What’s behind Iran’s oil development priorities?

Business Materials 25 September 2016 10:40 (UTC +04:00)
Iran is expected to sign new oil deals with foreign companies in the coming months
What’s behind Iran’s oil development priorities?

By Mehdi Sepahvand

Iran is expected to sign new oil deals with foreign companies in the coming months. The priorities that the country has announced for the fields come as somewhat different from what was expected earlier, a fact that brings some questions to mind.

One of Iran’s big potentials comes from early-life fields, which Iran started developing in the 2000s. Most of these fields extend into neighboring countries’ territories. It was expected that Tehran would focus on these fields’ development once it found the opportunity in the post-sanctions era.

However, Director of Integrated Planning at the National Iranian Oil Company Abdolmohammad Delparish on September 24 said that Iran is prioritizing “fields that are more complicated and would cost more to develop.”

The official mentioned shared field development programs only as the last item on his list of high-priority projects.

“Oil layers at the several Bangestan fields, Khamei, some offshore fields, as well as those shared with Iraq are high on agenda,” he said.

Iran unveiled the generalities of IPC in November 2015, offering 49 oil and gas projects to foreigners. In the IPC model, Iran has kept its sovereignty over its hydrocarbon reserves, but payment of all direct and indirect expenses, as well as finance and operation costs will be dependent on allocating a portion (maximum 50 percent) of products or proceeds based on current day sale prices.

By prioritizing the “more complicated” fields, Iran may be aiming at obtaining the latest technology for developing oil fields. One of the major objectives of the IPC model, according to the government, is to import technology. Once it possesses the know-how, Iran would be able to develop less-complicated fields by itself, thus saving on financial resources.

Underdeveloped due to harsh sanctions, Iran’s oil industry has been unable to tap the country’s resources as it should have. Many wells that date back to pre-sanctions times are also nearing their old age and decline of output.

According to two official documents obtained by Trend, Iran has re-injected about 580.810 billion cubic meters of gas to 24 oil fields from 1996 to 2015, while the needed amount was 1,270 billion cubic meters.

Iran hasn't put into operation any new oil field since 2007. Some 17 of the mentioned 24 fields, prioritized for gas re-injection, were producing 3.7 million barrels per day in 1979, but the figure plunged to 1.75 million barrels per day in mid 2000s and continued to decline.

Eighty percent of Iran's active oil fields are in their second half-life and lose 8-12 percent of their output naturally each year. Iran needs extra 942.795 billion cubic meters of gas (or 287 million cubic meters per day) re-injected to the current oil fields during 2016-2024, which is about three times more than the current level.

Before the western sanctions were imposed on Iran in mid-2012, the country was producing about 3.7 million barrels of crude oil per day, of which around 2.2 million barrels per day was being exported. In January 2016, when the sanctions were lifted, Iran started to add to its 1 million barrels per day oil export, now back at about 2.2 million barrels per day. The country is running to catch up on the sanctions period loss and much needs to develop its oil fields.

According to Fourth and Fifth Development Plans (2005-2009 and 2010-2015), Iran should have increased the oil recovery rate by 1 percent during the period of each plan, but the recovery rate remained unchanged during the Fourth Plan. Former head of NIOC Ahmad Qalebani said in 2012 that Iran needed a $70 billion worth investment to reach a 1 percent increase in the crude oil recovery rate.


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