The Oil & Gas Journal (5/5/08) published an analysis of the
Iranian oil industry that begins: “The Iranian oil and gas industry approaches
its 100th anniversary bloated, corrupt, and nearly bankrupt, managing four times
the employees but two thirds of the oil production it had before the Islamic
Revolution of 1978-79.”
The piece provides details supporting each of those allegations and it
outlines the history of the industry, starting with the discovery of oil in 1908
by a predecessor company of BP. Oil was nationalized in 1951 with a very
successful agreement between the new National Iranian Oil Company (NIOC) and a
group of IOC’s including BP in a 75 -25 split of oil revenues. Substantial
expansion of the size and scope of Iranian upstream and downstream activities
progressed with the development of a highly skilled local technical and
managerial structure until the Iranian Revolution.
Events in Iran since the Revolution are an eery echo of what has happened in
Venezuela since the advent of Chavez. Skilled workers and foreign capital and
technology have fled. Corruption has become rampant along with incompetence.
Production of over 6 mb/d fell to below 3 mb/d after the Revolution and is
currently about 3.8 mb/d. The pre-revolutionary head count of 32,000 employees
has grown to 112,000.
Since the Revolution Iran has exported $801.2 billion of oil but nobody knows
where that money has gone. “Certainly none of it was invested in Iranian oil
infrastructure which badly needs renovation and repair, upstream and
downstream.” The author claims the Iranian petro-industry is “on the brink of
bankruptcy” although such a claim is not documented.
It is clear that Iran, Venezuela, Mexico, Nigeria, and Iraq together
represent an enormous percentage of the world’s oil deposits and production that
is being mismanaged. The political and management dysfunctions in all of these
countries simultaneously is a major reason for the world’s current energy
crisis. If these countries all operated in a standard capitalist mode, I
suspect oil would be below $50 a barrel and the ultimate supply crisis might be
five or ten or even fifteen years beyond when we will see it fairly soon. There
seems to be little hope that any of these countries will make a dramatic change
in their oil productivity soon.
