According to the Oil and Gas Journal, Iran held 125.8 billion barrels of proven oil reserves as of January 1, 2005, roughly 10 percent of the worlds total. In July 2004, Irans oil minister noted that the countrys proven oil reserves had increased to 132 billion barrels following discoveries in the Kushk and Hosseineih fields of Khuzestan province. The vast majority of Irans crude oil reserves are located in giant onshore fields in the southwestern Khuzestan region near the Iraqi border (note: in September 2005, several bombs were detonated near oil wells in Khuzestan, raising concerns about unrest amongst ethnic Arabs in the region). Overall, Iran has 40 producing fields-27 onshore and 13 offshore. Irans crude oil is generally medium in sulfur, with gravities mainly in the 28°-35° API range.
During 2005, Iran has been producing about 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. Irans current sustainable crude oil production capacity is estimated at 4.0 million bbl/d, which is around 100,000 bbl/d below Irans latest (July 1, 2005) OPEC production quota of 4.110 million bbl/d. Some analysts believe that Irans capacity is lower, and that it could fall even further until new oilfield developments (Azadegan, Bangestan - see below) come online in a few years. Irans existing oilfields have a natural decline rate estimated at 8-13 percent per year (300,000-500,000 bbl/d). The fields are in need of upgrading, modernization, and enhanced oil recovery efforts (i.e., gas reinjection), with current recovery rates at just 24-27 percent (compared to a world average of 35 percent). Iran also needs to increase its search for new oil, with only a few exploration wells being drilled in 2005.
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. Irans 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). Irans 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, Irans 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 Irans 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. 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 fields 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 Japans 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. According to a top NIOC official, Dasht-e Abadan could contain reserves "comparable" in size to Azadegan.