Petroleum Industry In Iran

The history of Iran’s oil industry began in 1901, when British speculator William D’Arcy received a concession from Iran to explore and develop southern Iran’s oil resources. The discovery of oil on May 26, 1908 led to the formation in 1909 of the London-based Anglo-Persian Oil Company . By purchasing a majority of the company’s shares in 1914, the British government gained direct control of the Iranian oil industry, which it would not relinquish for 37 years. A 60-year agreement signed in 1933 established a flat payment to Iran of four British pounds for every ton of crude oil exported and denied Iran any right to control oil exports.

In the same year, officials in Iran estimated that Iran’s annual oil and gas revenues could reach $250 billion by 2015. However, the industry was disrupted by an international embargo from July 2012 through January 2016. In FY 2009, the sector accounted for 60 percent of total government revenues and 80 percent of the total annual value of both exports and foreign currency earnings. Oil and gas revenues are affected by the value of crude oil on the international market.

Oil was defined as inter-generational capital and an indispensable foundation of economic development. Thus, between 1997 and 2004 Iran invested more than US$40 billion in expanding the capacity of existing oil fields and discovering and exploring new fields and deposits. These projects were financed either in the form of joint investments with foreign companies or domestic contractors Delta 8 or through direct investment by the NIOC. In accordance with the law, foreign investment in oil discovery was possible only in the form of buyback agreements under which the NIOC was required to reimburse expenses and retain complete ownership of an oil field. Marketing of crude oil to potential buyers was managed by the NIOC and by a government enterprise called Nicoo.

In 2006 natural gas accounted for about 50 percent of domestic energy consumption, in part because domestic gas prices were heavily subsidized. Natural gas production will reach 700 million cubic meter/day by 2012 and 900 million cubic meter/day by 2015. Between 1981 and 2010, domestic consumption of oil products increased from 0.6 Mbbl/d (95,000 m3/d) to 1.8 Mbbl/d (290,000 m3/d)—an average annual growth rate of 3.7 percent. Between 1981 and 2004, consumption of gasoline grew by 6 percent annually, but domestic production met only 75 percent of demand for this product. By 2006 it imported 41 percent of its gasoline, but by 2010 imports were down to 19.5% of gasoline consumption and heavy investment in new refining capacity may see Iran exporting gasoline by 2015.

The output of South Pars is the basis of the Pars Special Economic Energy Zone, a complex of petrochemical and natural gas processing plants and port facilities established in 1998 on the Persian Gulf south of Kangan. Iran is now the third country in the world to have developed gas to liquids technology. In 1950 ongoing popular demand prompted a vote in the Majlis to nationalize the petroleum industry. A year later, the government of Prime Minister Mohammad Mossadeq formed the National Iranian Oil Company . A 1953 coup d’état led by British and U.S. intelligence agencies ousted the Mossadeq government and paved the way for a new oil agreement. In 1954 a new agreement divided profits equally between the NIOC and a multinational consortium that had replaced the AIOC.

Most of the petrochemical industry’s physical capital is imported, and the industry does not have strong backward linkages to manufacturing industries. In 2006 new petrochemical plants came online at Marun and Asaluyeh, and construction began on three others. Other notable petroleum sector development deals include those with Russia and China. On February 19, 2008, Russian state gas company Gazprom announced a deal to establish a joint venture company to develop the offshore Iranian South Pars gas field. A China National Offshore Oil Corporation investment deal, valued at $16 billion, to develop Iran’s North Pars gas field and to build a liquid natural gas plant, was supposed to be signed on February 27, 2008 but has been delayed. The state-operated National Iranian Oil Company and CNOOC signed a memorandum of understanding in December 2006 for the project, under which CNOOC would purchase 10 million metric tons per year of LNG for 25 years.

By the time of the Islamic Revolution of 1978–79, the five largest international companies that had agreements with the NIOC accounted for only 10.4 percent of total oil production. During this period, Iran’s oil industry remained disconnected from other industries, particularly manufacturing. This separation promoted inefficiencies in the country’s overall industrial economy.

In the same period, natural gas distribution pipelines increased from 2,000 kilometers to 45,000 kilometers in response to growing domestic consumption. Gas processing plants are located at Ahvaz, Dalan, Kangan, and Marun, in a corridor along the northern Persian Gulf close to the major gas fields. South Pars, Iran’s largest natural gas field, has received substantial foreign investment. With its output intended for both export and domestic consumption, South Pars is expected to reach full production in 2015. However, delays and lower production in the Iranian side due to sanctions is resulting in migration of gas to the Qatari part and a loss for Iran.

Among some more recent deals, Switzerland’s energy company EGL, signed a 25-year LNG export deal with Iran’s National Iranian Gas Export Company on March 17, 2007, reportedly valued at 18 billion. Switzerland will buy 5.5 billion cubic meters of Iranian natural gas each year, beginning in 2011. In April 2007, OMV, the Austrian partially state-owned energy company, signed letters of intent with Iran, worth an estimated $22.8 billion , for Iran to supply Europe with gas. The United States has expressed strong opposition to both the Swiss and Austrian deals with Iran. In 2004 Iran signed a contract with France and Malaysia for production and export of natural gas and another agreement with European and Asian companies for expansion and marketing of its natural gas resources. In 2005 Iran exported natural gas to Turkey and was expected to expand its market to Armenia, China, Japan, other East Asian countries, India, Pakistan, and Europe.

Iran’s petrochemical industries have absorbed a large amount of private and public investment. In the early 2000s, 43 percent of these investments was financed by Iran’s National Petrochemical Company, a subsidiary of the Ministry of Petroleum, which administers the entire petrochemical sector. Another 53 percent is owned by foreign creditors , 3 percent by banks, and 1 percent by the capital market.

With international oil prices increasing and projected to continue increasing, international demand for natural gas and investment in production and transportation of natural gas to consumer markets both increased in the early 2000s. Iran set a goal of increasing its natural gas production capacity to 300 billion cubic meters by 2015 while keeping oil production stable. To achieve this capacity, the government has planned a joint investment worth US$100 billion in the oil and gas industry through 2015. Early in the first administration of President Mohammad Khatami (in office 1997–2005), the government paid special attention to developing the country’s oil and gas industry.

The plan initially also included exporting gas to India, but negotiations have stalled over pricing. Under the plan, Turkey would assist in developing Iran’s South Pars field in exchange for cash or natural gas. Gas would be shipped from Iran to Turkey and Europe via a new pipeline that Turkey plans to build. In the 1980s, Iran began to replace oil, coal, charcoal, and other fossil-fuel energy sources with natural gas, which is environmentally safer. The share of natural gas in household energy consumption, which averaged 54 percent in 2004, was projected to increase to 69 percent by 2009. Overall, natural gas consumption in Iran was expected to grow by more than 10 percent per annum between 2005 and 2009.

In 2006 exports of crude oil totaled 2.5 Mbbl/d (400,000 m3/d), or about 62.5 percent of the country’s crude oil production. The direction of crude oil exports changed after the Revolution because of the U.S. trade embargo on Iran and the marketing strategy of the NIOC. Initially, Iran’s post-revolutionary crude oil export policy was 1000mg THC Cartridge 1ml based on foreign currency requirements and the need for long-term preservation of the natural resource. While the shares of Europe, Japan, and the United States declined from an average of 87 percent of oil exports before the Revolution to 52 percent in the early 2000s, the share of exports to East Asia increased significantly.

Market value of Iran’s total natural gas reserves at comparative international energy price of $75 per barrel of oil stands at ~US $4 trillion. Following the discovery of a large gas deposit in the Caspian sea in 2011 estimated at 50 trillion cubic feet (some 1.4 trillion cubic meters), Iran could rank first in the world in terms of gas reserves. In addition, Iranian media have reported in 2012 the discovery of gas field “as big as South Pars gas field” in the oil-rich Khuzestan province. In 2011, Iran signed a contract with Baghdad and Damascus in order to export Iran’s gas to Iraq, Syria, Lebanon, the Mediterranean region and eventually Europe. Once all pipelines become operational, Iran can potentially export a total of more than 200 million cubic meter of natural gas every year to Iraq, India, Pakistan, and Oman. In 2012, Iran, which exported around 1.5 million barrels of crude oil a day, was the second-largest exporter among the Organization of Petroleum Exporting Countries.

The first section of a new line to Armenia opened in spring 2007, as a much-discussed major pipeline to India and Pakistan remained in the negotiation stage. 1011m3), the estimate of Iran’s oil reserves was revised upward by 32 percent when a new field was discovered near Bushehr. Market value of Iran’s total oil reserves at international crude price of $75 per barrel stands at ~US $10 trillion. The National Iranian Gas Company is expected to finalize a natural gas export deal with Pakistan, with exports set to begin in 2011. The gas would be transported through a “Peace pipeline”, worth about $7.4 billion.

After a lengthy decline in the 1980s, production of crude oil began to increase steadily in 1987. In 2008 Iran produced 3.9-million-barrels per day and exported 2.4 Mbbl/d (380,000 m3/d). Accounting for 5 percent of world production, it returned to its previous position as OPEC’s second-largest producer. Iran’s long-term sustainable oil production rate Are delta 8 gummies good for pain? is estimated at 3.8 Mbbl/d (600,000 m3/d). Iran is an energy superpower and the Petroleum industry in Iran plays an important part in it. In 2004 Iran produced 5.1 percent of the world’s total crude oil (3.9 million barrels per day), which generated revenues of US$25 billion to US$30 billion and was the country’s primary source of foreign currency.

It has been estimated that at the Organization of the Petroleum Exporting Countries quota level , a one-dollar change in the price of crude oil on the international market would alter Iran’s oil revenues by US$1 billion. A more modest yet important agreement was signed with India to explore and produce oil and natural gas in southern Iran. In 2006 the rate of production decline was 8 percent for Iran’s existing onshore oil fields and 10 percent for existing offshore fields. However, the threat of American retaliation kept the investment way below the desired levels.

The signing of the JCPOA in July 2015 by Hassan Rouhani and Javad Zarif with Barack Obama heralded a new era of détente in foreign relations. With it, Iran was allowed to come in from the cold, as it were and once again to sell its oil unencumbered on the world stage. The withdrawal by Donald Trump from the JCPOA in May 2018 was an ill wind for Iran because he decided to re-apply the sanctions regime that had caused such difficulties to Khamenei. For example, the Grace 1 oil tanker was captured near Gibraltar in July 2019 at the request of the US by the armed forces of the UK. The incident was one of several that have been labelled as the 2019 Persian Gulf crisis, but the crisis soon widened to encompass more distant seas where Iranian arms are impotent.