As the world watches oil prices take another pounding, the country recently cut loose from economy-crippling sanctions is pushing forward with development of the world’s largest natural gas field—South Pars in the Persian Gulf.

Barring any financial or other setbacks, all gas fields in South Pars are expected to be operational by mid-2017, with the exception of a section of one of the phases.

“In the past 30 months, some 150 (million cubic meters) of gas were extracted from the gas field’s six phases, which has helped reduce consumption of liquid fuels by domestic power plants,” Iran’s Petroleum Minister Bijan Zangeneh said Jan. 11 in a statement released by Pars Oil and Gas Co., the National Iranian Oil Co. subsidiary that manages the project. He noted that the government completed the field’s top priority projects, despite being restrained by sanctions and low commodity prices.

Iran marked the launch of phases 15 and 16, developed mostly by Iranian companies, of the project last week. Phases 17 and 18, which are near completion but are producing gas, are set to become operational in March or April.

In all, the field Iran shares with neighboring Qatar, which calls its section the North Dome Field, is being developed in 24 phases. About half of the phases have been completed. Iran hopes the field, including the ones targeting oil, will be fully operational by March 2018.

Progress made so far at the field is already expected to boost Iran’s non-crude liquids production, which the U.S. Energy Information Administration (EIA) said could increase by 150,000 barrels per day (bbl/d) by year-end 2016 and another 100,000 bbl/d by year-end 2017.

The work comes as Iran tries to spark an economic boom after sanctions were lifted.

Potential Revenue

The Iranian news agency Shana reported that phases 15 and 16 of the supergiant field could add more than $4.5 billion in revenues to Iran’s coffers. So far, the phases have produced more than 15.5 billion cubic meters (Bcm) of natural gas and 14 million barrels (MMbbl) of gas condensate. Plans are for the phases to produce about 57 MMcm/d of gas and 75,000 bbl/d of condensate.

“Production from phases 1 to 10 [which are complete] was originally designed to be allocated for the domestic market for consumption and reinjection,” the EIA said. “Natural gas produced from the remaining phases was planned for export via pipelines and as liquefied natural gas (LNG) and/or used for proposed gas-to-liquids (GTL) projects. However, there are no firm plans to build an LNG export facility in Iran.”

Iran’s oil and natural gas export revenue dropped by 47% to $63 billion during the 2012-2013 fiscal year and is estimated to have fallen by another 10% to $56 million the following fiscal year, according to the International Monetary Fund.

Slightly higher natural gas exports were not enough to offset dramatic declines in oil exports.

Sanctions relief could change that, if Iran overcomes challenges posed by the world’s oil and gas oversupply and finds destinations for its hydrocarbon resources.

But the government is not counting revenues from crude oil, including from South Pars’ oil layers, to erase its budget woes. Iran lowered the budgetary share of such revenues from about 39% to 25%.

Iran’s economic recovery faces an uphill battle following the sanctions, and today’s lower commodity prices are not helping as the country works to regain market share with little sympathy from some of its fellow OPEC members.

Rising Production

The EIA projects Iran’s annual crude oil production will rise from an average 2.8 MMbbl/d in 2015 to reach 3.1 MMbbl/d in 2016 and nearly 3.6 MMbbl/d in 2017.

“The pace that Iran will ramp up its exports now that sanctions are lifted is uncertain. Iran has a considerable amount of oil stored offshore in tankers (between 30 MMbbl and 50MMbbl), most of which is condensate, and crude oil stored at onshore facilities,” the EIA said. “Initial post-sanction increases in Iranian exports will most likely come from storage, while meaningful production increases will occur after some of the storage is cleared.”

Gas production in Iran rose was nearly 8.1 Tcf in 2013 and increased in 2014, according to the EIA.

“Much like in the oil sector, the natural gas sector has been hampered by international sanctions,” the EIA said, noting the lack of foreign investment and technical issues. “Nonetheless, Iran’s natural gas production has grown, and output is likely to continue to increase in the coming years as new phases of the South Pars gas field come online.”

But the EIA pointed out that natural gas reinjection for EOR is critical for oil recovery in Iran, and gas is also flared due to the absence of gas capture and transporting infrastructure. Domestic consumption of natural gas has also increased.

South Pars is believed to hold nearly 40% of Iran’s gas reserves. At an estimated 1,201 trillion cubic feet, Iran’s proved natural gas reserves trail only Russia, according to the EIA.

Velda Addison can be reached at vaddison@hartenergy.com.