Oil on Way to Development

With over 65 years of experience in production and export in the region, National Iranian Oil Company (NIOC) has always sought to preserve its unique role in the regional and international markets by developing exploration and drilling activities, increasing oil and gas production, conducting research and development projects, refining and distributing oil, gas and petroleum products as well as their export.

As part of its efforts to maintain its standing in the region and the world, NIOC has focused its policies on developing jointly owned oil and gas fields (particularly West Karoun oil fields and South Pars gas field), enhancing oil recovery rate, injecting gas into oil fields and enhancing recovery from the fields that are in the second half of their operational lifespan.

In the meantime, development of cutting edge technology and further complication of political and economic ties have led NIOC to reconsider its national and regional policies with a view to boosting cooperation with top industrialized countries in the field of energy supply and helping stabilize oil market. 

Oil, Condensate Output Up

After the administration of President Hassan Rouhani took office, NIOC gave priority to maximum production at the shortest time possible, maximum efficient recovery, extraction from jointly owned hydrocarbon fields and accelerating delayed overhaul of facilities. All these measures were aimed at countering the impact of international sanctions imposed against Iran’s energy sector.

After Iran and P 5+1 group started implementing in January a historic nuclear accord they had reached last year, NIOC benefited from the lifting of sanctions to enhance production from joint fields. NIOC has met its production and export targets.

During years of sanctions, Iran’s oil exports stood at 1 mb/d, but NIOC was determined to bring it up to pre-sanctions level of 2.2 mb/d. Iran’s oil exports exceeded 2 mb/d throughout April.

Production from oil fields operating in West Karoun area in western Iran is planned to reach 280,000 b/d before the Rouhani administration finishes its first round next year. West Karoun’s output will reach 720,000 b/d by the end of the 6th Five-Year Economic Development Plan in 2020.

In the gas condensate sector, NIOC managed to export 450,000 b/d, up from 250,000 b/d under sanctions.

During the first four months of the current calendar year ending July 21, Iran’s crude oil and gas condensate production topped 4.124 mb/d, while export of oil and condensate reached 2.382 mb/d.

Furthermore, according to official data, oil and gas condensate production during the Iranian month of Tir (21 June -21 July), reached 4.154 million barrels, 2.428 million barrels of which were exported.

Oil Delivery to Asia Up

Iran’s oil exports to all main buyers of Iran’s oil – China, Japan and South Korea- reached 1.72 mb/d in June, up 47% year-on-year. Iran’s oil exports to the Asia market, particularly emerging economies, are expected to keep rising in the coming months.

China, Japan and South Korea were among top buyers of Iran’s crude oil even during years of tightened sanctions on Iran.

The increase in crude oil deliveries to Asia from Iran shows that the country has managed to claw back its share in Asia that it had lost due to the sanctions.

Oil market analysts believe that Iran should, in addition to broadening relations with its longtime customers in the Asia market, work for establishing new ties with other importers of oil in this continent.

Big Jump in South Pars Gas Output

Regarding oil and gas production from fields Iran shares with neighboring countries, priority has been given to the fields located in the West Karoun area and the giant offshore South Pars gas field. They are currently the most prioritized petroleum industry development projects.

The startup of phases 12, 15 &16 and parts of phases 17&18 of South Pars over the past two years has added some 105 mcm/d of treated gas to the total of gas injected into national trunkline. Such an increase during this short period of time sets a precedent.

Other development phases of South Pars are under way with progress varying between 70 and 80 percent. After phases 17&18 become operational, the priority for development will be for phases 19, 20&21.

With full development of South Pars phases, gas production capacity of this field, jointly operated by Iran and Qatar, will cross 800 mcm/d with gas condensate output at 1 mb/d. 

The operation of phases 15&16 of South Pars has brought recovery from the Iranian sector of South Pars to 420 mcm/d from a previous 370 mcm/d.

In the last Iranian calendar year, with the start of tests and launch of the first refining train of phases 20 & 21, the first step was taken for the operation of the refinery of these phases in treating sour gas supplied from phases 6 to 8. 

Development of the remaining phases of South Pars is under way based on priorities which involve financing, budget allocation and drawing up a roadmap.

All Eyes on West Karoun

After President Rouhani took office, his administration concentrated on the development of jointly oil and gas fields so that these shared fields would account for 7% of national output. Another objective has been to bring the country’s crude oil production to above 5.7 mb/d. In this regard, focus has been switched from independent fields to jointly owned fields over recent years. To this end, even drilling rigs operating in independent fields have been moved to the site of joint fields.

Halting development of oil and gas fields with low progress percentage and allocation of higher budget to jointly owned fields has been a tactic adopted by the Rouhani administration for accelerating the development of joint fields. Prioritization of West Karoun oil fields is a case in point. 

According to the target set for the Iranian calendar year 1397 (starting on 21March 2019), crude oil production from the West Karoun fields – North Azadegan, South Azadegan, North Yaran, South Yaran and Yadavaran – will reach 700,000 b/d. The five oil fields hold a total known reserve of 64 billion barrels in place.

Oil production has started from the first phase of North Azadegan and Yadvaran since the start of the current calendar year. These two fields are supplying 80,000 b/d together. The second phase development is under review.

Oil production from the first phase of South Azadegan oil field is projected to reach 320,000 b/d by 1397(starting on 21 March 2019). South Azadegan’s output is forecast to reach 60,000 b/d by next September.

Development of North Yaran oil field, under a buy-back deal, is 80% complete now. The field will start producing 30,000 b/d by September, as 20 wells have been drilled there.

Iran’s Petroleum Engineering and Development Company (PEDEC) is committed to contributing to export of 90,000 b/d of oil. PEDEC has to extract 60,000 b/d from South Azadegan and 30,000 b/d from North Yaran. PEDEC will be meeting its commitments by October. In case of resolution of financing problems, South Azadegan is likely to be producing 80,000 b/d, which will be above the required 60,000 b/d.

Production from the West Karoun fields is assessed as satisfactory and is in line with the projections of the Rouhani administration.

NIOC has experienced progress in the jointly owned fields located in the Persian Gulf. All plans for the preservation and enhancement of crude oil production in the Persian Gulf will materialize through prioritizing joint oil fields.

ICOFC Contributing 300 mcm/d Gas

Iranian Central Oil Fields Company (ICOFC) which is supplying nearly 300 mcm/d of gas is the second largest gas producer in Iran behind Pars Oil and Gas Company (POGC). 

ICOFC-run fields, located in more than 11 provinces, produced 700 million barrels of oil last calendar year. That has earned Iran $21 billion in revenue. Also last calendar year, ICOFC produced 90 bcm of gas. 

ICOFC oil production is expected to double in the current calendar year, while its gas output is estimated to remain unchanged.

Naft Shahr, Aban, West Paydar, East Paydar and Dehloran are among prioritized ICOFC-run fields aimed at maximum production. Meantime, development activities are under way in independent fields like Danan, Dal Pari, Sarvestan, Saadat Abad and Serkan Maleh Kouh. Regarding Gonbadli jointly owned gas field, the necessary activities are under way for maximum recovery. 

Sarvestan oil field has already been developed and is currently producing 7,000 b/d. Khesht field is forecast to start producing 20,000 b/d by next year.

Underground Gas Storage Top Rank

NIOC has been successful in underground gas storage. By launching Shourijeh storage site in northwestern Iran, NIOC managed to claim the top spot in gas storage capacity in the Middle East.

Currently, production is under way from Khangiran and Gonbadli reservoirs in northeast Iran. The bulk of natural gas produced from these reservoirs will meet the needs of northern and northeastern provinces, power plants and petrochemical plants.

Certain measures have been taken for minimizing the flaring of associated petroleum gas in a bid to generate value-added and reduce environmental pollution. Iranian Offshore Oil Company (IOOC), Arvandan Oil and Gas Production Company and National Iranian South Oil Company (NISOC) have finalized deals with three private companies for selling flare gas.

LNG 3100 and LNG 3200 projects are up for investment now. Once they become operational the entire flare gas produced at NIOC facilities would be gathered to generate value-added for the country and create jobs.

Oil Contracts Restructuring

Immediately after taking over, the Iranian Ministry of Petroleum started developing a new model of oil contracts in order to raise oil production capacity, preserve and boost Iran’s share in OPEC and world oil markets, encourage attraction of foreign investment in upstream oil and gas projects, enhance oil and gas production capacities particularly in jointly-owned fields, conducting exploration, development and production projects, and guarantee maximum efficient recovery from oil and gas reservoirs by boosting recovery rate.

Transfer of state-of-the-art technology for application and benefiting from new systems in exploration and development for production from oil and gas fields were among other philosophies behind the development of the new contractual frameworks, dubbed as Iran Petroleum Contract (IPC).

The general conditions, structure and model of upstream oil and gas contracts were recently approved by the Iranian board of ministers.

According to the latest amendments made to the IPC, in drawing up any contract, the rights, obligations and liabilities of parties to the contract in different sectors like the process of accounting and auditing, payment or recoupment, technical inspection, maintenance, methods of measuring production, training of human resources, health, safety and environment (HSE), imports and exports, insurance, confidentiality, terms and conditions for the discharge of contract, force majeure, abandonment of the contractual area, settlement of disputes and the language of the contract must be defined in clear terms in the IPC deals.

Domestic Manufacturing

During the second year of the administration of President Rouhani, Iran’s petroleum minister Bijan Zangeneh ordered the assignment of manufacturing of 10 widely consumed commodities needed by petroleum industry to domestic manufacturers and industrialists. That was a valuable step in line with the materialization of the policies of Resilient Economy, non-inflationary exit from stagnation and support for domestic manufacturing.

The ten items include wellhead equipment and downhole completion string equipment, downhole and wellhead pumps, drilling bits, pressure relief and safety valves, pipes, anti-combustion electromotors, rotary machinery, cryogenic alloy steels, drilling measurement tools and intelligent pigs.

Instructions have been drawn up for supporting commercialization of technologies needed by petroleum industry in line with high-level documents which include policies of the Resilient Economy for oil, gas and petrochemical sectors as instructed by Supreme Leader Ayatollah Seyed Ali Khamenei, the objectives of Iran’s Vision Plan for oil and gas, supporting knowledge-based companies, commercialization of innovations and inventions and also bylaws for research and development projects.

Furthermore, commercialization will be financed by Innovation and Blossoming Fund, Petroleum Development Fund, Fund for Supporting Manufacturers and Contractors and  other similar funds that have been established for the petroleum industry or supporting knowledge-based companies. More achievements are expected in the aforesaid sectors in the final year of the 11th administration in office.

By Forough Gashtasbi

Source: Iran Petroleum