Remarkable Foreign Investment Made to Expand Iran’s Oil, Gas Output

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Attracting foreign and domestic investments for the development of joint hydrocarbon fields is a top priority of the National Iranian Oil Company, as the key oil sector has long been the main driver of economic growth in Iran.

Mohsen Khojastehmehr, the head of the National Iranian Oil Company, made the statement on the sidelines of an online meeting for signing a memorandum of understanding with Russia’s oil and gas giant Gazprom to develop three gas fields and five oilfields shared with Arab neighbors, the Oil Ministry’s news portal Shana reported.

The MoU was signed by the NIOC chief and Vitaly Markelov, Gazprom deputy chairman of the Executive Board, in an online meeting on Tuesday.

Khojastehmehr noted that collaboration with Gazprom is part of a plan to invest about $160 billion in the upstream sector, of which $90 billion will go to the oil industry and $70 billion to the gas industry.

The long-term plan will help raise crude output from the current 2.5 million barrels a day to 5.7 mbd in 2030. Moreover, natural gas production is supposed to increase by 500 million cubic meters to reach 1.5 billion cubic meters in the eight-year period.

“As per the MoU, the Russian oil and gas giant is obliged to invest $40 billion in eight oil and gas fields over the next seven years,” the NIOC chief added.

Giving a breakdown, Khojastehmehr noted that of the total investment ($40 billion), $10 billion will be allocated to the expansion of the North Pars field, located 120 kilometers southeast of the southern Bushehr Province, and the development of Kish Gas Field, the second largest field in the Persian Gulf after South Pars located 30 km east of Lavan Island.

“The development of the two fields will raise NIOC’s natural gas production by at least 100 mcm per day,” he said.

North Pars is one of the biggest independent gas fields of the country. 

A brief review of North Pars shows that 17 wells have so far been drilled and 26 offshore platforms have been installed there. 

North Pars has the capacity to produce 100 million cubic meters of gas per day. Such a recovery would require the drilling of 46 wells. The rate of recovery envisaged for North Pars stands at 61%.

Its gas is planned to be used at processing plants for the annual production of 20 million tons of liquefied natural gas.

The Kish Gas Field’s development plan includes three phases. In the first phase, 14 wells have been drilled but production has not begun.

A 200-km pipeline is planned to be laid to connect the field to refineries in South Pars Gas Field and Fajr Jam Gas Refinery in Bushehr.

According to Khojastehmehr, Gazprom will also invest $15 billion to increase pressure in gas wells in 24 phases of South Pars Gas Field.

Pressure Reduction

Iran needs to make up for pressure reduction in its gas fields and prevent a decline in gas output.

Estimates show that pressure reduction in the South Pars Gas Field, which Iran shares with Qatar, will start from 2025 and reduce gas production to as low as 400 mcm in 2032, down 100% compared to the present levels.

To address the issue, new wells are expected to be drilled in the field. However, installation of offshore compressor stations in the field is the only long-term viable option to control pressure reduction.

Almost 350 wells in SP are acidized and perforated regularly to keep output as high as possible, but this cannot continue for long and drilling new wells is inevitable.

Output from the giant field is now 780 mcm/d and will reach 1.2 bcm per day by 2024 and then a downtrend would begin. Production is expected to fall by 28 mcm/d, which is 10 bcm per year, as of 2025.

South Pars meets 80% of Iran’s gas demand and the decline in output will create insurmountable problems for households, industries and thermal power stations.

The huge gas field, which has 24 phases, covers an area of 9,700 square kilometers, 3,700 square kilometers of which (South Pars) are in Iran’s territorial waters and the rest (North Dome) is in Qatari waters. It is estimated to contain 8% of the world’s known reserves and approximately 18 billion barrels of condensates.

LNG Projects

The NIOC chief noted that Gazprom will invest an additional $5 billion on liquefied natural gas projects in Iran.

“Drawing on the experience of Russian oil and gas giants is crucial to transform Iran into a major player in the global gas market. Using the expertise of Russian gas giant Gazprom will enable NIOC to access advanced technology for extracting gas from deep geological repositories to produce and export liquefied natural gas,” he said.

“Supplying gas to Europe and even to neighboring states [like Pakistan] via pipeline is not viable due to political instability and clash of interests.”

LNG accounts for 31% of the global gas trade, of which 70% are carried out in Asia and the Middle East. There are currently 60 LNG terminals in Asia, with 40 others in the pipeline.

Khojastehmehr said the LNG industry paves the way for entering new markets, access to which is not feasible through pipelines.

Referring to joint oilfields, he noted that the Russian giant will invest $10 billion to develop onshore Karanj, Abteymour and Mansouri fields in Khuzestan Province in addition to Azar and Changouleh fields near the Iraqi border in Ilam Province.

Iran (34 trillion cubic meters) and Russia (32.6 tcm) hold the largest proven gas reserves in the world, according to the BP Statistical Review of World Energy.

Iran is sitting on an estimated 836 billion barrels of oil and condensates in place, of which 239 billion barrels are recoverable.

Source: Financial Tribune

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