Iran strives to join the world shale oil club
Baku, Azerbaijan, Apr. 29
By Vagif Sharifov - Trend:
Iran, which intends to join the world shale oil and gas club, said about the discovery of shale reserves in the country, though provided no precise figures. Probably the exact figures of reserves are currently being clarified by Iranian geologists or maybe Iran intends to hold the cards waiting for some winning situation in the market. News of the shale oil and gas reserves in Iran was reported by Iran's news agency Shana quoting Mohammad Reza Kamali, director of Iran's Research Institute of Petroleum Industry (RIPI).
What next with shale oil?
The shale oil business is more sensitive to the world oil prices correlation rather than conventional one. The shale oil extraction is more expensive than traditional crude oil production due to technological reasons. For example, shale oil extraction capex costs less than conventional oil production. But opex in the shale oil projects is much higher than in the conventional oil fields development. The world average cost of the shale oil barrel extraction begins at 30-40 dollars, depending on the well production rate, again, on the initial capital expenditures and the volume of operational costs. As a comparison: the cost of the conventional oil barrel production starts at 5-10 dollars in some countries. So whatever Iran will state about the new reserves' figures there is a long way to go toward getting the first shale oil export profit. Iran therefore needs at least three things to start the shale oil production:
- Purchase new technology for shale oil extraction;
- Build new transport and export pipeline infrastructure.
Having no shale oil production experience Iran may attract the US skilled business to help. The breakeven price for shale oil production at the very early stages in the United States was around 100 dollars per barrel but the skillful oil guys got the hand to decrease the costs of shale extraction. Over the time the business along with a new technology has optimized the shale oil production line so that it could manage to survive within the cheap oil such as 40 dollars per barrel.
Indeed, the technology and inventiveness are not enough for the successful project if there are no investors around. The US business usually has an access to the cheap credits in dollars in its country. Obviously Iran business will hardly find the same cheap credits in US dollars and euros.
Due to the current weak world oil price no one can guarantee Iran the fast shale oil project investment return. The last update from the World Bank says the average oil price during this year is expected at 41 dollars per barrel, 50 dollars in the next year.
Who has the most shale oil reserves?
EIA report says there are 420 billion barrel of technically recoverable shale oil reserves in the world comparing with 1.7 trillion barrel of conventional oil. USA holds the largest shale oil reserves - 78.2 billion bbl., Russia has 74.6 billion bbl., China - 32.2 billion bbl. This Trio owns almost half of the total world shale oil reserves. Additionally 36 countries in the world own technically recoverable shale oil reserves but in fact there are only three countries who are currently producing the shale oil: USA, Canada and Argentina.
Vagif Sharifov is an analyst and expert in oil and gas markets.
Follow him on Twitter: @VagifSharifov