World oil consumption putting pressure on incorporation of Iran
by Dr. Cyril Widdershoven  

As various international energy forecasts predict an increase in energy demand for oil in the years to come, the Caspian region is and will become more and more prominent as one of the prolific regions in the world. The latest forecast of by OPECs World Energy Model suggests that world oil demand will reach 84 million barrels per day in 2005, 91 million barrels per day by 2010, 97 million barrels per day by 2015 and approximately 103 million barrels per day by 2020. As this forecast shows, OPEC members will have to come up with a crude oil and LNG production levels of about 36 million bpd in 2005, 41 million bpd in 2010, 47.8 million bpd in 2015 and 54.6 million bpd in 2020.

BP Chief Sir John Browne predicted that world oil demand will rise by 2 per cent a year for the next 10 years up to a peak of about 90 million bpd, a level he believes might be close to the industrys maximum production capacity. Furthermore, with developments in technology, allowing deep water drilling, that level of production might be maintained for 30 or 40 years before known oil reserves being to run dry. Sir John had this striking observation to offer: The amount of oil used in the next 10 years will exceed all the oil consumed in the first five decades of the last century. These remarks were substantiated by Ali Rodriguez, secretary general of OPEC, stating that according to OPEC consumption would grow by one third until 2020.

Sir John added that more efficient use of petroleum products and the supplement of alternative sources of energy might lead to some decline in Western oil consumption, but there would be a very substantial increase in the developing regions of Asia, particularly China. Technology is starting to provide some of the answers (put forward by environmentalists), with the development of both cleaner fuels and more efficient use of oil, but would not resist the legitimate aspirations of developing countries for growth and progress. As technology and politics will be the key factors driving the oil price, the deepwater technology is already in place while industry consolidation has created companies with sufficient capital and expertise to secure new supplies. However, this still means that new regions will have to be incorporated into the energy supply lines the next decades. The Caspian region is one of the foremost regions to be targeted for this.

Security of energy supply is in this case of the utmost importance and a very critical point to be assessed. The growing role of the Asia/Pacific region will play a major decision making role in the assessment of the Caspian region, with a vicinity to emerging consumer nations such as India, Pakistan, China and Japan. Based on an average consumption increase of 5% per year, Asian/Pacific demand for oil is expected reach 33.5 million bpd by 2010. China alone could be consuming 7.2 million bpd by 2010, and 10.7 million bpd by 2020, while oil production in Asia/Pacific region may decline from its current level of 6.3 million bpd. It is apparent that the Middle East will not be able to meet Asian/Pacific demand by then. The resources of the Caspian will become more prominent in the total constellation.

The Caspian as already is known is directly linked to developments in and around Iran. Irans vast energy reserves and its proximity to the Caspian gives it an important advantage among other states in the region. Irans strategic location in southwest Asia places it astride oil export routes from the Caspian region to the Persian Gulf, Turkey and Asian markets. Abbas Maleki, chairman of the International Institute for Caspian Studies, Iran, has written an in-depth analysis the last weeks on the directions Iran is following related to these developments. However, all its deliberations and conclusions should be taken into the light of its base in Teheran. Political considerations and faction building in Iran will have its impact on the total report. In that light, still, it is worthwhile to take it into account.

He concludes that the prospect of a constructing a gas pipeline from Iran to Armenia has been discussed for many years. Cost of construction are projected to around $120-150 million. This is a minor investment, in the light of exports of around one billion cubic meters per year. The fact that it is still under consideration, delayed, means political considerations are playing its role. A second possibility is to relay the Baku-Tiblisi-Ceyhan pipeline from Baku to Ceyhan via Tabriz. The Tabriz refinery has capacity for delivering about 150,000 bpd and the reverse pipeline should send up to 200,000 bpd to the Teheran refinery. This would mean that a pipeline with dual capacity from Baku to Tabriz and then to Ceyhan would be designed. This route to Mediterranean terminals is cheaper because of the closer distance and the dual capacity of the pipeline.

Koichiro Nagata, director of Trans-Peninsula  Oil, proposed a pipeline with the objective to reach the Asian markets. One of the possibilities would be to have a pipeline between Baku and Chah Bahar in Pakistan. The length of this route is 2,400 km, requiring a 52-inch pipeline, with a capacity of 2 million bpd. Projected costs are $4.4 billion. Operating costs will be $0.52 per barrel for the pipeline and $0.04 per barrel for the terminal. The second possibility is a pipeline between Kransnovodsk-Baku down to the port of Dayyer (Iran). The length of this route is 2,000 km and requires an 24-inch pipe with a capacity of 400,000 bpd. Costs of this project are $1.1 billion. 

All in all, the real message behind all is the intrinsic relationship between the Caspian potential and Iran. No real results for future energy supplies towards the East will be feasible without interconnection with the Iranian possibilities.

World oil supply will not be able to depend purely on the Middle East or North Africa. Domestic consumer countries production and reserves in the Gulf of Mexico also will not count up to the expected and demanded levels. Irans strategic position, still under pressure of ILSA, have to be taken into account to develop a full-fledged approach of the Caspian region. Additionally, it will decrease the expected political-military cloud Russia will have on all developments in the region. Purely energy deliveries to the Western European countries will be by the grace of the Tsar in Russia. Making it a real feasible region of development, given a breeze of fresh air to all projects under way, with a commitment towards Iran. The time is there to create a pro-active approach, not to wait for a Blue Dream or Nightmare alone. 

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