Iran's energy security in serious danger

The latest statistics released by National Iran Gas Company indicates the huge increase in gas consumption in Iran's housing sector led to cuts in gas supply to other sectors last winter.

This brings up the question of how Iran can evade the repetition of a gas shortage next winter?

Review of Iran's gas consumption history

Iran's energy consumption level increased significantly during the last three decades, from 500,000 barrels of crude oil equivalent per day in 1980 to about 4.5 million barrels of oil equivalent per day in March 2014.

Among energy carries, the share of gas increased at a more accelerated rate, from about 9.7 million cubic meters per day (mcmpd) in 1980 to above 415.4 mcmpd in the beginning of 2013, but last year's gas consumption experienced a huge increase as well.

Below is Iran's fossil energy carriers consumption according to the data derived from National Iranian Oil Refining and Distribution Company (NIORDC) annual reports. (Iran's fiscal year begins on March 20)

Fiscal year	Total energy consumption Kb of OE*	Gas consumption mcmpd	Gas consumption Kb of OE	Liquid fuels** MLD***
1979/80	565	9.7	63	79.1
1989/90	1062	38.4	248	127.2
1999/2000	2084	158.4	1025	164.3
2004/2005	2931	261	1689	194.7
2009/2010	3918	387	2504	222.6
2010/2011	4027	413.3	2673	210.6
2011/2012	4070	418.4	2707	213.1
2012/2013	4120	415.4	2688	224.7

* 1000 barrels of oil equivalent

** including gasoline, oil-gas, kerosene and fuel oil

*** million liters per day

Iran energy consumption, 1000 barrels per day equivalent

Fiscal year	Total energy consumption	Gas consumption	Liquid fuels	Liquid gas
1979/80	565	63	479	13
1989/90	1062	248	774	31
1999/2000	2084	1025	995	47
2004/2005	2931	1689	1174	53
2009/2010	3918	2504	1332	56
2010/2011	4027	2673	1274	56
2011/2012	4070	2707	1290	51
2012/2013	4120	2688	1362	49

During last Iranian fiscal year, the country's liquid fuels supply to power plants soared to 27 billion liters, indicates a 19 percent increase compared to the previous year. The major problem was the rapid gas consumption increase in the housing sector.

Iran's gas consumption during 11 months of last fiscal year (mcmpd)

The beginning day of months in Iran's calendar year	Housing and small industrial sector	Changes Y/Y	Total gas consumption*	Changes Y/Y
March 20	253	- 26.5%	344	-21%
April 20	119	15.8%	348	-4.8%
May 21	161	19.1%	375	-1.4%
June 21	126	-6.5%	316	-4.3%
July 23	118	- 8.3%	374	- 6.7%
August 23	130	6.9%	370	-4.9
September 23	131	7.3%	384	0.02%
October 23	215	7.5%	434	3%
November 23	367	12.2%	494	4.3%
December 23	463	14.7%	531	8.5%
January 20	431	3.3%	525	6.2%
February 17	393	12.2%	528	6.7%

* including housing, industrial, power plants. The statistics doesn't include gas re-injections to oil fields or gas flaring.

Iran's total gas output stands at 575 mcmpd, while during the winter, especially in November and December, Iran's daily gas consumption in the housing sector sometimes reached 490 mcm and total consumption level surpassed 570 mcmpd.

While Iran's petrochemical plants need 35 mcmpd of gas daily, Iran supplied about 15 to 17 mcmpd in winter, "which led to a 7.5 million tons decrease in petrochemical products worth $8 billion," said Mansour Moazzami the deputy of the oil ministry on April 17.

On the other hand, about 80 percent of Iran's active oil fields are in their second half-life and face an 8 to 13 percent decline in output annually. Iran has to re-inject above 200 mcmpd of gas to the oil fields to prevent acceleration of output decline.

Iran re-injected about 75 to 85 mcmpd of gas to oil fields during a year to March 20, 2013, but the figure likely decreased significantly during last year due to gas shortage.

Iran's automotive sector also demands about 17 mcmpd of LNG, but Iran cut supplies of LNG for several weeks during last winter due to the gas shortage.

According to the NIORDC statistics, during Iranian fiscal year ended on March 20, 2013, gas supply shared about 61 percent of the fuel needed for power plants, but the Energy Minister Hamid Chitchian said on April 10, 2014 that 44 percent of burnt fuel in power plants was liquid fuels, including oil-gas and fuel oil during the last Iranian fiscal year, ended on March 20, 2014. Then the share of gas in feeding power plants decreased from 61 percent to 54 percent during the last Iranian fiscal year compared to the previous year.

Gas production

It seems Iran has enough surplus gas in the first half of fiscal year (Spring and summer which cover from March 20 to August 23) to store and use in the winter, but the country has only one gas shortage facility in Qom city, called Serajeh, with 3.2 bmc capacity.

Iran re-extracted about 10 mcmpd of gas from this underground storage facility during the winter. The country plans to commence the second gas storage facility, called Shourijeh, to boost the re-extraction capacity to 30 mcmpd this winter.

Iran immediately needs to boost gas output until the end of August to avoid another gas shortage in the second half of the year, but only three upstream gas projects (in the giant South Pars gas field) have been developed to 92 percent capacity:

Phases	Production capacity	development	Implementation date
Phase 12	81 mcmpd	92% completed until January 2014	2014 or 2015
Phase 15 and 16	50 mcmpd gas	92% completed until January 2014	2015 or 2016
Phase 17 and 18	50 mcmpd	82% completed until January 2014	2016 or 2017

Iran started early gas production from Phase 12 last month, but the level of production is about 10 to 15 mcmpd.

At this rate the country's suffering another gas shortage during the winter is unavoidable.

Dalga Khatinoglu is specialist on Iran's energy sector and Iran News Service head in Trend Agency