In 1986 Iran's reported crude oil reserves of 48.5 billion barrels ranked behind only those of Saudi Arabia, the Soviet Union, and Kuwait. By February 1987, the NIOC estimated that Iran's recoverable oil reserves had nearly doubled from the 1986 level to 93 billion barrels, a figure that could not be verified by outside specialists. In the first half of 1986, Iran had produced 1.9 million bpd of oil, of which 800,000 bpd went for domestic consumption and 1.1 million bpd for export. Production dropped during 1986 as a result of the oil pricing crisis and the bombings of Khark Island and Sirri Island. By early 1987, oil exports had increased and neared the level set in OPEC's December 1986 agreement, averaging 1.5 to 1.7 million bpd.

Iran made strides in the development of the gas industry as well, with efforts dating back to the 1960s. One area of emphasis was the extraction of "associated" gas, natural gas found in solution with oil, which previously had been flared. In 1966 Iran reached agreement with the Soviet Union to deliver up to 28 million cubic meters of gas per day. In return, the Soviets committed equipment and expertise to build a steel mill, an engineering plant, and other related facilities. In 1966 the government also formed the National Iranian Gas Company, a wholly owned subsidiary of NIOC, to produce gas for both domestic consumption and export. By October 1970, the Iranian gas trunkline had been completed, capable of moving gas from the southwestern Iranian oil fields to the Soviet border at Astara on the Caspian Sea. Spur lines branched off the trunkline to major Iranian cities, supplying gas primarily for industrial use. Pipeline capacity reached 45.3 million cubic meters per day by 1975. Iran had made a heavy investment in developing the gas industry by 1977, anticipating a decline in oil production in the early 1980s.

Gas production increased from 20 billion cubic meters in 1980 to about 35 billion cubic meters in 1985. Much of this increased production, however, was flared (an inefficient but inexpensive process), peaking in 1982 at over 50 percent of gas produced (14.2 billion cubic meters flared of 24.5 billion cubic meters produced), largely as a result of Iraqi destruction of facilities for producing and reinjecting natural gas. Recovery of natural gas improved thereafter, with flaring accounting for less than 22 percent of production in 1984 and 17 percent in 1985.

The development of the Iranian gas industry was bolstered by the discovery of several natural gas fields in 1973 and 1974. Reserves in 1974 stood at 7.5 trillion cubic meters, and by 1977 known natural gas reserves amounted to 10.6 trillion cubic meters. According to Iranian sources, natural gas reserves in Iran were the second largest in the world at 13.8 trillion cubic meters in proven reserves as of 1987. This was more than the combined reserves of the entire Western world. Additional gas deposits were discovered in Baluchestan va Sistan Province in August 1986. Only Soviet reserves, estimated to be some 3.5 times larger, surpassed Iran's. Despite its enormous reserves, Iran 395 n exported no gas from 1980, when a pricing agreement with the Soviet Union was canceled and the gas trunkline to the Soviet Union was closed, to 1986. Because the Soviets refused to pay Iran's price, Iran turned its gas reserves to domestic industrial, commercial, and residential use. In August 1986, Iran announced that it would resume the export of natural gas to the Soviet Union, with the expectation of returning eventually to the previous export level of 10 billion cubic meters per year. Subsequently, the resumption of natural gas export was postponed and no deliveries had occurred as of the end of 1987.

Data as of December 1987