In recent times, the only time Iran seems to receive a mention in the press is in relation to US sanctions or former hostilities with its neighbour Iraq. Indeed with all the spotlight on Iraq i.e. the hand over of power back to the Iraqi people and talk of huge reconstruction efforts; the prospects that lie on the other side of the Iraqi fence often seem to be forgotten or perhaps ignored.
Compare the ‘opportunities’ in both power sectors. Iraq currently has a generating capacity of about 4300 MW and still faces regular load shedding. The ministry predicts electricity demand in the country will rise to 14 000 MW by 2007. It estimates the cost of rehabilitation in the 2004-2007 period will be $25 billion, excluding operating costs. A World-Bank-United Nations joint report put the figure at about half this.
Iran meanwhile has an installed generating capacity of about 33 GW, ranking it number one in the world among the developing nations. More crucially, demand is expected to grow at between 6 and 8 per cent for the next ten years. The goal is to add 30 GW within this time frame. Over the longer term, the goal is to increase capacity to 96 000 MW by 2020 – representing an addition of more than 60 000 MW. This capacity will require a projected investment of around $96 billion.
While most of this new capacity will be from thermal plant, what is also attractive about Iran is its diverse mix of energy resources. We know Iran is OPEC’s second largest oil producer and holds 7 per cent of the world’s proven oil reserves. It also has the world’s second largest natural gas reserves. But in addition to conventional fuel resources it has hydro potential as well as promising wind speeds in the mountainous regions of the northwest, northeast and south. The erection of a wind park near Mashad has been under consideration for some time but never built. In January 2003, the country also announced plans to build its first geothermal plant in the north-western province of Ardebil. There are also several small nuclear reactors and Iran plans to build more.
The numbers speak for themselves but the maths is not always straightforward. Despite relatively high oil export revenues, Iran still faces budgetary pressures, a rapidly growing population and high levels of unemployment. More importantly, it also has the huge obstacle of being subject to international isolation and sanctions.
No doubt the ‘West’ has issues with Iran but how much is politics affecting opportunities for equipment suppliers in the Western community and in particular the US? Iran has stated that it wants to have 7000 MW of nuclear power on line by 2020. This will account for about 10 per cent of generating capacity. The US, however, has concerns over Iran’s nuclear programme and the proliferation of nuclear weapons. Iran meanwhile insists that it is committed to complete transparency, having submitted a comprehensive report on its nuclear activities to the International Atomic Energy Agency (IAEA).
Unlike the US, Russia has no hang ups about embracing Iran’s power sector. Aleksandr Rumyantsev, head of the Federal Atomic Energy Agency said: “Russia is interested in the construction of new units at the nuclear power plant in Bushehr. Iran has recently been demonstrating complete openness in its relationship with the IAEA, and has given its inspectors access to all of its installations. Iran is perfectly entitled to develop its atomic energy sector.” He went on to say that fresh nuclear fuel for Unit 1 of the Bushehr plant, which was built with the help of Russian specialists, will be supplied by Russia in 2004-2005. The unit is due to be launched next year. Rumyantsev added that the additional protocol on the return of spent fuel from Iran to Russia “will be signed this year”. Russia hopes to earn as much as $40 million per year from supplying nuclear fuel to Iran and shipping out spent fuel.
Clearly the opportunities in Iran are abundant, and certainly the grass on the Iran side of the power sector fence is much greener than in Iraq. Yet it is Iraq that receives the attention. The money pours in and efforts to execute power contracts continue – even in the face of extreme adversity. Politics is indeed a strange thing.