Opportunities and challenges during 46 years of Iranian oil industry (Part Three)

SHANA (Tehran) – The development of South Pars and the oilfields of West Karoun, the capabilities of Iranian exploration and production companies, the factual nationalization of the oil industry, the fostering of self-reliance and independence, and more are among the most significant achievements of this industry over the 46 years since the Islamic Revolution in Iran.

The Iranian oil industry, as one of the pillars of the country's economy, has undergone remarkable transformations over the more than four decades since the victory of the Islamic Revolution.

This industry has not only played a key role in the production and export of oil and gas but has also taken significant steps in advancing technology, achieving industrial independence, and meeting the country's energy needs.

However, alongside these achievements, there have been challenges and shortcomings that, if identified and addressed, can illuminate the path forward for this industry. In a series of interviews with a group of oil industry managers and experts, SHANA sought answers to two key questions:

1- What has been the most significant achievement of Iran's oil industry over the past 46 years?

2- What is the most important measure that has been neglected during these years?

The third part of the interviews with senior oil industry managers follows:

Fereydoun Barkeshli, Head of OPEC Affairs at Iran’s Ministry of Oil (1989–97): 

Iran’s oil industry has achieved significant milestones over the past few decades. Before the revolution, less than 10% of the oil industry’s needs were met domestically. Today, this figure exceeds 70%, making the oil industry a major market for the country’s industrial sector.

The most notable achievement, however, has been the emergence of gas as the dominant energy source in Iran.

The development of South Pars transformed the energy sector and spurred growth in key economic areas such as petrochemicals and steel. Internationally, Iran’s standing in organizations like OPEC has been elevated, and the country has become a leader in thermal energy value among OPEC members.

The establishment of the Gas Exporting Countries Forum (GECF) was another outcome of the rapid growth of the gas sector.

On the other hand, sanctions and the isolation of the energy sector have been significant challenges. Oil is inherently international, and isolation limits its growth potential.

The oil, gas, and energy industries thrive on dynamism, and access to international markets, capital, and technology is crucial for their development. Even renewable energy, which also has an international nature, depends on global connections for growth.

This is why the US imposed its first sanctions on Iran’s oil sector just months after the Islamic Revolution.

Since then, oil has consistently been a primary target of sanctions, which have significantly hindered the development of the oil, gas, and energy sectors. The progress made so far is a testament to the relentless efforts of the oil industry’s workforce.

Ali-Mohammad Bosaqzadeh, advisor to the CEO of the National Petrochemical Company (2020–22):

Fortunately, oil extraction has stabilized despite the various fluctuations the country has faced. Additionally, gas extraction has seen remarkable growth with the development of South Pars phases, playing a crucial role in ensuring the country’s energy security.

Moreover, the Ministry of Petroleum’s delegation of authority to the petrochemical sector for upstream projects and NGL initiatives has accelerated progress. Examples include the Bid Boland Gas Refinery and NGL 3200.

The privatization of petrochemical companies under Article 44 of the Constitution has also fostered healthy competition among holdings, leading to better project execution.

However, we have failed to align production growth with energy consumption. While managing energy consumption and adhering to consumption patterns are essential, production growth must outpace consumption. Greater autonomy for the oil industry in attracting investments could have facilitated more rapid progress.

Reza Noshadi, CEO of Iran Gas Engineering and Development Company (2021–24):

The gas industry has made commendable progress. The number of gas subscribers has increased from tens of thousands to over 27 million, and daily gas production capacity has risen from 6 million cubic meters to 1 billion cubic meters.

This growth includes significant advancements in production, refining, transmission, and distribution. Gas production, refining, and transmission capacities have expanded two and a half times during this period.

Despite international sanctions on the National Iranian Oil Company, the Central Bank, and the National Iranian Gas Company, gas production continued. Foreign investors had already ceased cooperation with Iran before the sanctions were officially imposed. Yet, gas production persisted and even grew under these constraints.

Sanctions had a paradoxical effect on Iran’s gas industry, with production increasing two and a half times despite them. The intensity and scope of Iran’s sanctions are incomparable to those imposed on countries like Iraq and Venezuela.

This achievement is a result of the relentless efforts of Iran’s workforce and reflects significant progress.

A substantial portion of the equipment used in the gas industry is domestically produced, with 76% of required equipment being locally made. This demonstrates industrial self-sufficiency and engineering capabilities that have enabled these successes despite sanctions.

However, energy consumption optimization remains a critical unaddressed issue. While the gas industry generates $80 billion annually, inefficient energy consumption patterns in major and minor industries, households, and commercial sectors persist.

This is a national crisis that must be resolved. The issue is not a lack of effort but rather poor execution. Serious policies and programs are needed to manage energy consumption and improve efficiency.

Much of this optimization does not require advanced technology; existing technologies and market-based approaches can be employed to benefit society and prevent the squandering of national resources.

Shahabeddin Metaji, CEO of Tehran Oil Refinery (2006–9): 

The establishment of massive refineries in South Pars is one of the oil industry’s most significant achievements over the past 45 years, greatly impacting the welfare and economy of the people.

The expansion of the gas network and the shift from oil to gas consumption reduced domestic oil consumption, enabling Iran to become one of the world’s largest oil exporters.

However, increasing crude oil production capacity has been neglected. Iran ranks third globally in oil reserves but eighth in production. Utilizing existing capacities to boost crude oil production should be prioritized, with the resulting revenues directed toward national development and welfare.

Afkham Zarvani, head of Oil Industry Pension Funds (2016–21): 

The strengths of the Ministry of Petroleum’s work post-revolution can be divided into two periods: the imposed war and the post-war era, as the nature of activities and working conditions differed significantly.

The most notable strength during the war was the continuity of oil production and exports. Post-war, the development of the South Pars gas field and the subsequent growth of the petrochemical industry created jobs, added value, and increased export capacity and foreign currency earnings.

The most significant weakness has been the inadequate attention to human resources. The ministry has not succeeded in retaining, attracting, or developing a skilled workforce that meets the industry’s needs. Additionally, women have not been adequately represented in the oil industry.

News ID 653947

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