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

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

 Signed Paris Agreement ◦ Pending ratification and entry into force  INDC committed to 4-12% vs. BAU by 2030 ◦ Conditioned on sanctions, financial/tech transfer, other 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?