The National Iranian Oil Company generated $43 billion by selling oil and derivatives in international markets in 2021.
Oil Minister Javad Owji made the statement on the sidelines of a ceremony to sign a memorandum of understanding between the Oil Ministry and Tehran Municipality to enhance energy efficiency of buildings in the sprawling capital city, IRNA reported.
“NIOC earned $43 billion through exporting crude and petroleum byproducts, including diesel, gasoline and gas condensates, between March 2021 and 2022. The company’s earnings cannot grow unless refining capacity rises and energy demand declines,” he added.
Crude oil processing capacity has not increased over the past few years, because of which gasoline and diesel production volume has not increased either while demand has continued to rise.
Owji warned that the current energy supply will not be able to meet the burgeoning demand in the near future.
“One measure crucial for managing the rising energy demand is investment in energy efficiency plans and energy efficiency is not just a question of technology. It is more a question of attitude, intelligent thinking, governance and cost-effective solutions” he said.
For example, the building sector accounts for approximately one-third of global energy use and is expected to comprise 26% of all future energy efficiency savings, primarily related to space heating and cooling, lighting and appliances.
Energy efficiency should be on top of the to-do lists of all ministries as it cannot be an afterthought. Not only do energy efficiency measures provide affordable energy and access, and are an important tool to improve productivity and competitiveness, but they also help reduce greenhouse gas emissions in the long run.
“Energy waste is a critical issue and needs to be dealt with systemically,” Owji said, warning that Iran would turn into a major energy importer within a few years if the problem is not resolved immediately.
Demand Growth Rate
The growth rate of energy demand in Iran is estimated to be about 12% per annum, but infrastructural projects on the supply side are lagging behind due to lack of investment.
“Although each liter of gasoline is sold at 90 cents in international markets, NIOC cannot boost exports as whatever we produce is burnt domestically.”
Put it simply, high and growing energy demand leaves no space for exports.
Close to 105 million liters of gasoline are produced in Iran per day, of which 93% are used locally and there are worries that NIOC may have to import the fuel next year if the current demand is not curbed.
Referring to natural gas production in 2021, the oil minister noted that the National Iranian Gas Company injected 310 billion cubic meters of gas to the national grid last year.
Nonetheless, household consumption in winter exceeded 700 million cubic meters per day and the company had to cut gas delivery to industries and thermal power plants by 60% to compensate for the shortage.
“NIGC requires investments worth $80 billion to raise its current output at 1 billion cubic meters per day to 1.4 bcm/d over the next eight years, otherwise we will have to import gas from neighbors,” Owji said.
The state-run NIGC has projected a 65% growth to reach 430 bcm in 2040, which is commendable. However, demand for gas is expected to surpass 500 bcm by that time.
By 2040, annual demand for gas from electricity producers is forecast at around 210 bcm and households at 190 bcm.
Likewise, petrochemical factories and other industries will reportedly need 90 bcm in the next two decades – up 125% compared to 2020.
In the best-case scenario and even if gas export does not increase and remains at 10 bcm, demand will exceed supply by a massive 70 bcm come 2040.
The deficit is the equivalent of gas produced in 10 phases of the giant South Pars Gas Field in the Persian Gulf in a year.
According to the minister, low efficiency of thermal power plants (around 35%) is taking a heavy toll on the country’s gas reserves and boosting the efficiency to 50% can help decrease gas consumption remarkably.
Fuel subsidies in Iran stood at $80 billion in 2021, he said.
Energy Subsidies
Due to the huge energy subsidies, Iran is one of the most energy inefficient countries, with an energy intensity three times higher than the global average and 2.5 times the Middle East average, Hamed Houri Jafari, an advisor to CEO of Iranian Fuel Conservation Organization, said.
The official noted that the roads, energy and industries ministries, along with the agricultural and petrochemical sectors, are top Iranian energy consumers.
“Energy consumption in buildings is four times higher than that of the global average. The household sector in Iran consumes an equivalent of 1 million barrels of oil per day that is nearly eight times worse than the most energy-efficient countries," he said.
Comparing energy consumption in different sectors in Iran with those of other countries, he noted that a large amount of energy is wasted in the household sector whereas the lion’s share of energy in developed countries is consumed in industries.
According to Jafari, who is also a faculty member of the Institute for International Energy Studies, the massive energy consumption is rooted in poorly insulated walls, age-old heating and cooling installations, and inefficient light bulbs.
The official noted that energy consumption in the country's steel, cement and petrochemical industries is 150, 100 and 25 times higher than the global average respectively.
Outdated industries need to boost the energy efficiency of machinery and production procedures while public consumption trends should be reformed to cut wastage.
