Oil, gas and Iran economic analyst
While suffering from severe gas shortages, Iran wastes a staggering volume of natural gas during production and transmission—equal to Spain’s annual consumption or about half of what Turkey or Italy use each year.
In regional markets, the wasted gas would be worth over $10 billion per year. It amounts to 40% of the gas used annually by Iranian households.
This massive loss stems from underinvestment in gas recovery infrastructure at oil fields and an aging transmission network.
Most recent data from the International Energy Agency (IEA) shows methane leaks from Iran’s oil and gas facilities exceeded 8 billion cubic meters in 2023.
Iran also flares over 20 billion cubic meters annually due to the lack of gas-capturing systems at oil production sites, according to the World Bank estimates.
Leaks and flaring
Iran ranks fourth globally in methane emissions from fossil fuel operations. Despite this, Iran has made little progress in cutting emissions.
IEA data shows most methane leaks originate from production facilities, with the rest linked to transmission infrastructure.
When it comes to gas flaring, Iran ranks second worldwide. For two decades, the government has done virtually nothing to capture associated gas—the byproduct of oil extraction—opting instead to burn it off at the wellhead.
This alone releases 38 million tons of greenhouse gases annually, nearly matching the total yearly emissions of Sweden or Norway.
Iran’s Oil Ministry estimates it would cost $5 billion to capture the flared gas. Yet investment in oil and gas fields has fallen sixfold in two decades and now stands at just $3 billion, according to the parliament’s Research Center.
As a result, flaring continues unabated, and gas production growth has slowed to a third of its pace a decade ago. Iran now faces gas shortages in all seasons.
Authorities often blame consumers for excessive use, overlooking the fact that losses during production and transmission account for 40% of the gas consumed by households.
Turning to imports
With domestic solutions stalled, Iran has increasingly looked abroad to cover its shortfall. But solving the crisis will take more than money—it also requires advanced technology and cooperation with international energy firms.
Recent efforts have focused on non-binding memoranda of understanding with Russian companies, none of which have led to concrete outcomes. Ironically, Russia itself suffers from even greater gas losses and lacks the technological capability to fix the problem at home or in Iran.
Iran has also tried to import gas from Turkmenistan and Russia. Turkmenistan, however, halted exports years ago over debt dispute. Russia recently agreed to supply small volumes via Azerbaijan, but pipeline capacity on that route is a fraction of peak deficit in winter.
Despite these shortages, Iran continues to export gas to Turkey and Iraq, often at the expense of domestic industries and power plants.
The reason? Price disparities. Exporting just 7% of its gas earns more revenue than selling the remaining 93% at heavily subsidized domestic rates, offering critical budgetary relief.
In its current budget, Iran projects gas exports of 16 billion cubic meters worth $5 billion—a 14% increase over last year.
But the future is uncertain. The 25-year gas deal with Turkey expires in 2026, and Iraq has announced plans to phase out Iranian gas imports within three years.
Without urgent investment, technological cooperation, and sweeping infrastructure reforms, Iran’s energy sector risks permanent decline—trapped in a cycle of waste, environmental damage, and economic self-sabotage.
