Canada 3.3 Germany 3.5 Iran 3.8 Russia 16.6 United States NG Consumption(TCF) 84

26 4.6.3 Natural Gas Reserves In recent years natural gas reserves is important more than ever because natural gas (NG) is the fastest growing primary energy source in the world, NG is widely available, and it is the cleanest burning petroleum based fuel. The global market for NG is much smaller than for oil because gas transport is difficult and costly due to relatively low energy content in relation to volume. NG uses industrial, residential, electric generation, commercial and transportation sectors. NG is used across all sectors in varying amounts. CO2 emission of NG is lower than all other petroleum derivative fuel which is a favorable feedback for the engines, in terms of the greenhouse effect. Very positive contribution of NG on the environmental pollution must also be considered in economical aspects Iran s Natural Gas Reserves Iran s natural gas reserve is one of the major reserves in the world and it is increasing during recent years. As table and figure below show Iran s reserves are expected to be more effective since the natural gas reserves of Iran are improving continuously. Iran has 480 trillion cubic feet (Tcf) of proven natural gas reserves in It holds the world's second largest reserves after Russia. Around 62 percent of Iran natural gas reserves are located in non-associated fields and have not been developed yet. At the end of 2000, Iran had the second largest natural gas reserves (812.3 trillion cubic feet) in the world according to the Oil & Gas Journal 8. Both production and consumption have grown rapidly over the past 20 years, and natural gas is often used for re-injection into mature oil fields in Iran. According to Global Energy, Iran s natural gas exports will be minimal due to rising domestic demand even with future expansion and production from the massive South Pars project. In 2005, 65 percent of Iran natural gas was marketed production, while 18 percent was for EOR gas re-injection, and 17 percent was lost due to flaring and the 8 Joint Economic Committee, www. house. gov/jec/ 85

27 Natural Gas Reserves (Triilion Cubic Feet) reduction of wet natural gas from hydrocarbon extraction. Like the oil industry, natural gas prices in Iran are heavily subsidized by the government. Table 4.19: Iran Natural Gas Reserves during the selected years (TCF) Iran Source: Energy Information Administration, Iran Natural Gas Reserves Figure4.19:Iran Natural Gas Reserves during the Selected Years(TCF) OPEC s Natural Gas Reserves The top OPEC has around TCF of natural gas reserves; furthermore, it has more than 60 percent of natural gas in the world. A great contribution to stability would be made if the OPEC countries were to publish the true values of natural gas production and reserves, and if the prices were set at a level consistent with the supply/demand balance. There would be less reason for concern that low prices would damage the OPEC economies, and lessen the incentive for lower energy intensities. OPEC s goal of a fair price around 25$/b (in 2000 $) seems to be a good compromise. There are two main reserves in OPEC; Iran is a very important member among OPEC countries. It is the largest reserve (940 TCF) among OPEC countries; Qatar is the second-one (910 TCF) in

28 Table 4.20: Top OPEC Natural Gas Reserves in 2004(TCF) Rank Country NG Reserves (TCF ) 1 Iran Qatar Saudi Arabia UAE Algeria Nigeria Venezuela Iraq Indonesia 90.3 Source: Energy Information Administration, OPEC NG Reserves Figure 4.20:Top OPEC NG Reserves(T CF)in 2004 Indonesia Iraq Venezuela Nigeria Algeria UAE Saudi Arabia Qatar Iran NG Reserves(TCF) World s Natural Gas Reserves Collectively, the top 10 countries, i.e. Russia, Iran, Qatar, Saudi Arabia, UAE, US, Nigeria, Algeria, Venezuela and Iraq, possess around Tcf of natural gas reserves( out of the world s Tcf natural gas) while other countries have Tcf. The world natural gas market is assumed to grow significantly in the coming years. Looking at the past trends, we can see that worldwide natural gas use has grown remarkably over the last three decades; an annual growth rate of 2.7% is registered for natural gas. Before the 1973 crisis, not much attention was given to gas and it used to be flared off. 87

29 The natural gas showed an uninterrupted, rapid pace of growth during the last years; its annual average growth reached 3.4% between periods. Only Russia has more natural gas reserves than Iran. Qatar, neighboring country of Iran has almost equal natural gas reserves to Iran s (figure 4.21). It should be noted that 62 percent of Iran s natural gas reserves have not yet been developed. Table 4.21: Top World Natural Gas Reserves (Trillion Cubic Feet), 2006 Rank Country NG Reserves(TCF) 1 Russia Iran Qatar Saudi Arabia UAE United States Nigeria Algeria Venezuela Iraq Source: Energy Information Administration, World Natural Gas Reserves Figure 4.21:Top World Natural Gas Reserves,2006 (Trillion Cubit Feet) Venezuela Algeria 160 Nigeria United States United Arab Emirates Saudi Arabia Qatar Iran 971 Russia Natural Gas Reserves(TCF) 88

30 World s Natural Gas Exporters The major exporters of natural gas are Russia (8,416 BCF), Canada (3,606 BCF), Norway (2,966 BCF), Algeria (2,175 BCF), the Netherlands (1,930 BCF), Turkmenistan (1,593), Indonesia (1,215 BCF) and Qatar (1,098 BCF). Table 4.22: Top World Natural Gas Exporters (BCF), 2006 Rank Country NG Export(BCF) 1 Russia 8,416 2 Canada 3,606 3 Norway 2,966 4 Algeria 2,175 5 Netherlands 1,930 6 Turkmenistan 1,593 7 Indonesia 1,215 8 Qatar 1,098 9 Malaysia 1,053 Source: Energy Information Administration, World Natural Gas Export 89

31 World s Natural Gas Importers In term of imports, the US along with Germany, Japan, Italy, Ukraine, Russia, France, Spain and Turkey are among the leading importers. The import of natural gas is 4186 BCF, 3310 BCF and 3130 BCF for the US, Germany and Japan respectively in Till 1993, Germany was the leading importer of natural gas and then the US became the leading importer. Table 4.23: Top World Natural Gas Importers (BCF), 2006 Rank Country NG Import(BCF) 1 United States 4,186 2 Germany 3,310 3 Japan 3,130 4 Italy 2,733 5 Ukraine 1,872 6 Russia 1,847 7 France 1,751 8 Spain 1,215 9 Turkey 1,067 Source: Energy Information Administration, World Natural Gas Import Turkey Spain France Russia Ukraine Italy Japan Germany Figure 4.23:Top Natural Gas Importers ( Billion Cubic Feet) 1,067 1,215 1,751 1,847 1,872 2,733 3,130 3,310 United States 4, ,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Natural Gas Import(BCF) 90

32 Therma Electricity Generation (Billion Kilowatthours) 4.7 Electricity Electricity Generation Iran s Electricity Generation The main producer of electricity in Iran is the Ministry of Power. The electricity system of Iran (production, transmission and distribution) is centralized and owned by the government. Recently, the government has started to study the privatization in small-scale to assess its benefits and outcomes for future programs. The electricity includes conventional thermal, hydroelectric, nuclear, geothermal, solar, wind, wood and waste powers. In this study, the conventional thermal is assumed to be the total electricity. Iran electricity generation is increasing during the selected years; it was 146 billion Kilowatthours in 2004 while it was 30 billion Kilowatthours in It is increasing dramatically as shown in the following table and figure. Table 4.24: Iran Net Conventional Thermal Electricity Generation during the selected years (Billion Kilowatthours) Iran Source: Energy Information Administration, Iran thermal electricity generation Figure 4.24:Iran Thermal Electricity Generation during the selected years(billion Kilowatthours)

33 World s Electricity Generation Regarding the share of energy consumption in different sections in Iran; the electricity used in different sections is 35 %( household), 32% (industrial), 13% (public facility), 10% (agricultural), 7% (commercial) and 3% (others). U.S is the first thermal electricity generator (2,884.4 BKh), China is the second one (2,225.1 BKh), Japan is the third one (663.7 BKh) and Iran is the eleventh largest thermal electricity generator (171.8 BKh) in the world, in The US thermal gas generation is about 16 times greater than that of Iran. Table 4.25: Thermal Electricity Generation in some specific countries, 2006 (Billion Kilowatthours) Rank Country Thermal Electricity generation(bkh) 1 US 2, China 2, Japan Russia India Germany Nigeria UK Australia South Africa Iran Saudi Arabia UAE Iraq Norway 0.57 Source: Energy Information Administration, World Electricity Generation 92

34 Electricity Consumption(Bkh) Electricity Consumption Iran s Electricity Consumption In 2004, Iran generated 146 billion Kilowatthours (BKh) and consumed 127 BKh electricity. Iran needs to increase its electricity generation to meet the rapid consumption growth. The IEA estimates that energy intensity in Iran is 30 percent higher than those OECD countries. According to FACTS Global Energy, Iran s electricity demand is projected to grow at 6 percent per year through In Iran, multiple sources of power generation are being explored. One option for meeting electricity demand includes using fuel oil for power generation which can be particularly efficient for plants located close to oil refineries. Iran also plans to boost natural gas production to meet its electricity demand. Hydroelectric plants and the controversial nuclear power program will also be part of Iran s overall electricity plan if technological advances, investment, and political pressure allow. The electricity generation, transformation and distribution are now the duty of the government of Iran, but this is going to be shifted to private sectors in near future. Table 4.26: Iran Total Net Electricity Consumption, during the selected years (Billion Kilowatthours) Iran Source: Energy Information Administration, Iran Net Electricity Consumption Figure 4.26:Iran Total Net Electricity Consumption(BKh)

35 Electricity Consumption(BKh) World s Electricity Consumption The following table and figure show the top consumers of electricity in US, China, Japan, Russia, Canada, France, India, Brazil, UK and Italy are, in order, the main electricity consumers in the world. The United States is the first rank electricity consumer of BKh, whereas Italy consumes BKh of electricity, as the last consumer in the table. Table 4.27: Total Net Electricity Consumption (Billion Kilowatthours), in main consumer countries 2006 Rank Thermal Electricity Country generation(bkh) 1 United States 3, China 2, Japan Russia Canada France India Brazil United Kingdom Italy Source: Energy Information Administration, World Net Electricity Consumption Figure 4.27:Total Net Electricity Cosnumption(BKh) in Main consumer countries in , , , , , United States China Japan Russia Canada France India Brazil United Kingdom Italy 94

36 Per Capita Energy Consumption(Million Btu) 4.8 Macroeconomic Indices in Energy and Economic Growth Per capita Energy Consumption Per capita Energy Consumption in Iran Energy is one of the important factors for providing the welfare of each family member in the society. Generally the energy consumption in developed countries is high because of the higher level of income in these countries; they have more access to use of the variable available public services. Nevertheless in these countries, attempts are put to adjust the per capita energy consumption by increasing the productivity. Table 4.28 and figure 4.28 show per capita energy consumption in Iran; it is 48 million Btu in 1984 and 99.4 million Btu in Per capita energy consumption is increasing during recent years in Iran, due to huge energy reservoirs and low price of energy which lead to energy over -consumptions. Table 4.28: Iran per Capita Total Primary Energy Consumption, during the selected years (Million Btu) Iran Source: Energy Information Administration, Iran per Capita Energy Consumption Figure 4.28:Iran Per Capita energy Consumption(Million Btu) Per capita Energy Consumption in the world Table 4.29 and the related figure show the various per capita energy consumptions in some specific countries in Per capita energy consumption is high in some countries such as Canada, Norway, US, Saudi Arabia and Russia, while it is very low in China, Turkey and India. Per capita energy consumption in Iran is about 2 times 95

37 greater than China and Turkey; meanwhile it is 7 times more than per capita energy consumption in India. Table 4.29: per Capita Energy Consumption in some Specific Countries in 2006, (Million Btu) Country Per Capita Energy Consumption (Million Btu) Canada Norway United States Saudi Arabia Russia Japan United Kingdom Iran China 56.2 Turkey 55.5 India 15.9 Source Energy Information Administration, World per Capita Energy Consumption Figure 4.29:Per Capita Energy Consumption In some Specific Countries(Million Btu) India 15.9 Turkey 55.5 China 56.2 Iran United Kingdom Japan Russia Saudi Arabia United States Norway Canada Per Capita Energy Consumption(Million Btu) 96

38 4.8.2 Energy Intensity Energy intensity in Iran: One of the important economic indices that indicate energy consumption is energy intensity. This index shows the use of energy in each country. By using this index, we can evaluate energy consumption productivity during various years. Energy intensity is the ratio of consumed energy (Million barrel of crude oil) to gross domestic production (based on billion dollars). Energy intensity fluctuation depends on country s economic structure (developed or developing countries).in developed countries, by applying Productive Unit Managers, as a technical system improvement and promoting public awareness, energy intensity is considerably reduced. In other words, rational energy consumption leads to optimal energy intensity in theses countries. After the energy crisis period in 1970s, there has been a declining trend in energy intensity in industrial countries. Energy intensity can decrease when a proper management system and saving policies are performed for any production unit. Generally by graded economic development, energy intensity can decrease. Energy intensity fluctuations are likely due to variations in energy consumption productivity or economical structure changes. If Gross Domestic Production (GDP) is fixed, energy consumption productivity will increase and energy intensity decrease. In other words, energy intensity would be affected by energy consumption and Gross Domestic Production. EI = f(ed, GDP) EI = Energy Intensity ED= Energy Consumption GDP= Gross Domestic Production On the other hand, the most effective factor on energy consumption and Gross Domestic Production is energy price that is pointed as energy crisis. Therefore, the effect of increased energy price should be evaluated to determine theoretical principles of energy intensity. 97

39 Energy Intensity In table and figure below energy intensity in Iran during the selected years is shown. Table 4.30: Iran Energy Intensity (Total Energy Consumption per Dollar of Gross Domestic Production Using Market Exchange Rates, during the selected years Iran 41,081 48,883 63,024 57,179 52,540 72,656 65,556 72,724 74,272 73,727 72,597 Source: Energy Information Administration, Iran energy Intensity * (Btu per (2000) U.S. Dollars) Figure 4.30:Iran Energy Intensity(Per dollar/exchange Rates) World s Energy intensity In table and figure below, the energy intensity is compared in some specific countries; In Russia and Iran energy intensity is very high compared to other countries such as Norway, US, UK and Japan. Energy intensity in Iran is almost 18 times greater than Japan, 13 times greater than United Kingdom and 10 times greater than United States. Although the US is the largest energy consumer, it has less energy intensity because the GDP increasing is greater than energy consumption. Therefore as the energy intensity formula is equal to the energy consumption to GDP ratio, the total energy intensity decreases. In case of Iran that has high energy intensity, the energy is mostly used in consumption sectors rather than in production lines; thus the GDP is smaller than energy consumption. 98

40 Table 4.31: Energy Intensity in some countries (per Dollar /Exchange Rates) in 2006 Country Per Capita Energy Consumption (Million Btu) Russia 80,923 Iran 78,753 China 34,931 Saudi Arabia 28,974 India 24,616 Canada 16,486 Turkey 10,968 Norway 9,991 United States 8,841 United Kingdom 5,810 Japan 4,467 Source: Energy Information Administration, World energy Intensity Figure 4.31:Energy Intensity(per Dollar/Exchange Rates)in 2006 Japan United Kingdom United States Norway Turkey India Saudi Arabia China Canada Iran Russia 4,467 5,810 8,841 9,991 10,968 24,616 28,974 34,931 16,486 78,753 80, ,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Energy Intensity(Dollar/Excahnge Rates) 99

41 4.8.3 Energy Coefficient Iran s Energy Coefficient The energy coefficient shows the relationship between energy consumption and production. It is the ratio of energy consumption growth rate to the growth rate of Gross Domestic Production (GDP).The advantages of energy coefficient to energy intensity are that in energy coefficient there is no need to convert the value of gross domestic production to a unit exchange rate, as it is needed in energy intensity, and also this ratio can be calculated for a specific period whereas the energy intensity is calculated for a specific year. If the energy coefficient is less than one, it indicates that the country is using its energy more productively. Contrary, if this index is greater than one, it means that the energy consumption growth rate has increased comparatively more than gross domestic product growth rate. The value of this index is usually positive, but in some rare occasions, when one of the growth rates (energy consumption and GDP) is negative, this index takes a negative value. In this case, if the energy consumption growth rate is negative, but GDP growth rate is positive, it indicated a high efficiency of energy consumption. It should be noted that usually the negative energy coefficient is resulted of a negative GDP growth rate that indicates a non-efficient economy of the country. Energy Coefficient = Growth Rate of Energy Consumption Growth Rate of GDP The study of Iran s energy coefficient shows that the GDP is either negative or less than energy consumption growth rate. 100

42 Table 4.32: Energy Coefficient in different periods in Iran (%) Period Growth Rate of Growth Rate of Energy Energy GDP (%) Consumption (%) Coefficient *Basic year is 1999 Figure 4.32:Iran's Energy Coefficient in different Periods World s Energy Coefficient In table 4.32 the energy coefficient of some counties in three time intervals is shown. As it was previously indicated, the energy coefficient less than one implies efficient economy condition, but in a non-efficient economy situation this value is more than one. Energy coefficient in some countries, such as Japan, Korea, North America, etc, is suitable index for economic growth and development. This table also shows that the energy coefficient is improving in developed countries during recent years. 101