Despite the turbulence of its recent history and its rocky relations with the USA, Iran's role as a provider of the world's energy needs seems set to grow. At first sight, the auguries do not seem good. After the 1979 revolution, oil exports dropped sharply, while the war with Iraq (1980-88) took further toil, with several oil installations destroyed. 
Then the country was hit hard by the plunge in oil prices in 1998-9, but with the rebound in oil prices since then, it has recovered somewhat. The theocratic and anti-western elements in the government led to US sanctions, which can be expected to continue. Iran's prospects for growth are also hampered by excessive bureaucracy and by waste - for instance, its inefficient subsidy of energy prices and other goods - and there is widespread unrest and malaise, with high unemployment and a public perception of bleak economic prospects. Attempts to reform the economy have been largely unsuccessful, both because of disagreement among the various governing factions, and because the authorities are anxious to avoid further unrest.
Yet this negative picture does not convey the whole truth. A struggle for the Persian soul is occurring between the conservative theocratic guardians and the more liberal parliament. There is also a real desire to improve efficiency and to boost exports of both oil and gas - even though in the past the country has been unable or unwilling to make investment sufficiently attractive. And firms outside the USA - notably France's TotalFinaElf, Italy's Eni (with its subsidiaries Saipem and Snamprogetti), Malaysia's Petronas and the UK's BP - have been lining up to negotiate contracts for the exploitation rights of oil and gas. Even so, foreign investors are dissatisfied with delays in reaching agreements and feel that contracts in the past have offered insufficient incentives. The contract signed with Eni in 2001 for the Darquain oilfield was the first with a foreign partner to include performance-related penalties and incentives. Moreover, any company signing a contract with Iran risks triggering the US Iran Lybia Sanctions Act (1996), whereby companies who do business in Iran worth over USD 20 million face possible US sanctions. When Sheer energy, a small Canadian company, signed an oil contract in early June this year to develop the Masjed-Soleiman field in Khuzestan, Washington reacted angrily, though it is uncertain if reprisals will ensue.
Another area of uncertainty is the status of the fossil fuels in the Caspian Sea. The five littoral states cannot agree on a fair method to share the sea's treasures. Iran is advocating an arrangement that would allow each country to claim a 20% stake of the sea's territory, and has also proposed a condominium approach. However, the other countries have rejected or ignored the proposals, and up to now no agreement has been reached. The whole issue attracted bad publicity last summer, when a BP survey ship working in the Alov-Sharg-Araz block under licence from Azerbaijan clashed with an Iranian gunboat enforcing Tehran's claims to the area. Not surprisingly, BP suspended work in the block.
Despite these difficulties, however, the sheer size of Iran's oil and gas reserves, coupled with the country's ambitious development plans, leave little room to doubt that Iran will be bristling with projects for decades to come. Especially with regard to gas, Iran has all to play for, especially given this fuel's environmental advantages over oil. Moreover, the production cycle for gas is at an earlier stage than in the case of oil. With about 15% of the world's gas reserves, world market share is currently no more than 2.5%. Not that the prospects for oil exports area are very much brighter: this year, for the first time in the country's history, Iran's domestic oil consumption will exceed exports. This is only partly due to wasteful consumption: Iran also has a desperate shortage of refining capacity. Therefore refining is also likely to remain a growth industry.
In conclusion, it is impossible to separate Iran's future development prospects from its politics. If Iran can will the means to carry out the necessary reforms, and succeeds in putting in place a more encouraging investment regime, its economic future is assured. With any luck, this is only a matter of time. Iran's population is predominantly young, and its conservative element is in a decisive minority. Massive changes are already under way, and are bound to continue.
SECTOR ANALYSIS
The following overview with tables is a snapshot of recent, ongoing and planned projects, divided into industrial sectors. (Where the projects have already been reported in KCI's Project Preview, the reference is given as PP, followed by the date.)
Every attempt has been made to ensure that the information in the articles and associated tables is up to date and accurate. However, readers are advised not to rely solely on this source for the information it contains, but to rely also on their professional knowledge and experience, and to check the information by consulting other sources. Moreover, because many of the projects are at the discussion stages, some the information presented is likely to become out of date fairly soon.
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