Iran's natural gas reserves

Official Name: Islamic Republic of Iran.

Summary: Iran is a member of the Organization of Petroleum Exporting Countries and is ranked among the world’s top three holders of proved oil and natural gas reserves.

Of the thirteen member nations of the Organization of Petroleum Exporting Countries (OPEC) in 2023, Iran was the fourth-largest producer of crude oil, and the ninth-largest producer in the world. Iran's proven reserves of natural gas in 2021 were about 34 trillion cubic meters — second only to Russia in the world. Oil fields are found broadly across Iran, but nearly all of the most productive are located in the Zagros Mountains—especially along the Iraq border region and near the Persian Gulf coast. There are offshore fields in the Gulf, as well. Expanding offshore exploration and production of the South Pars natural gas field in the Persian Gulf is another critical part of Iran’s energy development strategy. South Pars is part of a single gigantic gas field—the largest in the world—the majority of which is in Qatar's territorial waters. Iran also has small reserves of coal and uranium.

Iran’s energy consumption is predominantly from petroleum and natural gas. Approximately 86 percent of electricity in the country was generated from natural gas in 2023, with roughly 7 percent sourced from oil. In 2022, nuclear power accounted for 1.7 percent of the country's electricity, hydropower comprised 4.4 percent, and wind and solar each accounted for 0.2 percent.

Production and Consumption

Iran was the fourth-largest consumer of natural gas in the world in 2017, after the United States, Russia, the European Union, and China. However, Iran’s trade balance in natural gas was positive, as it exported some 348 billion cubic feet (9.86 billion cubic meters) while importing 243 billion cubic feet (6.89 billion cubic meters). Since the 1970s, Iran’s total final energy consumption has grown rapidly. During the country’s first burst of industrialization (1967–77), total final energy consumption grew at an annual rate of 14.2 percent. Prior to the 1979 revolution and during the Iran–Iraq War (1980–88), the rate of growth slowed to 5.2 percent, and continued at roughly that rate through 2003.

With Iran’s booming economic and population growth—the nation of less than 35 million in 1975 became a nation of 88 million by 2022—the country’s oil consumption grew rapidly to the point where the government by 2003 had identified diversification of the fuel base as a strategic national priority, especially considering oil’s vital role in Iran’s export economy. Domestic consumption of oil in 1995 was 1.292 million barrels per day; this increased to 1.657 million barrels per day by 2005—a rise of 35 percent. And while the domestic market consumed 34.5 percent of total crude oil production in 1995, by 2005, the portion was 41 percent. In a parallel comparison, in the 1995–2005 period, Iranian oil consumption rose by 28 percent, but production increased by just 8.1 percent, and exports shrank by 2.5 percent. Few, if any, other Middle East oil producers faced the same demographically driven challenge that Iran did in this period. The government of Iran thus focused on natural gas development—with dramatic results—and on the beginnings of a nuclear power capacity, which has grown in a far more tepid, and controversial, pace. Despite a series of severe sanctions imposed by the United States in 2018, Iran's oil and natural gas industries continued to grow.

Oil

In 2021, Iranian oil deposits were ranked third in the world. Iran exported roughly 1.5 million barrels of oil per day in 2023. That same year, Iran produced roughly 4.42 million barrels per day, making Iran the supplier of roughly 4 percent of the world's oil.

Since its discovery in Masjed Soleiman more than 100 years ago, oil, to some degree, has dominated the economy and politics of Iran. Exports began in 1913; the United Kingdom controlled the industry. Iranian oil was briefly nationalized, from 1953 until 1957, then largely turned back over to a multinational corporate consortium with the United Kingdom in a leading role again. By 1977, income from exports of crude oil was the main source of government funds in Iran for investment in infrastructure and industrial development.

Following the 1979 revolution, however, with complete nationalization of oil, the Iranian government reduced daily production in accordance with an oil conservation policy. Production declined even more as the result of damage to oil facilities during the war with Iraq (1980–88).

Oil has been found beyond the onshore concentrations of southwestern Iran. Some has been tapped in the northern region of the country, but the offshore fields in the Persian Gulf are particularly important. In total Iran’s main extraction comes from twenty-seven onshore and thirteen offshore oil-producing fields, mostly concentrated in the southwestern Khuzestan region, bordering Iraq.

Apart from its own entirely domestic oil fields, Iran has been active from time to time in shared oil fields with some of neighboring the countries, such as Azerbaijan, Iraq, Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar.

Natural Gas

After Russia, Iran has the second-largest gas reserves in the world and is the third-largest producer of gas in the world. This gas is exploited primarily for domestic use and accounts for roughly 86 percent of Iran’s total domestic energy consumption, while the remaining electricity is predominantly created through oil consumption. With continuing discoveries in the Persian Gulf South Pars field, a large amount of Iran’s natural gas reserves has remained untapped. The production of natural gas is expected to increase significantly in the future.

Electricity

Iran is a nation where the government has a near monopoly on electricity generation, in this case overseen by the Ministry of Energy (MOE). This agency has its hands full, as Iran’s booming population growth and self-proclaimed mission of modernization has seen very rapid demand growth. Electricity generation and consumption over the 1990–2003 period increased at an average annual rate of 7.4 percent. This expansion was actually faster than each of the already considerable growth rates for population and the overall economy—meaning that per capita consumption was growing at historically high rates, and also that both agricultural and industrial use of electricity was pushing aside all prior limits. Electricity consumption growth rates in the industry and agriculture sectors were 10.4 percent and 10.7 percent, respectively, for this period, compared to 5.6 percent for the unified household-commercial sector, another measure of the pace of modernization within Iran’s economy.

Historically and up until the mid-1970s, oil-fired plants accounted for well over 50 percent of electricity generation. Most electricity in Iran is produced in steam boilers, using inefficient combined-cycle gas-turbine technology. By the 2020s, roughly 86 percent of Iran's electricity was generated through natural gas consumption.

Nearly 190 terawatt-hours were generated by conventional thermal electric power plants (fossil fuels), and about 20 terawatt-hours were generated by hydroelectric power, with a marginal amount of renewable power provided, in large part from wind resources. Iran’s nameplate generation capacity is about 92,000 megawatts. Many of the country’s power plants, however, are outdated or in need of repair; the transmission network, could also stand an overhaul. Iran seeks to increase its installed capacity by roughly 10 percent annually, an ambitious outlook, but in line with its projected 7–9 percent annual demand growth.

Due to a continued mismatch between Iran's electricity generation and its electricity consumption, power outages are common throughout peak energy consumption seasons. To remedy this, Iran intends to renovate its power network over the coming decades. As of 2024, the country also intended to increase its fuel use efficiency and invest in renewable energy.

Nuclear Energy

Just as it looked beyond oil to the expansion of its natural gas production and infrastructure, Iran made a strategic decision to pursue a nuclear-powered electrical industry as well. The origins of the country’s nuclear power program actually extend back to the 1950s, when Iran was encouraged by the United States and some European nations to pursue civilian nuclear power as well as scientific research facilities. The program was curtailed during the 1979 Iranian revolution, but eventually restarted; this phase lacked American support, although several other countries assisted.

The high degree of diplomatic tension among Iran and several other nations in the region, in particular Israel, as well as various reckless and aggressive statements made over the years by various Iranian government figures, has caused Iran’s nuclear activities to come under extremely high levels of scrutiny and dispute, even leading to several waves of economic sanctions. As a country that has ratified the Nuclear Non-Proliferation Treaty, Iran’s nuclear activities are subject to inspection, monitoring, and verification by the International Atomic Energy Agency (IAEA). This body has been actively investigating Iran’s nuclear program since at least 2001. The IAEA has made numerous inspections and issued reports with sometimes conflicting analyses. Meanwhile, Iran has carried out construction and activation of its initial installation for generating electricity by nuclear power. This first nuclear power plant, of 1,000 megawatts, was built at Bushehr with German technical assistance (prior to the revolution) and completed with Russian assistance.

The most important goals of the Atomic Energy Organization of Iran include completing the Bushehr power station. In August 2010, nuclear fuel was loaded at the Bushehr plant’s initial reactor; it began generating electricity in September 2011. By 2020, only one nuclear reactor was operational in the country.

Renewables

Iran’s geography has bestowed some rich, diversified sources with the potential for developing renewable energy such as hydropower, geothermal, biomass, biogas, solar, wind, and tidal. Renewables development programs have lagged somewhat behind those of other countries, however, in part due to Iran’s superior endowment of fossil fuels. Still, the government is working toward its strategic goal of diversifying beyond hydrocarbons.

Hydropower plants can help ensure security of base and supplemental electricity supply, and are environmentally friendly as compared to fossil-fuel-fired generation. Hydropower plants have also been utilized in Iran to deliver increased industrial capacity, as well as everyday social enhancements in rural areas, with the added positive of helping provide jobs and advance the technical know-how of the society.

Iran, one of the most arid nations, records only about 9.8 inches (250 millimeters) in average annual rainfall. However, plentiful river flow does exist in Iran’s mountainous western regions (the Zagros range), and there is scattered but high quality resource distribution in the northern regions (Alborz range) that skirt the Caspian Sea’s southern shores. The establishment of hydroelectric generation began in earnest in Iran in the 1950s, and has continued to build momentum. The present-day program makes Iran one of the most aggressive dam builders, by number of dams, in the world. Iran’s total annual potential of hydroelectricity generation is projected at some 50 terawatt-hours.

Iranian interest in geothermal energy has been active since 1975, when the MOE joined with an Italian firm to prospect geothermal sources; the northwestern areas of Sabalan, Damavand, Khoy-Maku, and Sahand were identified as favorable; 10 additional sites around the country were later identified by the Electric Power Research Center and Renewable Energy Organization of Iran (SUNA). After years spent drilling exploratory wells and working out solutions to the many engineering and cost challenges, the first plant was completed. The Meshkinshahr geothermal electric power plant, with a maximum generating capacity of 250-megawatt-hours, was built to tap the Sabalan field under SUNA stewardship; it came on line in 2010. By injecting pressurized water into wells, steam is produced, which then acts on turbines to generate the electricity. The plant provides, as an ancillary benefit, direct heat for residential, commercial, and industrial sector uses. SUNA is considering a priority list of additional sites to apply what it has learned across a wide swath of Iran’s geothermal hot spots.

Iran has a relatively high potential for using solar energy, with an average annual solar radiation budget of approximately 4 kilowatt-hours per square meter, as well as an average sunshine equivalent of 2,800 hours per year—which in certain regions, such as Iran’s inland desert cities and rural expanses, is sustained up to an average of 3,200 hours per year or more. Average solar radiation of 19.23 megajoules per square meter is the benchmark in Iran. To tap some of this energy, the MOE has considered the full range of proven and experimental solar energy technologies. Among other projects either in operation, under construction, or in pre-build planning stages across Iran are: a central receiving power station for solar-driven energy; a linear parabolic mirror solar farm; a variety of photovoltaic (PV) systems and sites; and a solar kettle industry, to provide village-scale solutions for off-grid water heating and cooking.

The first major parabolic mirror solar concentrating site in Iran is sited near the southwestern Iranian city of Shiraz. This 250 kilowatt capacity plant began operation in 2008. The linear parabolic mirrors, or “troughs,” concentrate reflected rays into tubes containing a heat transfer fluid. Pumped to a central tower, heated fluid turns water into steam, used in conventional turbines. The Shiraz facility has the potential for expansion to 500 kilowatt capacity. One year later, Iran began operation of the Yazd combined cycle solar energy plant. This hybrid used both concentrating solar power and natural gas to fuel steam turbines. The total combined generating capacity at Yazd is 467 megawatts.

Used for thousands of years in such functions as pumping well water and the milling of cereal grains, wind energy in Iran was not tapped for producing electricity on a mass scale until fairly recently. The country’s total wind energy potential is estimated at some 6,500 megawatts. The country has scarcely begun to tap this renewable, zero-emissions power base. In 1994 two wind turbines came on line, producing 1.8 kilowatt-hours of electricity annually. According to the Global Wind Energy Council, the total installed capacity of Iran has grown from 12 megawatts in 2002, to 92 megawatts in 2010. The main installations are the wind farms in Manill, with a capacity of 62 megawatts, and in Binalood, at 28 megawatts capacity. There are two smaller sites, in Tabriz and Zabol, each of which was capable of generating less than 1 megawatt as of 2010.

The first truly large-scale wind energy project, however, is likely to be a privately owned one. The Iranian government announced in June 2011 that a Danish company, utilizing at least some German financing, had agreed to build a power plant of up to 1 gigawatt capacity. The proposed installation, to be sited at Damghan, would actually be a hybrid, combining wind turbines and a type of solar energy power plant. Plans called for the Damghan plant to be built in 10 stages, each of approximately 100 megawatt capacity.

Future Plans

Besides generating electricity, as well as some space heating and water heating, Iran plans to use its progress in various renewables programs to create a new component in its export sector. Iran is on its way to achieving this goal by remaining fixed on the vertical integration of these technologies within the country, meaning it aims to develop a technical talent base and manufacturing experience sufficient to be competitive in renewables engineering, development, construction, and operation beyond its borders in the near future. Already, the neighboring countries of Pakistan and Armenia have availed themselves of Iranian investment and expertise to construct wind energy facilities there.

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