Iran should yearly invest from $5 to $8 billion into new drilling wells

Business Materials 14 September 2012 17:26 (UTC +04:00)

Azerbaijan, Baku, Sept. 14 /Trend S.Isayev, T. Jafarov/

Iran should be investing from $5 million to $8 million into drilling new oil wells, professor at the University of Glasgow Reza Taghizadeh told Trend.

The expert was commenting on the continious decline of Iran's oil production.

Today, Iran is facing extreme international pressure because of its nuclear program, and the imposed sanctions damage the economy of the country, which heavily depends on oil exports.

In the OPEC report, Iran pegs its August crude-oil production at 3.7 million barrels a day, up 5% from last year and broadly stable since the beginning of the year, according to Nasdaq.

But secondary sources put Iran's output at 2.8 million barrels a day, about 1 million barrels a day lower than Iran's estimates and 24% down compared with last year.

Currently, Iran is exporting 1.1 million barrels a day of oil, and some analysts forecast the figure to be dropping down more in the near future.

Facing problems, looking for solutions

According to Taghizadeh, Iran has two problems - maintaining the oil output, and exporting it outside the country's borders.

"Iran has to maintain the level of oil production on those oil wells that are out of the continental shelf," Taghizadeh said.

He noted that Iran has a a number of oil fields shared with other countries, in particular eight of them, adding that about 20 percent of Iran's oil production comes from offshore.

Taghizadeh noted that Iran lacks not only sufficient technical resources because of the sanctions, but also investment money.

"Iran is facing the declining production. This has been going on for three years already, and during past year country's production declined by 600,000 bpd," Taghizadeh underscored.

Speaking of Iran's oil wells, Taghizadeh said Iran needs about 100 billion cm of gas to be injected there daily, to raise the oil production level.

"If this continues further, the situation in the country will be getting 15-20 percent worse with each year," Taghizadeh said, adding that normalizing foreign relations for Iran would have helped to stabilize the situation.

"Iran's foreign policy is tumbling. If the sanctions continue, country will not be able to take advantage of the modern technology to produce more oil supplies," Taghizadeh said.

"While Iran has announced that its nuclear program will help to reduce the domestic oil and gas consumption and put up more of it for export, this has not worked out. Now the cost of Iran's nuclear program is dozen times more," Taghizadeh added.

Currency and domestic market affected

Taghizadeh noted that the situation with Iran's economy has affected the domestic market as well.

"Last week, rial's value has fallen by more than 18 percent," he said, adding that over the past 8 months the exchange rate (rial-usd) has fallen by 60 percent.

Taghizadeh said that Iran might be soon forced to reduce its imports, because of the low consumption.

"Much of the domestic industry in Iran is dependent on imports. Because of low consumption, the imports can be cut down in half," Taghizadeh noted.

He explained that as of now, the industry production potential in Iran is only 30-35 percent, and if the imports of raw materials, machinery and other technology reduce, that percentage can fall down even more.

"That in turn, will cause the unemployment rate to grow," Taghizadeh said.

"Each year, Iran imports consumer goods for some $50 billion," the expert said. "And if the situation does not change, the domestic market will naturally be affected."