Iran is perhaps most well-known these days for the controversy surrounding its nuclear programme, but the country is also awash with proven reserves of oil and natural gas. Following the lifting of the international embargo from 2012 to January 2016, Iran produced some 3.9 million barrels of oil a day in 2016, making it the third-largest OPEC producer after Saudi Arabia and Iraq.
Iran’s oil industry began in 1901 when William D’Arcy, a British speculator, was awarded a concession to investigate and develop the country’s southern oil fields. Oil was later struck in 1908, leading to the formation of the Anglo-Persian Oil Company (APOC) in 1909. A few years later, the British government gained direct control over Iran’s oil industry by purchasing a majority of shares in APOC, which it held for 37 years. In 1933, a new 60-year agreement between the Anglo-Iranian Oil Company (the new name for APOC) and Iran set out a flat price of £4 for every ton of crude exported, but it also prohibited Iran from restricting oil exports.
Popular dissatisfaction with this arrangement later led to the Majlis (Iran’s legislative body) voting to nationalise the industry. The Iranian government then formed the National Iranian Oil Company (NIOC) for nationalisation, but a British- and American-supported coup d’état in 1953 ousted the Mossadeq government and laid the way for a new profit-sharing agreement in 1954. Unfortunately, Iran’s international oil agreements failed to realise the anticipated results, with many participating oil companies contributing little or nothing to national production.
The 1979 Iranian Revolution inevitably changed Iran’s oil industry. All foreign oil contracts were cancelled, and the petroleum industry was brought entirely under NOIC’s control. Iran’s production slumped in the 1980s as the government prioritised the long-term preservation of its natural resources, but this shifted to a more production-oriented approach following the Iran–Iraq war.
From 1997, Iran started investing more in improving capacity and developing new oil fields, some through joint investments with domestic contractors or international operators. NIOC, however, was obliged to refund any expenses in order to retain ownership of oilfields.
Following the lifting of sanctions in 2016, many Western energy companies are keen to gain access to Iran’s substantial reserves, but US-based giants like ExxonMobil, maker of the Mobil DTE 24 hydraulic oil, face additional delays as the US government maintains its own restrictions concerning Iran despite the nuclear accord.
