National Iranian Oil Company

Background: 1901 - 1951

In May 1901, William Knox D'Arcy was granted a concession by the Shah of Iran to search for oil, which he discovered in May 1908. This was the first commercially significant find in the Middle East. In 1923, Burmah employed future Prime Minister, Winston Churchill as a paid consultant; to lobby the British government to allow the Anglo-Persian Oil Company (APOC) to have exclusive rights to Persian oil resources, which were successfully granted.

In 1935, Rezā Shāh requested the international community to refer to Persia as 'Iran', which was reflected in the name change of the Anglo-Persian Oil Company (APOC) to the Anglo-Iranian Oil Company (AIOC). Following World War II, Iranian nationalism was on the rise, especially surrounding the Iranian natural resources being exploited by the foreign companies without adequately compensating Iranian taxpayers. AIOC and the pro western Iranian government led by Prime Minister Ali Razmara, initially resisted nationalist pressure to revise AIOC's concession terms still further in Iran's favour. In March 1951, Ali Razmara was assassinated; and Mohammed Mossadeq, a nationalist, was elected as the new prime minister by the Majlis of Iran.

NIOC: 1951–79

In April 1951, the Majlis nationalised the Iranian oil industry by unanimous vote, and the National Iranian Oil Company (NIOC) was formed, displacing the APOC. The APOC withdrew its management from Iran, and organised an effective worldwide embargo of Iranian oil. The British government, which owned the APOC, contested the nationalisation at the International Court of Justice at The Hague, but its complaint was dismissed.

By spring of 1953, incoming US President Dwight D. Eisenhower authorised the Central Intelligence Agency (CIA), to organise a coup against the Mossadeq government, known as the 1953 Iranian coup d'état. In August 1953, the coup brought pro-Western general Fazlollah Zahedi as the new PM, along with the return of the Shah Mohammad Reza Pahlavi from his brief exile in Italy to Iran. The anti-Mossadeq plan was orchestrated under the code-name 'Operation Ajax' by CIA, and 'Operation Boot' by SIS (MI6).

In 1954, the APOC became the British Petroleum Company. The return of the shah did not mean that British Petroleum would be able to monopolise Iranian oil as before. Under the pressure from United States, British Petroleum reluctantly accepted membership in a consortium of companies, founded in October 1954, to bring back Iranian oil to the international market. It was incorporated in London as a holding company called 'Iranian Oil Participants Ltd' (IOP). The founding members of IOP included British Petroleum (40%), Gulf (later Chevron, 8%), Royal Dutch Shell (14%), and Compagnie Française des Pétroles (later Total S.A., 6%). The four Aramco partners - Standard Oil of California (SoCal, later Chevron) - Standard Oil of New Jersey (later Exxon, then ExxonMobil) - Standard Oil Co. of New York (later Mobil, then ExxonMobil) - Texaco (later Chevron) - each held an 8% stake in the holding company.

All IOP members acknowledged that NIOC owned the oil and facilities in Iran, and IOP's role was to operate and manage on behalf of NIOC. To facilitate that, IOP established two operating entities incorporated in Netherlands, and both were delegated to NIOC. Similar to the Saudi-Aramco "50/50" agreement of 1950, the consortium agreed to share profits on a 50–50 basis with Iran, "but not to open its books to Iranian auditors or to allow Iranians onto its board of directors". The negotiations leading to the creation of the consortium, during 1954-55, was considered as a feat of skillful diplomacy.

In Iran, IOP continued to operate until the Islamic Revolution in 1979. The new regime of Ayatollah Khomeini confiscated all of the company’s assets in Iran. According to the company's Web site: The victory of the Islamic revolution annulled the Consortium Agreement of 1954 and all regulations pertaining to it. The taking of power by the Islamic Republic led to the withdrawal of foreign employees from Iran's oil industry; domestic employees took full control of its affairs.

NIOC's Oil Reserves

According to OPEC, NIOC recoverable liquid hydrocarbon reserves at the end of 2006 was 1,384 billion barrels (2.200×10¹¹ m³).

NIOC oil reserves at the beginning of 2001 was reported to be about 99 billion barrels (1.57×10¹⁰ m³), however in 2002 the result of NIOC’s study showed huge reserves upgrade adding about 317 billion barrels (5.04×10¹⁰ m³) of recoverable reserves to the Iranian oil reserves.

After 2003 Iran made some significant discoveries which led to addition of another 7.7 billion barrels (1.22×10⁹ m³) of oil to the recoverable reserves of Iran.

The vast majority of Iran's crude oil reserves are located in giant onshore fields in the south-western Khuzestan region near the Iraqi border. Overall, Iran has 40 producing fields – 27 onshore and 13 offshore. Iran's crude oil is generally medium in sulfur and in the 28°-35 °API range.

As at 2012, 98 rigs are in operation in onshore fields, 24 in offshore fields and a single rig is in operation in the Caspian Sea. Iran plans to increase the number of its drilling rigs operating in its onshore and offshore oilfields by 36 units to reach 134 units by March 2014.

Table 1- The five biggest NIOC oil fields;

Strategic petroleum reserves

Iran began in 2006 with plans to create a global strategic petroleum reserve with the construction of 15 crude oil storage tanks with a planned capacity of 10 million barrels (1,600,000 m³). The storage capacity of oil products in the country is around 11.5 billion liters (2011), but it will reach 16.7 billion liters by the end of the Fifth Five Year Development Plan (2010-2015). As of 2012, Iran is capable of storing crude oil in the Persian Gulf for a period of 10–12 days. The figure should hit 30–40 days after the construction of new storage facilities are completed.

Gas reserves

NIOC holds about 1,000×10^¹² cu ft (28,000 km³) of proven Natural gas reserves of which 36% are as associated gas and 64% is in non associated gas fields. It stands for world's second largest reserves after Russia.

NIOC’s ten biggest Non-Associated Gas Fields;

Recent discoveries

Since 1995, National Iranian Oil Company (NIOC) has made significant oil and gas discoveries, standing for some 84-billion-barrels (1.34×10¹⁰ m³) of oil in place and at least 175×10^¹² cu ft (5,000 km³) of gas in place, which are listed below.

Organizational structure

The company is completely owned by Iranian government. NIOC's General Assembly (GA) consists of:

The GA is its highest decision making body, determining the company's general policy guide lines, and approving the annual budgets, operations and financial statements and balance sheets. The company's Board of Directors has the authority and major responsibilities to approve the operational schemes within the general framework ratified by the General Assembly, approve transactions and contracts, and prepare budgets and Board reports and annual balance sheets for presentation to the General Assembly.

The Board supervises the implementation of general policy guidelines defined by the General Assembly, and pursues executive operations via the company's Managing Director.

Subsidiary companies

With appropriate division of tasks and delegation of responsibilities to subsidiaries- affiliates, NIOC has been able to establish acceptable degrees of coordination within its organizational set up. In fact, NIOC's Directors act primarily in policy making and supervision while subsidiaries act as their executive arm in coordinating an array of operations such as exploration, drilling, production and delivery of crude oil and natural gas, for export and domestic consumption.

The NIOC's subsidiaries are as follows:

Production costs and investments

The cost of producing each barrel will rise to $30 or more from $7 in 2012.

Iran currently allocates $20 billion a year to develop fields and $10 billion on maintaining output. In the next decade, maintaining production will cost $50 billion, with a similar sum required for development. This does not include development and investment costs in related fields such as Petrochemicals.

NIOC's major domestic contractors

Although usually neglected and overlooked, Iran also has a number of very active private companies in the oil sector. The growing private sector activity is mainly active in projects involving the construction of oil field units, refinery equipment, tanks and pipelines, as well as engineering. Iranian manufacturers will supply oil industry with $10 billion worth of domestically-made goods and equipment in 2012.

Iranian companies are already outperforming foreign firms in South Pars. NIOC produces 60-70% of its industrial equipment domestically including refineries, oil tankers, oil rigs, offshore platforms and exploration instruments. Iran is also cooperating with foreign companies to transfer technology to Iranian oil industry. The objective is to become self-sufficient by 85% before 2015. The strategic goods include onshore and offshore drilling rigs, pumps, turbines and precision tools. Domestic production of 52 petrochemical catalysts will be started in 2013. As of 2015, Iran had reached most of its above mentioned objectives in manufacturing.

Participations in foreign gas fields

Environmental record

According to geographer Richard Heede, is 3rd on the list of companies with the highest level of CO2 emissions globally with 739 million tonnes (727,000,000 long tons; 815,000,000 short tons) in 2013, amounting to more than 3.1% of worldwide anthropogenic emissions.