Trends and opportunities
The market
Oil
Iran is OPEC’s second largest oil producer and holds 10 per cent of the world’s proven, conventional world oil reserves. Most oil is located in the south-western part of Iran, near the Iraqi border and Persian Gulf.
Iran held 125.8 billion barrels of proven oil reserves as of 1 January 2005, roughly 10 per cent of the world's total. In July 2004, Iran's oil minister noted that the country's proven oil reserves had increased to 132 billion barrels following discoveries in the Yadavaran field of Khuzestan province. The vast majority of Iran's crude oil reserves are located in giant onshore fields in the south-western Khuzestan region near the Iraqi border.
Overall, Iran has 32 producing oil fields, of which 25 are onshore and 7 offshore. Iran's crude oil is generally medium in sulphur, with gravities mainly in the 28°-35° API range.
In 2005, Iran produced around 4.2 million bbl/d of total oil (of which 3.9 million bbl/d is crude oil), up nearly 400,000 bbl/d from 2003. Iran's current sustainable crude oil production capacity is estimated at 4 million bbl/d, which is around 100,000 bbl/d below Iran's latest (July 1, 2005) OPEC production quota of 4.110 million bbl/d.
Foreign investment/buybacks
Iran utilises buyback contracts as a means of involving foreign companies in the country’s oil sector without violating its constitutional prohibitions on concessions or direct equity stakes.
The Iranian constitution prohibits the granting of petroleum rights on a concessionary basis or direct equity stake. However, the 1987 Petroleum Law permits the establishment of contracts between the Ministry of Petroleum, state companies and "local and foreign national persons and legal entities".
Buyback contracts, for instance, are arrangements in which the contractor funds all investments, receives remuneration from NIOC in the form of an allocated production share, then transfers operation of the field to NIOC after the contract is completed.
Natural gas
Iranian natural gas consumption is growing fast, but so is production from the South Pars field and elsewhere, meaning that the country could become a significant gas exporter in coming years.
Iran contains an estimated 940 trillion cubic feet (Tcf) in proven natural gas reserves - the world's second largest and surpassed only by Russia. Around 62 per cent of Iranian natural gas reserves are located in non-associated fields, and have not been developed, meaning that Iran has great potential for future gas development.
Major non-associated gas fields include:
- South Pars (280-500 Tcf of gas reserves)
- North Pars (50 Tcf)
- Kangan (29 Tcf)
- Nar (13 Tcf)
- Khangiran (11 Tcf)
Currently, natural gas accounts for nearly half of Iran's total energy consumption, and the government plans billions of dollars worth of further investment to increase this share. The price of natural gas to consumers is state-controlled at extremely low prices, encouraging rapid consumption growth and replacement of fuel oil, kerosene and LPG demand.
Opportunities
Iran is attempting to diversify its economy by investing some of its oil revenues in other areas, including petrochemicals. In 2004, non-oil exports rose by a reported nine per cent. Iran also is hoping to attract billions of dollars worth of foreign investment to the country by creating a more favourable investment climate (ie., reduced restrictions and duties on imports, creation of free-trade zones). However, there has not been a great deal of progress in this area, in part due to disagreements between reformers and conservatives.
Driven by the infrastructure expansion demands of such projects, there are also more broad-ranging opportunities in the supply of products and services to the large parastatal and international exploration and production companies for products/services in the areas of ICT, Education, Environmental, and Transport and Logistics.
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