Cheap Feedstock Reducing Power Plant Efficiency
In order to enter the international electricity markets, the price of natural gas as feedstock for power plants should be based on global gas prices, a deputy oil minister said on Monday.
"Power plants' efficiency in Iran stands at 23% compared to that of the global average of 60%," Mansour Moazzami was quoted as saying by ISNA.
According to the official, power plants' low efficiency in Iran would lead to the wastage of national resources. In other words, boosting gas export is economically more viable than wasting it in power plants whose efficiency is not even half as much as the global average.
Moazzami said, “In spite of the fact that the Oil Ministry supplies 95% of Iran's energy, the Energy Ministry is in charge of generating electricity. Yet each one acts independently based on their own interests, the result of which would be lack of fulfillment of their ultimate objective, that is achieving a developed economy.”
Referring to the long-term economic viability of gas export, Moazzami said regular and consistent gas export to neighboring states will make them dependent on this type of energy resource. Such a measure will oblige them to adapt themselves to our policies, both politically and economically.
“Consuming natural gas just to heat our houses, without converting it to value added products, would definitely mean wasting national resources, as gas consumption in Iran during winter exceeds a whopping 400 million cubic meters per day,” he said, noting that there is a wide range of strategies to make a better use of the precious resource.
Asked about gas export strategies, Moazzami said natural gas can be exported in different ways and the most effective way is either by converting it to electricity or liquefied natural gas or transferring it via pipelines.
"Each alternative has its own advantages, yet it may enjoy a different value added," he said.
The oil expert approves of exporting value added gas commodities and, in line with such a strategy, he believes that the Majlis should make a serious decision to merge the oil and energy ministries in the sixth five-year development plan (2016-21).
“As long as prices are based on international gas prices, we can be hopeful of having a say in the international electricity markets. Otherwise, long-term goals cannot be accomplished,” he said.
"Like other consumers in the household sector, power plants should also be required to pay for the gas they use, yet lots of them seem to be reluctant to do so."
Moazzami noted that energy rent seekers have already inflicted serious damage on the economy.
Pointing to the low gas prices as feedstock for power plants, which amounted to 8.5 cents, Moazzami said, “If feedstock prices were higher, power plants' efficiency would not be that low. Neither low efficiency nor underselling natural gas is justified economically. Moreover, they are in stark contrast with Resistance Economy."
Resistance Economy is a set of policies proposed by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei to counter sanctions, boost production and reduce consumption.
The price of feedstock is a decisive factor for domestic and international companies exploring investment opportunities in the Persian Gulf country's promising energy market.
According to reports, feedstock prices vary from 6 to 8 cents in the Middle East.
Energy consumption in Iran is above global average. According to the Paris-based International Energy Agency, Iran is the fourth biggest consumer of natural gas after the US, Russia and China, three of the world's leading economies with large populations.
The Persian Gulf country is also the world's fourth largest producer of natural gas. It produced 173 billion cubic meters of gas in 2014, the most after the US, Russia and neighboring Qatar.
Iran exports natural gas via pipelines to three neighboring countries, namely Turkey, Armenia and Azerbaijan.