Iran crude oil production to decline by 700 kbd by 2015; budget neutral oil price $130

The new IEA Medium Term Oil Market Report 2010

estimates Iran’s oil production capacity will decline by 700 Kb/d by 2015.  The above graph shows the  change of crude oil capacities between 2015 and 2009, for various OPEC countries.

Assuming continuing domestic growth of oil consumption for a 70 million population  this means that Iran’s oil exports will be half in just 5 years.

What does that mean for the Iranian budget?  The Iranian Press TV reports:

Iran’s new budget bill and its challenges

8 March 2010

“…..In 1389 [year 2010 starting in March]  crude and oil byproducts incomes stand at %51 of the budget revenues….the 1389 Budget Bill, that will be passed by the Parliament after making amendments within the next fortnight, has been projected on the basis of oil prices of US$65 p/b and US dollar -IRL exchange rate of 9850 Rials..”

Therefore, provided all other factors being equal, oil prices need to double from that level to $130 a barrel for declining oil exports to be revenue neutral.

Although many countries are struggling to maintain a balanced budget the geo-political implications of declining oil exports from Iran are incalculable.

The above estimate, however, could well be too optimistic. I have superimposed oil production and consumption curves on the estimate range provided by the late Dr. Bakhtiari which he presented at an ASPO conferennce in May 2003, in Paris:


Dr. Bakhtiari’s paper

It is interesting to note that Dr. Bakhtiari’s WOCAP model contains “geo-politics” as a factor impacting on oil production

In his 2006  testimony to the Senate Inquiry on future oil supplies he had explained the transition phase T1 between growing and declining oil production and that the world will experience new econpomic rules:

Another warning about export extinction in Iran (by 2014-2015) was published in 2007 in the Proceedings of the National Academy of Sciences of the US.

The Iranian petroleum crisis and United States national security

Although all of the above reports and the latest IEA decline rate arrive at different time frames for exports going towards zero this problem will for sure attract the world’s attention in the next years to come, long before the actual zero point is reached.