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Optimizing Energy Consumption from the Policy Maker's Point of View

image credit: Iran
Reza Hosseini's picture
Economic, Financial & Business Analyst | Energy Sector, Energy Development Company

Energy economics, business analyst and result-oriented manager with more than 15 years’ experience in planning and technical and economic evaluation of oil, gas, power and some other...

  • Member since 2019
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  • Feb 1, 2023

Optimizing Energy Consumption from the Policy Maker's Point of View

Iran’s estimated proved natural gas reserves were 1,203 trillion cubic feet as of December 2021, second only to Russia. Hence, natural gas is considered one of Iran's most important energy sources. Currently, natural gas pipelines have been developed in most of the regions. The high energy intensity and the high share of the household sector, indicate the inefficiency natural gas consumption in Iran.

The issue of energy consumption optimization has been discussed for many years, but due to the low price of energy, it has not been given attention at any point of time. Now the question is where to start to optimize gas consumption. Production, refining, transmission and distribution, or natural gas consumption sector?

To answer this question, it is necessary to know the energy value for each section, which I discussed in the previous paper ( According to Iran’s Energy Balance published in 2015, the Iranian government directly owns and operates hundreds of state-owned enterprises. As it can be seen, by neglecting the quality of energy (i.e., Exergy), about 60% of the energy losses are come from the activities of MOP and MOE, which are the two main government ministries.

MOP: The Ministry of Petroleum (MOP) manages the oil industry, the producer of oil and petrochemical products. MOP is in charge of all issues pertaining to exploration, extraction, exploitation, distribution and exportation of crude oil and oil products.

MOE: Ministry of Energy (MOE), is the main organ of the Government in charge of the regulation and implementation of policies applicable to energy, electricity, water and wastewater services.

In this note, for simplicity, the area under investigation is limited to the refining and transmission of natural gas.

The Iran Gas Trunkline (IGAT) is a series of large diameter pipelines constructed from gas refineries in the south of Iran (Khuzestan and Bushehr provinces) in order to transfer natural gas to consumption centers across the country.

Based on economic studies, assuming the investor opportunity cost is 15%, the rich gas refining cost is estimated by 2.9 US cents per cubic meter in the south of Iran.

With the same assumption, the gas transmission costs will rise with increasing distance from production centers. Therefore, if it is assumed that most of the gas needed in the country is supplied from the south of the country, the transmission cost of three centers has been calculated and shown in the following table.


Transmission Cost


Tabriz (C1)


Tehran (C2)


Shiraz (C3)


C1 > C2 > C3

The table is shown that the saving value of one cubic meter of natural gas in the northwest of the country (e.g., Tabriz) is equivalent to 2.1 cubic meters of natural gas in Shiraz. This means that the value of saving in Tabriz is 110% more than the value of saving in Shiraz. Other centers of the country can also be compared with the same concept. Therefore, from the government point of view, as the investor in the development of gas fields, refining plants, gas pipelines and other infrastructures, the priority of making energy savings at the end-user sector, is given to centers that are far from production centers, i.e., more added value in energy saving is gained from centers that are far from energy supply centers.


Reza Hosseini

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