NPEC Meeting, July 12, 2017 Geoffrey Styles GSW Strategy Group, LLC - - PowerPoint PPT Presentation

NPEC Meeting, July 12, 2017 Geoffrey Styles GSW Strategy Group, LLC

 Hydrocarbons supply ~98% of Iran’s energy  Gas production & consumption still growing

• 6% CAGR since 2006
• Led by electricity, industrial and petrochemical

segments

• Exports become significant around 2020

 Electricity consumption near all-time high

• 53 GW earlier this month
• Expected to roughly double by 2040, led by

industrial growth

 Oil – 157.8 BB (billion barrels)

• #4 in global proved reserves
• 110 years at current production

 Gas – 1,201 TCF ( 207 BBOE)

• #1 in global proved reserves
• 177 years at current production

 Coal – 2.5 B tons

• Production ~ 2 M tons/yr

 Significant renewable energy potential,

especially solar

Data: 2016 BP Statistical Review of World Energy

 Current reserves essentially all conventional  Additional shale resource potential of 2 BB

• Unlikely to be economical for years

 Plans to expand oil production to 5 MBD  Gas production growth mainly from S. Pars

• Primarily domestic consumption
• Constrained by int’l capital and export capacity

Source: NASA SSE GIS Annual Solar Irradiance, Peak-Sun Hours

 Signed Paris Agreement

• Pending ratification and entry into force

 INDC committed to 4-12% vs. BAU by 2030

• Conditioned on sanctions, financial/tech transfer,
• ther aid and transfers
• Mentions nuclear, renewables and CCGT
• Hydrocarbon development still needed for social &

economic goals

 On a practical level, local air pollution

appears to be a bigger concern

 Multiple low-emission, non-nuclear options

for meeting future electricity demand

• Natural gas

 Substituting gas for fuel oil in existing power plants would cut CO2 by 30-60% per MWH  CCS options for ~zero-emission gas

 Incl. “Allam cycle” gas plants  Unknown potential market for captured CO2

• Solar

 Good candidate for PV or CSP but cost of former dropping much faster than latter

 Oil displacement for exports widely

discussed as rationale for nuclear power

 Currently burning ~350 MBD f.o. for power, equivalent to 10% of total oil production.  However, global market for HSFO is shrinking, especially in light of IMO 2020 sulfur cap

 Export opportunities for gas

 Turkey, Armenia, Iraq

 Fallacy of nuclear displacement rationale

 Subsidy reform of 2010 substituted cash

subsidies to families for fuel subsidies

 However, energy prices still controlled at

well-below market levels

• E.g., current gasoline pump price ~$1/gal.
• Electricity price ~ 1¢/kWh

 Iran has 3.5 million CNG vehicles

• #1 globally
• ~20% of all passenger cars, essentially saturated

 Currently modest exporter of gas, but large

demand centers in close proximity

 Analysis by the Stanford Iran 2040 Project

concluded that for alternative* generation aimed at gas displacement to be economical, the equivalent PPA price must be <8 ¢/kWh.

 Scale: Only 5% of 2014 generation from RE

• Mostly large hydro

 Iran renewable energy agency (SUNA)

• But Iranian RE industry small

 (More needed here)

 Iran’s oil minister on record citing $200 B of

int’l investment needed in oil & gas sector

• Total/CNGC $5B deal for South Pars (Phase 11) is a

downpayment on this

 (More needed here)

Source: Lazard “Levelized Cost of Energy Analysis - Version 10.0”

Source: Lazard “Levelized Cost of Energy Analysis - Version 10.0”

 McKinsey marginal GHG analysis (2010)

clearly outdated

 Use well-to-wheels analysis and social cost of

carbon as a proxy?

 Cost/benefit analysis in CPP?