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Petroleum industry in Iran

October 21, 2023

This article is about the petroleum industry in Iran. For the industry's economic effects, see Economy of Iran.

Iran is an energy superpower and the petroleum industry in Iran plays an important part in it.[2][3][4] In 2004, Iran produced 5.1 percent of the world's total crude oil (3.9 million barrels (620,000 m3; 160 million US gal) per day), which generated revenues of US$25 billion to US$30 billion and was the country's primary source of foreign currency.[5][6] At 2006 levels of production, oil proceeds represented about 18.7% of gross domestic product (GDP). However, the importance of the hydrocarbon sector to Iran's economy has been far greater. The oil and gas industry has been the engine of economic growth, directly affecting public development projects, the government's annual budget, and most foreign exchange sources.[5]

Iran manufactures 60–70% of its industrial equipment domestically, including various turbines, pumps, catalysts, refineries, oil tankers, drilling rigs, offshore platforms, towers, pipes, and exploration instruments.[1]
Oil production in Iran (1965–2019)

In FY 2009, the sector accounted for 60% of total government revenues and 80% of the total annual value of both exports and foreign currency earnings.[citation needed] Oil and gas revenues are affected by the value of crude oil on the international market. It has been estimated that at the Organization of the Petroleum Exporting Countries (OPEC) quota level (December 2004), a one-dollar change in the price of crude oil on the international market would alter Iran's oil revenues by US$1 billion.[5]

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.[7] In the same year, officials in Iran estimated that Iran's annual oil and gas revenues could reach $250 billion by 2015.[8] However, the industry was disrupted by an international embargo from July 2012 through January 2016.[9][10] Iran plans to invest a total of $500 billion in the oil sector before 2025.[11][12]

History Edit

Main articles: Anglo-Iranian Oil Company and 1953 Iranian coup d'état

The era of international control, 1901–1979 Edit

Further information: National Iranian Oil Company § History, 1970s energy crisis, and The nationalization of the Iran oil industry movement
 
Abadan Refinery

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 exploration in Iran was led by George Reynolds. The discovery of oil on May 26, 1908[13] led to the formation in 1909 of the London-based Anglo-Persian Oil Company (APOC). 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. After 1935 the APOC was called the Anglo-Iranian Oil Company (AIOC). 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.[5]

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 (NIOC). 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.[14][15] In 1954 a new agreement divided profits equally between the NIOC and a multinational consortium that had replaced the AIOC. In 1973 Iran signed a new 20-year concession with the consortium.[5]

Beginning in the late 1950s, many of Iran's international oil agreements did not produce the expected outcomes; even those oil companies that managed to extract oil in their designated areas contributed very little to the country's total oil production. 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.[clarification needed] 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.[5]

In 1973, at a time when Iran was the second-largest oil exporter in the world and the Arab–Israeli War of October 6–25 was pressurizing the price of oil, the Shah of Iran told the New York Times,[16] "Of course the world price of oil is going to rise. ... Certainly! And how ...; You [Western nations] increased the price of wheat you sell us by 300%, and the same for sugar and cement ...; You buy our crude oil and sell it back to us, refined as petrochemicals, at a hundred times the price you've paid to us ...; It's only fair that, from now on, you should pay more for oil. Let's say ten times more."

The era of nationalized oil, 1979–present Edit

See also: Economic history of Iran
 
Arak Petrochemical complex.

Isolation and stagnation under Khomeini Edit

Following the Revolution, the NIOC took control of Iran's petroleum industry and canceled Iran's international oil agreements. In 1980 the exploration, production, sale, and export of oil were delegated to the Ministry of Petroleum. Initially Iran's post-revolutionary oil policy was based on foreign currency requirements and the long-term preservation of the natural resource. Following the Iran–Iraq War, however, this policy was replaced by a more aggressive approach: maximizing exports and accelerating economic growth. From 1979 until 1998, Iran did not sign any oil agreements with foreign oil companies.

Khatami era Edit

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. 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 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. Nicoo marketed Iranian oil to Africa, and the NIOC marketed to Asia and Europe.[5] According to IHS CERA estimate, oil revenue of Iran will increase by a third to USD 100 billion in 2011 even though the country is under an extended period of U.S. sanctions.[17]

Post-JCPOA era Edit

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. In May the Iranian tanker Happiness 1 suffered difficulties near Jiddah. In August the tanker Helm encountered difficulties while transiting the Red Sea, and in October the Iranian tanker Sabiti was attacked by two missiles of unknown origin, again in the Red Sea.[18] The fully laden Sabiti had been destined for the "Eastern Mediterranean".[19]

China is a significant supporter of the Iranian petroleum industry. In 2017, 64% of an export total $16.9 billion with China was labelled "crude oil".[20] Because the National Iranian Tanker Company cannot defend the product on the oceans, it most often leaves port under the flag of another nation which is able to defend its own interests.[21] The case of a Shanghai-based operator of oil tankers, Kunlun Holdings is illustrative: in early June it was operating with a shipment of Iranian crude oil as the Pacific Bravo before its transponder disappeared on 5 June in the Straits of Malacca. When it reappeared on 18 July, the ship had been relieved of its load and had been renamed to become the Latin Venture. The US, which had warned ports not to offload the $120 million cargo of the Pacific Bravo, was unhappy about the failure of its sanctions regime.[22] Kunlun Holdings is owned by the Bank of Kunlun, which is in turn owned by the (SOE) CNPC. The Bank "has long been the financial institution at heart of China-Iran bilateral trade".[23] Chinese foreign ministry spokesperson Geng Shuang "resolutely opposes" American unilateral sanctions.[24]

Oil production and reserves Edit

Main articles: National Iranian Oil Company and Oil reserves in Iran
 
Iran's oil & gas production (1970–2009 data, 2010–2030 projected)
 
Iran's Petroleum production and consumption (1977-2010)

Total oil production reached a peak level of 6.6 Mbbl/d (1,050,000 m3/d) in 1976. By 1978, Iran had become the second-largest OPEC producer and exporter of crude oil and the fourth-largest producer in the world. 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 (620,000 m3) per day (bpd) and exported 2.4 Mbbl/d (380,000 m3/d).[25] Accounting for 5 percent of world production, it returned to its previous position as OPEC's second-largest producer. According to estimates, in 2005 Iran had the capacity to produce 4.5 Mbbl/d (720,000 m3/d); it was believed that production capacity could increase to 5 Mbbl/d (790,000 m3/d) to 7 Mbbl/d (1,100,000 m3/d), but only with a substantial increase in foreign investment.[26] Iran's long-term sustainable oil production rate is estimated at 3.8 Mbbl/d (600,000 m3/d).[5] According to the Iranian government, Iran has enough reserves to produce oil for the next 100 years while oil reserves of other Middle Eastern countries will be depleted in the next 60 years and most other oil-rich countries will lose their reserves within the next 30 years.[citation needed]

In 2006 Iran reported crude oil reserves of 132.5 billion barrels (2.107×1010 m3), accounting for about 15 percent of OPEC's proven reserves and 11.4 percent of world proven reserves. While the estimate of world crude oil reserves remained nearly steady between 2001 and 2006, at 1,154 billion barrels (1.835×1011 m3), 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.[27]

In the early 2000s, leading international oil firms from China, France, India, Italy, the Netherlands, Norway, Russia, Spain, and the United Kingdom had agreements to develop Iran's oil and gas fields. In 2004 China signed a major agreement to buy oil and gas from Iran, as well as to develop Iran's Yadavaran oil field. The value of this contract was estimated at US$150 billion to US$200 billion over 25 years.[5][28] In 2009, China National Petroleum Corp (CNPC) signed a deal with the National Iranian Oil Company whereby the former took ownership of a 70% stake upon promising to pay 90 percent of the development costs for the South Azadegan oil field, with the project needing investment of up to $2.5 billion. Earlier that year, CNPC also won a $2 billion deal to develop the first phase of the North Azadegan oilfield.[29]

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 (furnishing the majority of oil output) and 10 percent for existing offshore fields. Little exploration, upgrading, or establishment of new fields occurred in 2005–6.[5] However, the threat of American retaliation kept the investment way below the desired levels.[30] It only allowed Iran to continue to keep its oil export at or below its OPEC determined quota level.[31][32] Today, much of the equipment needed for oil industry are being produced by local manufacturers in Iran.[citation needed] Besides, Iran is among the few countries that has reached the technology and "know-how" for drilling in the deep waters.[33]

Oil refining and consumption Edit

Main articles: National Iranian Oil Refining and Distribution Company, Iranian targeted subsidy plan, and Fuel smuggling in Iran
 
Iran's refining capacity (2007-2013 est.)

In 2011 Iran's refineries had a combined capacity of 1.457 Mbbl/d (231,600 m3/d). The largest refineries have the following capacities: Abadan, 350,000 bbl/d (56,000 m3/d); Esfahan, 284,000 bbl/d (45,200 m3/d); Bandar-e Abbas, 232,000 bbl/d (36,900 m3/d); Tehran, 220,000 bbl/d (35,000 m3/d); Arak, 170,000 bbl/d (27,000 m3/d); and Tabriz, 100,000 bbl/d (16,000 m3/d).[34] In 2004 pipelines conveyed 69 percent of total refined products; trucks, 20 percent; rail, 7 percent; and tankers, 4 percent. Oil refining produces a wide range of oil products, such as liquefied petroleum gas (LPG), gasoline, kerosene, fuel oil, and lubricants.[5] As of 2011 Iran is a net exporter of petroleum products thanks to large exports of residual fuel oil, but the refineries cannot meet domestic demand for lighter distillates such as gasoline.[34]

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)[34]—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. In 2004 the country imported US$1.6 billion worth of gasoline. By 2006 it imported 41 percent of its gasoline, but by 2010 imports were down to 19.5% of gasoline consumption[34] and heavy investment in new refining capacity may see Iran exporting gasoline by 2015.[34] Refining capacity increased 18% in 2010 and the target is to increase refining capacity to 3.5 million barrels per day.[35]

Trade in oil and oil products Edit

See also: Iranian Oil Bourse, National Iranian Tanker Company, and Oil and gas revenues in Iran

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 based on foreign currency requirements and the need for long-term preservation of the natural resource. In addition, the government expanded oil trade with other developing countries. 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 (excluding Japan) increased significantly. In addition to crude oil exports, Iran exports oil products. In 2006 it exported 282,000 barrels (44,800 m3) of oil products, or about 21 percent of its total oil product output.[36] Iran plans to invest a total of $500 billion in the oil sector before 2025.[11][dead link][12]

In 2010, Iran, which exports around 2.6 million barrels of crude oil a day, was the second-largest exporter among the Organization of Petroleum Exporting Countries.[37] Several major emerging economies depend on Iranian oil: 10% of South Korea's oil imports come from Iran, 9% of India's and 6% of China's.[17] Moreover, Iranian oil makes up 7% of Japan's and 30% of all Greece's oil imports.[17] Iran is also a major oil supplier to Spain and Italy.[37] In the same year, officials in Iran estimate that Iran's annual oil and gas revenues could reach $250 billion by 2015 once the current projects come on stream.[8]

According to IHS CERA estimate, oil revenue of Iran will increase by a third to USD 100 billion in 2011 even though the country is under an extended period of U.S. sanctions.[17] As of January 2012, Iran exports 22% of its oil to China, 14% to Japan, 13% to India, 10% to South Korea, 7% to Italy, 7% to Turkey, 6% to Spain and the remainder to France, Greece (& other European countries), Taiwan, Sri Lanka, South Africa.[38]

In 2020 exports of petrochemicals and petroleum products were worth almost $20 billion.[39]

Pipeline transport Edit

According to the Global Energy Monitor website, the top five countries in terms of developing pipelines (proposed and under construction) are the United States, India, Iraq, Iran, and Tanzania. Iran has ranked first in terms of oil pipelines under construction. Ministry of Petroleum Iran is among the five parent companies developing oil pipelines.[40][41]

Natural gas Edit

Main articles: National Iranian Gas Company and Natural gas reserves in Iran
 
Iran holds 10% of the world's proven oil reserves and 15% of its gas. It is OPEC's second largest exporter and the world's fourth largest oil producer.[42][43]
 
Projected Iran-Pakistan-India gas pipeline.
 
Iran natural gas production (red) and exports (black), 1960-2012

In addition to the natural gas associated with oil exploration and extraction, an estimated 62 percent of Iran's 32.3 trillion cubic meters of proven natural gas reserves in 2006 were located in independent natural gas fields, an amount second only to those of Russia.[44] In 2006 annual production reached 105 billion cubic meters, with fastest growth occurring over the previous 15 years. In 2006 natural gas accounted for about 50 percent of domestic energy consumption, in part because domestic gas prices were heavily subsidized.[36] Natural gas production will reach 700 million cubic meter/day by 2012[45] and 900 million cubic meter/day by 2015.[citation needed]

Since 1979, infrastructure investment by Iranian and foreign oil firms has increased pipeline[46] capacity to support the Iranian gas industry. Between 1979 and 2003, pipelines to transport natural gas to refineries and to domestic consumers increased from 2,000 kilometers to 12,000 kilometers. 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.[47]

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.[36] Iran is able to produce all the parts needed for its gas refineries.[48] Iran is now the third country in the world to have developed gas to liquids (GTL) technology.[49]

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.[36]

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.[50] To achieve this capacity, the government has planned a joint investment worth US$100 billion in the oil and gas industry through 2015.

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.[51] Following the discovery of a large gas deposit in the Caspian sea (The Sardar Jangal gas field) 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.[52][53] 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.[54] 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.[55] Oman and Kuwait were negotiating an import agreement in 2014.[56] 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.[57]

Major foreign projects Edit

See also: Foreign direct investment in Iran and Sanctions against Iran
 
South Pars' construction phases.

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. 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.[36]

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 (22 billion euros), for Iran to supply Europe with gas. The United States has expressed strong opposition to both the Swiss and Austrian deals with Iran.[58]

The National Iranian Gas Company (NIGC) 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. The plan initially also included exporting gas to India, but negotiations have stalled over pricing. Iran also is discussing a gas production and export deal with Turkey. 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.[58]

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 (CNOOC) investment deal, valued at $16 billion, to develop Iran's North Pars gas field and to build a liquid natural gas (LNG) plant, was supposed to be signed on February 27, 2008 but has been delayed.[59] The state-operated National Iranian Oil Company (NIOC) 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.[58]

Petrochemicals Edit

Main article: National Petrochemical Company
 
Abadan Petrochemical Complex

In the early 2000s, an ambitious state petrochemicals project called for expansion of annual output in that industry from 9 million tons in 2001 to 100 million tons in 2015.[60] Output capacity in 2006 was estimated at 15 million tons. The goal of this expansion is to increase the percentage of Iran's processed petroleum-based exports, which are more profitable than raw materials. In 2005 Iran exported US$1.8 billion of petrochemical products (about one-third of total nonoil exports in that year). Receiving 30 percent of Iran's petrochemical exports between them, China and India were the major trading partners in this industry. Iran's domestic resource base gives it a unique comparative advantage in producing petrochemicals when international crude oil prices rise. The gain has been greatest in those plants that use liquid gas as their main input. For FY 2006, the petrochemical industry's share of GDP was projected to be about 2 percent.[61] Iran plans to invest a total of $500 billion in the oil sector before 2025.[11][dead link][12]

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 (more than 100 foreign banks and foreign companies), 3 percent by banks, and 1 percent by the capital market. 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.[61] Iran National Petrochemical Company's output capacity will increase to over 100 million tpa by 2015 from an estimated 50 million tpa in 2010 thus becoming the world' second largest chemical producer globally after Dow Chemical with Iran housing some of the world's largest chemical complexes.[62][63]

See also Edit

References Edit

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External links Edit

 
Wikimedia Commons has media related to Petroleum industry in Iran.
  • US Department of Energy - Iran's entry
  • SHANA - Official News Service for Oil and Gas in Iran
  • - 2003 Study (history, market overview, domestic suppliers, major projects, buy-backs)
  • FACTBOX-Iran's crude export and fuel import customers - Reuters
  • Offshore Middle East and Caspian Sea Oil and Gas Market Report 2011
  • Iran Gas Markets Report, 2011 - GlobalData
  • Iran's oil exportation map by country 2012-01-28 at the Wayback Machine
  • Iran oil sanctions calculator - Reuters
  • Infrastructure map of Iran's fields and facilities
  • Persia Land of Black Gold

October 21, 2023
petroleum, industry, iran, parts, this, article, those, related, 2012, present, need, updated, please, help, update, this, article, reflect, recent, events, newly, available, information, april, 2016, this, article, about, petroleum, industry, iran, industry, . Parts of this article those related to 2012 present need to be updated Please help update this article to reflect recent events or newly available information April 2016 This article is about the petroleum industry in Iran For the industry s economic effects see Economy of Iran Iran is an energy superpower and the petroleum industry in Iran plays an important part in it 2 3 4 In 2004 Iran produced 5 1 percent of the world s total crude oil 3 9 million barrels 620 000 m3 160 million US gal per day which generated revenues of US 25 billion to US 30 billion and was the country s primary source of foreign currency 5 6 At 2006 levels of production oil proceeds represented about 18 7 of gross domestic product GDP However the importance of the hydrocarbon sector to Iran s economy has been far greater The oil and gas industry has been the engine of economic growth directly affecting public development projects the government s annual budget and most foreign exchange sources 5 Iran manufactures 60 70 of its industrial equipment domestically including various turbines pumps catalysts refineries oil tankers drilling rigs offshore platforms towers pipes and exploration instruments 1 Oil production in Iran 1965 2019 In FY 2009 the sector accounted for 60 of total government revenues and 80 of the total annual value of both exports and foreign currency earnings citation needed Oil and gas revenues are affected by the value of crude oil on the international market It has been estimated that at the Organization of the Petroleum Exporting Countries OPEC quota level December 2004 a one dollar change in the price of crude oil on the international market would alter Iran s oil revenues by US 1 billion 5 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 7 In the same year officials in Iran estimated that Iran s annual oil and gas revenues could reach 250 billion by 2015 8 However the industry was disrupted by an international embargo from July 2012 through January 2016 9 10 Iran plans to invest a total of 500 billion in the oil sector before 2025 11 12 Contents 1 History 1 1 The era of international control 1901 1979 1 2 The era of nationalized oil 1979 present 1 2 1 Isolation and stagnation under Khomeini 1 2 2 Khatami era 1 2 3 Post JCPOA era 2 Oil production and reserves 3 Oil refining and consumption 4 Trade in oil and oil products 5 Pipeline transport 6 Natural gas 6 1 Major foreign projects 7 Petrochemicals 8 See also 9 References 10 External linksHistory EditMain articles Anglo Iranian Oil Company and 1953 Iranian coup d etat The era of international control 1901 1979 Edit Further information National Iranian Oil Company History 1970s energy crisis and The nationalization of the Iran oil industry movement nbsp Abadan RefineryThe 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 exploration in Iran was led by George Reynolds The discovery of oil on May 26 1908 13 led to the formation in 1909 of the London based Anglo Persian Oil Company APOC 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 After 1935 the APOC was called the Anglo Iranian Oil Company AIOC 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 5 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 NIOC A 1953 coup d etat led by British and U S intelligence agencies ousted the Mossadeq government and paved the way for a new oil agreement 14 15 In 1954 a new agreement divided profits equally between the NIOC and a multinational consortium that had replaced the AIOC In 1973 Iran signed a new 20 year concession with the consortium 5 Beginning in the late 1950s many of Iran s international oil agreements did not produce the expected outcomes even those oil companies that managed to extract oil in their designated areas contributed very little to the country s total oil production 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 clarification needed 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 5 In 1973 at a time when Iran was the second largest oil exporter in the world and the Arab Israeli War of October 6 25 was pressurizing the price of oil the Shah of Iran told the New York Times 16 Of course the world price of oil is going to rise Certainly And how You Western nations increased the price of wheat you sell us by 300 and the same for sugar and cement You buy our crude oil and sell it back to us refined as petrochemicals at a hundred times the price you ve paid to us It s only fair that from now on you should pay more for oil Let s say ten times more The era of nationalized oil 1979 present Edit See also Economic history of Iran nbsp Arak Petrochemical complex Isolation and stagnation under Khomeini Edit Following the Revolution the NIOC took control of Iran s petroleum industry and canceled Iran s international oil agreements In 1980 the exploration production sale and export of oil were delegated to the Ministry of Petroleum Initially Iran s post revolutionary oil policy was based on foreign currency requirements and the long term preservation of the natural resource Following the Iran Iraq War however this policy was replaced by a more aggressive approach maximizing exports and accelerating economic growth From 1979 until 1998 Iran did not sign any oil agreements with foreign oil companies Khatami era Edit 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 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 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 Nicoo marketed Iranian oil to Africa and the NIOC marketed to Asia and Europe 5 According to IHS CERA estimate oil revenue of Iran will increase by a third to USD 100 billion in 2011 even though the country is under an extended period of U S sanctions 17 Post JCPOA era Edit The signing of the JCPOA in July 2015 by Hassan Rouhani and Javad Zarif with Barack Obama heralded a new era of detente 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 In May the Iranian tanker Happiness 1 suffered difficulties near Jiddah In August the tanker Helm encountered difficulties while transiting the Red Sea and in October the Iranian tanker Sabiti was attacked by two missiles of unknown origin again in the Red Sea 18 The fully laden Sabiti had been destined for the Eastern Mediterranean 19 China is a significant supporter of the Iranian petroleum industry In 2017 64 of an export total 16 9 billion with China was labelled crude oil 20 Because the National Iranian Tanker Company cannot defend the product on the oceans it most often leaves port under the flag of another nation which is able to defend its own interests 21 The case of a Shanghai based operator of oil tankers Kunlun Holdings is illustrative in early June it was operating with a shipment of Iranian crude oil as the Pacific Bravo before its transponder disappeared on 5 June in the Straits of Malacca When it reappeared on 18 July the ship had been relieved of its load and had been renamed to become the Latin Venture The US which had warned ports not to offload the 120 million cargo of the Pacific Bravo was unhappy about the failure of its sanctions regime 22 Kunlun Holdings is owned by the Bank of Kunlun which is in turn owned by the SOE CNPC The Bank has long been the financial institution at heart of China Iran bilateral trade 23 Chinese foreign ministry spokesperson Geng Shuang resolutely opposes American unilateral sanctions 24 Oil production and reserves EditMain articles National Iranian Oil Company and Oil reserves in Iran nbsp Iran s oil amp gas production 1970 2009 data 2010 2030 projected nbsp Iran s Petroleum production and consumption 1977 2010 Total oil production reached a peak level of 6 6 Mbbl d 1 050 000 m3 d in 1976 By 1978 Iran had become the second largest OPEC producer and exporter of crude oil and the fourth largest producer in the world 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 620 000 m3 per day bpd and exported 2 4 Mbbl d 380 000 m3 d 25 Accounting for 5 percent of world production it returned to its previous position as OPEC s second largest producer According to estimates in 2005 Iran had the capacity to produce 4 5 Mbbl d 720 000 m3 d it was believed that production capacity could increase to 5 Mbbl d 790 000 m3 d to 7 Mbbl d 1 100 000 m3 d but only with a substantial increase in foreign investment 26 Iran s long term sustainable oil production rate is estimated at 3 8 Mbbl d 600 000 m3 d 5 According to the Iranian government Iran has enough reserves to produce oil for the next 100 years while oil reserves of other Middle Eastern countries will be depleted in the next 60 years and most other oil rich countries will lose their reserves within the next 30 years citation needed In 2006 Iran reported crude oil reserves of 132 5 billion barrels 2 107 1010 m3 accounting for about 15 percent of OPEC s proven reserves and 11 4 percent of world proven reserves While the estimate of world crude oil reserves remained nearly steady between 2001 and 2006 at 1 154 billion barrels 1 835 1011 m3 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 27 In the early 2000s leading international oil firms from China France India Italy the Netherlands Norway Russia Spain and the United Kingdom had agreements to develop Iran s oil and gas fields In 2004 China signed a major agreement to buy oil and gas from Iran as well as to develop Iran s Yadavaran oil field The value of this contract was estimated at US 150 billion to US 200 billion over 25 years 5 28 In 2009 China National Petroleum Corp CNPC signed a deal with the National Iranian Oil Company whereby the former took ownership of a 70 stake upon promising to pay 90 percent of the development costs for the South Azadegan oil field with the project needing investment of up to 2 5 billion Earlier that year CNPC also won a 2 billion deal to develop the first phase of the North Azadegan oilfield 29 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 furnishing the majority of oil output and 10 percent for existing offshore fields Little exploration upgrading or establishment of new fields occurred in 2005 6 5 However the threat of American retaliation kept the investment way below the desired levels 30 It only allowed Iran to continue to keep its oil export at or below its OPEC determined quota level 31 32 Today much of the equipment needed for oil industry are being produced by local manufacturers in Iran citation needed Besides Iran is among the few countries that has reached the technology and know how for drilling in the deep waters 33 Oil refining and consumption EditMain articles National Iranian Oil Refining and Distribution Company Iranian targeted subsidy plan and Fuel smuggling in Iran nbsp Iran s refining capacity 2007 2013 est In 2011 Iran s refineries had a combined capacity of 1 457 Mbbl d 231 600 m3 d The largest refineries have the following capacities Abadan 350 000 bbl d 56 000 m3 d Esfahan 284 000 bbl d 45 200 m3 d Bandar e Abbas 232 000 bbl d 36 900 m3 d Tehran 220 000 bbl d 35 000 m3 d Arak 170 000 bbl d 27 000 m3 d and Tabriz 100 000 bbl d 16 000 m3 d 34 In 2004 pipelines conveyed 69 percent of total refined products trucks 20 percent rail 7 percent and tankers 4 percent Oil refining produces a wide range of oil products such as liquefied petroleum gas LPG gasoline kerosene fuel oil and lubricants 5 As of 2011 update Iran is a net exporter of petroleum products thanks to large exports of residual fuel oil but the refineries cannot meet domestic demand for lighter distillates such as gasoline 34 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 34 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 In 2004 the country imported US 1 6 billion worth of gasoline By 2006 it imported 41 percent of its gasoline but by 2010 imports were down to 19 5 of gasoline consumption 34 and heavy investment in new refining capacity may see Iran exporting gasoline by 2015 34 Refining capacity increased 18 in 2010 and the target is to increase refining capacity to 3 5 million barrels per day 35 Trade in oil and oil products EditSee also Iranian Oil Bourse National Iranian Tanker Company and Oil and gas revenues in Iran 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 based on foreign currency requirements and the need for long term preservation of the natural resource In addition the government expanded oil trade with other developing countries 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 excluding Japan increased significantly In addition to crude oil exports Iran exports oil products In 2006 it exported 282 000 barrels 44 800 m3 of oil products or about 21 percent of its total oil product output 36 Iran plans to invest a total of 500 billion in the oil sector before 2025 11 dead link 12 In 2010 Iran which exports around 2 6 million barrels of crude oil a day was the second largest exporter among the Organization of Petroleum Exporting Countries 37 Several major emerging economies depend on Iranian oil 10 of South Korea s oil imports come from Iran 9 of India s and 6 of China s 17 Moreover Iranian oil makes up 7 of Japan s and 30 of all Greece s oil imports 17 Iran is also a major oil supplier to Spain and Italy 37 In the same year officials in Iran estimate that Iran s annual oil and gas revenues could reach 250 billion by 2015 once the current projects come on stream 8 According to IHS CERA estimate oil revenue of Iran will increase by a third to USD 100 billion in 2011 even though the country is under an extended period of U S sanctions 17 As of January 2012 Iran exports 22 of its oil to China 14 to Japan 13 to India 10 to South Korea 7 to Italy 7 to Turkey 6 to Spain and the remainder to France Greece amp other European countries Taiwan Sri Lanka South Africa 38 In 2020 exports of petrochemicals and petroleum products were worth almost 20 billion 39 nbsp Iran s projected oil and gas revenues by the International Monetary Fund nbsp Iran crude oil and condesate exports for key countries nbsp Iran export treemap 2010 nbsp Iran s oil and natural gas pipelines Pipeline transport EditAccording to the Global Energy Monitor website the top five countries in terms of developing pipelines proposed and under construction are the United States India Iraq Iran and Tanzania Iran has ranked first in terms of oil pipelines under construction Ministry of Petroleum Iran is among the five parent companies developing oil pipelines 40 41 Natural gas EditMain articles National Iranian Gas Company and Natural gas reserves in Iran nbsp Iran holds 10 of the world s proven oil reserves and 15 of its gas It is OPEC s second largest exporter and the world s fourth largest oil producer 42 43 nbsp Projected Iran Pakistan India gas pipeline nbsp Iran natural gas production red and exports black 1960 2012In addition to the natural gas associated with oil exploration and extraction an estimated 62 percent of Iran s 32 3 trillion cubic meters of proven natural gas reserves in 2006 were located in independent natural gas fields an amount second only to those of Russia 44 In 2006 annual production reached 105 billion cubic meters with fastest growth occurring over the previous 15 years In 2006 natural gas accounted for about 50 percent of domestic energy consumption in part because domestic gas prices were heavily subsidized 36 Natural gas production will reach 700 million cubic meter day by 2012 45 and 900 million cubic meter day by 2015 citation needed Since 1979 infrastructure investment by Iranian and foreign oil firms has increased pipeline 46 capacity to support the Iranian gas industry Between 1979 and 2003 pipelines to transport natural gas to refineries and to domestic consumers increased from 2 000 kilometers to 12 000 kilometers 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 47 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 36 Iran is able to produce all the parts needed for its gas refineries 48 Iran is now the third country in the world to have developed gas to liquids GTL technology 49 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 36 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 50 To achieve this capacity the government has planned a joint investment worth US 100 billion in the oil and gas industry through 2015 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 51 Following the discovery of a large gas deposit in the Caspian sea The Sardar Jangal gas field 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 52 53 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 54 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 55 Oman and Kuwait were negotiating an import agreement in 2014 56 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 57 Major foreign projects Edit See also Foreign direct investment in Iran and Sanctions against Iran nbsp South Pars construction phases 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 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 36 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 22 billion euros for Iran to supply Europe with gas The United States has expressed strong opposition to both the Swiss and Austrian deals with Iran 58 The National Iranian Gas Company NIGC 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 The plan initially also included exporting gas to India but negotiations have stalled over pricing Iran also is discussing a gas production and export deal with Turkey 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 58 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 CNOOC investment deal valued at 16 billion to develop Iran s North Pars gas field and to build a liquid natural gas LNG plant was supposed to be signed on February 27 2008 but has been delayed 59 The state operated National Iranian Oil Company NIOC 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 58 Petrochemicals EditMain article National Petrochemical Company nbsp Abadan Petrochemical ComplexIn the early 2000s an ambitious state petrochemicals project called for expansion of annual output in that industry from 9 million tons in 2001 to 100 million tons in 2015 60 Output capacity in 2006 was estimated at 15 million tons The goal of this expansion is to increase the percentage of Iran s processed petroleum based exports which are more profitable than raw materials In 2005 Iran exported US 1 8 billion of petrochemical products about one third of total nonoil exports in that year Receiving 30 percent of Iran s petrochemical exports between them China and India were the major trading partners in this industry Iran s domestic resource base gives it a unique comparative advantage in producing petrochemicals when international crude oil prices rise The gain has been greatest in those plants that use liquid gas as their main input For FY 2006 the petrochemical industry s share of GDP was projected to be about 2 percent 61 Iran plans to invest a total of 500 billion in the oil sector before 2025 11 dead link 12 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 more than 100 foreign banks and foreign companies 3 percent by banks and 1 percent by the capital market 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 61 Iran National Petrochemical Company s output capacity will increase to over 100 million tpa by 2015 from an estimated 50 million tpa in 2010 thus becoming the world second largest chemical producer globally after Dow Chemical with Iran housing some of the world s largest chemical complexes 62 63 See also Edit nbsp Iran portal nbsp Energy portalEnergy in Iran Economy of Iran Industry of Iran Iranian Oil Bourse Ministry of Petroleum of Iran National Iranian Oil Company National Iranian Oil Refining and Distribution Company National Iranian Petrochemical Company National Iranian Gas Company Tehran Stock Exchange Iranian targeted subsidy planReferences Edit SHANA Share of domestically made equipments on the rise Archived 2012 03 09 at the Wayback Machine Retrieved July 26 2010 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Archived from the original on 4 June 2014 Retrieved 2 June 2014 Iran Investment Monthly December 2014 Archived 2015 02 26 at the Wayback Machine Turquoise Partners Retrieved February 25 2015 a b c Ilias Shayerah 2008 Iran s Economy PDF Report Congressional Research Service pp 17 18 Archived PDF from the original on 2017 06 27 Retrieved 2017 06 25 nbsp This article incorporates text from this source which is in the public domain BENOiT FAUCON And SPENCER SWARTZ 2010 08 12 Iran Curbs LNG Export Ambitions WSJ com Online wsj com Archived from the original on 2015 02 26 Retrieved 2010 10 08 Iran to build 46 new petchem units Tehran Times 2010 01 13 Archived from the original on 2011 06 13 Retrieved 2010 10 08 a b Kurtis Glenn Eric Hooglund Iran a country study Washington D C Library of Congress pp 166 167 ISBN 978 0 8444 1187 3 Retrieved November 21 2010 nbsp This article incorporates text from this source which is in the public domain NPC Iran will be second largest commodity chemical producer in the world by 2015 Business Credit 2006 06 01 Archived from the original on February 21 2009 Retrieved 2016 04 14 a href Template Cite journal html title Template Cite journal cite journal a CS1 maint unfit URL link Iran to build 46 new petchem units tehran times 12 January 2010 Archived from the original on 2011 06 13 Retrieved 2012 02 07 External links Edit nbsp Wikimedia Commons has media related to Petroleum industry in Iran Ministry of Petroleum Of Iran Official Website Ministry of Energy Of Iran Official Website US Department of Energy Iran s entry SHANA Official News Service for Oil and Gas in Iran Oil amp Gas Industry in Iran 2003 Study history market overview domestic suppliers major projects buy backs FACTBOX Iran s crude export and fuel import customers Reuters Offshore Middle East and Caspian Sea Oil and Gas Market Report 2011 Iran Gas Markets Report 2011 GlobalData Iran s oil exportation map by country Archived 2012 01 28 at the Wayback Machine Iran oil sanctions calculator Reuters Infrastructure map of Iran s fields and facilities Persia Land of Black Gold Iranian Discoveries Continue Retrieved from https en wikipedia org w index php title Petroleum industry in Iran amp oldid 1169676387, wikipedia, wiki, book, books, library,

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