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Research Report


Sara Vakhshouri
Copyright Date: Nov. 1, 2015
Published by: Atlantic Council
Pages: 26
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Table of Contents

  1. (pp. 3-4)

    The history of Iran’s hydrocarbon industry is one of ups and downs. It has engendered a palpable sense among Iranian leaders of the need for self-reliance and increased “resistance” of the Iranian economy against international pressures. As a result, Iranian energy policy has become predicated upon survival and preparing for the worst.

    Iran’s oil discovery dates back to 1901, when Iranian King Mozaffar a-Din Shah of the Qajar dynasty gave the British William Knox D’Arcy a sixty-year oil concession with the exclusive right to explore, process, and export oil and petroleum products.⁸ The agreement stipulated that the Iranian government would...

  2. (pp. 4-8)

    Iran holds the fourth-largest proven oil reserves after Saudi Arabia, Venezuela, and Canada. The country also possesses the second-largest natural gas reserves after Russia.15 In 2015, estimates indicated that Iran had the largest natural gas reserves in the world.16 In 2013, Iran produced 3.2 mb/d of oil and 5.6 trillion cubic feet (Tcf) of natural gas. Iran is among the top-five global oil and gas producers in the market. However, because of sanctions, Iran’s share of oil exports in the global market has plummeted since 2012. Also, despite having substantial natural gas reserves, Iran has never obtained even 1 percent...

  3. (pp. 8-13)

    The historical context of Iran’s crude oil export policy has been discussed earlier. As mentioned, after the Islamic Revolution, the consortium of international oil companies that were in charge of marketing and sales of Iranian oil was dissolved, and NIOC took over the entire export process. After the 2012 sanctions that targeted Iranian oil sales, the country’s oil production and export dropped by more than 1 mb/d. Given the low oil prices of the current environment, Iran could face hurdles in terms of marketing and selling its oil. This section discusses different strategies that NIOC would adopt to regain its...

  4. (pp. 13-15)

    Increasing the refinery capacity of crude oil, natural gas, and condensate is part of Iran’s policy to expand its production chain and increase the value added by preventing the export of raw materials. According to the official website of Iran’s Supreme Leader Sayyed Ali Khamenei, article thirteen of “The General Policies of the ‘Economy of Resistance’” suggests that, in order to reduce Iran’s vulnerability and dependence on its crude oil exports, Iran needs to increase exports of natural gas, electricity, petrochemical products, and refined petroleum products.91

    After Saudi Arabia, Iran is the second-largest consumer of refined products in the Middle...

  5. (pp. 15-15)

    During Bijan Zangeneh’s first term as oil Minister, from 1997 to 2005, he massively expanded Iran’s petrochemical industry, increasing the value of annual petrochemical production from $1 billion to $18 billion.107 Investment in and development of Iran’s downstream sector has always been part of Zangeneh’s strategy, and, since his reappointment in 2013, this will continue to be part of his new team’s plan. In 2014, Iran’s petrochemical industry consumed 5 percent of Iran’s total liquid and gas hydrocarbon production and produced about 41 million ton of products. Iran’s petrochemical products represented 40 percent of Iran’s non-oil export in the same...

  6. (pp. 15-18)

    US and EU sanctions have had a significant long-term toll on Iran’s infrastructure and have prevented adequate investment and technology from entering the country. According to Iran’s latest five-year energy investment plan (2011-2015), Iran needs $255 billion worth of investment in its oil and gas industry in order to reach its target plans (see table 7). According to this plan, Iran needs to drill 2,500 wells—2,000 wells onshore and 500 wells offshore—to increase its crude oil production to the target level of 5 mb/d.111 Iran’s petroleum ministry could not absorb the required investment, however, and is far behind...

  7. (pp. 18-20)

    Iran, with its huge oil and gas reserves, has witnessed many ups and downs in its relations with other countries and international oil companies. In response to each challenge, Iran’s energy policy changed, moving it toward self-reliance. After the 1979 Islamic Revolution, years of sanctions and war prevented the energy industry from having continuous access to the necessary investment and technology. Since 2012, sanctions against Iran’s energy industry and oil exports intensified, due to conflict surrounding Iran’s nuclear program. In 2014, Khamenei announced the idea of the “Economy of Resistance,” with the aim of reducing dependency on oil revenue, and...