Iranian Oil Production: Decline after 2010?

Transition is all about building community resilience in the face of the twin challenges of peak oil and climate change.

Peak oil is all about oil production flow rates, the imminence of a production peak and the consequences of an ever decreasing supply of oil.

Locally, the North Sea has been a huge oil producing province, producing around 6 million barrels per day at its peak in 1999. Since the peak in production from the North Sea, production has dropped so that today it is just over 3 million barrels per day, or about half its peak flow rate only 11 years after the production peak.

It is widely believed that there is a lot of oil in the countries that make up the Organisation of the Oil Exporting Countries (OPEC). This is true, but there has been a tendency to overstate and upgrade reserves of oil for political reasons (oil reserve data that is available in the public domain is often contradictory in nature and should be interpreted with caution).

Iran is a member of OPEC and is a fascinating country with a rich and vibrant history.

Iran's oil production showed dramatic growth in the sixties and early seventies before peaking at aound 6 million barrels per day in the late seventies. There followed a revolution and a major war with Iraq in the early eighties. During this time the population grew dramatically from around 25 million in the mid sixties to over 75 million today. As a result of increasing population and subsidised oil prices (although subsidies have recently been reduced), internal oil consumption (shown in magenta in the graph) has increased dramatically.

If we subtract oil consumption from oil production, we get the amount of oil available for export which generates revenues for the Iranian government. Net exports are shown in green in the graph.

What is noticable about the green line on the graph is that it has tended to be fairly flat for a period since the early nineties, but now appears to be drooping down slightly. [The recent export peak was in 2004 at 2.69 million barrels per day, in 2009 Iran's net exports were 2.48 million barrels per day].

Recent news on Iranian oil production is not good with a 13% decline rate in production from existing fields reported. This is a shockingly high decline rate and implies a halving of oil production from these fields within 5 years. OPEC is reported as saying Iran's total output is 3.7 million b/d (14th Feb 2011) as reported here, which is considerably lower than the last data point we have from BP in the graph above.

The availability of world oil for export has been studied (by Sam Foucher and Jeffrey Brown)  and reported at the recent ASPO conference in the USA. Foucher and Brown have produced a range of predictions for Iranian oil exports based upon realistic estimates of Iranian oil reserves, production declines and increasing internal consumption.

Their graph of past oil exports is similar to the one in green in my original graph although they use a different data set from the BP data and show production data only up to and including 2005 when Iran was the 3rd largest oil exporter in the world. They predict future oil exports from 2005 where they have placed a vertical dashed line. I have reproduced this vertical dashed line in my graph up  above for ease of cross reference. You can see that the data points since 2005 in my graph fall to the high side of Foucher and Brown's exports median forecast (solid blue line), but within their confidence interval (dashed blue lines).

The conclusion that can be drawn from this graph is that, unless there is some dramtic change in circumstances, Iran will be exporting less and less oil in the future and will cease to be an oil exporter in the 2020 - 2040 time frame.

In a previous study, Foucher and Brown concluded that the top 5 oil exporters in 2005 (Saudi Arabia, Russia, Iran, Norway and UAE) will cease to be oil exporters in a similar time frame i.e. 2020 - 2040.

Update 26th January 2011: A recent news report in the FT warns that Saudi Arabia will be burning most of its oil production domestically in less than 20 years if current consumption patterns persist. Just what Foucher and Brown predict as shown in their graph of actual and projected production, consumption and next exports for Saudi Arabia below. Notice that the actual data since the projection was made in 2007 have followed their projected trends.

The oil age is drawing to a close.

One notable Iranian was Samsam Bakhtiari, sadly recently departed, who was a senior expert for the National Iranian Oil Company. Dr Bakhtiari's presentation to the Australian Senate's hearing on global oil supplies in Sydney in 2006 is a fascinating and chilling insight into the subject of peak oil.

Further more detailed discussion of Iranian oil production from this source:-

During the 1970s, up until the fall of the Shah, Iran routinely produced over 5 million bbl/day. In that era, supergiant fields such as Agha Jari, Gach Saran, Ahwaz and Marun had the potential to produce around 1 million bbl/day each. Added to that were the giant fields Bibi Hakimeh, Karanj, Paris and Rag-e-Safid, all producing in the hundreds of thousands of bbl/day. All of those huge fields produced by the pressure exerted by expanding gas caps. As the gas caps proceeded down structure, pressure fell and with it crude oil production rates. Today these fields produce at fractions of the rates of 40 years ago and many fields have been redeveloped with horizontal wells to tap into the fracture systems which contain most of the crude oil. When Khuzestan was thoroughly surveyed by the Iranian Oil Exploration and Production Company (the Consortium) during the 1970s, many smaller structures were identified but not drilled because plenty of oil could be produced from the large reservoirs. After the fall of the Shah and subsequent long reorganization of the petroleum industry, these smaller structures have been exploited, many of them with assistance from  the Chinese. In addition, several large but complex reservoirs ignored by the Consortium are being developed with modern technology some provided by the Japanese and some by the Chinese. Russian technology has also found its way into Iran's oil fields. A third important factor is the development of the huge South Pars gas/gas condensate field (called North field by Qatar). As a result, for the last decade, the National Iranian Oil Company has been able to hold liquids rate in the range of 4 -4.5 million bbl/day. But with the high decline rates of the older fields, it is doubtful if Iran can continue to produce at present rates much longer. Thus the need for enhanced recovery methods in use by Western Oil companies. Some engineers question whether this technology will work in the low matrix porosity reservoirs where oil is contained in the fracture systems. Nevertheless, Iran, like the U.S.A. and many other regions of the world needs more hydrocarbon fuel than can be produced domestically. Thus the controversial pursuit of nuclear energy that has provoked the sanctions. In a world where survival of international currency systems has become the prime focus of the second decade of the 21st Century, these sanctions may lose force and be superseded by events. Time will tell and pretty soon too.

Data from the IEA World Energy Outlook in 2008 provided the following information on Iran's supergiant oil fields:-

The Ahwaz field was discovered in 1958, peaked in 1977 with a flow rate of 1.082 million barrels per day and was producing 0.77 million barrels per day in 2007 when it was the 7th largest producing field in the world.

The Mahrun field  was discovered in 1964, peaked in 1976 with a flow rate of 1.345 million barrels per day and was producing 0.51 million barrels per day in 2007 when it was the 12th largest producing field in the world.

The Gach Saran field was discovered in 1928, peaked in 1974 with a flow rate of 0.921 million barrels per day and was producing 0.5 million barrels per day in 2007 when it was the 14th largest producing field in the world.

According to the Colin Campbell's ASPO newsletter of January 2009,

It is very difficult to assess the endowment due to the extremely unreliable nature of the data, but total discovery todate is here estimated to have been 120 Gb, of which 57 Gb remain, with scope for the addition of an estimated 10 Gb to come from future finds. It will be remembered in connection with this assessment that Iran was reporting reserves of 49 Gb in 1987, consistent with a long prior trend when the country’s oil industry was controlled by international companies. It then announced an increase to 93 Gb, closely matching Kuwait’s anomalous revision of 92 Gb, in order to protect its OPEC quota. Total production to 1987 amounted to 35 Gb, which suggests that the new estimate represented the total found (49+35=84 Gb) with a slightly higher recovery. Accordingly, the revised number might have referred to Original, as opposed to, Remaining reserves.

The country also has a substantial gas potential, especially in the southern Persian Gulf. It is claimed that some 1100 Tcf have been discovered, of which comparatively little has been produced, but the data are very unreliable. Despite the substantial endowment, Iran imports gas from Turkmenistan to supply the capital Tehran.

Putting the numbers together from the BP data and those above, Iran had produced 64 Gb of oil by the end of 2009, or over 50% of the total estimated discovery of 120 Gb. However, Campbell predicts a production decline from 2010 with a depletion rate of 2% a year. A 13% decline rate reported above implies that the total oil found may not be as high as even Campbell's figures imply.

The IEA World Energy Outlook press release in 2008 also noted that an unprecidented field-by-field analysis of the historical production trends of 800 oilfields indicate that decline rates are likely to rise significantly in the long tern, from an average of 6.7% today to 8.6% in 2030. A deline rate of 13% for Iran is therefore rather shocking.

The press release went on to say that 580 out of the top 800 fields are now in decline and that, even if oil demand was to remain flat to 2030, 45 million barrels per day of gross capacity - roughly four times the current capacity of Saudi Arabia - would need to be built by 2030 just to offset the effect of oilfield decline.

 

 

Thanks for that Alister.  Submitted by Dariush on 14 January 2011 - 6:37pm.

Thanks for that Alister.  I think it's been clear for a long time that OPEC members have grossly exagerated their oil reserves for political advantage.  Good to see the link to Iran's history.  I think all news articles that cover the country's politics should start off like that to remind people that there is a lot more to the country than we hear about in the news.

If anybody is interested in delving a little further back in Iranian oil history.  First interesting fact is that BP started in Iran as British-Persian when Britain controlled Iran's oil reserves.  Second interesting fact is that the democratically elected Iranian Prime Minister Dr Mossadeq wanted to nationalise Iranian oil from the British in 1953 but was taken out by a UK-US coup.  Many have considered the 1979 revolution and now religious nutcases in charge would not have come about if we had just let them keep their oil all those years ago!

For an overview see http://en.wikipedia.org/wiki/Mohammad_Mosaddegh