Sanctions hit Iran oil sector

26 November 2012

Tehran’s oil exports have fallen this year due to sanctions on exports, rendering many of its planned investments unfeasible


The key driver in the development of Iran’s offshore fields is the production of higher volumes of gas to feed growing domestic demand and boost exports, which Tehran has planned to do via pipelines and a liquefied natural gas (LNG) terminal. Although Iran is a significant producer of gas, it is also the world’s third-largest consumer after the US and Russia, driven by rapid industrial expansion and a growing population. There is little scope to expand oil production due to a lack of investment and sanctions imposed on the country by the US and its allies in response to its controversial nuclear scheme.

Operating companies

Iran has three main subsidiaries of state oil firm National Iranian Offshore Company (NIOC), which conduct offshore production, processing and export operations in the Gulf and Caspian Sea. Iranian Offshore Oil Company (IOOC) operates all of Iran’s offshore fields in the Gulf apart from the Pars Fields. Pars Oil and Gas Company operates the North Pars and South Pars gas fields. The latter is the northern section of a gas field Iran shares with Qatar – known in Qatar as the North Field – which is considered to be the largest in the world. Khazar Oil Exploration and Production Company (Kepco) operates the onshore and offshore assets in and around the Caspian Sea in northern Iran.

Iran operating companies
Major operating companies (all NIOC subsidiaries)Area of operation
National Iranian Offshore Company (NIOC)All offshore oil fields in Persian Gulf except Pars fields
Pars Oil and Gas CompanyOffshore North and South Pars fields
Khazar Oil Exploration and Production CompanyOnshore and offshore fields in the Caspian Sea region
Source: MEED Projects

Current offshore operations

Iran’s offshore operations have the capacity to produce about 883,000 barrels a day (b/d) out of a total capacity of about 4.2 million b/d, with the majority of its oil production coming from onshore fields in the west of the country. The largest producing offshore fields, with capacities of more than 100,000 b/d, are Abuzar, Doroud, Sirri A & E and Soroosh.

The majority of Iran’s gas reserves are found at the South Pars or North Pars fields, with the remainder largely associated gas in oil fields. NIOC had planned 30 phases of development on the South Pars field and had completed five by 2005. It completed five more by 2009, but further phases have been hit by several delays.

Planned investment

Iran’s investment in oil and gas rocketed in the 12 months to June 2012. According to regional projects tracker MEED Projects, more than $24bn was spent on engineering, procurement and construction (EPC) contracts for oil and gas schemes. However, there are concerns about verifying the size of these awards and about whether work is actually taking place on several of these projects.

Iran’s oil exports have plummeted this year due to sanctions preventing exports, rendering many of its planned investments unfeasible. Severe delays have impacted the South Pars phase 11 project, and developer China National Petroleum Corporation has been slow to mobilise, according to Iranian state media.

Challenges to Iran’s offshore sector

Iran faces significant challenges in the development of its offshore sector. Sanctions on tankers carrying Iranian oil have led to a collapse in exports.

Western measures have also prevented foreign firms from dealing with Iran’s central bank, which means the country will struggle to find contractors to develop its fields. This also prevents Tehran from acquiring the technology to construct an LNG export terminal for the South Pars field and limits the potential for new export pipelines. The stagnation of the country’s economy has also left it with fewer funds to invest in oil and gas field developments.

Iran oil and gas statistics

Value of projects planned or under way: $78.2bn

Main areas of activity: The Gulf, Caspian Sea

Source: MEED

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