The government’s Economic Council has approved $4.4 billion worth of investment in three oil and gas development projects, the managing director of the National Iranian Oil Company said.
“Investment in the key sectors is vital and will help NIOC to meet the rising domestic demand for oil derivatives and natural gas in the years to come without having to import them at exorbitant prices,” Mohsen Khojastehmehr was also quoted as saying by the Oil Ministry’s news portal.
The development of oil and gas fields will secure energy supply in the future, he added.
At an estimated cost of $300 million, the expansion of Changouleh Oilfield near the Iraqi border in Ilam Province was the first plan approved by the council.
The NIOC chief noted that the scheme entails drilling at least 10 development and exploratory wells to increase the field’s output to 15,000 barrels a day.
A 150-km pipeline will also be laid to transfer the field’s natural gas to Dehloran Gas Refinery and Azar Oilfield, both in Ilam Province.
Referring to the second venture that received the council’s green light, Khojastehmehr said close to $500 million will be invested in initiatives to enhance oil and gas output capacity from hydrocarbon reserves in abandoned wells.
“Now that we have received the approval of the Economic Council, several contracts will be concluded between knowledge-based companies and NIOC to both revive abandoned wells and increase production level from wells whose output have declined,” he said.
“More than 500 knowledge-based firms are active in oil, gas and petrochemical sectors and their capabilities can help reduce costs in the key industry.”
Risk of Ventures
Khojastehmehr said plans are underway to link startups with local oil and gas firms so that they can help minimize the risk of ventures by applying enhanced oil recovery and improved oil recovery techniques that are crucial for increasing production.
Oilfield exploitation can be divided into four stages, the last of which is characterized by a slow, gradual decline of oil production.
There are more than 5,500 oil and gas wells in 400 oil and gas fields of the country, some of which are under the late stage of development. This stage is associated with a number of challenges during the production and operation of reservoir fluids.
The official stressed that by drawing on the capabilities of knowledge-based companies, NIOC will be able to increase annual production capacity to more than 80 million barrels of oil.
“The government is planning to offer tax and customs exemptions to high-tech firms, ease the cumbersome process of issuing commercial licenses, cut social security insurance costs, reduce the obligatory military service duration [for tech enthusiasts] and help empower innovative businesses,” he said.
According to Research Institute of Petroleum Industry, affiliated with Iran’s Oil Ministry, two knowledge-based companies have recently signed contracts with RIPI to inject new technologies in the petrochemical sector.
The last plan ratified by the Economic Council was the development of 12 gas fields controlled by the Iranian Central Oil Fields Company, a subsidiary of NIOC, at an estimated cost of $3.6 billion.
Khojastehmehr said the scheme, projected to become operational in four years, will help raise ICOFC’s daily natural gas output and gas condensates’ production by 140 million cubic meters and 100 barrels respectively.
Engine of Economic Growth
Oil experts believe that the economy will struggle if the oil industry, the engine of economic growth, does not get the long-awaited impetus after years of underinvestment.
"The oil industry is gearing up for a big leap forward," he said, adding that local contractors' capacity is incomparable with the past, which will help them play a key role alongside multinationals in oil and gas projects.
Lack of investment is taking a heavy toll on the beleaguered oil industry and has severely impaired NIOC’s ability to process crude, he added.
The failure to capitalize the private sector’s experience, absence of rehabilitation plans and the focus on selling low value-added products have reduced oil processing capacity by 231,000 barrels per day since 2013.
Referring to the giant South Pars Gas Field, he noted that despite peak production in the field off the Persian Gulf, pressure reduction has emerged gradually.
“The installation of offshore compressor stations in the field is the only long-term option to control gas pressure reduction and this calls for the investment of $80 billion in the massive field,” he said.
Contrary to popular belief, the field will not be able to produce 700 million cubic meters of gas per day [the current output] forever and this clean resource should be used as prudently as possible.
He noted that by 2024, pressure is expected to decline by 28 mcm per year unless special platforms and compressors are installed, for which each phase will need approximately $1 billion.
“Pressure reduction will anyway take place. However, other gas fields in the Persian Gulf, including Kish, Ferdowsi and Golshan, might help compensate for the output reduction [but not for long]," he said.
South Pars is the world’s largest gas field, shared between Iran and Qatar, covering an area of 3,700 square kilometers of Iran’s territorial waters in the Persian Gulf. It adjoins Qatar’s North Field that measures 6,000 square kilometers.
