Puzzle of gas re-injection in Iran; economical or not?

Baku, Azerbaijan, March 19

By Dalga Khatinoglu - Trend:

Iran has announced that some 93 million cubic meters per day of natural gas was re-injected to old oil fields during the current year. Iran's fiscal year will end March 20.

During last year, Iran's gas re-injection to oil fields which are in their second half-life increased by one billion cubic meters on year.

Iran hasn't commenced any new oil field since 2007 due to sanctions and withdrawal of foreign companies and some 80 percent of the country's active oil fields are in their second half-life and re-injection of 290 million cubic meters per day (mcm/d) natural gas is needed to keep the crude oil production level high and enhance the recovery rate.

The oil recovery factor in Iran is very low, about 20 percent in average, means In other words, Iran is able to extract just 20 percent (157 billion barrels) of its oil reserves. The current active fields lose about 8 to 13 percent of production volume.

Fereydoun Barkeshli, the former general manager of National Iranian Oil Company (NIOC) in OPEC and International Affairs told Trend March 19 that Iran's injection policy remains a puzzle for most of the time, because it is always injection that must quietly compensate for domestic consumption and even exports. "However the ministry of petroleum has an aggressive injection policy in order to boost oil production capacity," he said.

Iran is producing about 2.8 million barrels of crude oil per day of which some 1.7 million barrels is consumed domestically.

Barkeshli, who is currently a private energy consultant and president of Vienna Energy Research Group believes that "according to current administration in less than ten years time, the country will virtually have a ministry of gas rather than ministry of oil".

"Most of NIOC projects that are going to be put for tender hopefully in 2015 are gas and Iran's energy diplomacy will center around gas projects," he said.

Iran's primary energy consumption, excluding flared gas, gas re-injection, derived from the National Iranian Oil Refining and Distribution Company's (NIORDC) annual reports and Oil Ministry officials' statements:

According to the official statistics, Iran's gas consumption has increased by about 48 times during the last 25 years, while the figure for oil production usage increased less than three times.

According to Iran's Oil Ministry studies, the country needs $70 billion to invest in projects for raising oil and gas recovery rate and extract $700 billion worth of oil and condensates from old fields.

Barkeshli says that Iran's initial plan for produced gas is 30 percent domestic consumption, 30 percent for exports and the remaining for injection. "This should very challenging but possible one sanctions begin to recede," he said.

Iran wants to increase the gas production by 100 mcm/d during the next year. In case, the Phases 12, 15, 16, 17 and 18 of giant South Pars gas field become operational fully, then it's expected that the country's total raw gas production capacity would increase from the current 660 mcm/d to 800 mcm/d at the end of next fiscal year and it's expected the volume increases to 1.1 bcm/d by 2020.

Total Gas consumption

Current year (bcm)

Last year

(bcm)

Housing sector

91

88.9

Industrial sector

32.45

29.8

Power plants

50.5

36.8

Re-injection

33.9

32.9

Flaring

11.7

11.7

Export

10

9

Total

229.55

209.1

Iran has two gas trade deals with Iraq, two with Pakistan and Turkey, as well as one memorandum of understanding with Oman that adds up to a total of 150 mcm/d of natural gas exported to these countries by 2020. Iran is evaluating other markets like Kuwait, UAE, Saudi Arabia and Europe.

Iran is selling each 1000 cubic meters of gas to Turkey at about $480.

Edited by CN

Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service. Follow him on @dalgakhatinoglu

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