Investment opportunities and interest in Iran's lucrative oil industry have increased despite the recent plunge in oil prices, monetary predicaments, and a projected budget deficit, a senior oil official told IRNA.
Pointing to the positive impact of lower oil prices on investment opportunities in low-cost oil producing countries, Seyed Mehdi Hosseini, head of Iran's Oil Contract Revision Committee, reiterated falling oil prices have encouraged investors to participate in growing numbers in Iranian oil projects.
An unexpected supply-side shock to the oil prices in the second half of 2014 devastated global oil market with crude prices falling to six year lows. Plummeting prices have resulted in stopping or postponing energy projects that suddenly became too risky or not economically viable at such lower oil price.
"Oil production costs are much lower in Iran than in most other oil producing countries," Hosseini said. Under current circumstances, costs of producing one barrel of oil in the Iranian onshore and offshore fields are about $3-4 and $5-6 respectively. Oil production on average costs $3-10 per barrel in Iran.
Global benchmark crude oil prices have fallen sharply over the past few months on slower demand growth besides surging tight oil supplies from the US. The front-month Brent crude oil futures contract on the ICE declined by more than 50 percent since hitting a short-term peak of $115 per barrel in June of last year.
Iran is to offer up to 50 projects worth $40 billion at a London seminar where the recently-drafted Iran Petroleum Contract (IPC) will be unveiled for the first time in September. However, restoration of foreign investment in Iran's energy sector is contingent on lifting of sanctions imposed by the US and EU in 2012. Targeted at Iran's oil and financial sectors, sanctions have impeded trade and investment in the energy sector.
After eight days of marathon talks on Tehran's nuclear program in Lausanne, Switzerland, Iran and the P5+1 (Britain, China, France, Russia, the US plus Germany) on April 2 reached a framework agreement that calls for lifting of all trade sanctions against Iran. The details of the agreement are to be finalized by a June 30 deadline.
Foreign Participation in EOR Projects
Several foreign firms have expressed willingness to participate in Iran's enhanced oil recovery (EOR) projects, deputy technology and foreign affairs director at Iran's Research Institute of Petroleum Industry said (RIPI).
"All aspects of the projects are technological," Amir-Abbas Hosseini said, adding: "The RIPR has the knowledge to run a part of the projects without assistance; however, it would require foreign assistance on other parts," the official said without elaboration.
EOR is the application of various techniques for increasing the amount of crude that can be extracted from an oilfield, including gas well injections, well and reservoir assessments. EOR can increase production from a well up to 75%.
Iran holds the world’s second biggest natural gas reserves after Russia, and the fourth-largest proved crude oil reserves. However, the vast majority of Iran's gas reserves are undeveloped. Lifting of the sanctions will also allow renewed international investments in Iran's gas fields.
