Iran fuel rationing prompts panic buy

by Reuters
17 June 2007

Some Iranians are stocking up on gasoline amid uncertainty over when a delayed rationing scheme will take effect, an official from a body representing pump stations was quoted as saying on Saturday.

Nasser Raisifar said fuel station managers were concerned about the situation in Iran -- OPEC's second largest oil exporter - with long queues forming in some places and even reports of fights breaking out between car owners.

Despite big energy reserves, Iran lacks refining capacity to meet domestic fuel demand, which analysts say is rising at about 10 % a year. Heavy subsidies which drain state coffers make fuel so cheap it encourages waste, analysts say.

The first phase of gasoline rationing started on Thursday, limiting fuel that drivers of government cars can buy. But ordinary Iranians still do not know when the full plan will be implemented and what their quota of subsidised fuel will be.

"Uncertainty and not trusting (government) decisions lead many to fill their tanks continuously and this caused long queues at fuel stations," Raisifar, from the association of fuel station managers, told the semi-official Mehr News Agency.

"This shows people are stocking up," he said.

His comments seemed to be at odds with statements by Iranian officials that consumption has fallen since the gasoline price was increased by 25 % to 1,000 rials (11 U.S. cents) per litre in May -- still among the world's cheapest.

Drivers must also produce electronic "smart" cards to buy any fuel.

Iran has to import about 40 % of daily consumption estimated at 75 million or more litres, a sensitive issue as world powers have threatened to ratchet up U.N. sanctions over Iran's nuclear programme.

Officials have sent conflicting signals about when full rationing would be in place. Some say it might be on June 22. MPs have said fuel above the rationed quota would be offered at market rates but no official announcement has been made.

"Fighting among car owners, very long queues ... have created insecurity," Raisifar said. "Fuel station managers are concerned about the situation."

The United States, which is leading efforts to isolate Iran over its atomic plans, has said Iran's gasoline imports are a point of "leverage". Washington accuses Iran of seeking to build nuclear weapons, a charge Tehran denies.

Baghdad Burns, Calgary Booms Naomi Klein Canada (Update 06-11-07)

Lookout by Naomi Klein

Baghdad Burns, Calgary Booms
[from the June 18, 2007 issue]

The invasion of Iraq has set off what could be the largest oil boom in history. All the signs are there: multinationals free to gobble up national firms at will, ship unlimited profits home, enjoy leisurely "tax holidays" and pay a laughable 1 percent in royalties to the government.

This isn't the boom in Iraq sparked by the proposed new oil law--that will come later. This boom is already in full swing, and it is happening about as far away from the carnage in Baghdad as you can get, in the wilds of northern Alberta. For four years now, Alberta and Iraq have been connected to each other through a kind of invisible seesaw: As Baghdad burns, destabilizing the entire region and sending oil prices soaring, Calgary booms.

Here is how chaos in Iraq unleashed what the Financial Times recently called "north America's biggest resources boom since the Klondike gold rush." Albertans have always known that in the northern part of their province, there are vast deposits of bitumen--black, tarlike goo that is mixed with sand, clay, water and oil. There are approximately 2.5 trillion barrels of the stuff, the largest hydrocarbon deposits in the world.

It is possible to turn Alberta's crud into crude, but it's awfully hard. One method is to mine it in vast open pits: First forests are clear-cut, then topsoil scraped away. Next, huge machines dig out the black goop and load it into the largest dump trucks in the world (two stories high, a single wheel costs $100,000). The tar is diluted with water and solvents in giant vats, which spin it around until the oil rises to the top, while the massive tailings are dumped in ponds larger than the region's natural lakes. Another method is to separate the oil where it is: Large drill-pipes push steam deep underground, which melts the tar, while another pipe sucks it out and transports it through several more stages of refining, much of it powered by natural gas.

Both techniques are costly: between $18 and $23 per barrel, just in expenses. Until quite recently, that made no economic sense. In the mid-1980s, oil sold for $20 a barrel; in 1998-99, it was down to $12 a barrel. The major international players had no intention of paying more to get the oil than they could sell it for, which is why, when global oil reserves were calculated, the tar sands weren't even factored in. Everyone but a few heavily subsidized Canadian companies knew that the tar was staying put.

Then came the US invasion of Iraq. In March 2003, the price of oil reached $35 a barrel, raising the prospect of making a profit from the tar sands (the industry calls them "oil sands"). That year, the United States Energy Information Administration "discovered" oil in the tar sands. It announced that Alberta--previously thought to have only 5 billion barrels of oil--was actually sitting on at least 174 billion "economically recoverable" barrels. The next year, Canada overtook Saudi Arabia as the leading provider of foreign oil to the United States.

All this has meant that Iraq's oil boom has not been delayed; it has been relocated. All the majors, save BP, have rushed to northern Alberta: ExxonMobil, Chevron and Total, which alone plans to spend $9-$14 billion. In April, Shell paid $8 billion to take full control of its Canadian subsidiary. The town of Fort McMurray, ground zero of the boom, has nowhere to house the tens of thousands of new workers, and one company has built its own airstrip so it can fly in the people it needs.

Seventy-five percent of the oil from the tar sands flows directly to the United States, prompting Brian Hall, an energy consultant with Colorado-based IHS, to call the tar sands "America's energy security blanket." There is a certain irony there: The United States invaded Iraq at least in part to secure access to its oil. Now, thanks partly to economic blowback from that disastrous decision, it has found the "security" it was looking for right next door.

It has become fashionable to predict that high oil prices will spark a free-market response to climate change, setting off an "explosion of innovation in alternatives," as New York Times columnist Thomas Friedman wrote recently. Alberta puts the lie to that claim. High prices have indeed led to an R&D extravaganza, but it is squarely focused on figuring out how to get the dirtiest possible oil out of the hardest-to-reach places. Shell, for instance, is working on a "novel thermal recovery process"--embedding large electric heaters in the deposits and literally cooking the earth.

And that's the Alberta tar sands for you: The industry already contributing to climate change more than any other is frantically turning up the heat. The process of refining bitumen emits three to four times the greenhouse gases produced by extracting oil from traditional wells, making the tar sands the largest single contributor to Canada's growth in greenhouse gas emissions. Nonetheless, the industry plans to more than triple production by 2020, with no end in sight. If prices stay high, it will soon become profitable to extract an additional 141 billion barrels from the tar sand, which would place the largest oil reserves in the world in Alberta.

Developing the sands is devouring trees and wildlife--the Pembina Institute, the leading authority on the tar sands' environmental impact, warns that boreal forests covering "an area as large as the State of Florida" risk being leveled. Now it turns out that the main river feeding the industry the massive quantities of water it needs is in jeopardy. Climate scientists say that dropping water levels are the result--fittingly enough--of climate warming.

Contemplating the collective madness in Alberta--a scene even the Financial Times has labeled "some dystopian fantasy"--it strikes me that Canada has ended up with more than Iraq's displaced oil boom. We have its elusive weapons of mass destruction too. They are out near Fort McMurray, in the jet-black goo beneath the earth's crust. And with the help of trucks, pipes, steam and gas, these weapons are being detonated.

http://www.thenation.com/doc/20070618/klein

Mexico

Mexico

Pemex CEO: Company is in critical condition
http://www.eluniversal.com.mx/miami/vi_23834.html

Mexico´s state oil monopoly is in "critical condition" and needs to boost exploration and seek outside expertise to replenish oil reserves that are currently set to last less than a decade, energy officials said Sunday.

President Felipe Calderón, however, said during a ceremony marking the 69th anniversary of the nation´s oil nationalization that there are no plans to privatize the industry and that Petróleos Mexicanos, or Pemex, "will always continue to belong to all Mexicans."

Pemex´s proven reserves have fallen to the equivalent of 9.3 years of production from 9.7 years in 2005, and daily output declined last year by 2.3 percent to about 3.2 million barrels, officials said at the ceremony in the Gulf coast state of Veracruz.

"The situation of Petróleos Mexicanos is critical and merits immediate attention," Pemex chief executive Jesús Reyes Heroles .

The company currently transfers most of its income to the government in taxes and revenue sharing, leaving little for investment. Pemex sent 93.2 percent of its profits to the government last year, accounting for 37.5 percent of federal income.

At the end of last year, proven reserves were 5.8 percent lower than in 2005. And production at the Cantarell oil field, the country´s biggest, fell by 11.9 percent last year.

"We should be conscious that this situation cannot go on," said Energy Secretary Georgina Kessel, referring to policies that bar Pemex from entering joint ventures and alliances.

She said Mexico must seek "complementary investment," especially in technology and scientific knowledge, in order to develop energy infrastructure projects.

"If we do not confront and resolve the problems posed by these challenges, the situation of Petróleos Mexicanos could be become unsustainable over the long term," Kessel said

Mexico´s constitution, however, currently bans private or outside investment in Pemex. Private companies are currently allowed to serve as outside contractors on specific projects.

"We have to invest, and invest seriously, in exploration and turn this situation around," Calderón said.

He said one option was to form strategic alliances to explore for new reserves in deep waters off the Gulf of Mexico.

Reyes Heroles said the company replaced 41 percent of production with new reserves last year, up from 26.4 percent in 2005 but well below the 100 percent, complete-replacement level officials are seeking.

In real terms, he said, Pemex´s exploration budget in last year was 17 percent less than in 2005 and 42 percent less than in 2004.

Pemex funds many of its projects by assuming debt, which rose by about US$880 million last year to about US$51 billion.

In addition, the company has about US$40.7 billion in labor-related debts and commitments.

Reyes Heroles said Pemex remains the most indebted oil company in the world. He also said the company continues to be a target for fuel thieves, with 207 illicit openings discovered in pipelines or valves last year.

Officials also pushed for building more refinery capacity, noting that Mexico now imports about 40 percent of its gasoline.

The country is also a net importer of petrochemical products.

Monthly Mexican Production - Crude and Condensates only






From CERA's 2005 Report:

In Mexico the Cantarell field (2.2 mbd peak) dominates Mexican liquid productive capacity currently at 3.9 mbd. Cantarell is expected to start its decline in 2006 according to Pemex, but it may have already begun to decline. This decline will be partially offset by a nitrogen injection project at the Ku–Maloob-Zaap heavy oil fields, increasing capacity to 800,000 bd from 300,000 bd now—plus the Tabasco Littoral light oil project, which will add 250,000 bd by 2009. Major deepwater potential exists in Mexico adjacent to the US Gulf of Mexico, but will not make a contribution to liquids capacity until at least 2012.

Pemex: KMZ Hits Record Output of 496,900 bpd

BNamericas
March 02, 2007

Mexico's Ku-Maloob-Zaap (KMZ) offshore oilfield hit record production of 496,000b/d in recent days, the country's state oil company Pemex said in a statement.

The output followed the startup of the PB-KU platform, the statement said. KMZ's average output in January rose 18% to 445,600b/d compared to the same month in 2006.

KMZ is Mexico's second most important field after Cantarell, contributing 15% of domestic production. Proven and probable reserves total 4.9Bb. The oilfield is in the Sonda de Campeche marine region offshore Tabasco and Campeche states.

China Sees Sharp Fall in Output at Daqing

China CNPC Long-Term Plan Sees Sharp Fall in Output at Daqing
by David Winning
Feb 27, 2007

BEIJING - China National Petroleum Corp. (CNPC.YY) said Tuesday that crude oil and natural gas production at its flagship Daqing oilfield may slump by more than 50% in five decades.

The projection is significant because Daqing currently accounts for around a quarter of China's total domestic production, and lower output would have to be covered by new finds or more crude imports.

According to a long-term plan drawn up by CNPC, China's biggest oil producer by capacity, annual crude oil and natural gas production will total between 20 million metric tons and 25 million tons in 2060.

This compares with the 43.38 million tons of crude pumped in Daqing last year, equivalent to 871,000 barrels a day.

Daqing has been in production since 1963 and output has been declining rapidly in recent years despite efforts to drill in peripheral areas and use enhanced oil recovery to keep existing wells in operation.

Crude output at Daqing, which is located in northeastern China's Heilongjiang province, fell 3.5% last year after falling 3% in 2005.

PetroChina Co. (PTR), the listed unit of CNPC, loses about 16 million tons of production capacity each year due to the declining reserves of its aging fields.


© 2007 Dow Jones Newswires.

Noam Chomsky on Iraq and Oil

It’s very hard to predict the Bush administration today because they’re deeply irrational. They were irrational to start with but now they’re desperate. They have created an unimaginable catastrophe in Iraq. This should’ve been one of the easiest military occupations in history and they succeeded in turning it into one of the worst military disasters in history. They can’t control it and it’s almost impossible for them to get out for reasons you can’t discuss in the United States because to discuss the reasons why they can’t get out would be to concede the reasons why they invaded.

We’re supposed to believe that oil had nothing to do with it, that if Iraq were exporting pickles or jelly and the center of world oil production were in the South Pacific that the United States would’ve liberated them anyway. It has nothing to do with the oil, what a crass idea. Anyone with their head screwed on knows that that can’t be true. Allowing an independent and sovereign Iraq could be a nightmare for the United States. It would mean that it would be Shi’ite-dominated, at least if it’s minimally democratic. It would continue to improve relations with Iran, just what the United States doesn’t want to see. And beyond that, right across the border in Saudi Arabia where most of Saudi oil is, there happens to be a large Shi’ite population, probably a majority.

http://www.fpif.org/fpiftxt/3999

Kashagan Oil Field Problems

The following from a WSJ/DJ Newswire piece Feb 2007:

Eni confirmed that its most important exploration project, the Kashagan field in the Caspian Sea with proven reserves of more than 13 billion barrels, won't begin pumping until the second half of 2010, a full two years later than had previously been disclosed.

That is the latest in a series of setbacks at Kashagan, where Eni had initially expected to start pumping oil in 2005.

In addition, the price tag for the project keeps climbing. Though the company didn't disclose exactly how far over budget the project had come, its effect can be seen in Eni's overall capital expenditure plan, which has shot up to EUR44.6 billion for the 2007-2010 period, a 27% hike over the amount it had forecast to spend during the 2006-2009 period.

Still, Chief Executive Paolo Scaroni was upbeat about Kashagan, saying that the company was now confident that the reserves would be greater than previously estimated, and that production would plateau at 1.5 million barrels a day in 2019, instead of its previous estimate of a 1.2 million barrel per day plateau in 2016.

http://www.rigzone.com/news/article.asp?a_id=41778&rss=true

Iran's Oil Production Is Drying Up

02/20/2007
Filed by Michael Roston

A report in today's Wall Street Journal paints a picture of an Iran in the early stages of an energy crisis. Although long considered an energy giant, the Persian Gulf country is facing the prospect of an oil output crash within a decade, and it may start rationing gasoline next month.

Bill Spindle writes in the Journal this morning that Iran's oil production is stagnating. Demand in the country is high because the government makes the price of gasoline very cheap. At the same time, "a combination of Western sanctions and Iranian policies has discouraged foreign investment in oil fields," resulting in a lull in production growth. The problem is so severe that Iran's government "shelled out at least $7 billion on gasoline imports alone so far this fiscal year."

In response, Iran is hoping to expand its production abilities. But the US government and others see political implications from the current state of affairs in the Iranian energy sector. "Iran's energy woes could make it more vulnerable to international
economic sanctions," Spindle writes. "Even many Iranian officials concede that
the longstanding ban the U.S. has placed on American oil companies working in
Iran has hampered the country's ability to develop its oil fields adequately."

The full article can be accessed by Wall Street Journal subscribers at this link. An excerpt is provided below.

At the same time, a combination of Western sanctions and Iranian policies has discouraged foreign investment in oil fields, causing production to stagnate. The result: Iran's oil exports could dry up in as little as a decade, according to some who have studied the situation. That's a looming disaster for Iran, which derives about 85% of its export income from the sale of oil. "The industry is in a crisis," says Mehdi Varzi, a
former Iranian diplomat and national oil company official who heads a London-based consulting company, Varzi Energy.

The impact would be felt far beyond Iran. The country produced 3.8 million barrels of oil a day in 2006, almost 5% of the world's total supply, according to the Organization of Petroleum Exporting Countries. It exported an average of about 2.5 million barrels of that each day. Should those sales decline, Iran's largest customers, Japan and China, would scramble for other supplies, pushing up prices for everyone.

Avoiding an export squeeze is one reason Iran argues it needs to consider nuclear energy. But that ambition has contributed to a diplomatic impasse with the West. Bush administration officials describe Iran's nuclear program as little more than a ruse to conceal what they say is a hidden effort to build nuclear weapons. Iranian officials deny that, arguing that nuclear plants could handle some of the soaring domestic energy demand, leaving more oil and gas to export and avoiding difficult domestic choices.

CERA and Daniel Yergin

Probably one of the most fascinating stories in the world of oil is that of Daniel Yergin. In 1991? he penned the masterpiece The Prize. If ever there was a book about oil, this is it.

Today he is considered by some the goto guy for words of wisdom and by others as somewhat of a villain.

More to be said about this quirky deal in the future. For now I just wanted to get something posted for this CERA link that has been staring me in the face since I started this blog.

CERA (or Cambridge Energy Research Associates) is most reviled for its forecast of future global oil-production capacity extending to 2010 and then 2015. The original 2010 version was published in early 2005. As of this writing(March 2007, 2 years later) I think it is safe to say that it was very wrong.

But I don't want to berate them for this. I'd rather explore the reasons why it was so wrong - or maybe even whether it is actually wrong, and then try to figure out what can be done better. To see how easy it is to come up with a five- or ten-year forecast that nails it.

Saudi Arabia

01 - Saudi Arabia




Saudi Arabia, Russia, and Iran are in the "A" Group. These three will be considered swing production.


For a more detailed look at Saudi Oil Production click on this link:
http://saudioilproduction.blogspot.com







From CERA's 2005 Report:

Saudi Arabia is a key component of the outlook, and crude and
condensate capacity (excluding the Neutral Zone) will average 11.3 mbd in 2005
and rise slowly to 11.6 mbd by 2010 (see Figure 7a). Some concerns have been
expressed recently about the ability of Saudi Arabia to expand liquids capacity,
with some commentators suggesting an imminent, dramatic decline. CERA believes
that capacity will not decline until well beyond 2020, with efforts being made
by Saudi Arabia to both replace natural decline and add new capacity in order to
reach a target of 12.5 mbd if necessary by 2010, which the Saudis believe will
provide 1.5–2 mbd of surge capacity.* Having recently inaugurated the Abu
Safah/Qatif fields, the country is expected to expand Haradh Phase 3 (300,000
bd) in early 2006, Shaybah (300,000–900,000 bd) in 2008, and the Khursaniyah
field (500,000 bd of new capacity) by 2007. If needed, the Khurais field will be
brought back onstream at up to 1.2 mbd by 2010. However, CERA believes that this
latter addition will be ramped up slowly or delayed.

USA

03 - USA

Crude and Condensate only

Russia

Number 2
Russia

Russian March Crude Oil Production Rises Annual 3.4 Percent

April 2 (Bloomberg) -- Russia, the world's second-largest oil supplier, produced 3.4 percent more crude oil and oil condensate in March than in the same month last year.

Crude output climbed to 9.87 million barrels a day (41.76 million tons) from 9.46 million barrels a day in the same month a year earlier, according to data released today by CDU TEK, the Energy Ministry's dispatch center.

The monthly gain was 0.1 percent, after the country produced 9.86 million barrels a day of crude in February.

Iran

04 - Iran



From CERA's 2005 Report:

Iranian crude and condensate capacity is estimated to be 4.17 mbd in 2005 and could rise to as much as 5.07 mbd by 2010 (see Figure 7b). However, a number of uncertainties could slow this expansion, including the current political situation, unattractive buyback contracts, and protracted negotiations, all of which have discouraged foreign investment. Indeed, one supermajor has stated in public that it would not invest in Iran at present. The liquids capacity growth story is still dominated by expansion of the mature fields, and a number of feasibility studies involving mature fields are under way. Before any capacity expansion occurs, annual depletion rates of around 350,000 bd have to be counterbalanced. The Azadegan contract was signed in 2004, but delays are already being experienced with drilling contracts, and the start-up will likely be delayed past 2007. Expansions are also expected at Darkhovin, Masjid-i-Suleiman, and more imminently at Nowruz/Souroush, where capacity should to rise to 190,000 bd in mid-2005, and a large increase in NGLs and condensate is expected as the South Pars gas condensate field is developed.

China

Number 6
China

http://www.rigzone.com/news/article.asp?a_id=42765

China's strong demand for energy spurred PetroChina to produce an aggregate of over 1 billion barrels of oil equivalent last year with crude oil accounting for 831 million barrels. Jiang forecast that PetroChina's oil output may rise to 2.3 million barrels a day this year, with gas production reaching 4.56 billion cubic feet a day. Its refineries will process an estimated 2.25 million barrels of crude daily.

From CERA's 2005 Report:

Capacity in China is projected to decline slowly from peak levels of 3.52 mbd in 2005 to 3.30 mbd in 2010. Many of the large onshore fields are in decline, but this will be partially offset by the increasing production from the Bohai Gulf area as the largest development, Peng Lai Phase 2, ramps up, and from the Wenchang and Pearl River Mouth areas.

Canada

07 Canada



From CERA's 2005 Report:

Canadian liquids capacity is projected to increase substantially from 3.48 mbd in 2005 to 4.70 mbd in 2010. As in the United States, there is one major contributor to this increase—in Canada’s case, it is the oil sands. Conventional liquid production, helped by growth of 0.3 mbd in the Newfoundland offshore, will remain essentially flat at 2.30 to 2.40 mbd through 2010. In addition to existing production at Hibernia and Terra Nova, the White Rose field will begin production early in 2006, and the Ben Nevis–Hebron field may be onstream by 2010, along with the shallow Avalon reservoir at Hibernia. Oil sands capacity is projected to increase by 1.12 mbd from 1.18 mbd in 2005 to 2.30 mbd in 2010. Mineable oil sands production is projected to increase from 0.67 mbd in 2005 to 1.20 mbd in 2010, led by expansions in the existing projects and initial production from the Horizon and Kearl Lake projects. Bitumen production from in-situ or steam assisted gravity drainage (SAGD) methods will increase from 0.51 mbd in 2005 to 1.10 mbd in 2010, led by expansions at Cold Lake, Christina Lake, Firebag, and Foster Creek, along with initial production from the Surmont, Long Lake, and Sunrise projects. In the next decade oil sands production is projected to reach 2.7 mbd in 2012 and 4.8 mbd by 2020.

Norway

08 Norway

Venezuela

09 Venezuela

United Arab Emirates

10 UAE

Kuwait

11 Kuwait

Nigeria

Number 12

Nigeria reached its recent highs of production in 2005 at 2.7 mbpd of crude plus condensate, 2.5 mbpd of which was crude oil. In the first quarter of 2006 there were reports of insurgent/rebel violence knocking out up to 800,000 bpd of production. This is not shown in the numbers from either the EIA or IEA, which have averaged about 20,000 bpd different for the last 18 months. The lowest recored production seems to be 2.1 mbpd in March and April, or a drop of 400,000 bpd.