Irans largest natural gas field is South Pars, geologically an extension of Qatars 900-Tcf North Field. South Pars was first identified in 1988 and originally appraised at 128 Tcf in the early 1990s. Current estimates are that South Pars contains 280 Tcf or more (some estimates go as high as 500 Tcf) of natural gas, of which a large fraction will be recoverable, and over 17 billion barrels of liquids (i.e., condensates - by 2010, South Pars could be producing condensates of more than 500,000 bbl/d, mainly for domestic consumption and petrochemicals production).
Development of South Pars is Irans largest energy project, already having attracted over $15 billion in investment, but development has been delayed by various problems - technical (i.e., high levels of mercaptans - foul-smelling sulfur compounds - in the South Pars gas), contractual issues (i.e., controversy over buyback arrangements), politics, etc.
Phase 1, for instance, which is being handled by Petropars (owned 60 percent by NIOC), was delayed several times but finally came onstream, several years behind schedule, in November 2004. Phase 1 involves production of 900 million cubic feet per day (Mmcf/d) of natural gas for the domestic grid, plus 40,000-45,000 bbl/d of condensate.
Overall, South Pars is slated to be developed in 28 phases, although only 18 phases are active so far. According to FACTS, Inc., total condensate production from South Pars phases 1-14 is expected to reach 628,000 bbl/d by 2015. Total gas reinjection needs from South Pars are estimated by FACTS at 8-10 billion cubic feet per day (Bcf/d) by 2010-2012, although "field engineers think this may not be enough," with some citing the need for as much as 20 Bcf/d. If this latter figure is correct, it could cut significantly into the potential for South Pars gas exports, since future South Pars production is projected at perhaps 20 Bcf/d total - potentially all of South Pars future production according to FACTS. Ultimately, Iran could be faced with a choice between using natural gas for domestic purposes, or exporting it.
Natural gas from South Pars largely is slated to be shipped north via the planned 56-inch, 300-mile, $500 million, IGAT-3 pipeline (a section of which is now being built by Russian and local contractors), as well as planned IGAT-4 and IGAT-5 lines. Gas also will be reinjected to boost oil output at the mature Agha Jari field (output peaked at 1 million bbl/d in 1974, but has since fallen to 200,000 bbl/d), and possibly the Ahwaz and Mansouri fields (which make up part of the huge Bangestan reservoir in the southwest Khuzestan region).
Besides condensate production and reinjection/enhanced oil recovery, South Pars natural gas also is intended for domestic consumption and for export, by pipeline and also possibly by liquefied natural gas (LNG) tanker. Sales from South Pars could earn Iran as much as $11 billion per year over 30 years, according to Irans Oil Ministry. However, Iran likely will face stiff competition for LNG customers, particularly given the fact that many other LNG suppliers (Oman, Qatar, the UAE) are already players, having locked up much of the Far East market. U.S. sanctions also mean that Iran is limited to non-U.S. liquefaction technology, which is an important consideration given that most LNG plants use processes developed by U.S. companies. Currently, Iran has no LNG facilities.
In February 2003, Oil Minister Zanganeh officially inaugurated Phases 2 and 3 of South Pars development, which began to come onstream in March 2002. A consortium led by Total – and including Petronas and Gazprom - developed the project at a cost of approximately $2 billion. Currently, phases 2 and 3 are producing around 2.8 Bcf/d of natural gas for domestic use, plus 80,000 bbl/d of condensates. Twin undersea pipelines carry gas from South Pars to onshore facilities - natural gas processing trains, sulphur recovery units, condensate stabilization and storage units, and export compressors-at Asaluyeh.

Phases 4 and 5, estimated to cost $1.9 billion each, are being handled by Eni and Petropars, and involve construction (by Eni and Petropars) of onshore treatment facilities at the port of Bandar Asaluyeh. These two phases began coming online in October 2004 and are expected to produce around 2 Bcf/d (for domestic consumption) of natural gas, 80,000-90,000 bbl/d of condensates, plus ethane, sulfur, liquefied petroleum gas (LPG), and petrochemicals.
Phases 6-8, which are to produce a combined 3 Bcf/d of natural gas and 120,000 bbl/d of condensate at a cost of $2.7 billion, are being handled by Petropars and Norways Statoil, which signed an agreement in October 2002. The project is scheduled to come online by 2007, with gas being transported via the planned $235 million IGAT-5 pipeline to the Agha Jari oilfield for injection as part of enhanced oil recovery efforts. NIOC is to take over as operator when development is finished. In May 2003, Iran signed a $1.2 billion deal with a Japanese-led consortium for construction of an onshore natural gas and condensate processing facility for Phases 6-8.
Phases 9 and 10, being developed by South Koreas LG Engineering and Construction Corp., are expected to supply 2 Bcf/d to the domestic market, possibly by 2007, plus around 80,000 bbl/d of condensate production. In September 2002, South Koreas LG signed a $1.6 billion deal with NIOC on phases 9 and 10. LGs share is 42 percent, and the deal reportedly uses international bank project financing rather than a buyback model. In January 2005, a foreign (Cayman Islands) subsidiary of Halliburton Co. reportedly reached agreement on helping develop Phases 9 and 10, along with local partner Oriental Kish (in late March 2005, Halliburton announced that it would seek no new work in Iran but would honor existing contracts).
Bids on Phase 11, which is slated for LNG export, were opened in March 2003. In February 2004, Total (30 percent) formed "Pars LNG" along with Petronas (20 percent) and NIOC (50 percent). In April 2004, Total was selected to enter into final negotiations on the $1.2 billion project, while Petronas reportedly withdrew in May 2005. In addition, CNPC is negotiating for a 10 percent stake, and Indias ONGC is reportedly interested as well. Phase 11 is slated to produce 2 Bcf/d for export as LNG and 80,000 bbl/d of condensate under a buyback contract, possibly beginning in 2010.

Phase 12 is slated for LNG export (2 Bcf/d), reinjection (0.7 Bcf/d), and condensate production (around 100,000 bbl/d), possibly beginning around 2010. The consortium slated to export the LNG is called "NIOC LNG." As of mid-2005, both Eni and Statoil were in the running to participate in developing Phase 12; BG reportedly withdrew from participation in June 2005.
Meanwhile, a Shell-led consortium called "Persian LNG" hopes to win Phase 13, which is slated for LNG export (2 Bcf/d) and LPG production (80,000 bbl/d) starting in 2010. In September 2004, Shell signed a framework agreement on the $4 billion project, along with NIOC, Repsol and YPF. According to Shell, a final investment decision on the project is due by the end of 2006.
Phase 14 of South Pars is slated for gas-to-liquids (GTL) development, with Statoil and Shell reportedly interested.
In January 2005, phases 15-16 of the South Pars project were initially awarded to a consortium of international and domestic companies led by Norways Aker Kvaener. Subsequently, they were re-tendered. The two phases are expected to cost $2 billion to develop. They are expected to produce 2 Bcf/d of natural gas for domestic use, plus 80,000 bbl/d of condensate and 1 million tons per year of LPG for export.
Phases 17 and 18 of South Pars are expected to produce 2 Bcf/d of natural gas, possibly for export to Pakistan/India, plus 70,000 bbl/d or so of condensates. In late 2004, Iran invited companies to bid on Phases 17 and 18.

In addition to South Pars, Irans long-term natural gas development plans may involve: the 48-Tcf North Pars field (a separate structure from South Pars); the 6.4-Tcf, non-associated Khuff (Dalan) reservoir of the Salman oil field (which straddles Irans maritime border with Abu Dhabi, where it is known as the Abu Koosh field); the 800-Bcf Zireh field in Bushehr province; the 4-Tcf Homa field in southern Fars province; the 14-Tcf Tabnak natural gas field located in southern Iran; the onshore Nar-Kangan fields, the 13-Tcf Aghar and Dalan fields in Fars province, and the Sarkhoun and Mand fields. In September 2003, President Khatami inaugurated the first phase of Tabnak development, along with a related gas processing plant and a combined cycle power facility.
In June 2004, the Iranian News Agency reported that Iran had discovered two new natural gas fields in the Persian Gulf, one at Balal and the other beneath Lavan Island (with possible reserves of 7 Tcf).