The history of Iran’s oil industry began in 1901, when British speculator William D’Arcy received a concession from Iran to explore and develop southern Iran’s oil resources. The discovery of oil in 1908 led to the formation in 1909 of the London-based Anglo-Persian Oil
Company (APOC). By purchasing a majority of the company’s shares in 1914, the British government gained direct control of the Iranian oil industry, which it would not relinquish for
37 years. After 1935 the APOC was called the Anglo-Iranian Oil Company (AIOC). A 60year agreement signed in 1933 established a flat payment to Iran of four British pounds for every ton of crude oil exported and denied Iran any right to control oil exports.
In 1950 ongoing popular demand prompted a vote in the Majlis to nationalize the petroleum industry. A year later, the government of Prime Minister Mohammad Mossadeq formed the
National Iranian Oil Company (NIOC). A 1953 coup d’état led by British and U.S. intelligence agencies ousted the Mossadeq government and paved the way for a new oil agreement. In 1954 a new agreement divided profits equally between the NIOC and a multinational consortium that had replaced the AIOC. In 1973 Iran signed a new 20-year concession with the consortium.
Beginning in the late 1950s, many of Iran’s international oil agreements did not produce the expected outcomes; even those oil companies that managed to extract oil in their designated areas contributed very little to the country’s total oil production. By the time of the Islamic
Revolution of 1978–79, the five largest international companies that had agreements with the
NIOC accounted for only 10.4 percent of total oil production. During this period, Iran’s oil industry remained disconnected from other industries, particularly manufacturing. This separation promoted inefficiencies in the country’s overall industrial economy.
Following the Revolution, the NIOC took control of Iran’s petroleum industry and canceled
Iran’s international oil agreements. In 1980 the exploration, production, sale, and export of oil were delegated to the Ministry of Petroleum. Initially Iran’s post-revolutionary oil policy was based on foreign currency requirements and the long-term preservation of the natural resource. Following the Iran–Iraq War, however, this policy was replaced by a more aggressive approach: maximizing exports and accelerating economic growth. From 1979 until 1998, Iran did not sign any oil agreements with foreign oil companies. Early in the first administration of President Mohammad Khatami (in office 1997–2005), the government paid special attention to developing the country’s oil and gas industry. Oil was defined as intergenerational capital and an indispensable foundation of economic development. Thus, between 1997 and 2004 Iran invested more than US$40 billion in expanding the capacity of existing oil fields and discovering and exploring new fields and deposits. These projects were financed either in the form of joint investments with foreign companies or domestic contractors or through direct investment by the NIOC. In accordance with the law, foreign investment in oil discovery was possible only in the form of buyback agreements under which the NIOC was required to reimburse expenses and retain complete ownership of an oil field. Marketing of crude oil to potential buyers was managed by the NIOC and by a government enterprise called Nicoo. Nicoo marketed Iranian oil to Africa, and the NIOC marketed to Asia and Europe. According to IHS CERA estimate, oil revenue of Iran will
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increase by a third to USD 100 billion in 2011 even though the country is under an extended period of U.S. sanctions.
No one knows exactly when humans first used petroleum. It is known, however, that ancient peoples worshipped sacred fires fuelled by natural gas seeping to the surface through pores and cracks.
The use of thick gummy asphalt to waterproof boats and heat homes was recorded as long ago as 6000 BC. About 3000 BC the Egyptians used asphalt in the construction of the pyramids, to grease the axles of the Pharaoh's chariots, as an embalming agent for mummies and in medicinal preparations.
There are numerous references to asphalt or pitch (a form of petroleum) in the Bible, including that it served as mortar for the builders of the Tower of Babel, was used by Moses' mother to waterproof his cradle of bulrushes, and by Noah to caulk the Ark.
In early North America, Indians skimmed oil from the surface of springs using it to waterproof canoes and in the making of war paints. They taught the colonists to use oil for healing and self-styled "doctors" bottled "Seneca oil" or "rock oil" and sold it as a cure-all.
When whale oil, the main source of lamp fuel in the early 1800’s, became scarce, a new source was needed.
Formation of Petroleum
For thousands of years, the only sources of petroleum had been surface seeps or tar pits.
These sources were not very productive, so certain individuals decided to look for oil underground, by drilling.
In 1858, one such individual, a 39 year old carriage maker from Hamilton, Ontario, named
James Miller Williams made the first major commercial oil discovery in North America at
Oil Springs, Ontario. Drilling in "gum beds" in Lambton County, 25 km southeast of Sarnia, he struck oil at a depth of only 18 metres. Williams refined the oil he produced and sold the product as lamp oil. In the following year, Colonel Edwin L. Drake discovered oil in
Titusville, Pennsylvania by drilling to 21 metres (Figure 2.2). This discovery signaled the birth of the modern petroleum industry in the United States*.
Inventors began to distill illuminating and lubricating oils from natural petroleum seeps and from coal. Despite the varied and inventive uses being recognized, petroleum was still thought to be a substance of only minor importance. Some thought it was suitable only for use as a lubricant, patent medicine, asphalt and kerosene (for lamps) and nothing else. Others even argued that removal of petroleum from beneath the earth's surface would put out the fires of Hades. But changes were occurring in the world. Changes that would make the continued development and growth of the petroleum industry inevitable.
The Present
Today, we are well into the space age, but petroleum is still the dominant source of energy used by humankind. This is especially true in the transportation industry. This versatile fuel that is so easily transported and poured into the fuel tanks of our cars and planes has also been largely responsible for the rapid technological advances we have experienced in the past
100 years.
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It was less than 500 years ago, in 1519, that Ferdinand Magellan set out with five ships on one of the greatest expeditions in human history; to circumnavigate the world. This voyage cost the lives of most of Magellans' men, including his own, and took three years to complete.
Today, it would not be considered a great accomplishment to go around the world, using modern air travel, on a three week vacation. Indeed the world has become a much smaller place, largely due to petroleum - that smelly, oily substance that had its beginnings in ancient seas millions of years before men and women walked the earth.
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