Energy in Iran is characterized by vast reserves of fossil fuels, positioning the country as a global energy powerhouse. Iran holds the world's third-largest proved oil reserves and the second-largest natural gas reserves as of 2021, accounting for 24% of the Middle East's oil reserves and 12% of the global total.
In 2023, the Total Energy Supply (TES) in Iran was predominantly derived from natural gas (71.5%) and oil (26.5%), with nuclear power and renewable sources contributing only 0.5% and 1% each respectively. Despite the heavy reliance on fossil fuels, Iran possesses significant potential for renewable energy. Due to its geographical location near the equator, 90% of the country's land is suitable for solar power generation for at least 300 days a year.
While Iran's energy wealth provides considerable economic opportunities, it also poses challenges. Heavy dependence on oil and gas has resulted in widespread air pollution and high greenhouse gas emissions.
In recent years, Iran has faced a significant energy crisis driven by a combination of aging infrastructure, mismanagement, and international sanctions. This has resulted in frequent power outages, disruptions in industrial production, and challenges in meeting domestic energy demands. Additionally, the growth of cryptocurrency mining in the country has further strained the electricity grid, exacerbating the crisis. Addressing these challenges is crucial for Iran's energy sector to meet the needs of its growing population and economic ambitions. The crisis in Iran energy sector may indicate also a problem in its reported economic data.
History Iran is in a constant battle to use its energy resources more effectively in the face of subsidization and the need for technological advances in energy exploration and production. In 2008, energy wastage in Iran amounted to six or seven billion dollars. The energy consumption in Iran is extraordinarily higher than international standards. Iran paid $84 billion in subsidies for oil, gas and electricity in 2008.
Iran is one of the most energy-intensive economies of the world, with per capita energy consumption 15 times that of Japan and 10 times that of European Union. Also due to huge energy subsidies, Iran is one of the most energy inefficient countries of the world, with the energy intensity three times higher than global average and 2.5 times the middle eastern average. In 2014, half of Iran's energy was wasted in the domestic sector, 3.4 of which is wasted through single-occupancy vehicle use. 2/3 parts of Iranian power plant energy is wasted.
Iran is one of the leading members of OPEC (Organization of Petroleum Exporting Countries) and the Organization of Gas Exporting Countries (GECF). In 2008, Iran received $47 billion in oil export revenues, which accounts for about 50% of state revenues.BBC News, "Iran Energy: Overview", https://news.bbc.co.uk/1/hi/world/middle_east/4688984.stm, April 1, 2008. Natural gas and oil consumption both account for about half of Iran's domestic energy consumption. With its heavy dependence on oil and gas revenues Iran continues to explore for new sources of natural gas and oil. Since 2009, Iran has focused its energy sector on the exploration of the South Pars offshore natural gas fields in the Persian Gulf.EIA, "Iran's Energy Data", , April 1, 2008.
Iran has become self-sufficient in designing, building and operating dams and power plants and it has won international bids, such as in Ecuador, in competition with foreign firms.
In 2007, energy generation capacity of Iranian thermal power plants reached 173 terawatt hours, accounting for 17.9 percent of energy production in the Middle East and African region. In 2007, Natural gas was the main energy source in Iran, comprising over 55 percent of energy needs, with oil and hydroelectricity accounting for 42 and 2 percent respectively. The region's energy need will increase by 26.8 percent until 2012. In 2017, the fuel consumption in Iran was equivalent to 5.5 million barrels of fuel per day (bpd), the rate of which is considered as the highest energy consumption rate in the world in terms of energy intensity.
Energy plays an important role in Iranian politics. Robert Baer in his 2008 book The Devil We Know: Dealing with the New Iranian Superpower argued that Iran had attained the status of an energy superpower and was on its way to become a military-political superpower.
Iran plans to create an energy saving company in conjunction with the 2014 Iranian subsidy reform plan. + Energy in IranIEA Key World Energy Statistics Statistics 2015 , 2014 (2012R as in November 2015 + 2012 as in March 2014 is comparable to previous years statistical calculation criteria, 2013 , 2012 , 2011 , 2010 , 2009 , 2006 IEA October, crude oil p.11, coal p. 13 gas p. 15 Year Population (million) Prim. energy (TWh) Production (TWh) Export (TWh) Electricity (TWh) CO2-emission (Mt) 2004 67.0 1,696 3,233 1,530 137 369 2007 71.0 2,151 3,757 1,602 165 466 2008 72.0 2,350 3,801 1,429 174 505 2009 72.9 2,514 4,068 1,537 168 533 2010 73.97 2,423 4,060 1,574 196 509 2012 74.80 2,467 4,113 1,614 200 521 2012R 76.42 2,554 3,523 961 210 532 2013 77.45 2,656 3,477 649 224 526 Change 2004-10 10.4% 42.9% 25.6% 2.9% 43.0% 37.8% Mtoe = 11.63 TWh, Prim. energy includes energy losses 2012R = CO2 calculation criteria changed, numbers updated
Primary energy sources Primary energy supply is around two thirds gas and one third oil, with tiny amounts from other sources.
Natural gas
Iran is the world's third producer of natural gas (5.1% of the world's total and 184 BCM); which is primarily used for domestic electricity generation or heat production. It contains an estimated (Tcf) in proven natural gas reserves. In 2005 a large share of Iran's natural gas reserves were believed to remain untapped. About 62% of these reserves are located in non-associated fields. Iranian production of natural gas is expected to increase over the next few years due to continuing discoveries in the North Pars and South Pars regions.National Iranian Gas Company
Domestic consumption has matched production at in the year of 2005. Domestic consumption is expected to go up at about 7% per year for the following decade. The Iranian government has also subsidized natural gas prices along with gasoline prices, and this is expected to sustain this high level of domestic consumption. In lieu of this increasing domestic demand, natural gas exports are expected to decrease in the following years.EIA, Iran's Energy Data , April 1, 2008
In 2021, Iran ranked as the world's fourth-largest consumer of natural gas, behind the United States, Russia, and China. A significant share of its natural gas production is utilized domestically in various sectors. Over the last ten years, consumption of natural gas in Iran has risen by approximately 50%, influenced by a range of factors. These include heavily subsidized prices, an extensive distribution network, enhanced domestic production, and government initiatives aimed at replacing oil with natural gas in residential, commercial, and electric power sectors.
Natural gas: production: 151.8 billion cu m (2011 est.) consumption: 144.6 billion cu m (2010 est.) exports: 9.05 billion cu m (2011 est.) imports: 10.59 billion cu m (2011 est.) proved reserves: 33.61 trillion cu m (1 January 2013 est.)
Oil
Iran has the second largest oil reserves in the world, and the third largest exporter of it. By the end of 2009, Iranian oil R/P ratio was 89.4 years which is the world's highest. By 2009, Iran had 52 active rigs and 1,853 producing oil wells.
Iran possesses abundant fuels from which to generate energy. Since 1913 Iran has been a major oil-exporting country. Oil industry output averaged per day in 2005, compared with the peak output of reached in 1974. Following the 1979 revolution, however, the government reduced daily oil production in accordance with an oil conservation policy. Further production declines occurred as result of damage to oil facilities during the war with Iraq. In the early 2000s, industry infrastructure was increasingly inefficient because of technological lags. Few exploratory wells were drilled in 2005. Iranian oil was nationalized in 1953 and thus is owned and operated by the National Iranian Oil Company (NIOC).
Iran held 10.3% of the world's total proven oil reserves and that figures out to be about of oil reserves at the end of 2009. Oil also is found in northern Iran and in the offshore waters of the Persian Gulf. Nevertheless, in 2005 Iran spent US$4 billion on gasoline imports, mainly because of contraband and inefficient domestic use that result from subsidies. Iran is one of the largest gasoline consumers in the world ranking second behind United States in consumption per car.
There is a growing recognition that prices must rise faster to curb consumption and ease the burden on the public finances. Cheap energy has encouraged wasteful consumption in Iran, and a brisk business in smuggling petrol into Iraq, Turkey, Pakistan and Afghanistan. Demand has also been supported by rapid increases in car production in recent years. In the absence of imports, the car industry has developed strongly (albeit from a low base) with output reaching over 1m vehicles in fiscal year 2006/07 (March 21 – March 20).
The growth in consumption of domestically produced oil has been modest, owing to refining constraints. By contrast, fuel imports rose to in January 2005 from in 2000, and petrol consumption is estimated to have been around in 2007 (before rationing), of which about one-third is imported. These imports are proving expensive, costing the government about US$4bn in the first nine months of 2007/08, according to parliamentary sources. Nearly 40% of refined oil consumed by Iran is imported from India.Does US road to better relations with Iran pass through India?, The Christian Science Monitor, July 18, 2009
Iran contains 27 onshore and 13 offshore oil-producing fields, largely concentrated in the southwestern Khuzestan region near the Iraqi border. The Iranian government is heavily reliant on oil revenues and they have heavily subsidized the energy industries, which figures out to be about 12% of Iran's GDP. However, domestic oil consumption has decreased due to the alternative use of natural gas. Economic growth from these resources is uncertain and stunted in Iran due to these subsidies and population growth. Iran has been unable to reach it full production levels due to a combination of sanctions and war plaguing the region. Iran's oil fields have a natural decline rate at 8 percent for onshore wells and 10% for offshore fields. The Iranian recovery rate is currently approximately 27 percent, which is well below the world average. Iran needs structural improvements made to coincide with their enhanced oil recovery efforts.
Oil: production: (2012 est.) consumption: (2008 est.) (expected to increase 10% each year since 2006) exports: (2010 est.) imports: (2010 est.) proved reserves: based on Iranian claims (1 January 2009 est.)
note: as of 2009, 1/3 of Iran's gasoline needs are imported because of insufficient domestic refining capacity, over-consumption and contraband.
Nuclear energy
Iran plans to generate 23,000 MW of electricity through nuclear technology to meet its increasing demand for energy. The first of four 915 MW reactors of Bushehr Nuclear Power Plant, built with help from Russia, came online in August 2010. While nuclear power in the US costs a little over 10 cents per kilowatt hour, Iran, with domestic uranium enrichment capabilities, high interest rates, low energy output (a single 1,000 MW reactor), low efficiency, extremely slow reactor construction, and no reprocessing pays around 68 cents per kilowatt hour (this assumes a price of $140 per separative working unit and of $40 per kilogram of uranium).
Hydro