Examination of Iran's Crude Oil Production Peak and Evaluating the Consequences: A System Dynamics Approach

Abstract

Despite considerable efforts to give diversity to world's energy supply portfolio, oil still has a significant share among energy carriers and plays a major role in economy of countries. Regarding dependency of Iran's economy on revenues of crude oil exports, investigations on the dynamics of crude oil production rate (considering the factors such as technological, economic, political, etc.) are of high importance for the country. In this paper, factors influencing the Iran's crude oil production peak are investigated by system dynamics approach. Through results obtained by the model it is shown how different factors, within causal relationships, affect the occurrence time and the volume of produced oil at its peak. The model is also used to evaluate different scenarios on oil price, geological uncertainty, production depletion, and foreign investment level in the country. Moreover, it can be used to simulate behavior of main variables in the industry under different policy options. The model predicts that the peak will occur sometime between 2035 and 2042 with various production volumes in different scenarios. The developed model can help practitioners, especially policy makers, in the oil sector to gain a systemic and comprehensive insight of influencing factors and the relationships which cause occurrence of Iran's crude oil peak. Investments in all exploration and production sectors, which depend on the oil prices, might be the most crucial variable on the future of the industry and its success to help the developing country achieve its goals.