The South Pars project promises to be one of the mainstays of Iran's gas policy going forward.

As the world looks to alternative sources of energy, natural gas has fast risen up the ranks as the fuel of choice. Once “flared off" as an unrecoverable by-product of oil extraction, natural gas and the technology to transport and export it have become the focus of global attention. The development of Iran's South Pars field as one of the main centers of natural gas extraction internationally is being closely followed. The South Pars/North Dome field is the world's largest known gas field, holding an estimated 51 trillion cubic meters of natural gas and 50 billion barrels of condensates. The field, located in the Persian Gulf, covers an area of 9,700 square kilometers and is shared by Iran and Qatar. The territorial waters of Iran in the South Pars region cover some 3,700 square kilometers, and are estimated to contain 14 trillion cubic meters of gas, making up 36% of Iran's estimated reserves and 6% of the world's total proven gas reserves. This easily gives Iran the second largest natural gas reserves in the world, following hot on the heels of Russia.

The South Pars region is estimated to hold 18 billion barrels of condensates, of which some 9 billion barrels are believed to be recoverable. However, as the field is shared by Iran and Qatar, estimate figures can vary as the gas underground is considered to have a tendency to migrate. This migration tendency has set up a race between Qatar and Iran to accelerate their production activities so that they do not lose the natural gas estimated to lie beneath their territorial waters.

The National Iranian Oil Company (NIOC) discovered the field in 1990 and Pars Oil and Gas Company (POGC), a subsidiary, is in charge of the development phases for the South Pars project. Iran aims to develop the field in 24 to 30 phases. Each phase is estimated to have an average capital spend of around $1.5 billion.

Gas production from the South Pars field started in the Phase 2 area in December 2002. The development of different phases of the field was awarded to a variety of general contractors by POGC, including local and foreign companies as well as local/foreign consortia. Petropars and Khatam al-Anbia are two of the most important general contractors active in the South Pars region. Other oil majors who have made their presence felt include Total in Phases 2, 3, and 11; Eni in Phases 4 and 5; and Statoil in Phases 6, 7, and 8. The contracts made are usually signed on a buy-back basis. The general contractors are encouraged to work with Iranian subcontractors so as to increase their field expertise and prepare them for larger projects in the future.

As of 2010, the completed South Pars fields are estimated to produce 10,450 million cubic feet of natural gas and 420,000 barrels of condensates. The Ministry of Petroleum Supervision reports that nearly $3 billion worth of natural gas products left the South Pars gas field during 2Q and 3Q 2010, representing a 50% growth in volume and 74% growth in value in y-o-y terms.

The Iranian government aims to sustain this increase by awarding contracts for the development of a further series of phases in the South Pars field. In June 2010, a series of contracts were awarded for the development of six phases (13, 14, 19, 22, 23, and 24). All of the contracts were awarded to local developers including MAPNA, SADRA, Petropars, and Khatam al-Anbia. In the upcoming three years, these six phases are expected to be complete and will add another 250 million cubic meters per day of natural gas and 400,000 barrels of LPG per day to Iran's production capacity. When all phases of South Pars are completed, $100 billion per year in revenues will be generated for the country. In October 2010, Venezuela's PDVSA also indicated its interest in participating in Phase 12 of the South Pars project, with the company formally earmarking $780 million for the deal. Other companies have also expressed strong interest in this phase of the project, such as India's state-run Oil & Gas Corporation and the Hinduja Group.

The South Pars project is looking to address more than just field development; it will also improve Iran's natural gas export transport capabilities. Iran is currently developing two alternatives to export its natural gas around the world. In cooperation with China, Iran aims to improve its technology to produce LNG, and send its first cargo by 2012. This would make the country a serious competitor with Qatar, currently the world's largest LNG exporter. In addition, Iran is also building pipelines both to the East and West. To the West, it is already an exporter via pipelines to Turkey. Iran aims to increase the volume of exports to the West as the production from South Pars comes online. Furthermore, Iran and Pakistan are building a common pipeline for the transportation of Iranian natural gas. India also declared its interest in joining the project, and thus has given birth to the IPI Peace Pipeline project, which when finished is expected to contribute to the stability and economic development of all three countries.