“Power shortages in summer, gas shortages in winter” has become a recurring scenario in Iran’s economy. Despite the increase in natural gas production in Iran in recent years through the development of various phases of the South Pars gas field, the gas shortage caused by increased consumption in the winter season still persists; even the increase in gas prices and reduction of subsidies have not been able to reduce this growth in consumption. With a decrease in production from various phases of South Pars, we can expect even more gas shortages; shortages that may turn Iran into a gas importer in the coming years.”

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More than two months ago (October 18th), a report was presented by the spokesperson of the Energy Commission regarding the production and consumption of natural gas in the open session of the parliament, with the presence of Javad Owji, the Minister of Oil. The report aimed to illustrate the importance of gas in various sectors of the country and highlight the consequences of neglecting this challenge. After the presentation of the Energy Commission’s report, the Minister of Oil also gave a speech, emphasizing the need for an investment of eighty billion dollars in the development of gas fields. However, it was implied that securing this amount of money is not possible under this government and in the current circumstances of sanctions, a point that Ali Larijani also mentioned in his speech after Owji’s.

Resources.

According to the latest information published by the US Energy Information Administration (EIA), Iran’s proven natural gas reserves are over 2.2 quadrillion cubic meters, making it the second largest natural gas reserve in the world after Russia. Iran holds 17% of the world’s proven natural gas reserves and nearly half of OPEC’s reserves, with approximately half of these reserves located in the shared South Pars gas field. According to official energy balance statistics, gas accounts for about 74% of the country’s fossil fuel basket, with the majority coming from this same gas field.

Largest Holders of Natural Gas Reserves in the World (2021 / Million Cubic Feet).

Production and consumption.

Iran is the third largest producer of natural gas after the United States and Russia, but it is also one of the top five consumers. Therefore, although it is one of the major producers of natural gas in the world, it has not been able to become a major exporter. However, exports to Turkey have been on the government’s agenda since the mid-1380s and exports to Iraq have been on the agenda since the early 1390s, but the total of these two accounts for a small share of Iran’s gas production. The reason is clear: high consumption.

According to the latest statistics from the Ministry of Energy, the production and consumption of natural gas has increased from 601.1 million cubic meters in 1390 to 824.4 million cubic meters in 1398 and 1,050 million cubic meters in the current year. Based on this, Iran’s gas consumption in the past year was equivalent to the total gas consumption of the countries of England, Italy, and Germany; in addition, this figure is 60 billion cubic meters more than the consumption of Canada and Mexico and 120 billion cubic meters more than the total consumption of the African continent. But where does this high consumption come from?

Separation of sections.

The examination of published figures in the country’s energy bulletin shows that fifty-five percent of the country’s gas consumption is used in the power sector, twenty-one percent in the industrial sector, twenty-six percent in the residential and commercial sector, and the remaining (equivalent to eight percent) is used in the public sector. As it is evident, the majority of gas consumption is used in power plants for electricity production and then in industries; however, this ratio is an average for the year and increases in the cold months. For example, in recent days, residential gas consumption has reached five hundred and ninety-six million cubic meters due to the intensification of cold weather, which accounts for about sixty percent of the country’s total gas production and has increased by about sixty million cubic meters compared to the same period last year. Additionally, gas consumption has increased by six percent in the power sector and ten percent in the industrial sector compared to the warmer months of the year.

Unbalanced production and consumption.

In recent years, during the cold seasons, we have seen an increase in consumption in residential and commercial sectors, leading to a shortage of gas production and supply on certain days of the year. The main reason for this shortage and imbalance is the lack of necessary investment in projects related to increasing and expanding gas production, as well as the existence of numerous unfinished projects and lack of attention to the problem of pressure drop in various gas fields. The dispatch manager of the National Gas Company of Iran stated regarding the level of gas imbalance this winter: “If the temperature and consumption levels are similar to last year, we will have a shortage or imbalance of approximately two hundred to two hundred and fifty million cubic meters per day.” He did not mention what he meant by similar temperatures. Hamidreza Salehi Nayebi, the head of the Energy Commission of the Iran Chamber of Commerce, also believes that this shortage will worsen this year and we should be prepared for its consequences.

Low efficiency.

One of the consequences of gas shortage is the lack of fuel supply for power plants, which leads to disruptions in electricity production. However, the government has been trying for several years to reduce gas consumption in the power sector by replacing it with mazut, which has significant environmental consequences. Gas is also wasted extensively in power plants and the industrial sector. Approximately more than sixty percent of the country’s gas production is consumed in the power and industrial sectors. While power plants in some countries have an efficiency rate of sixty percent, the best power plants in the country operate at a forty percent efficiency rate, meaning that more gas is needed to produce one unit of electricity.

In the past two decades, other industries such as brick, cement, petrochemicals, and steel have developed extensively in the country, with energy efficiency in these industries much lower than the global average. Improving consumption patterns in these industries requires the use of low-consumption devices and the use of up-to-date technology, which is currently not a priority for industrialists due to sanctions and lack of short-term motivation.

Inequality in consumption.

According to officials of the gas distribution company, consumption among customers is not equal. On average, 25% of consumers who are in the high-income bracket, consume 50% of the gas for household use, while the remaining 75% only consume 50% of the gas for household use. Among these, the gas company mentions a very high-consuming group, which is responsible for about 7.5% of the gas for household use; residents in areas one to three of Tehran, who use a large portion of the country’s gas through their fireplaces and home pools. Although there is talk of regulating this pattern of excessive consumption, no action has been taken in practice.

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Over the past three decades, natural gas has become available to the general public in Iran due to the reliance on the country’s abundant reserves. In fact, it can be said that the country’s officials have chosen to prioritize gas supply to cities for heating and gas distribution. In addition, relying on Iran’s gas industry has made the country one of the top five consumers of this energy carrier. The presence of abundant resources in the South Pars field has strengthened the belief among officials that gas is plentiful and cheap, but it is not far off when Iran will become a gas importer due to a decrease in production from this field. However, in recent months, the discussion of importing gas from Russia has resurfaced. Some believe that due to the alignment of the two countries in regional equations, this could lead to a closer relationship, but dependence on gas imports could create difficult conditions for Iran in the future.

Note:

1- 1.5 times increase in gas consumption in households/ Start of liquid fuel consumption in power plants and cement industries, Tasnim News Agency, November 25, 2022.