Iranian oil: the revolution's blue chip, extremists' target
With oil prices sagging on the international spot market, Iran has unofficially cut its crude production since January by nearly half. Despite claims by Oil Minister Ali Akbar Moinfar that Iran still is pumping 2 .7 million barrels a day of crude (against government plans for 3 million), a top executive of the National Iranian Oil Company (NIOC) in the Khuzestan oil fields admitted that crude production had fallen to 1.8 million barrels a day.
Khuzestan, a steamy province bordering the Gulf, contains most of Iran's huge oil and gas reserves. The area recently has been struck by bad floods that submerged many villages and thousands of square miles along the Tigris River. However, officials at the state-run NIOC there claimed that flood damage was only temporary and hit the Abadan refinery much harder than it did oil-field operations.
NIOC officials also denied persistent petroleum-industry reports that the production drop was caused either by the departure of foreign experts after the Shah's overthrow or acts of sabotage by Khuzestan Arabs who, like the Kurds and other ethnic minorities in Iran, are fighting for greater autonomy.
Instead, Iranian authorities privately claim that closing off the crude valve is part of the new Islamic government's hawkish pricing policy.
Foreign sales out of that 1.8 million barrels of crude amounted to only 985, 000 barrels a day for the last week of February -- far below the 2 million barrel export level officially announced by the NIOC. At that rate, Iran just barely covers its existing crude contracts with British Petroleum, Shell International, Japan, and Brazil, leaving only a small amount to sell on the international spot market, where oil traders are tacking on an extra $2.50 a barrel to the standard price.
Oil brokers in London suggest Iran may be holding back production until spot-market prices once again shoot up into the $45 a barrel price range that exporters were charging last December during fears of an oil shortage.
Now crude goes for $10 less than that, around $35 a barrel on the Rotterdam spot market. As Prof. Peter O'Dell, a petroleum marketing expert in Rotterdam explained, "The spot market is so fat right now that the loss of Iranian crude isn't even noticed."
Before the Shah was toppled, Iran's capacity approached 6 million barrels a day, an export level ranked second only to Saudi Arabia's. But as Dr. Hassan Fatemi, NIOC's vice-Chairman of operations for Khuzestan, said, "We could easily open the throttle and push production to 4 million barrels, but why should we? At the current prices, Iran is already making more than enough money."
In fact, th revolutionary government cannot spend its oil revenues fast enough. Since the Shah's ouster, over $12.6 billion has been allocated to development. But Tehran economists estimate that only half of that sum has been pumped into badly needed agricultural and labor-intensive projects.
The politically fractious ruling Revolutionary Council is still bickering over long-term development priorities and also fears that dumping too much cash too fast into the country's stalled economy would boost Iran's inflation even higher. While crude prices stay sluggish, Tehran has no need to gear up production.
The flooding in Khuzestan caused a leak on a crude pipeline near Ahwaz that cut NIOC's huge Abadan refinery intake by 80,000 barrels a day. However, Ahmad Rafieyan, assistant manager at the Abadan refinery, claimed repairs were finished "two to three days" after the accident, enabling the refinery to return to its previous 600,000 barrels-a-day production.
Peak capacity for the refinery, which produces 100 different petroleum-base products -- everything from aviation fuel to bitumen for tarring highways -- is 640,000 barrels a day, Mr. Rafieyan said.
Otherwise, the only other damage caused by floods was to new drilling.
During 1980, Iran plans to drill a total of 11 new wells, using equipment abandoned by foreign contractors during the revolution. US drilling companies had 40 new rigs under way in early 1979 whn Ayatollah Ruhollah Khomeini ended the Shah's 37-year reign. NIOC officials claim that flooding has not affected the flow of crude pipelined out to the supertanker terminal at Kharg Island.
NIOC's oil-field installations have also been the target of sabotage by a shadowy guerrilla force, backed by neighboring Iraq, that wants Arabic-speaking Khuzestan to break away from Iran. Since January, small guerrilla groups stealing across the Tigris River from Iraq have struck repeatedly, blowing up pipelines and the company's communications towers, Dr. Fatemi said.
At his Ahwaz headquarters, 100 miles from Abadan, Dr. Fatemi gestured to a map of the oil fields. "Most of the explosions have occurred on the pipelines running down the border from the Dehluran field. Iraq seems to be directly behind these attacks."
The Dehluran field extends across the border and Iraq also pumps oil from there. As Dr. Fatemi added, "Every barrel of crude that Iran lifts means less for Iraq. That's why they're trying to stop us."
However, Dr. Fatemi admitted that behind the bombings was someone who knew the NIOC's operations, possibly a local employee angered by the fact that Khuzestan's Arab population only totals one-quarter of NIOC's work force.
Iraq has a motive for arming the disgruntled Khuzestan Arabs. The government of Iraqi President Saddam Hussein is predominately Sunni Muslim, while most Iraqis belong to the Shiite sect of Ayatollah Khomeini. A successful Iranian revolution might sweep across the border and topple the Hussein regime.
Iraq knows that Ayatollah Khomeini's revolution can only succeed if there is a steady flow of crude to pay for imports until the stalled Iranian economy starts up again.
But can Iran maintain its 1.8 million level? Even this comparative trickle may be reduced, say industry experts in Europe who claim that the loss of highly sophisticated foreign maintenance crews has caused many of Iran's wells to silt up. NIOC's assistant oilfields manager denied this.
"Sure, we need the service companies like Halliburton and Dowell Schlumberger. But at our current production, Iran can hold offm another one or two years without them -- or their spare parts," Dr. Fatemi said.
Foreign experts are needed for Iran's new petroleum-industry projects, such as construction of a refinery near the huge natural gas field called the Pars Namak-Kangan, further south on the Gulf coast. NIOC intends to pmp "dry gas" from the proposed refinery back into the country's four main oil-bearing formations, Ahwaz, Abha-jari, Gaschsaran, and Masjed-e-Suleman.
By gas reinjection, NIOC, which, under current technology, is only recovering 30 percent of known reserves, can raise its recovery ratio another 10 to 15 percent.
NIOC officials are saying privately that once the Majlis (national assembly) is voted in March 14, discussions will resume to bring a limited number of foreign companies quietly back into the oil fields.
In Tehran, Western diplomats claim that the biggest threat to the flow of Iranian oil is not the problem of spare parts or sabotage, but a different kidn of time bomb -- the violent political and ethmic rivalries, which could easily splinter Iran into warring provicnes.
If factions opposing President Abolhassan Bani-Sadr, such as the Mujahideen and the Fedayeen, are dissatisfied with the Majlis elections, they may decide to bring down the government through widespread strikes and demonstrations.
NIOC officials claim that both these Muslim extremist groups are recruiting in the oil fields and refineries in Khuzestan. If so, Iran's petroleum industry may be their first target.