Iran has the second-biggest natural gas reserves in the world. But it is also one of the countries with the highest rates of gas wastage. Every year, “gas flaring” leads to the permanent loss of some 14 billion cubic meters of natural gas: a quantity that could have potentially met a third of Iran’s power needs.
A recent study by Iran Open Data found that gas flaring is costing Iran billions of dollars in lost revenues. The amount of gas that goes up in smoke at Iranian oilfields, according to the team’s calculations, could have provided electricity for 25 million Iranians.
Gas flaring is the process of burning the gas released through certain industrial processes, including oil extraction. In the past, when the demand for natural gas was low and, consequently, producers had little incentive to gather and sell it, it was generally – and more reasonably – dissipated through flaring.
Now, however, natural gas is known to be a valuable means of generating electricity and an important raw ingredient for the petrochemical industry. On the other hand, when released into the air, unrefined gas pollutes the atmosphere by releasing greenhouse gases such as carbon dioxide, causing extensive environmental damage.
The study asserted: “Iran not only burns this valuable natural resource, something that is economically costly, but in doing so it also foments air pollution and global warming. Flaring unrefined gas at Iran’s oilfields produces sulfur oxides and leads to acid rain and environmental pollution. Acid rain damages trees and vegetation and can acidify groundwater as well.”
Official figures show that although Iran’s petroleum production in 2019 was one-third that of Saudi Arabia, it flared six times more gas than Saudi Arabia in the same year. The World Bank reports that in 2019, Iran lost close to 14 billion cubic meters of gas in the process of producing oil while Saudi Arabia’s loss was around 2.2 billion cubic meters.
Of the six biggest oil producers in the world, Iran ranks fourth in gas flaring, but if the ratio of gas flaring to total oil production is taken into account, it ranks first. That is to say, Iran is the least efficient country out of six.
Meanwhile, the volume of gas flared in Iran is 21 times higher than that of Saudi Arabia, four times higher than that of the United States, twice that of Russia and a little more than the total flared by Nigeria and Iraq.
Even official reports by state-backed research centers in Iran, such as the Parliamentary Research Center, have pointed out that other, poorer countries such as Nigeria are taking effective action to reduce gas flaring. The Iranian government is fully aware that the volume of wasted gas in Iran on the increase, and climbed from around 11 billion cubic meters in 2018 to 12 billion in 2015, and to around 14 billion cubic meters in 2019.
In 2019 Iran flared close to 11 cubic meters of gas for every single barrel of oil. In 2015, the figure was closer to nine, and around seven in 2008. In other words, the amount of gas wasted per barrel of oil has risen by over 57 percent in 11 years. In the same time period, Nigeria succeeded in reducing this proportion by half.
But why the situation in Iran is like this? Why does Iran have no incentive – or ability – to solve the issue of gas flaring?
In its report on the issue, the Parliamentary Research Center cities a combination of factors it believes to have contributed. These include “negligence” and the fact that foreign investors play no role in Iranian oil industry.
“Iran lacks an independent and powerful agency that can hold the National Oil Company accountable through imposing the necessary punishments,” authors wrote. “In addition, the private sector plays no significant role in the production of crude oil in Iran and, as a result of sanctions, international oil companies are not willing to invest in Iran.
“Altogether, practically speaking, the Iranian government has created a complicated system that cannot quickly respond to the problem of gas flaring. The Iranian parliament has discussed the issue but has taken no steps towards implementing structural changes and solving the problem.”
A Solution Undone
Before the Islamic Revolution in 1979, the Iranian government had in fact initiated a project to reduce gas flaring. Part of the gas released in the process of oil production was instead to be exported to Soviet Union.
Iran Gas Trunk Line 1 (IGAT 1) was a large-diameter pipeline that carried gas from Bid Boland Refinery in the southern Iranian province of Khuzestan to Astara on the border with the Soviet Union (now the Republic of Azerbaijan). It was completed in October 1970.
The agreement signed between Iran and Soviet Union was unprecedented and hugely beneficial to Iran. For exporting the gas that it had been flaring off for years, Iran was to receive around $900 million credit from Soviet Union for trade. After the revolution, however, the Islamic Republic shut down the pipeline and gas exports to Soviet Union came to a halt.