Iran in focus

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Iran holds an estimated 974 trillion cubic feet in proven natural gas reserves, the second largest in the world behind Russia. (Getty Images)

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The South Pars field is the nation's major project. (Getty Images)

With huge reserves Iran desperately needs foreign investment to turn potential into profit.

Oil has been the dominant industry in Iran since the 1920s. The nation still holds massive oil and natural gas reserves, which should, provided the country's international relations improve, ensure that energy remains the country's core industry for many years to come.

Oil

According to most independent analysis, Iran has proven oil reserves of around 136 billion barrels, with 40 production sites - 27 of which are onshore and 13 offshore. In 2006 Iran produced 3.8 million bbl/d of crude oil, equal to 5% of world production and found mainly in the southwestern Khuzestan region near the Iraqi border. The crude oil generally has medium sulphur content and is in the 28o - 35o API range.

Despite best efforts, Iran has not yet been able to reach the 6 million bbl/d produced in 1974. The oil fields are in desperate need of structural upgrades, with an estimated 400,000 - 500,000 bbl/d lost due to reservoir damage and decreases in oil deposits.

The government has set a target of 5.8 million bbl/d by 2015, which, according to Global Insight, will need around $25-35 billion of foreign investment - something hampered by Iran's current political relations.

The state owned National Iranian Oil Company (NIOC) is responsible for all oil and gas production and exploration within Iran. The National Iranian South Oil Company (NISOC), a subsidiary of NIOC, controls 80% of local oil production in the regions of Khuzestan, Bushehr, Fars and Kohkiluyeh va Boyer Ahamd.

Although private ownership of any upstream function is prohibited under the Iranian constitution, buy-back contracts have been allowed, enabling IOCs to engage in production and exploration if done through an Iranian affiliate.

Iran's oil consumption was around 1.6 billion bbl/d in 2006, and oil remains heavily subsidized by the government, increasing domestic demand but creating budget deficits. In 2005 the IMF estimated energy subsidies account for 12% of Iran's GDP, the highest rate in the world according to an IEA study.

Shipping

IEA (International Energy Agency) statistics put Iran's net crude oil exports averaged 2.5 million bbl/d in 2006, primarily to Japan, China, India and other OECD nations, with export revenues at around $54 billion.

Iran holds the largest fleet of oil tankers in the Middle East. The National Iranian Tanker Company (NITC) has 29 ships in operation, including Very Large Crude Carriers (VLCCs). Kharg Island, the country's largest terminal, has a holding capacity of 16 million barrels of oil and a loading capacity of 200,000 bbl/d.

The Strait of Hormuz, found off the south coast of the country, is only 34 miles wide at its narrowest point yet 17 million barrels - roughly two-fifths of all seaborne traded oil - travels through the Strait every day.

Iran has a total refinery capacity of around 1.5 billion bbl/d with nine operational refineries run by National Iranian Oil Refining and Distribution Company (NIORDC), a subsidiary of NIOC.

There are plans to increase the capacity by a further 985,000 bbl/d by 2012 with expansions and upgrades to existing refineries, as well as new sites at Bushehr, Abadan and Bandar Abbas, however, much of this expansion is reliant on foreign capital investment, which is not forthcoming.

Gas

With an estimated 974 trillion cubic feet in proven natural gas reserves - the second largest in the world behind Russia, Iran is looking at stepping up production in the coming years.

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