Iran has launched exploratory drilling operations in the Caspian Sea after years of neglecting the region due to sanctions constraints and cheaper extraction costs from southern oil fields.

Iran's Oil Ministry announced drilling commenced at the Rudsar structure in Caspian Block 18, targeting depths of 5,077 metres under a $50mn EPD contract to evaluate potential reserves of over 600mn barrels of crude oil and approximately 2 trillion cubic feet (56.6bn cubic metres) of gas, Bartarinan reported on July 14.

The project marks Iran's first major Caspian exploration despite possessing the region's only inactive platform, Amir Kabir, and the undeveloped Sardar Jangal oil field discovered in 2012 at 700-metre depth.

Iran had deprioritised Caspian development due to extraction costs several times higher than southern fields, with sanctions limiting investment capital for the more expensive offshore operations in deeper waters.

The Sardar Jangal field remains the only Iranian discovery among 46 studied hydrocarbon structures to progress beyond exploratory stages, though no budget has been allocated for feasibility studies or early production development.

Iran's Oil Ministry previously denied foreign media reports about discovering and developing the large Chalous gas field in the Caspian, clarifying that only the Chalous hydrocarbon structure exists with probable oil and gas resources requiring exploratory drilling.

Iranian hydrocarbon structures are located in deep Caspian waters where no coastal states possess deep-water extraction technology, whilst other countries focus on shallow-water resources unavailable to Iran in shallow depths.

The current drilling uses North Drilling Company equipment based on geological and seismic studies, though final reserve estimates require completion of drilling operations and supplementary studies.

Oxford Energy Institute questions US Energy Information Administration (EIA) estimates of 200bn barrels of Caspian oil reserves, suggesting actual reserves between 25-35bn barrels, which would reduce the region's share of global oil reserves to 3% rather than the claimed 16%.

Iran's renewed Caspian focus comes as regional energy competition intensifies with Azerbaijan expanding partnerships and maintaining dominant production positions.

Azerbaijan leads Caspian production with 650,000 barrels per day, followed by Kazakhstan with 280,000 bpd, Russia with 150,000 bpd and Turkmenistan with 122,000 bpd, whilst the Caspian region accounts for 1% of global oil and 3% of global gas production.

Total investment in Caspian hydrocarbon development has reached $145bn, with Azerbaijan producing 20 times more natural gas than other regional countries combined from Caspian sources.

The EIA estimates Caspian oil reserves at 100bn barrels and natural gas at 12 trillion cubic metres, though Oxford Energy Institute questions these figures, suggesting reserves between 25-35bn barrels.