The Gap Between Potential and Performance Does Not Stem from Sanctions Alone
Iran sits atop one of the world’s largest proven natural gas reserves, estimated at roughly 1,200 trillion cubic feet, second only to Russia. On paper, this should make Iran a major energy exporter and a consequential player in regional gas markets. But instead, Iran exports only 15 billion to 20 billion cubic meters per year, almost entirely to neighboring states such as Turkey and Iraq. This gap between potential and performance does not stem from sanctions alone but instead reflects deeper structural failures that prevent Iran from turning geological abundance into reliable export power.
Iran’s gas sector relies heavily on a single asset. The South Pars field, shared with Qatar, supplies nearly 80 percent of national production. In 2023, Iran produced about 9.4 trillion cubic feet of dry natural gas, equivalent to roughly 266 billion cubic meters, a sharp increase from a decade earlier. Production growth, however, has slowed markedly. Since 2021, output has risen by only 2.7 percent per year, far below the level required to offset natural decline or support export growth.
Reserves alone do not translate into energy power without sustained investment and technical capacity.
South Pars now faces geological limits. Iranian officials estimate that without advanced pressure-management systems, the field could lose 350 billion cubic feet per year, or roughly 10 billion cubic meters, before 2030. Independent analysts report that the reservoir has entered its second half-life, with falling pressure already reducing output by about 10 billion cubic meters annually. Qatar, by contrast, extracts several times more gas from the same formation by deploying modern compression and reservoir-management technology. The comparison underscores a basic reality: Reserves alone do not translate into energy power without sustained investment and technical capacity.
Chronic underinvestment remains the central constraint. Analysts estimate that Iran needs at least $250 billion to stabilize production, modernize infrastructure, and expand exports. Many gas facilities date back decades and suffer annual decline rates of 5-8 percent. Sanctions have restricted access to key technologies such as compressors, enhanced recovery systems, and liquefied natural gas equipment, forcing reliance on domestic contractors with limited expertise. In early 2025, Tehran announced $17 billion in new contracts to sustain South Pars output, but energy specialists argue that the figure must at least double to prevent continued decline.
Infrastructure weaknesses amplify these problems. Iran flares roughly 20 billion cubic meters of gas each year, about 8 percent of total production, while failing to supply sufficient volumes for reinjection into aging oil fields. The oil sector requires roughly 110 billion cubic meters annually for reinjection, yet Iran delivers only 11 billion to 14 billion cubic meters. These losses reflect a political economy that prioritizes subsidies and short-term stability over efficiency, modernization, and long-term export capacity.
Rising domestic consumption further erodes export potential. Iran ranks as the fourth-largest gas consumer globally, using 8.9 trillion cubic feet in 2023 alone. Extremely low subsidized prices encourage wasteful use. During winter peaks, residential and commercial consumers absorb more than 80 percent of daily supply. In early 2026, consumption reached a record 726 million cubic meters per day, driven by cold weather and rapid expansion of household connections. Over the past decade, demand increased nearly 60 percent, fueled by population growth, petrochemical expansion, and the replacement of oil with gas in power generation.
These consumption patterns force hard trade-offs. During cold months, Iran routinely cuts gas deliveries to industry and curtails exports to meet household demand. As a result, export volumes remain irregular and unreliable, undermining Iran’s credibility as a long-term supplier.
Iran holds reserves well suited for liquefied natural gas production, yet it operates no export terminals.
Export infrastructure offers little relief. The Iran-Pakistan pipeline, designed to carry 21 billion cubic meters per year, stalled after Pakistan delayed construction amid fears of U.S. sanctions penalties reaching $18 billion. Iran completed its portion of the line, but the project remains dormant. Plans to extend pipelines to India or Europe never advanced beyond the planning stage, blocked by sanctions, financing constraints, and regional politics. Even existing pipelines to Turkey and Iraq, with combined capacity of roughly 22 billion cubic meters per year, suffer frequent disruptions.
Liquefied natural gas could have expanded Iran’s reach beyond regional markets. Iran holds reserves well suited for liquefied natural gas production, yet it operates no export terminals. Multiple projects collapsed after 2007 as sanctions cut off capital and technology. A revived national liquefied natural gas project, announced in 2023, aims to produce 10.8 million metric tons per year by 2026, but delays and financing obstacles persist. Without liquefied natural gas, Iran remains confined to narrow pipeline markets.
Iran’s gas paradox persists because structural barriers remain unresolved. Chronic underinvestment, rising domestic demand, aging infrastructure, and stalled export projects trap vast resources underground. Sanctions intensify these weaknesses but do not fully explain them. Without reforms in pricing, efficiency, and investment policy, Iran will remain gas-rich but export-poor, with limited leverage in regional energy politics.
