The Oil Drum: Europe

Luis - 120Gb production to date is based on API Facts and Figures Centennial edition 1959 for 1936 to 1964 and then BP data from 1965 to present. BP is C+C+NGL. How the Centennial edition dated 1959 reports data till 1964 - I don't know.

Are you saying that Campbell estimates 160Gb and Bakhtiari 130Gb remaining reserves in Saudi? If so then Campbell has 61% of the Saudi official estimate and Bakhtiari 49% - and so in those terms they are both substantially lower than the Saudi official estimate.

If we assume the 1980 figure was prepared in good faith, then an upwards allowance does have to be made for new discoveries and new technology - which would nudge the 91 billion remaining upwards towards Bakhtiari.

Luís de Sousa:

Iran reports 130 Gb of remaining reserves every year. At the same they struggle to get daily production above 3.5 Mb/d, and more than that, gasoline consumption is being rationed.

How can anyone believe in those 130 Gb?

1st I do not claim Iran has 130Gb in remaining reserves.

However, the foreign analysts' opinion seems to be that the current problem with Iran's oil production rate is due to:

- lack of technically skilled workers
- delays in new projects (partially to reasons above/below)
- lack of funding in new projects (oil minister Kazem Vaziri-Hamaneh has himself directly stated this)

These could explain a current lack of production capacity, even without imposing final geological constraints. Of course, for their current wells they must be constrained, otherwise they'd be producing more.

As for the rationing, I think this is a direct consequence of their double-folly:

1) subsidizing domestic consumption way too heavily (gasoline roughly 10 euro cents/liter), which has really accelerated the growth of consumption

PLUS

2) not being able to produce more oil (either through lack of investments/skill or due to geological constraints).

They are in the situation where they are now: they need to export to get money, they need to keep local economy going (cheap oil), which has been financially strangled for so log and they also need to invest in new projects.

I think it is going to be very difficult to do it without several foreign big investment projects and as far as I understand it. USA may be still weighing whether that is the best option for them.

To me the situation for USA looks like this:

Fact: Iran still exports a big amount of oil (roughly 2.5-2.9 Mbpd, I can't find exact data)

Assumption 1: Iran has a lot of unexploited oil reserves (whether it is 130GB or not)

Assumption 2: Iran's own production development is in a rut. If they do not get new projects in the pipeline soon, their production levels could crash (Vaziri-Hamaneh has been quoted as saying 13% p.a.)

Assumption 3: IF Iran's production crashes, that combined with the situation in North Sea, Canada and Mexico, will cause huge strains on the system (pricing, availability, access to right type of refining capacity as wrong type of crude would be brought to market in order to compensate).

So, USA has to ensure that Iran will keep producing.

Options:

1) Attack, take over and start investing.

2) Remove sanctions, threat of war and make Iran an inviting target for investments. Risk terms of PSA and export-end-points => end result not acceptable to USA

I'm not sure the PNAC posse/Israel Lobby allows for option number 2. It's not a "long term" solution for them. Too many risks.

However, attacking might in fact play out assumption 3: removal of Iran from oil market. I won't even try to consider what it could do to Russia/China relations. I'm not 100% sure USA is overly concerned about those either.

Supply-demand margins are very tight now. I don't think they can risk Iran going off-line currently.

So, to be able to attack, USA must enable the world to build build a cushion first. A 1-3 Mbpd temporary cushion? Is that doable?

I don't honestly know, but based on all that I've read here and elsewhere, I seriously doubt it's easy to do.

I think USA, due to their strategic thinking and oil dependency, is between an rock and a hard place in regards to Iran.

They'd love to be able to double Iran's oil production (and so would Chinese, Europeans, etc.)

So, they can't risk production falling to zero due to non-investments or due to military conflict related chaos.

I'm afraid that in the end, they will attack, because that is what they appear to be gearing up to do. Of course, I hope I'm wrong and they'll do this through negotiations.

Sorry for off-topic, but imho, the strategic moves of USA also indicate to me that there are serious untapped reserves of oil in Iran.