A Dynamic Model for Maximization of External Profits of Natural Gas Reserves of Iran and its Application

Abstract

In this article, one of the most important challenges facing the National Iranian Oil Company - the optimum allocation of natural gas to the different consuming sectors such as export, petrochemical plants and injection into oil fields – is discussed employing the optimization and preference analysis theory of Professor Harry Markowitz!. Our results show that gas export, gas injection and petrochemicals are the optimal preferences from the mean expected present value and risk points of view. When choosing the optimal portfolio employing a risk-return frontier, if less risk is desired, then the weight (ratio) of gas allocated to export projects should be decreased. On the other hand, decreasing the weight ratio for gas injection and petrochemicals will mean that the risk (as well as the expected value) increases. Put another way, in the case of Iran at the present time, it appears that the more risk averse is the investor, the smaller the gas ratio allocated to gas exportation projects.