A rebirth required
Iran’s oil industry turned ۱۰۶ years old on ۲۶ May ۲۰۱۴; however, as one of the most oil - rich countries and despite major progress made during the past ۳ decades in the area of production capacity, transmission and distribution of oil and gas products and petrochemicals, the country still imports gasoline. Putting more than one century behind grappling with ups and downs of colonialism, Islamic revolution, imposed war, post - war renovation, economic boom and most recently unlawful international sanctions, the ancient locomotive of oil industry is still driving ahead to experience a new era.
Putting more than one century behind grappling with ups and downs of colonialism, Islamic revolution, imposed war, post-war renovation, economic boom and most recently unlawful international sanctions, the ancient locomotive of oil industry is still driving ahead to experience a new era.
On May 26, 106 years ago, the first drops of oil was extracted from a well in Masjed Soleiman, southwestern Iran in the depth of 338 meters. It was a turning point in the history of the country.
The National Iranian Oil Company history has it that following the delegation of oil exploration and production right to a British national, William Knox D'Arcy, and after 5 years of search for black gold, on May 26 1908, Iran accessed the priceless crude oil for the first time. D'Arcy had obtained an exclusive concession for the extraction and production of the black gold from Qajar kings to place oil pipelines across Iran (except in Northern provinces) for 60 years during the reign of Mozaffar-e-din Shah Qajar. In return, D'Arcy committed to pay the Iranian court 16% of the profits and 20,000 British lire in cash.
Having drilled the country's first well in Asmari by means of primitive technology, production started in 1918 with 500 barrels of oil per day. Soon after, other oilfields were discovered namely Haftkel in 1927, Aghajari in 1936, Gachsaran and Pazun in 1937, Naft-e-Sefid in 1938, Lali in 1948, Ahwaz in 1958, Beinak in 1959, Bibi Hakimeh in 1961, Maroon and Kerenj in 1963, Parsi and Rag Sefid in 1964.
Since then, the colonial powers eyed Iran's underground resources and sought every opportunity to win concessions in oil exploration and production. After D'Arcy's concession was cancelled by the Iranian government, an additional Gass-Golshayan Agreement on oil exploration and extraction was imposed on Iran by British oil companies. Upon submission to the Iranian parliament, the Agreement garnered opposing reactions from MPs with Ayatollah Kashani being the forerunner. The ensuing events led to the nationalization of Iranian oil industries on 18 March 1951.
By the time oil industry was nationalized, the number of high-ranking officials in oil-rich regions of the country and National Iranian Oil Company affiliates did not exceed 30. In the meantime, the then NIOC was only responsible for domestic sales and distribution of gas and oil products as well as administering production support services under the umbrella of "non-industrial services". Therefore, the nationalization served as a stepping stone for localization of the industry.
Iranian crude oil production volume has fluctuated throughout the times. Before the Islamic Revolution, the figure topped 6 million barrels per day (bpd) while during the Iran-Iraq war, it fell below 3 million bpd.
As Iranian oil industry turned 106, a Western set of hostile yet smart sanctions hindered the way to further prosper the sector. In the meantime, some domestic sanctions has also slowed down the economic locomotive in upstream industries.
Currently, Iran shares 22 oil fields with the neighbors out of which 8 are joint with Iraq, 5 with Saudi Arabia, 5 with Qatar, 4 with UAE, 1 with Oman and 1 with Turkmenistan. Except for 3 or 4 of them, Iran lags far behind its Arab partners in terms of production, the best example of which is South Pars oil and gas fields shared with Qatar. While Qatar is swallowing gas and oil resources, Iran has not even been able to add one new phase to increase gas production despite $46 billion investment. As envisaged in the 5th National Development Plan, oil and gas production capacity should respectively surpass 5 million barrels and 1.4 billion cubic meters per day. However, the slow pace of development in the sector has hindered achieving the said targets.
Petroleum specialists believe that the EU sanctions on Iranian oil sector provided a unique opportunity for Iran to renovate and revive old oil fields and increase gas production through further technical, engineering and logistic focus on the sector. However, not only the golden chance has been lost but also gas production continues to decline.
Iran's current proven oil reserves are estimated at more than 157 billion barrels and proven gas reserves is believed to be more than 33.7 trillion cubic meters. Despite the depleting oil and gas reserves in OPEC member countries, Iran is said to have enough oil and gas reserves for the next 100 and 200 years respectively.
Prospect of gasoline self-sufficiency
Possessing 35,000 kilometers of high pressure gas transmission lines, Iran has the capacity to transmit 700 million cubic meters of gas. As to oil refining, the capacity has increased to 2.8 million barrels of oil per day. As per the targets defined for certain relevant projects, Iran seeks to increase refining capacity to 3 million bpd. The increase will help gasoline imports stop. Although Iran is the first country in the Middle East to have built refineries and produced oil products, it is importing 7 million liters of gasoline per day given the halt in gasoline production in petrochemical plants.
As to petrochemical industries, although the petrochemicals and polymer production capacity has hit 70 million tons per year, major targets for developing the industry and ending crude oil and gas exports have not been fully met.
Despite the above shortcomings which are mainly due to the imposed international sanctions, significant progress has been achieved in the area of designing, installing and launching the most complicated oil megaprojects.