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Iran Power Report Q3 2010
Business Monitor International, July 2010, Pages: 110
The Iran Power Report provides industry professionals and strategists, corporate analysts, power associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Iran's power industry.
BMI forecasts that Iran will account for 16.12% of Middle East (ME) regional oil demand by 2014, while providing 16.15% of supply. Regional oil use of 7.47mn barrels per day (b/d) in 2001 rose to an estimated 10.64mn b/d in 2009. It should average 10.98mn b/d in 2010 and then rise to around 11.95mn b/d by 2014. Regional oil production was 22.83mn b/d in 2001, and in 2009 averaged an estimated 24.66mn b/d. It is set to rise to 27.18mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average of 15.36mn b/d. This total had eased to an estimated 14.02mn b/d in 2009 and is forecast to reach 15.23mn b/d by 2014. Iraq has the greatest production growth potential, followed by Qatar.
In terms of natural gas, the region consumed an estimated 367.6bn cubic metres (bcm) in 2009, with demand of 492.5bcm targeted for 2014, representing 28.7% growth. Estimated production of 429.9bcm in 2009 should reach 657.8bcm in 2014 (+39.8%), which implies net exports rising to 165.0bcm by the end of the period. Iran consumed an estimated 32.64% of the region’s gas in 2009, with its market share forecast at 30.90% by 2014. It contributed an estimated 28.15% to 2009 regional gas production and, by 2014, will account for 31.92% of supply.
We are sticking with our forecast that the OPEC basket of crudes will average US$83.00/bbl in 2010. Wide variations in crude differentials so far in 2010 make forecasting tricky for Brent, West Texas Intermediate (WTI) and Urals, but we believe the three benchmarks will average around US$85.11, US$88.22 and US$83.62/bbl respectively, with Dubai coming in at US$83.14. By 2011, there should be further growth in oil consumption and more room for OPEC to regain market share and reduce surplus capacity through higher production quotas. We are assuming a further increase in the OPEC basket price to an average of US$85.00/bbl. For 2012 and beyond, we continue to use a central case forecast of US$90.00/bbl for the OPEC basket.
For 2010, the BMI assumption for premium unleaded gasoline is an average global price of US$96.83/bbl. The year-on-year (y-o-y) rise in 2010 gasoline prices is put at 38%. Gasoil in 2010 is expected to average US$92.45/bbl, with the full-year outturn representing a 37% increase from the 2009 level. For jet fuel in 2010, the annual level is forecast to be US$95.58/bbl. This compares with US$70.66/bbl in 2009. The 2010 average naphtha price is put by BMI at US$82.46/bbl, up 39% from the previous year’s level.
Iran’s real GDP is assumed by BMI to have risen by 1.0% in 2009, followed by forecast 2.1% growth in 2010. We are assuming average annual growth of 3.0% in 2010-2014. We expect oil demand to rise from an estimated 1.61mn b/d in 2009 to 1.92mn b/d in 2014, almost matching the underlying rate of economic expansion. The state-owned National Iranian Oil Company (NIOC) is responsible for all upstream oil and gas activities, although there is some small-scale participation by international oil companies (IOCs) on a subcontractor basis. The lack of large-scale IOC investment contributes to modest output growth, with crude production forecast to increase from an estimated 4.19mn b/d in 2009 to 4.38mn b/d in 2014, subject to OPEC quotas and the possible impact of sanctions resulting from the nuclear energy debate. Gas production should reach 210bcm by 2014, up from an estimated 121bcm in 2009. Consumption is expected to rise from 120bcm to 152bcm by the end of the forecast period, providing export potential of almost 58bcm.
Between 2010 and 2019, we are forecasting an increase in Iranian oil production of 11.2%, with crude volumes rising towards 4.65mn b/d by the end of the 10-year forecast period, although there will have been an OPEC-induced dip in 2009/10. Oil consumption between 2010 and 2019 is set to increase by 27.3%, with growth slowing to an assumed 2.0% per annum towards the end of the period and the country using 2.17mn b/d by 2019. Gas production is expected to climb to 290bcm by the end of the period. With 2010-2019 demand growth of 46.0%, this provides export potential rising to 108bcm by 2019. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Iran ranks fifth, just ahead of Bahrain, BMI’s composite Business Environment (BE) Ratings table, which combines upstream and downstream scores. It holds sixth place in BMI’s updated upstream Business Environment Ratings. Iran is now three points behind Bahrain, in spite of a score benefiting from the region’s biggest gas reserves base and a very healthy oil reserves position. Reserves-to-production ratios (RPRs) are high, but strict government control of the upstream industry prevents Iran’s achieving a better overall score. Iran is above the mid-point of the league table for BMI’s updated downstream Business Environment Ratings, with some high scores but progress further up the rankings unlikely. It is rated third, above Oman, thanks to high scores for refining capacity, oil demand, gas consumption, retail site intensity and population. The growth outlooks for oil/gas consumption and refining capacity represent relatively weak suits. Oman is just two points behind it in the regional rankings and there is some longterm risk of it challenging for Iran’s third place.
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