Background

Iran’s state-run oil company traces its roots back to the early 20th century, when William Knox D’Arcy was awarded the country’s first oil exploration concession. Oil was discovered in 1908, by which time the UK’s Burmah Oil held most of the rights to the concession. In 1935, the Burmah subsidiary Anglo-Persian Oil Company was renamed Anglo-Iranian Oil Company, and in 1951 the company was nationalised by then Prime Minister Mossadegh – an action that led to his ousting in a 1953 coup d’etat.

Overall oil production in Iran peaked at 6.6 million barrels a day (b/d) in 1976, but fell after the 1979 Islamic Revolution. National Iranian Oil Company (NIOC) can currently produce about 3.8 million b/d, but production fell to an estimated 3.7 million b/d in 2012.

Iran’s South Pars Field forms the world’s largest offshore gas reservoir along with Qatar’s North Field, and is developed by NIOC subsidiaries.

Role in Iran’s economy

The hydrocarbons sector accounted for about 27 per cent of all economic output in Iran in the fiscal year 2011/12, but made up 60 per cent of all government revenues. Tehran has been working on a series of plans to wean the government off its oil dependence, and revenues have dropped substantially in recent years as US and EU sanctions have bitten into production levels.

Role in the global economy

Iran was once one of the biggest oil producers in the world, and still has the world’s third-largest oil reserves and third-largest gas reserves. But mismanagement since 1979 and, more recently, the impact of sanctions have limited output. NIOC has struggled to buy equipment and hire contractors on international markets. But the fact remains that under the right circumstances, it could produce in excess of 4 million b/d.

Strategy

NIOC has been hamstrung in recent years in its ability to competitively tender major projects to non-Iranian companies, and was further squeezed by sanctions imposed by the EU in late 2012. It has nevertheless been working on a series of projects to expand oil and gas production. In late 2012, NIOC formed a Strategic Studies Centre at Iran’s Institute for International Energy Studies.

Subsidiaries

Key NIOC subsidiaries include Iranian Offshore Oil Company, which produces oil and gas from the offshore South Pars field; Central Iranian Oil Fields Company, which is in charge of oil and gas exploration and production in central Iran; National Iranian South Oil Company; Pars Oil and Gas Company; National Iranian Oil Terminals Company; National Iranian Drilling Company; and National Iranian Tanker Company.