With sufficient investment, it is widely believed that Iran could increase its crude oil production capacity significantly. Iran produced 6 million bbl/d of crude oil in 1974, has not come close to recovering to that level since he 1978/79 Iranian revolution. Still, Iran has ambitious plans to increase national oil production - to more than 5 million bbl/d by 2010, and 8 million bbl/d by 2015. The country is counting on billions of dollars in foreign investment to accomplish this, but the goal is unlikely to be achieved without a significant change in policy to attract such investment (and possibly a change in relations with the West).

Iran exports around 2.7 million bbl/d, with major customers including Japan, China, South Korea, Taiwan, and Europe. Iran's main export blends include Iranian Light (34.6° API, 1.4 percent sulphur); Iranian Heavy (31° API, 1.7 percent sulphur); Lavan Blend (34°-35° API, 1.8-2 percent sulphur); and Foroozan Blend/Sirri (29-31° API). Iran's domestic oil consumption, 1.5 million bbl/d in 2005, is increasing rapidly as the economy and population grow. As mentioned above, Iran subsidizes the price of oil products heavily, resulting in a large amount of waste and inefficiency in oil consumption. 

State-owned National Iranian Oil Company (NIOC)'s onshore field development work is concentrated mainly on sustaining output levels from large, aging fields. Consequently, enhanced oil recovery (EOR) programs, including natural gas injection, are underway at a number of fields, including Marun and Karanj. Overall, Iran's oil sector is considered old and inefficient, needing thorough revamping, advanced technology, and foreign investment.

In February 2004, a Japanese consortium led by Inpex signed a final agreement on the $2 billion Azadegan oilfield development project. Azadegan was discovered in 1999, representing Iran's largest oil discovery in 30 years, and is located onshore in the southwestern province of Khuzestan, a few miles east of the border with Iraq. Reportedly, Azadegan contains proven crude oil reserves of 26 billion barrels, but the field is also considered to be geologically complex, making the oil more challenging and more expensive to extract. In January 2001, the Majlis approved development of Azadegan by foreign investors using the so-called "buyback" model (see below).

Inpex, which has no upstream experience of its own, hopes to bring in an international partner - possibly Total, Statoil, Sinopec, or Lukoil (Shell has indicated that it is not interested) - as the field's operator. Initial production of medium-sour crude oil from Azadegan could come in 2007, ramping up to 260,000 bbl/d by 2012. At its peak, Azadegan production could account for as much as 6 percent of Japan's oil imports. However, as of early December 2005, little forward progress had been made on Azadegan, including the lack of an operating agreement with NIOC, possibly due to financial and/or political issues (e.g., US sanctions against Iran, the absence of an Iranian oil minister). In September 2005, Iran sharply criticized Japan for the slow progress.

Since 1995, NIOC has made several other sizable oil discoveries, including the 3-5-billion-barrel Darkhovin onshore oilfield, located near Abadan and containing low sulfur, 39° API crude oil. In late June 2001, Eni signed a nearly $1 billion, 5 1/2-year buyback deal to develop Darkhovin, with the added incentive of a limited risk/reward element (payment is to be linked to production capacity). Darkhovin came online at 50,000 bbl/d in July 2005, with ultimate production expected to reach 160,000 bbl/d.

Another oil discovery in western Iran near the Iraqi border was made recently by Norsk Hydro, in the 2-billion-barrel Anaran field. According to Norsk Hydro, Anaran could produce more than 100,000 bbl/d of oil, possibly starting in 2010. Lukoil is a minority partner in the field. Reportedly, development of Anaran is complicated by the need to clear landmines in the area.

NIOC also would like to develop five oil and natural gas fields in the Hormuz region: Henjam A (known as West Bukha by Oman; the two countries are discussing possible joint development); the A field near Lavan Island; the Esfandir field near Kharg Island; and two structures near the South Pars natural gas field. According to NIOC, the five Henjam fields hold an estimated 400 million barrels of oil and have a production potential of 80,000 bbl/d. Other Iranian oil fields slated for increases include Doroud, Nosrat, Farzam, and Salman.

In February 2001, NIOC announced the discovery of a very large offshore oil field, named Dasht-e Abadan, in shallow waters near the port city of Abadan.

Source: Energy Information Administration