Escalating Conflict Between Israel and Iran
The escalating conflict between Israel and Iran, with both sides firing and drones, has unsettled the global energy markets. The Israeli attacks on Saturday aimed at the Iranian energy infrastructure, including vital oil storage, refineries, and power plants.
Targeting of Iranian Energy Infrastructure
One of the targeted locations was the massive South Pars gas field, which is part of the world’s largest natural gas reservoir. It is located in the Iranian province of Southern Bushehr and is the source of the largest part of the gas produced in Iran. Iran shares control over the South Pars gas field with neighboring Qatar, which calls the reservoir under its control North Dome.
Impact on Global Energy Markets
The attack that forced Tehran to partially expose production on the field increased the prospect that an extended conflict would endanger Iran’s energy generation and supply. Foreign Minister Abbas Araghchi has blamed Israel for the organization of South Pars and said it was an attempt to "expand the war beyond Iran". The conflict into the Persian Gulf region is an important strategic mistake, probably intentionally and intends to extend the war beyond the Iranian area.
Iran’s Strong Trust in Hydrocarbons
Iran is an important player in the global energy sector. According to the US Energy Information Management, the land is home to the second largest natural gas reserves in the world. Iran produced around 266.25 billion cubic meters of natural gas in 2023, whereby domestic consumption is 255.5 billion cubic meters. About 15.8 billion natural gas were exported. Iran holds the third largest crude oil reserves in the world, about 9% of the overall proven oil reserves worldwide.
Iranian Oil Production and Export
The country extracts around 3.3 million barrels of crude oil and another 1.3 million barrels of condensate and other liquids daily, of which it exports around 1.8 million barrels. Iran is the third largest oil producer in the organization of the Petroleum Exporting Countries (Opec). The income that Iran achieved from energy exports make up a considerable part of state income and foreign exchange reserves. A report by EIA suggests that Iran received $144 billion from oil export sales in the three years from 2021 to 2023.
Sanctions Cripple the Economy of Iran
Despite the huge hydrocarbon reserves of Iran, a large part of its potential remains unused. The Iranian officials acknowledge that the country needs progressive technology and billions of dollars of new investments to modernize its oil and gas sector. However, the country is subject to one of the most strictest sanctions in the world and hinders its commercial and investment opportunities. The sanctions that aimed at containing Tehran’s nuclear and ballistic rocket programs have provided the oil exports of Iranian oil as well as banking and shipping traffic.
Power Failures in an Energy-Rich Country
Decades of mismanagement and geopolitical tensions have tightened the economic problems. Despite its enormous oil and gas resources, Iran has to struggle with energy shortages because production, outdated devices, and lack of investments in the infrastructure lack. Iran is strongly based on natural gas for domestic consumption, especially for electricity generation. In recent years, the Iranian government has been forced to impose rolling power outages that affect both houses and factories in order to deal with spikes in electricity needs.
