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Khuzestan Generates Significant Wealth for Iran but its People Suffer

July 26, 2021

The oil-rich but otherwise poor southern province of Khuzestan is an important contributor to Iran's economy. Steel, sugar, agriculture and electricity are some of the important resources produced by this province. But it is Khuzestan’s oil and gas fields as well as its petrochemical industries that are Khuzestan's real wealth generator. 

Although the province makes an important contribution to Iran’s economy, the population of Khuzestan does not benefit from this wealth. Amid severe water shortages in the area, in recent days deadly protests have erupted across the province with people denouncing the country's leadership.

The importance of Khuzestan’s contribution to Iran’s economy is shown in the diagram below (Figure 1). 

In 2019, Khuzestan produced 15.1% of Iran’s GDP. Khuzestan is the second largest contributor to Iran’s GDP after Tehran (21.6%). For reference, the eastern province of Razavi Khorasan, with a population that is 40% larger than Khuzestan and includes the mega city of Mashhad, only contributed 4.9% of Iran’s GDP. The central province of Isfahan, with a population that is around 10% larger than Khuzestan contributed 5.7% of Iran’s GDP

Link to Figure 2

Khuzestan’s GDP contribution is not reflected in the living conditions of its population. From the data in Figure 3, it is observed that Khuzestan has a rate of unemployment of 13.9%, the highest rate of the four provinces that make large contributions to Iran’s GDP. 
Link to Figure 3

There is a similar story about absolute poverty (2016 Data, Figure 4), which shows that despite the wealth generated by the province of Khuzestan, it has a higher percentage of individuals who reside below the absolute poverty line.
Oil, gas & petrochemical industries in Khuzestan

Khuzestan is an important contributor to Iran’s economy. The bulk of the revenue generated comes from the province’s oil, gas and petrochemicals industries. For instance, the Bandar Imam Petrochemical Complex, which was built in early the 1970’s during Shah’s regime is estimated to generate more than $300 Million per year of revenue for Khuzestan.

However, the most important source of revenue in Khuzestan comes from its oil reserves. The first oil discovery in the Middle East was in Khuzestan (Masjed Soleyman) by the British businessman William D’Arcy, in 1908. His venture became the Anglo-Persian Oil Company and later formed British Petroleum (BP), which is now one of the largest oil companies in the world. 

The majority of Iran’s oil reserves are still located in Khuzestan. The province produces on average over 80% of the country’s oil production and close to 20% of Iran’s gas production.

To help put this into perspective, we turn to the data provided in Table 1. Iran’s oil production in the past couple of years has been hampered by sanctions. However, looking at the potential oil production without sanctions, we can see that on average, Iran produced 4.35 million barrels per day (b/d) between 2015 and 2019. Iran’s gas production for the same period was 594.16 million cubic meter per day (million m3/d) (BP Statistical Review of World Energy, 2020 version).

Taking an average oil price of $70/Bbl (barrel of crude oil) for the past three months and a conservative price of $3/1,000 ft3 of gas, we can formulate the following estimates for the value of Khuzestan’s oil & gas production shown in Table 1.
Using these numbers as reference, Khuzestan’s oil & gas production is valued at nearly 100 billion USD per year, which is larger than the annual GDP of countries such as Oman or Bulgaria. Despite the amount of revenue generated by the province, Khuzestan suffers from lack of water and electricity, combined with extreme poverty. These living conditions show that the people of Khuzestan see little of the total money generated by their own province.

This article was originally published in Persian (available here).