Wednesday, December 27, 2006

Analysis says Iran's oil revenue is going to be Zero by 2015

While the scariest man in the world, Mahmood Ahmadinejad, chooses to peddle his inane drivel to Pope, a new study by Roger Stern, an economic geographer at Johns Hopkins University has published in this week's edition of the Proceedings of the National Academy of Sciences that the Islamic Republic could soon run out of oil to export. "Iran earns about $50 billion a year in oil exports. The decline is estimated at 10 to 12 percent annually. In less than five years, exports could be halved, and they could disappear by 2015, Stern predicted."

Stern faults the inadequate investment (hostility to foreign investment to develop new oil resources) and mismanagement (poor state planning) and sheer negligence by the mullahs as the main causes of declining oil exports. The decline is estimated at 10 to 12 percent annually. Stern also informs us that the poor managment and inadequate care and maintenance of the refinaries contribute significantly to the loss of revenue and waste of precious oil, "If we look at that shortfall, and failure to rectify leaks in their refineries, that adds up to a loss of about $10 billion to $11 billion a year." "That is a picture of an industry in collapse."
Iranian oil production, which has been the main industry in Iran since the 1920s accounts for more than 65% of the nation's overall revenue. Iran earns about $50 billion a year in oil exports. He also points out that Iran's Oil Peaked in the 1970s and has been on a decline since the early 1980s. (see definition of Peak Oil).

The original forecast by EIA (Energy Information Adminstration) was that Iran will run out of oil by the year 2025. However, I think the mullahs are looting the oil revenues at a higher rate and not re-investing the revenues to maintain their only source of profit. That's what happens when a bunch of uneducated mob are at the helm of fourth larges oil producing nation.

This is quite frightening for a nation who's main source of revenue is oil. Iran has been investing in everywhere else in the world except Iran to the determinant of the Iranians future.

I have no doubt the murderous regime is fully aware of this fact and that's why they have chosen to expand their domination in the region unwisely to compensate for their incompetence.

Blinded by Islamic fanaticism, inaptitude and hubris, they have squandered and exhausted the oil resources to line their own bulging pockets and have invested the oil revenue in Dubai, Iraq, Lebanon, Somalia, etc. Instead of re-investing the money to replace and upgrade the antiquated oil industry infrastructures build by the Brits in 1920s, the regime has chosen to give $12000 cash per person to shameless Southern Lebanese welfare queens and kings and building them schools and hospitals and offering them free health care. And god knows how much more to Hamas et al while 40% of Iranians live below poverty level and the GDP of around $2800 and per capita income of only $8600 (Peru and Thailand have the same per capita income althought they are not oil producing countries)

I think all democratic activists inside and outside of Iran should demand the full disclosure of all pertinent information regarding this energy crisis from the Islamic Republic. Sober and objective assessment of this looming threat that faces all Iranians has nothing to do with politics and should be vigorously debated and it's catastrophic consequences fully identified and remedied before it's too late. This priority is above partisan politics. Iranians should hold the Islamic parliament responsible, according to the obligations under its own constitution, to discuss and inform the people of Iran on the consequences of their inept management of nation's oil. They should come clean and inform the people of how they have not used the oil profit to secure it's sustainability and as a result endangering the national security of the nation.

Stern ends his analysis suggesting that the US should be patient and scrap military intervention because Iran will be exceedingly weak economically and politically," If the United States can "hold its breath" for a few years, it may find Iran a much more conciliatory country, he said. And that, Stern said, is good reason to delay any instinct to take on Iran militarily.
"What they are doing to themselves is much worse than anything we could do," he said.

The absolute priority is to end the reign of ignorance of these medieval NON-IRANIAN TAZIS. The clock is ticking and Iranian's culture, heritage, history, people, and national wealth are being wiped off the map by the Islamic ummah and their agents.


RoxieAmerica said...

Ahmadinejad certainly knows about the oil problems - he is working overtime to the become the world's leader in uranium enrichment - and what will replace oil worldwide? Nuclear. A nuclear armed Iran would surely impose both energy blackmail and nuclear bomb blackmail on th world.

It is wishful thinking that Iran will self-destruct. It is also a false-belief to assume that strength now will lead to destruction of the government...

Iran is currently funding Hezbollah, Hamas, and other groups. It is supporting covert operations in Iraq. It is building missiles and other military equipment at a rapid rate -- More pressure could help this regime self emplode. Ahmaindejad has promised the moon at home, and delivered molded cheeze to the Iranian people.

Weakness, is not the answer in dealing with Iran.

SERENDIP said...

Dear Roxie: I'm in full agreement with you. "Weakness, is not hte answer in dealing with Iran", and it will never be. Iran is hell bent on world domination. The commentary was written with my Iranian readers in mind inside Iran who are kept uninformed by censorship.

A Jacksonian said...

Did a basic overview and some analysis of the report and came to a few conclusions.

First, the regime has not been investing enough to keep their basic infrastructure going. Their income from oil is just enough to cover maintenance, but not future investments. So, by trying to bring up the old maritime platforms as producers, they are actively removing money from the maintenance budget.

Second, the entire petroleum infrastructure is going to pot. The very pinnacle and most complex piece of the infrastructure is the refinery: if you do nothing else, you keep the refineries going as the most value added is there. Any modern, well run refinery system does not *lose* oil. The entire supply and refining system in Iran is losing 3-4% of its oil above and beyond the depletion rate of its field capacity. The added subsidies to gasoline and natural gas are killing the refineries, which cannot sustain themselves on that economic footing without other monetary inputs. The natural gas problem is even worse, as it is the #1 easiest and cheapest method of 'rejuvenating' old oil fields. Plus Iran is hopping to let liquid natural gas futures and contracts. To do this there will be *no* cheap oil sustainment and more expensive methods will need to be employed. In point of fact they may not be able to let any contracts on natural gas based on domestic consumption alone.

Third, the entire petro-infrastructure has seen no new additions on it for at least 4 years and most likely 8 years. Japan has shut off ALL new investments in this area and the amounts that Iran is trying to bring online no where meet current consumption increases. Gross supply,then, at best will remain flat with diminishing older fields losing production, no new projects to be online before 2010 and actual maintenance losing oil in the sytem. And as the older maritime equipment needs an overhaul, bringing it up again only means a faster date to get that started. From that the expectation is that gross supply will *not* remain steady and will actually begin to decline.

Fourth, the first indicator or warning sign is that Iran can't meet contractual obligations. They have not met their OPEC export quota for 18 months.

When production crosses consumption downwards, Iran becomes a net oil IMPORTER. Their refinery system is already so bad off that they are talking about buying gasoline to import and selling it at cost... considering the subsidized gas is 34 cents/gallon and the world market is about 5 times that, the economic shock of even a slow transition will be huge as money starts to flow out of Iran to buy gasoline.

The refineries are the key: they are the most integral part of adding value to the crude oil and get a high return on investment. When those start to fail, that indicates a system-wide problem in lack of skills and maintenance. No modern Nation loses *any* oil in the pipeline system or refining system, unless it is venting of natural gas that cannot be used or captured. It isn't just the nice economic trouble numbers out at 2012-19 that are worrying, it is the fact that before that happens the entire system reaches a tipping point and Iran changes from oil export on contract to being forced out of OPEC and onto the spot market because it cannot meet export quotas and is seen as an unreliable Nation for meeting contractual obligations. Things get very ugly then. Especially if the refineries have to be shut down and gasoline imported. And there is no cheap rejuvenation of older oil fields with natural gas. And maintenance of the basic pipeline and pumping system declines steadily.

The refineries are near that point already. The oil fields are already experiencing the fact that more expensive rejuvenation needs to be used because natural gas cannot be taken from the domestic use side. And the infrastructure is already losing 3-4% of all oil pumped out of the ground.

These are not little post-it note warnings: these are huge billboards in neon brightly flashing *Danger Ahead*.

What happens when this house of cards falls in on itself is of speculation. Even if they stopped subsidies *today* and took the resultant economic downturn, new projects will not come online until 2010 if the system worked well. It does not work well. This is the strangest form of economic suicide that has ever been described: willful neglect of a cash cow that drives the National economy to undermine one's own Nation.

When the refineries die or are closed, the rest of Iran is not far behind.

sm said...

Firstly, I very much dislike what the mullahs have done to Iran and still do. I also recall them being helped, initially, by Carter Administration & thereafter, at best, ignored or contained by other U.S. Administrations. I also recall Reagan Administration helping the Mujahedeen in Afghanistan leading to the oust of the Soviets and the creation of Taliban. Hence, mainly, contributing to our current Al-Queda, Mullah and Islamist problems. I won’t continue re U.S. myopic policy.
Secondly, All I've to say to you and Roxie, in particular, is that I do sincerely hope the U.S. doesn't pursue another chaos strategy with Iran in the ME, similar to Iraq (even unknowingly). We all know that the U.S. is very capable of hardware i.e. military war, but her track record of implementing effective change or liberation, has been abysmal. If the U.S. is sincerely looking for democracy in the ME, then she has to visibly demonstrate it. I'm afraid we haven't even seen a glimpse of that, in a very long time, except purple fingers and the public execution of someone who was no longer relevant after he was caught in a hole. His execution was a foregone conclusion even then, despite the show now.
I’ve always held the U.S. in high regard for the positive things in the world, therefore, I’m very disappointed about rampant anti-American feelings in many world regions, even those that supported the U.S. in Iraq in ’03.
Best Wishes for 2007.

SERENDIP said...

Dear SM:

All your points well taken...however, email me at