Iran Faces Severe Energy Shortages Despite Vast Natural Gas Reserves

Despite sitting on the world’s second-largest natural gas reserves, Iran is grappling with severe energy shortages, particularly during the winter months. The country has long struggled with air pollution, but the situation worsens in winter when power plants are forced to burn low-quality heavy fuel oil, known as mazut, due to insufficient gas supply.

In recent weeks, a rare cold snap has exacerbated these energy shortages, with temperatures in northern Iran plunging as low as -20°C (-4°F). The frigid weather has led to school classes being held online and government offices being ordered to close to conserve energy. This unprecedented situation has prompted President Masud Pezeshkian to call on the public to reduce thermostat settings by 2°C, while other officials, including Foreign Minister Abbas Araqchi, have encouraged staff to dress warmly at work.

The root of Iran’s ongoing energy crisis lies in both structural issues and poor management. Despite having abundant natural gas resources, Iran has failed to increase its production in line with growing consumption. This imbalance is worsened by energy subsidies that keep energy prices low, encouraging wasteful usage.

Moreover, Iran’s energy infrastructure is aging and inefficient. The country’s gas flaring issue — burning off excess gas produced during oil extraction — has been a major contributor to the crisis. In 2023, Iran ranked second globally for gas flaring, burning around 21 billion cubic meters of gas, enough to meet 40% of Turkey’s gas demand. This wasteful practice further strains the country's already limited resources.

Outdated Infrastructure and the Challenge of Expansion

Iran’s major natural gas fields are located in the south and southwest, far from the northern regions where demand is highest. This geographical disparity requires a robust gas transport network, but Iran’s aging infrastructure struggles to meet the growing demand. Expanding the grid and increasing production requires substantial investment, but the country's weak economy and international sanctions have hindered progress.

Gregory Brew, an energy analyst at the Eurasia Group, noted that the situation is compounded by a lack of access to foreign investment and technology due to U.S. sanctions. These sanctions, imposed in response to Iran's nuclear and missile programs, have crippled the Iranian economy and limited its ability to access the resources necessary to address its energy needs.

Additionally, despite facing significant domestic shortages, Iran continues to export natural gas to neighboring countries such as Iraq and Turkey. Many question the wisdom of these exports, given the pressure it places on domestic supply. According to Brew, Iran’s need to generate revenue through exports leads to further strain on its already limited resources, worsening the energy crisis at home.

Impact of Sanctions and Future Challenges

Sanctions have significantly hindered Iran’s ability to exploit its vast natural gas reserves, particularly in the South Pars field, which Iran shares with Qatar. While Qatar has secured lucrative deals with international energy companies, Iran’s reliance on domestic capabilities has limited its ability to fully capitalize on this vast resource.

With sanctions likely to remain in place under the current geopolitical climate — especially with the return of Donald Trump to the White House — the pressure on Iran’s energy sector is expected to intensify. The country’s ongoing struggle with energy shortages is likely to continue unless significant investment in infrastructure and production is made, which seems increasingly difficult due to political and economic constraints.