Petroleum Energy in Iran

Michael Genender
December 19, 2016

Submitted as coursework for PH240, Stanford University, Fall 2016


Fig. 1: The Abadan oil refinery in Iran, one of the largest in the world. (Source Wikimedia Commons)

Petroleum, a fossil fuel, is a combination of oil and natural gas that is made naturally from decayed prehistoric plant and animal remains. It is a blend of many different hydrocarbon molecules, which can sometimes occur as a liquid (crude oil) and sometimes as vapor (natural gas). It is used predominantly to power our homes and our transportation means. Iran has historically been one of the most influential countries in petroleum production, as Fig. 1 shows. [1]

Iran Facts

In 2015, Iran had 157.8 thousand million barrels of oil reserves, accounting for nearly 10% of the worlds total, steady progression in the last 10 years. Iran also has 1201.4 trillion cubic feet of natural gas reserves, which is almost 20% of the world's total, and has nearly half the reserves of the entire middle east, with the only other country producing close to as much in the region being Qatar. [2]

The Current Situation

OPEC, or the Organization of Petroleum Exporting Countries has just signed a six month deal, starting in January 2017, to lower production, which in turn would raise costs. Iran has also recently been relieved of their nuclear sanctions by Western countries. So Iran is desperately trying to revamp its economy, world image, and in turn, stimulate foreign investment. Now, there are two sides to the coin. Iran wants prices to be very high, but they also want to produce a lot to restore their position as an oil producing power. Most of their nuclear related sanctions were released this past January and from then to now, Iran's crude oil production has risen a third, reaching pre- sanction levels. As Bhushan Bahree, an OPEC analyst at the research firm IHS Market said,"Iran's influence in OPEC, and indeed in the region, has been growing since the lifting of nuclear-related international sanctions."However, Iran does not want to stop there and wants to increase the production capacity to 4.8 million barrels a day by 2021. In pursuing this goal, Iran has begun negotiating deals with outside companies like Total and Royal Dutch Shell to increase the foreign investment. While beneficial for Iran, it puts the goals of OPEC at stake, because with all this extra production, prices will inevitably drop. It will be very interesting to see in the coming weeks and months as the OPEC deal gets into action how other countries will respond to Iran. [1]


The reason for rushing into these aforementioned deals with foreign companies is also due to the election of Donald Trump. The lifting of the sanctions this past January by Obama, as part of the international nuclear agreement may be under threat from Trump, who has said publicly he is considering dismantling the deal. If the deal was dismantled, Iran would return to economic isolation and prices would be low again. So, this month, December 2016, may be one of the most important in the history of the Iranian economy. If they can sign enough deals before Trump takes office, the damaging effects of the repealing of Obama's foreign policy regarding Iran could be offset. [3]

© Michael Genender. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.


[1] S. Reed and C. Krauss, "OPEC Reaches Deal to Limit Production, Sending Prices Soaring," New York Times, 30 Nov 16.

[2] "BP Statistical Review of World Energy 2016," British Petroleum, June 2016.

[3] T. Erdbrink and C. Krauss, "Iran Races to Clinch Oil Deals Before Donald Trump Takes Office," New York Times, 8 Dec 16.