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Iran: Water stress is one of the biggest operational risks to oil and gas operators

Maplecroft’s Water Stress Index 2015 classifies Iran as ‘extreme risk, with a score of 0.51/10 and ranking 12th out of 183 countries (where lower scores and ranks indicate greater risk). The country is largely arid, with the Caspian coastal region benefiting from the highest rainfall in the country – reaching 1,800mm in the Gilan province. Inefficient water usage by both domestic and agricultural consumers compounds water stress and demand outstrips supply across the country.

Notably, the size of Iran’s renewable internal freshwater resource has fallen from 3,052m3 per capita in 1982 to 1,659m3 per capita in 2013. Persistent drought risk and growing demand increases operational challenges for companies linked to scant water resources. Businesses operating around Tehran complain of daily water shortages.

Industrial operators may face reputational risks amidst competition for water resources with domestic and agricultural users. Civil society protests held in 2013 and 2014 over the loss of water resources highlight the growing risk of conflict that companies may face if seen to be exacerbating local water challenges.

Current approaches to water management require substantial and rapid change to address the critical nature of the problem. The UN Resident Coordinator for Iran has acknowledged that water is the biggest resource constraint and long-term risk for the country.

Despite the severity of the issue and calls by politicians for a nation strategy to conserve water, prospects to successfully tackle this problem are low in the short to medium-term. As reservoir levels continue to drop, authorities have threatened water rationing in several of Iran’s major cities since the beginning of 2014.