The National Iranian Oil Company needs investment worth $10 billion to refurbish the petroleum industry’s dilapidated equipment, an energy analyst said.
“It will be next to impossible to raise oil output unless dilapidated upstream oil sector machines and gears, including pumps, compressors and rigs, are upgraded,” Seyyed Mehdi Hosseini was also quoted as saying by ILNA.
The upstream oil sector includes the exploration of potential underground or subsea crude oil and natural gas fields, drilling of exploratory wells and subsequently operating the wells that recover and bring crude oil and natural gas to the surface.
Iran’s oil industry is facing major challenges, especially since 2018 when the US unilaterally withdrew from the 2015 nuclear deal between Iran and six world powers, and reimposed economic sanctions, including on the oil, tech, banking and transport sectors, he added.
The draconian sanctions have taken the form of an economic blockade and made it impossible for international companies to cooperate with Iran.
Referring to NIOC’s plan to increase its output capacity by 2 million barrels per day to reach 4 million bpd, the analyst noted that the ambitious initiative cannot be carried out unless both greenfield and brownfield projects are developed, for which an investment of $70 billion is needed.
“NIOC’s production will experience a downtrend in a few years unless new fields are discovered, or the company enhances its brownfield output with the help of enhanced oil recovery technology,” he added.
EOR is the implementation of techniques for increasing extractions from an oilfield.
According to Hosseini, the construction of new refining complexes to process gas condensates is of high importance because as long as sanctions are in place, condensates cannot be sold easily unless they are converted to value-added products, for which there are potential customers.
The Persian Gulf Star Refinery, a subsidiary of the National Iranian Oil Refining and Distribution Company in the port city of Bandar Abbas, is Iran’s sole condensate processing company that is supplied with 400,000 barrels per day of gas condensate from the South Pars Gas Field in the Persian Gulf. The refinery converts condensates to gasoline.
SP Challenges
Referring to challenges in natural gas extraction from SP, Hosseini said pressure reduction in South Pars wells is expected to start from 2025 and gas production will be as low as 400 million cubic meters in 2032, down 100% compared to the present levels.
Output from the giant field is now 700 million cubic meters per day and will reach 1.2 billion cubic meters per day by 2024 and then a downtrend would begin.
According to Mohammad Meshkinfam, the head of Pars Oil and Gas Company, production is expected to fall by 28 mcm/d, that is 10 bcm per yea, as of 2025.
Estimates suggest output will be around 400 mcm/d in 2032, when consumption will exceed 1.5 bcm/d.
"The installation of offshore compressor stations in the field is the only long-term viable option to control pressure reduction," he added.
The POGC chief said contrary to what some may perceive, the field will not be able to produce 700 mcm of gas per day (the current output) forever and the eco-friendly resource should be used as wisely as possible.
Recent reports said household gas consumption has surpassed 600 mcm/d.
Referring to short-term strategies to postpone pressure reduction, he said the company has started to acidize offshore wells and this should delay the process by three years.
"By 2025, the pressure is expected to decline by 28 mcm per year unless special platforms and compressors are installed.”
South Pars accounts for 80% of Iran’s gas need and the decline in output will create insurmountable problems for households, industries and thermal power stations.
According to Meshkinfam, the new installations are 10 times heavier than the normal platforms built by local companies, that is why relying solely on domestic firms could have sizable risks because they have never performed such tasks.
"Installed gas platforms weigh a maximum 2,500 tons and are designed to produce 28 mcm of gas/day. However, the new platforms that will hold the compressors are estimated to weigh at least 20,000 tons,” he added.
Regarding domestic potential and capability, the official said firms like Petropars, a subsidiary of NIOC, are able to undertake offshore drilling and transfer gas to onshore refineries, but lack advanced technology to manufacture heavy platforms and compressors.
“Pressure reduction is inevitable. However, other gas fields in the Persian Gulf, including Kish, Ferdowsi and Golshan, might help compensate the loss [but not for long]," Meshkinfam said.
