IRAN - Part 1 - The Prospects.Iran's capacity to produce OPEC OPEC: see Organization of Petroleum Exporting Countries.
in full Organization of the Petroleum Exporting Countries
Multinational organization established in 1960 to coordinate the petroleum production and export policies of its quota-crude oil is 3.9m b/d, while the state-owned National Iranian Oil Co. (NIOC NIOC National Iranian Oil Company
NIOC Navy Information Operations Command (US Navy)
NIOC Naval Information Operations Command (US Navy)
NIOC Northern Illinois Orienteering Club ) says it is 4.2m b/d. On July 3, 2004, then Oil Minister Bijan Zanganeh said that, thanks to major finds and a re-rating of earlier estimates, Iran's oil and condensate reserves had risen to 132 bn barrels. Later Tehran put them at 137 bn barrels, the world's second largest next to those of Saudi Arabia. Iran's proven reserves of natural gas are estimated at more than 28 TCM (1) (Trellis-Coded Modulation/Viterbi Decoding) A technique that adds forward error correction to a modulation scheme by adding an additional bit to each baud. TCM is used with QAM modulation, for example. .
Despite the fact that Iran is one of the world's largest petroleum provinces, international oil companies (IOC IOC
International Olympic Committee
IOC n abbr (= International Olympic Committee) → COI m
IOC n abbr (= ) involved in exploration and production (E&P) are discouraged by a number of problems. One is Iran's lack of modern equipment and difficulty of importing new rigs. Antagonism towards foreign explorers and central government by disgruntled dis·grun·tle
tr.v. dis·grun·tled, dis·grun·tling, dis·grun·tles
To make discontented.
[dis- + gruntle, to grumble (from Middle English gruntelen; see , impoverished locals seeking jobs is another set of problems (see Gas Market Trends of this week).
Domestic oil products, natural gas, electricity and other services remain heavily subsidised, causing the state huge budget deficits. The theocracy theocracy
Government by divine guidance or by officials who are regarded as divinely guided. In many theocracies, government leaders are members of the clergy, and the state's legal system is based on religious law. Theocratic rule was typical of early civilizations. is insisting on developing nuclear energy on a large scale despite Western suspicions that its plan is to produce atomic bombs (see DT of this week).
Tehran's terms for IOCs to expand Iran's oil and gas production remain unattractive. What is on offer is a buy-back contract in which the terms have been tough. As a result, no major buy-back contracts have been signed since the award of the $2.8 bn Azadegan onshore oilfield to a Japanese-led group in February 2004. But the Japanese had their stake in this cut drastically in 2006 and the field's development has been delayed (see Part 2).
In an effort to secure major markets for liquefied natural gas liquefied natural gas: see under natural gas.
Liquefied natural gas (LNG)
A product of natural gas which consists primarily of methane. Its properties are those of liquid methane, slightly modified by minor constituents. (LNG LNG (liquefied natural gas): see under natural gas. ), with Iran promoting several different LNG export ventures, the government is offering potential buyers stakes in buy-back contracts to develop oilfields and guarantees of long-term crude oil supplies (see Part 3).
Changes to decision making have been made since the June 24, 2005, presidential elections which brought to office Mahmoud Ahmadi-Nejad and the elite Islamic Revolutionary Guard Corps (IRGC IRGC Islamic Revolutionary Guard Corps (Iran)
IRGC International Risk Governance Council
IRGC Iowa Racing and Gaming Commission
IRGC International Rice Germplasm Center ), the main power base of a defiant radical who is influenced by a supremacist ayatollah and like-minded fanatics (see who's who in Part 4).
The Political Perspective: Leaders of the Shi'ite theocracy in Tehran are suspicious that, even if the US does not attack their country militarily, the Americans intend to destabilise it. One theory since 2005 has been that a US-Shi'ite alliance in Iraq could potentially undermine the legitimacy of Iran's theocracy and lead to a popular uprising against the ruling mullahs.
According to this theory, trouble could start in the holy city of Najaf which has long been regarded as the highest seat of religious authority for Ja'fari Shi'ism. This is the base of Grand Ayatollah Ali al-Sistani Grand Ayatollah Sayyid Ali Husaini al-Sistani Arabic: السيد علي الحسيني السيستاني, Persian: سید علی , the most senior Ja'fari religious leader in Iraq. He belongs to a quietist qui·et·ism
1. A form of Christian mysticism enjoining passive contemplation and the beatific annihilation of the will.
2. A state of quietness and passivity. tradition which holds that mosque and state should be kept separate. There are already profound roots for this philosophy in Iran, particularly in the holy city of Qom where the quietist tradition has long been upheld by Grand Ayatollahs more senior than the theocracy's Supreme Leader Ayatollah Ali Khamenei.
In an article published on March 24, 2005, by the International Herald Tribune International Herald Tribune
Daily newspaper published in Paris. It has long been the staple source of English-language news for American expatriates, tourists, and businesspeople in Europe. , Cameron Khosrowshahi argues that Iraqi Shi'ism could topple the ruling mullahs of Iran (see his forecast in omt13IranProspctMar28-05).
Step by step for the past six years the US has been surrounding Iran militarily, economically, and politically. The unanimous UN Security Council (UNSC UNSC United Nations Security Council
UNSC United Nations Space Command (gaming)
UNSC United Nations Staff College ) resolution on March 24 added further sanctions against Tehran and the two UNSC powers on which Iran has been counting for support, Russia and China, are no longer on board as they used to be. Subsequent developments are showing the Shi'ite theocracy of Tehran is miscalculating things dangerously and could fall into a trap (see fap4-Iraq-USsurroundingIranApr2-07).
Citing industry sources, the FT on March 20 reported that the Bush administration appeared to have backed away from a threat to impose stricter controls on US exporters to the UAE (Uninterruptible Application Error) The name given to a crash in Windows 3.0. In subsequent versions of Windows, a crash was called a "General Protection Fault," "Application Error" or "Illegal Operation." See crash in Windows and abend. in response to the latter's efforts to clamp down on the diversion of dual-use items to Iran. It said the US Department of Commerce had put pressure on the UAE, an important trans-shipment centre, to step up scrutiny of its exports as part of a broader effort to isolate Iran over its nuclear programme.
The FT quoted a UAE official as saying UAE Economy Minister Shaikha Lubna al-Qassimi had been assured in talks in Washington that the UAE was not the intended target of a newly established country group 'C' designation which would require tighter US controls over exports to trans-shipment hubs suspected of being conduits for military-related and other sensitive items. The US Commerce Department announced in the federal register on Feb. 26 its intention to designate "country group C: destinations of diversion concern".
In December 2006, a US official spoke of growing concern in the Bush administration over an increasing number of controlled items being diverted from ports in the UAE, particularly Dubai, to Iran and Syria. He threatened unspecified steps if action was not taken.
The sensitive dual-use goods the US wanted to stop reaching Iran included chemicals, petroleum production equipment and computer technology. US exporters to countries designated under category C would be required to obtain export licences for a range of goods which have not been specified. The apparent reprieve for the UAE would be welcomed by Halliburton, the US oil services and construction company, which recently announced it would move its CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and corporate headquarters to Dubai.
The UAE has remained an important trans-shipment hub for Iran despite a long-running territorial dispute. Responding to US pressure, the UAE has intercepted dozens of ships bearing suspect goods and closed down more than 24 trading companies.
Qatar can cope with an 18-month interruption in its oil and gas exports in case of a conflict resulting from the Iran nuclear standoff with the West. At a conference in which a main topic was the impact of a possible war in the Persian Gulf, Qatar's Finance Minister Yussef Hussein Kamal on March 19 said: "We can last for 18 months without exporting a drop of oil or any gas. We have lived for over 30 years in the same atmosphere and tension", referring to a chain of crises and military conflicts in the region including the 1980s Iran-Iraq war and Iraq's invasion of Kuwait The Invasion of Kuwait, also known as the Iraq-Kuwait War, was a major conflict between the Republic of Iraq and the State of Kuwait which resulted in the 7 month long Iraqi occupation of Kuwait in 1990.
Kamal boasted that Qatar's economy had grown rapidly during the past 12 years, surging from $5 bn in 1995 to $52 bn in the financial year 2006. The six Arab Gulf Co-operation Council (GCC GCC: see Gulf Cooperation Council.
(compiler, programming) GCC - The GNU Compiler Collection, which currently contains front ends for C, C++, Objective-C, Fortran, Java, and Ada, as well as libraries for these languages (libstdc++, libgcj, etc). ) states fear that any conflict between Western powers and Iran over its nuclear programme would impact other states in the region. Qatar sits on top of 15% of world proven gas reserves.
Washington fears Iran is secretly developing atomic weapons, a charge Tehran strongly denies, insisting its nuclear programme is for peaceful energy only.
GCC states are planning oil pipelines to bypass the Strait of Hormuz Noun 1. Strait of Hormuz - a strategically important strait linking the Persian Gulf and the Gulf of Oman
Strait of Ormuz
Arabian Sea - a northwestern arm of the Indian Ocean between India and Arabia , aiming to avoid possible Iranian threats to global oil shipments. If built, two pipelines could ferry as much as 6.5m b/d of crude oil around the strait, an amount equal to nearly 40% of the daily exports currently shipped through the narrow channel at the entrance of the Persian Gulf.
Construction of the first, 1.5m b/d line is to begin in 2007. A more ambitious 5m b/d line is under discussion and could take a decade to build.
Around two-fifths of the world's traded oil is shipped by tanker through the Hormuz Strait. But the 54-km-wide passage is highly vulnerable to threats from Iran. With tensions rising between Tehran and the West, Iran's Supreme Leader Khamenei warned in June that his country could disrupt the world's oil supply if it comes under attack.
Bypassing Hormuz could lead to a drop in the price of crude oil. Even before the crisis with Iran, traders have marked up prices by a so-called "security premium" of a few dollars per barrel because of fears of disruption in the turmoil since the 2003 US-led invasion of Iraq. The new pipelines could reassure traders over the stability of exports and knock down the premium.
The idea of new pipelines is so popular to traders "they think it's a dream", says Mustafa al-Ani, a security analyst at the Dubai-based Gulf Research Centre (GRC GRC Greece (ISO Country code)
GRC Glenn Research Center (NASA)
GRC Governance, Risk and Compliance
GRC Gendarmerie Royale du Canada (RCMP - Canada)
GRC John H. ), adding: "Crisis after crisis is threatening stability. We need a permanent solution. Any threat, real or imaginary, will increase the price a dollar or two. This project will give a new boost to the stability of oil".
The first, 360-km pipeline would carry 1.5m b/d of crude oil from Abu Dhabi's Habshan gathering centre, across a mountain range, to the emirate e·mir·ate
1. The office of an emir.
2. The nation or territory ruled by an emir.
Noun 1. emirate - the domain controlled by an emir of Fujairah on the Gulf of Oman Noun 1. Gulf of Oman - an arm of the Arabian Sea connecting it with the Persian Gulf
Arabian Sea - a northwestern arm of the Indian Ocean between India and Arabia . Abu Dhabi's International Petroleum Investment Co. (IPIC IPIC Intellectual Property Institute of Canada
IPIC Indianapolis Private Industry Council
IPIC International Petroleum Investment Co (Abu Dhabi)
IPIC Inventory Price Index Computation
IPIC Information Processing Interagency Conference ) is planning to build the line. A third of the crude would be used for a refinery planned in Fujairah.
The Trans-Gulf Strategic Pipeline would bring 5m b/d from various GCC ports to a newly built export terminal outside the straits, perhaps in Oman. A GRC study suggests six possible routes for this line, which could bring crude oil from as far north as Iraq, via Kuwait, Saudi Arabia and the UAE to Muscat on the Arabian Sea. Other routes could see this ending in Yemen or Fujairah. It would shorten tanker routes by hundreds of miles, lower transport costs and reduce shipping traffic in the crowded Gulf. It could be as long as 2,400 km and traverse at least one mountain range. If that is not enough of a headache for planners, they will have to bury it too. Keeping it above the ground may be cheaper and quicker, but would leave it vulnerable to terrorist attack.
Neo-Salafi terrorists have set their sights on Gulf oil facilities. Al-Qaeda claimed responsibility for 2006 attacks on oil installations in Saudi Arabia and Yemen after al-Qaeda leader Osama bin Laden Osama bin Laden: see bin Laden, Osama. called on fighters to stop the flow of oil to the West. The group was also behind the 2002 attack on a French oil tanker which killed one person in the Gulf of Aden Noun 1. Gulf of Aden - arm of the Indian Ocean at the entrance to the Red Sea
Indian Ocean - the 3rd largest ocean; bounded by Africa on the west, Asia on the north, Australia on the east and merging with the Antarctic Ocean to the south , off Yemen.