Oil and gas is the most important industry in Iran. Iran is the world’s 5th large crude oil producer. Iranian proven oil reserves are about 158 bn barrels, which composed 10.68% of total global reserves. Iran has 34 TCM of natural gas reserves, which approximately composed 18% of the world’s total reserves. Iran’s oil and Gas production includes Liquefied gas, Fuel oil, Gasoline, Kerosene and Naphtha.
Iran’s Oil Ministry is in charge of this industry, which is leading it through four subsidiaries. National Iranian Oil Company is the largest subsidiary of Iran’s Oil Ministry, in charge of the upstream sector of oil and gas industry. This company is responsible for producing Crude oil, Natural Gas and Condensates. National Iranian Gas Company manages natural gas’ distribution and transmission in domestic. Iran’s National Petrochemical Company is in charge of all responsibilities related to petrochemical industry. National Iranian Oil Refining and Distribution Company also manage the production, transportation and distribution of petroleum products throughout the country also swapping, bartering and exporting of petroleum products.
Figure 1 Iran’s oil and gas fields
Iran has 10.68% of the world’s proven oil reserves and 13.07% of OPEC’s total oil reserves. Most of Iran’s oil reserves (about 80%) are discovered before 1965, that 70% of them are located in onshore and its offshore reserves are located in the Persian Gulf mainly. Iran also owns about 500 mn barrels of oil offshore proven reserves in the Caspian Sea.
Figure 2 The world’s largest Crude Oil reserves holders (bn/bbl)
Iran’s largest oil fields are those, which are located in the coastal areas; such as Ahvaz, Asmaari, Gachsaran and Marun that all of them are destined in the Khuzestan province. Abazar oil field in Persian Gulf is the largest offshore field (Sea) and its production capacity is 175,000 barrels per day. Iran also has some offshore oil’s proven reserves in Caspian Sea. Exploration and development of mentioned (Caspian Sea) reserves are ceased since territorial disputes between neighbours, such as Azerbaijan and Turkmenistan.
After imposing sanctions against Iran in late 2011, crude oil production fell and Iran lost its second rank in oil production among OPEC producers since mid- 2012. Iran could produce an average of 3,651,000 barrels per day in 2016. In the last OPEC countries meeting, Iranian Oil production level (quota) increased to 3,975,000,000 barrels per day to return Iran oil production rate to pre- sanction periods.
Figure 3 Iran’s Crude Oil production trend (000 bbl /day)
The following table shows Iran’s share and ranking in world and the Middle East total oil production.
Table 1 Iran’s oil production share and ranking in world and Middle East
Iran oil cost was 9.8 USD. Nearly 49% of Iran’s crude oil cost is related to capital spending, 29.4% is related to administrative and transportation and the rest is related to production costs. The following table shows costs of Iran crude oil production per barrel.
Table 2 Cost of producing an oil barrel (USD)
The production cost is showing the highest rate for UK and the lowest for Saudi Arabia. Concerning minimum production cost index, Iran is located in the second rank after Saudis.
Figure 4 Comparing oil producing cost among the main producers (USD)
Following Iran’s sanctions and oil sales reduction due to buyers (other countries) efforts to replace Iran’s oil with other oil producers, Iran’s oil export fell under 2 mn barrels per day from 2012 onwards. Before sanctions, Iran exported oil to China, India, Japan, South Korea, Europe, Turkey, South Africa, and the UAE. After sanctions, some buyers such as European Union member states stopped importing Iran oil and other countries declined their import from Iran. Before sanctions’ intensification in 2011, Iran was exporting 3.2 mn barrels of oil condensates (crude oil and other petroleum condensate) per day.
Figure 5 Iran’s oil export trend in recent years (000 bbl/day)
After the nuclear negotiations between Iran and Group 5+1 and subsequently lifting Iran’s sanctions, the national Iranian oil company increased export volumes since April 2016. The national Iranian oil co. exported more than 2 mn barrels per day since May 2016, of which 500,000 barrels were sent to europe per day. Iran export reached to 2.4 mn barrels in November 2016. Asian countries such as China, India, South Korea and Japan, composed 75% of Iran total crude oil export. Iran’s national oil products distribution company has regained its market share from europe, when it increased 110,000 barrels’ export to european countries in November. Export rate to these countries reached 700,000 barrels per day.
Table 3 Iran’s oil export destination (000 bbl/d)
Iran gained 12th rank among the world’s oil- exporting countries with 2.6% of total world oil export and with 6.3% of total Middle East oil export gained the 5th rank among Middle East countries.
Table 4 Iran’s total oil export share and ranking in world and the Middle East
Iran’s crude oil consumption was about 1.7 mn barrels per day in 2005, which has increased to more than 2 mn barrels per day in 2013. However, crude oil consumption had a downward trend since 2013.
Figure 6 Iran crude oil consuming (000 bbl/d)
The following table shows Iran’s share and rank of crude oil’s consumption among the world and the Middle East countries:
Table 5 Iran’s total crude oil consumption share and ranking in world and the Middle East
Iran’s refinery production has been about 1, 830,000 bpd since March 2017. Iran’s production capacity is about 1,844,000 bpd, which changes in certain circumstances and with the planning of National Iranian Oil Products Distribution Company (NIOPDC).
Table 6 The status of Iran refineries
Iran’s refining capacity will rise to 70% up to next four years. The capacity would reach from 1,850,000 to 3,200,000 barrels per day in 2020 after ending forecasted projects and plans. Iran’s Refining capacity will be experienced 70% growth by implementation and operation of Persian Gulf Star’s 360,000 barrels’ condensate refinery projects, Siraaf 480,000 barrels plan, Anahita’s 150,000 barrels refinery, Bahman’s 300,000 barrels GNU refinery in Jask port and Pars’ 120,000 barrels refinery. Several refinery complexes are also under construction, which the most important ones are as follow:
Table 7 Under construction refineries
Table 8 Iran’s petroleum products
Iran’s original production refineries in the year ended in March 2016 are composed of base gasoline (24%), gas oil (38%), and fuel oil (28%).
Figure 7 Iran’s refinery products composition
Table 9 Iran’s petroleum products consumption (CM)
According to the latest statistics, the world total gas reserves are 187.1 TCM in 2015. Iran has 18.2% of the total gas reserves in the world by having 34 TCM’ gas reserves, and it is the largest holder of gas reserves in the world.
Figure 8 The world’s biggest holders of natural gas reserves (TCM)
South Pars is the largest natural gas field in Iran and in the world. In addition there are at least 15 other major gas fields (The largest fields include Kish, North Pars, Tabnaak, Forooz, and Kangaan). in 1990 South Pars’ gas field discovered jointly with Qatar’s cooperation. Pars Oil and Gas Company (POGC), is a subsidiary of National Iranian Oil Co, and responsible for developing South Pars’ phase 24 with more than 100 bn USD total estimated cost. Each of the 24 phases is composed of natural gas production with gas condensate or natural gas liquids (NGPL). According to the planning, annual gas production will reach to 270 BCM when all phases prepared.
Iran’s natural gas production was about 5,801 MCM per day from 2016 April to October which increased by 10.8% in comparison to the same period in the last year.
Table 10 Iran’s natural gas production (BCM)
Figure 26-9 Iran’s natural gas production (BCM)
The following table shows Iran’s gas production rank and share in world and Middle East:
Table 11 Iran’s rank and share of gas production
Figure 10 Natural gas consumption trend in Iran (BCM)
Iran is among the world’s biggest natural gas consumers and the country’s natural gas consumption trend is rising. Iran is the major natural gas consumer in the Middle East, and the world’s fourth- largest gas consumer. Natural gas consumption in Iran has reached from 102.7 BCM in 2005 to 191.2 BCM in 2015, and shows more than 86% growth. In the first ten months of 2016, Iran’s gas consumption was 153.02 BCM. The following chart shows Iran’s natural gas consumption trend in recent years:
Table 12 Iran’s natural gas consumption rank and share
Residual, industrial, and power plants allocated Iran’s highest natural gas consumptions amount. The main reason of consumption’s small growth in large scale industry is gas consumption decrease in Steel and cement industries.
Table 13 The composition of Iran’s gas consumption (MCM per day)
34.7% of natural gas consumption related to the residual, commercial, and industrial sectors, 43.9% owned by power plants and 21.4% was for large scale industry between 2016 April to October.
Figure 26-11 Iran’s gas consumption composition during Apr – Oct 2016
The study on natural gas trade in the 2016 April to October indicates 1.2% decline in natural gas export and 23.6% decline in natural gas import over the same period in the last year. In this period Iran’s natural gas export was equal to 21.1 MCM per day, which in comparison to the same period in the last year decreased by 240,000 CM (1.2%). A total 4,560.3 MCM natural gas have been exported during this period also Iran’s natural gas import was 16.1 MCM per day.
Table 14 Iranian’s natural gas export and import (MCM p/d)
About 92% of Iran gas export to Turkey, 5% to Armenia, 2% to Nakhchivan and 1% to Republic of Azerbaijan.
Figure 12 Iran Gas export destinations
About 97% of Iran’s import need for natural gas provided through Turkmenistan and another 3% through Azerbaijan. Importing gas from Azerbaijan is performing in the SWAP’s framework. Azerbaijan is approximately delivering 0.41 MCM of natural gas to Iran and Iran mutually export 0.4 MCM of natural gas to Nakhchivan per day.
Figure 13 Gas import origins
The gas condensate’s daily production was approximately 563,000 barrels in 2016 April to October that shows 18.27% growth in comparison to 476,000 barrels in the same period in the last year.
Table 26-15 Iran’s gas condensate production (000 bbl/d)
S W O T
– Having sufficient basic infrastructures in the oil sector
– Huge oil, gas and petrochemical projects
– Low production costs because of placing major oil resources in Iran’s Southern parts and on land.
– Having huge gas transmission’s infrastructure to abroad
– Possibility of swap gas to neighboring countries
– Potential big consumers
– sufficient infrastructure for export, gas swaps and transition to Europe, East Asia, Persian Gulf States and in Iran and Europe gas export paths
– Existence of several oil and gas fields which often have low technical risk and their extraction costs are low on a global scale
– Trained and competent Human resources and wide range of engineering and contractor firms, which reduces the costs and prevents investing oil companies to provide everything from abroad
– Applying old technology
– Non- optimal and high fuel and energy consumption in Iran
– The projects’ period will be prolonged
– Iran’s geopolitical location as the passage of oil transit and its export
– Access to high seas
– Security in all Iran regions that does not impose any risk and cost to the investor
– The shortest path to global markets
– The oil fields’ Proximity to the export terminals
– Poor relations with the states owning the Science and Technology
– Non- optimal utilization of joint reservoirs with other countries
Vision in 2025
According to Iran’s oil industry position, the outlook for this industry has great importance; in this regard, various purposes are intended for it.
– Reducing Iran’s energy intensity to less than 0.3
– Maintaining the second large crude oil producer rank in OPEC that is required keeping the proper distance due to the capacity from other competitors
– Achieving the second rank in the natural gas production’s global capacity, due to use of common repositories such as cases in which the oil vision is considered.
– Achieving the region’s first rank in terms of refining capacity in order to help Iran’s highest added value creation in hydrocarbon resources
– Achieving the region’s first rank in terms of petrochemical goods’ production value to create higher added value for the hydrocarbon resources
– Achieving the first rank in the region’s oil and gas technology.
Laws & Regulations
According to the article 45 in Iran’s constitution, natural resources’ foreign and private ownership is prohibited; therefore, ownership of oil and gas resources and equipment must remain in hands of National Iranian Oil Company and so contracts such as of producing share agreement (PSA) cannot be used in Iran.
Also according to the 6th Development Plan and second paragraph of Article 55;
Providing requirement facilities and financing for establishment refining capacity of 2,700,000 crude oil and gas condensate’s barrels per day with high complexity factor by the non- governmental sector, so that they are essentially allocated the combined production of lighter products and petroleum distillates so that share of producing fuel oil does not exceed 10%.
– National Iranian Oil Company (NIOC) plans to develop new fields in the West area of Karoun. These fields include some large fields like Azadegan, Yaran, Yadavaran and Darkhoein as well as some smaller fields such as Jafir, Karkhe and Susangerd. Karun
West oil fields produce only 100,000 barrels per day. NIOC is expected to increase oil production of these fields to one mn barrels per day. It is anticipated that, production capacity of the fields reaches to 400,000 – 800,000 barrels per day in 2020, concerning the national oil company’s ability for providing the required investment.
– Plans to prioritized investment will be implemented to enhance oil production capacity in fields such as Ahvaz, Gachsaran, Marun, as well as for operating some of the blocked oilfields. It is expected that Ahvaz field production almost reach to its original value, while other field’s production gradually increases. The Total oil production’s increase might be between 200,000 and 400,000 barrels per day in 2020.
– Iran’s petrochemical industry is one of the largest petrochemical industries in the Middle East. Currently, after crude oil export this industry brings the most income for the Iranian economy. This industry can seriously take enough advantages from sanctions’ lifting. The Government plans to develop and expand this industry to get more value added than hydrocarbon resources in the downstream sector.
– According to the full advantage of South Pars’ new phases, it is expected that gas condensate production has a significant increase and reaches to 300,000 – 500,000 barrels per day by 2020.
– National Iranian Gas Company in order to penetrate in the global gas markets has done negotiations on the agenda for export to the Basra area. In the framework of this six years contract, the gas export’ volume reaches to seven MCM per day in the first phase, 12 months after the first phase, 14 to 18 MCM and consequently 20 to 35 MCM. Iraq signed two contracts with Iran and totally import 40 to 70 MCM per day from Iran and has become the Iran biggest gas customer.
– Gas export to Europe, is the other program that can have an important role in increasing Iran’s share in global gas trade. Now Europe Union is procuring about 22 to 23% of its required energy from the natural gas, and based on Europe Parliament studies, there is the possibility of exporting gas from 12 countries to this continent that Iran is among these countries and is the best source of gas supply. Iran has annual export capacity of 25 to 30 BCM of gas from eight paths to Europe.
1. Investment opportunities in refinery and pipeline projects:
It is estimated the investment opportunities volume to be 15 bn Euros in new refineries constructions projects, the required investments volume to be nearly 5.6 bn Euros for development and optimization of existing refineries, and for reduction of existing initiatives petroleum refinery production to be 3.5 bn Euros. In addition to the above projects, National Iranian Oil Refining and Distribution Company intends to implement extensive plans in the pipeline petroleum products that they have provided other opportunities for more than 7 bn Euros
2. Iran LNG project located in Assaluyeh – Kangan
3. Floating LNG installation projects (FLNG)
4. Power Exporting projects (feed gas supply for power plants in the private sectors in order to export power)
5. Participation and investment in gas export pipelines’ construction to neighboring countries and Europe
6. Specification of 49 oil and gas field development plans have been prepared which 21 projects among them are joint fields and 28 projects are non- joint at land and sea; Total estimated investment of the project reaches to more than 40 bn USD that concludes about 70% of the joint fields.
Implementation and completion of joint oil and gas field development is considered as the top priority of investment in National Iranian Oil Company, which can be noted as remaining phases of
South Pars oil field development, development of integrated West Caroon project, completion and development of Foroozan and Esfandiar’s oil fields, development of Farzad gas field project and completion and development of Salman. Funding and implementation of oil and gas prioritized development projects is especially important in policy of resistance economic context.
7. Iran’s gas export diversification is under investigation. Iran LNG industry has encountered difficulties in providing products and technology requirements during sanctions that is seeking to attract foreign investment in this section to resume LNG plants construction in Iran.
National Iranian Oil Company
National Iranian Oil Company has been responsible for the oil industry’s regulating and policymaking such as exploration, drilling, production, research and development, refining and distribution of oil, gas and petroleum products and its export since 1952 up to now. This company is one of the largest oil companies with having the huge hydrocarbon storage. Joint fields Production is the main priority of the Ministry of Petroleum and National Iranian Oil Company; so that extraction of the South Pars gas field (joint with Qatar) increased about 300 MCM per day in the past three years. Iran is having the equality with Qatar’s gas extraction also capacity of Karun West oil production has increased remarkably in the joint fields so that daily production capacity reached to over 300,000 barrels in these fields now. Total recovery factor of Liquid hydrocarbon reserves is 28.5% and the Iran’s crude oil recovery factor is an average of 24.5% now. This factor does not exceed 5% in some of the tanks. There are 170 oil and gas fields, including 120 oilfields and 50 gas fields in Iran. The numbers of oil and gas tanks are 358, among which, 163 tanks are developed and 195 tanks are under development.
National Iranian Gas Company
National Iranian Gas Company was established as one of the four main companies dependent on the Islamic Republic of Iran’s Ministry of Petroleum in 1965. Now National Iranian Gas Company is one of the ten biggest companies in the field of oil and gas in the Middle East and it is one of the four major companies with a history of over 45 years, which should supply more than 61% of Iran’s fuel requirements.
Now Iran gas refining capacity is about 540 MCM per day. Now Iran’s share in the global gas trade is including export, import, swaps, transit and trade with electricity about 2%. However, Iran’s share of global trade in natural gas will be raised to 10% by the end of 2025. National Iranian Gas Company currently provides about 61% of the Iran’s energy needs. The next 15 years aim is reaching to 1,300 MCM of gas, 70,000 km of high- pressure gas pipeline and 8 to 10% share of global gas trade.
National Iranian Oil Refining and Distribution Company (NIOPDC)
National Iranian Oil Refining and Distribution Company (NIOPDC) established based on the separation of upstream activities principle (Exploration and production of crude oil and gas) from downstream activities (refining, crude oil and petroleum products, export, import and distribution of petroleum products) in oil ministry in March 1991 and began its official activities in 1992. National Iranian Oil Refining and Distribution Company is responsible for steering and monitoring the activities of 4 subsidiary companies and 9 refining companies, as one of the 4 major companies of the ministry of oil and does their missions by utilizing the services of over 20,000 highly qualified workforce. Currently Iran’s refineries capacity is totaled 1.85 mn barrels per day.
Iran refinery products are including kerosene, gas oil, gasoline, and all of solvents. According to Iran’s growing demands to oil products, the company has done the joint development plan, updating, and improving refinery and has a huge program of building new refineries at hand. National refining and distribution company’s activities, focused on other four major sectors including national engineering and Iranian oil building companies, petroleum products’ distribution, oil pipelines and transferring and finally Semi- centralized refining industries development.