Situated in the Persian Gulf, the world’s largest gas reserve is shared by Iran and Qatar, the Iranian part being called South Pars. It contains 6% of all the total gas reserves worldwide. Iran’s oil and gas sector put much of its efforts in 1990s into development of South Pars Gas Field. South Pars can be referred to as one of the most attractive investment opportunities for foreign contractors given the fact that it has absorbed almost half of all the foreign capital recently invested in Iran’s oil and gas projects.
Most of the gas projects that Iran followed in 1980s were located in North Pars. However, South Pars found greater priority when an Italian-led consortium revealed its vast expanse of reserves. Iran’s share of the field is an estimated 8 trillion cubic meters which is about one-third of all the country’s gas reserves. South Pars also contains oil in the depths of 1200-1400 meters, capable of yielding 100,000 barrels per day.

South Pars complete development project consists of 25 phases implementation of each will lead to the production of 35 million cubic meters of gas. In 1991, a tender was put out by NIOC (National Iranian Oil Company) to conduct a 25-year strategic research plan for this project and operations now continue on phases 1-3 of this field. Under the operation of Iranian companies, the first phase of South Pars is expected to be completed by March 2002.
In 1997, development of phases 2 and 3 was assigned to a consortium led by the French TOTAL. The $2 billion investment in this project clearly flew in the face of U.S. sanctions in those days. This figure is said to be cut by 20% through the engagement of Iranian subcontractors in the project. Iran subcontractors have so far signed $600-million worth of deals with TOTAL as the project’s head contractor for implementing the first three phases of the project. Also, based on the buy-back agreement, 30% of all the contract’s value will be ceded to Iranian subcontractors active in the project. For these phases, a refinery is under construction through an $820-million contract signed with the Korean Engineering and Construction Company Hyundai. The refinery will be capable of refining one billion cubic feet of gas a day.
Negotiations on phases 4 and 5 continue between NIOC and different companies including Shell. Iran intends to use the gas exploited from phase 5 mainly for domestic purposes while the gas provided by phases 6-8 will be injected to the south Iranian oil fields.
Export is the most attractive thing that Iran aims to do with the gas exploited from South Pars. However, certain measures must be achieved before Iran turns into a gas exporter. There are questions of building pipelines, adherence of purchasing countries to their obligations, market and means of storage. Iran is yet to build facilities to store gas especially when domestic consumption remarkably drops during summer. Meanwhile, the Oil Ministry has planned to establish large liquefaction plants for natural gas and installations to export gas from southern Province of Bushehr.
The strategic significance of the Persian Gulf area, access to international waterways, the increasing importance of gas as a clean fuel and the wealth of oil and gas have all encouraged Iran in establishing the Pars Economic Zone which, according to the Iranian Oil Minister, will become a highly developed area in the world.