Drilling Sector Challenges Outlined

Drilling Sector Challenges OutlinedDrilling Sector Challenges Outlined

A prominent industrial manager has called on the government to privatize drilling companies first, arguing that non bureaucratic structure in private firms could help the sector easily handle expeditious operations in oil and gas industry.

"While drilling costs $68 per meter in the US, it is estimated at $3,000-$3,500 per meter in Iran, mostly due to protracted operations, inexperienced labor, and low-quality drilling equipments," said Mohammad Keshavarz, the drilling manager of Mapna Group.

The cost of a well depends mainly on the daily rate of the drilling rig, the extra services required to drill the well, the duration of the well program (including downtime and weather time), and the remoteness of the location (logistic supply costs).

Referring to the problems confronting Iran's drilling industry, Keshavarz pointed to lack of operating liquidity. "Drilling companies struggle to raise funds and have no access to foreign financial resources as a consequence of sanctions imposed on Iran," he noted. "A mechanism should be devised to address the issue," he added.

Maintenance of drilling equipments is also problematic. "In recent years, most of appliances used in the drilling industry have been imported from China, forcing companies to spend much on repairs due to poor quality of Chinese products," he said, as quoted by ILNA.

With Iran having been under external pressure, China has been in a prime position to export to the Iranian market in recent years.

In May 2011, an unprecedented agreement was signed between Tehran and Beijing, allowing Iran to receive 40 percent of its oil revenues in the Chinese yuan. Iran agreed to spend 60 percent of the total revenue in yuan on Chinese imports.

The US and its western allies imposed tough sanctions on Iran to curb Tehran's nuclear energy program which they claim is geared to military use. Iran insists its program is peaceful.

Iran and the P5+1, five permanent members of the UN Security Council plus Germany, have been holding marathon talks over the past year to thrash out a mutually acceptable "comprehensive deal," which will help lift western sanctions in exchange for Iran addressing international concerns over its nuclear program.