Friday, February 24, 2006

Iran's Ability to Export Oil

In this post, I repeat the same exercise I did for Saudi Arabia and try to predict the growth of Iran domestic oil consumption based on the predicted population growth. Iran was the fourth world oil exporter with a net export of 2.55 mbpd in 2004. Compared to Saudi Arabia, Iran faces less population pressures with a fertility rate of 2.1 children per woman. However, Iran's oil consumption is growing rapidly as shown on Figure 1.


Fig 1. Iran's oil consumption (millions of barrels per day, src: BP)

The annual population growth rate is about 1.2% for 2005 and is expected to stay constant for the next 10 years ([1]). The population was 69.5 million in mid-2005 and is expected to reach 102 million in 2025 (Population Reference Bureau). If we divide the oil consumption by the population numbers, we can see that the oil consumption is not mature and is expanding quickly at about 1 barrel/capita/year every ten years (see Figure 3). It is difficult to predict at which level the oil consumption per capita will stabilize. For now, we assume that the observed growth pattern will continue and could potentially reach European levels of consumption (about 10 barrels/capita/year) within 20 years.

Fig 2. Iran population trend (src: UN)

Fig 3. Number of barrels consumed per capita per year.

Based on the linear growth model (black dotted line on Figure 3) we predict Iran's future oil consumption based on the UN population forecast shown on Figure 2. The result is shown on Figure 4 for the three population model variants. The oil production forecast for Iran was derived from the SBM-PF model. We can observe that the oil exports will stay flat a few years around 2.8 mbpd before going down. The fraction of oil exports will fall below 60% after 2010 (Figure 5). This forecast is somewhat optimistic on future production levels with an URR around 188 Giga-barrels and a peak production at 5 mbpd around 2025. we also assume that the domestic oil consumption will continue to grow at the same pace which is a reasonable assumption knowing that fuel prices are heavily subsidised in Iran (Diesel at 1 US cent/liter, super gasoline at 9 US cents/liter in 2004!).

Fig 4. Projected oil consumption based on the population growth and a linear growth for the consumption per capita per year (1 additional barrel/capita/year every decade).

Fig 5. Projected share of the oil exports for the different population scenario.


References:

[1] PRB Country Profiles: Iran
[2] Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2004 Revision and World Urbanization Prospects: The 2003 Revision

[3] www.internationalfuelprices.com

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