Low exploration, recovery rate remain Iran’s major challenges

Business Materials 21 December 2016 20:41 (UTC +04:00)

Baku, Azerbaijan, Dec. 21

By Dalga Khatinoglu – Trend:

Despite ranking the first and fourth globally in terms of gas and oil reserves, Iran hasn't invested significantly in exploration sector and statistics indicate that above 80 percent of Iran's reserves are those found until 1960s.

Homayoun Falakshahi, Middle East upstream analyst for Wood Mackenzie, told Trend Dec. 21 that exploration is not likely Iran’s priority.

Recently, on August 23, an Iranian official said that the country added 532 million barrels (mb) of oil and 522 billion cubic meters (bcm) of gas to its extractable reserves since the beginning of Hassan Rouhani's presidency in mid-2013.

He told Trend on conditions of anonymity that currently the country's recoverable proved oil and gas reserves stand at 159 billion barrels and 34 trillion cubic meters.

“In total the reserves of 18 oil and gas fields or layers were proved during August 2013 to August 2016," said the official.

Iran has about 650-700 billion barrels of in-situ oil reserves, of which 159 billion are extractable, based on the current 23-25 percent recovery rate of fields in average.

Falakshahi says in the short term, exploration budget is likely to be dedicated to appraising new discoveries in the north of the country, such as Sardar-e-Jangal (offshore Caspian field), Moghan (in northwest) and some new gas fields near Turkmenistan (Tous, Attar, Afshar).

“NIOC [National Iranian Oil Company] is planning to offer 18 exploration and appraisal blocks to foreign companies in the next two to three years. However, given Iran’s huge undeveloped resources, exploration is not likely to be such a priority,” he said.

The other problem for Iran is the very low oil recovery rate, which stands below 10 percent in average is several huge fields like West Karoon Block (including huge fields Yaran, Yadavaran and South Azadegan) with 64 billion barrels of in-situ oil reserves.

Enhanced oil recovery (EOR) still remains one of Iran’s major challenges in upstream sector.

Iran has injected about 580 bcm to oil fields during 1995-2016, but the figure is two times less than the demanded volume to maintain oil production level.

Increasing the recovery rate of oil by injecting gas and polymer or water can increase the life of a field, production volume and cumulative output relatively, but Iran needs new technology, modern studies and new method of drilling to boost the recovery rate of its fields.

For instance, water may be effective for oils that are lighter in density, but it only results in a 10 percent extraction rate for reservoirs containing heavier oils, according to International Energy Agency (IEA).

Falakshahi says that bringing in skills and technologies in EOR (or IOR) is one of the two main priorities of NIOC, along with developing the shared fields.

“We calculate that just a 1-percent increase at the country’s three biggest oil fields [Ahvaz, Marun, Gachsaran] would increase the country’s reserves by 2 billion barrels. In the future, the main upside for Iran’s oil sector will come from techniques improving the fields’ recovery rates”.

According to the IEA, 30-70 percent more oil could be recovered from mature oil reservoirs through the use of enhanced oil recovery technologies by 2040.

EOR market is expected to reach $283 billion by 2020, according to a research published by Hexa Reports.

Regarding a $583 billion of global investment in upstream oil and gas sector in 2015 and $1.8 trillion total investments in energy sector, the EOR market perspective is quite bright and huge.

Currently, above 80 percent of Iran’s active oil fields are in their second half-life and naturally lose 8-12 percent of their productivity each year.

Iran has introduced 49 oil and gas fields to foreigners to be developed.