Iran ranks second in the world in natural gas reserves and also second in oil reserves. It is OPEC's 2nd largest oil exporter. In 2005, Iran spent $4 billion on fuel imports, because of contraband and inefficient domestic use. Oil industry output averaged 4 million barrels per day (640,000 m³/d) in 2005, compared with the peak of six million barrels per day reached in 1974. In the early 2000s, industry infrastructure was increasingly inefficient because of technological lags. Few exploratory wells were drilled in 2005.
The Iranian constitution prohibits the granting of petroleum rights on a concessionary basis or direct equity stake. However, the 1987 Petroleum Law permits the establishment of contracts between the Ministry of Petroleum, state companies and "local and foreign national persons and legal entities." Buyback contracts, for instance, are arrangements in which the contractor funds all investments, receives remuneration from the National Iranian Oil Company (NIOC) in the form of an allocated production share, then transfers operation of the field to NIOC after a set number of years, at which time the contract is completed.
NIOC controls huge deposits of crude oil from which over 130.798 billion barrels (2.07952×1010 m3) can be exploited in the form of primary and secondary recoveries. Iran is the fourth largest oil producer in the world after the United States and OPEC's second largest exporter. During 2005, Iran produced about 4.24 Mbbl/d (674,000 m³/d) of total liquids. Of this, 3.94 Mbbl/d (626,000 m³/d) is crude oil, roughly 5 percent of world crude production. Iran's current sustainable crude oil production capacity is estimated at 3.8 Mbbl/d (600,000 m³/d), which is around 310,000 bbl/d (49,000 m³/d) below Iran's latest (July 1, 2005) OPEC production quota of 4.110 Mbbl/d (653,400 m³/d).
The huge reserves of natural gas put Iran in the second place, in terms of the natural gas reserve quantity, among other countries, only next to the Russian Federation, with an estimate of proven reserve quantity close to 23 bcm. There are, at present, eight refineries —with a potential capacity of 950,000 barrels per day (151,000 m³/d) and one refinery complex in the country with a total refining capacity of over 1,5 mb/d (in Tehran, Tabriz, Isfahan, Abadan, Kermanshah, Shiraz, Bandar Abbas, Arak and Lavan Island) and a storage capacity of 8 milliard litre. Abundance of basic material, like natural gas, in the country provide favorable conditions for development and expansion of petrochemical plants.
Thus National Iranian Petrochemical Company (NIPC) has succeeded in the recent years in producing a wide range of petrochemicals and increasing its production, in terms of quantity, to a new level.
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