Iran Underscores Recovery in Oil, Gas Fields

Iran Underscores Recovery in Oil, Gas FieldsIran Underscores Recovery in Oil, Gas Fields

Iran plans to bring in state-of-the-art technology to enhance the recovery rate in joint fields, the National Iranian Oil Company’s managing director said.

“What is important in developing the oil and gas fields is to boost extraction rate, which needs modern technology,” Ali Kardor was also quoted as saying by ILNA.

Commenting on the probable handover of Azadegan Oilfield in Khuzestan Province and the critics’ claim that as the field has a low risk of development, it should not be taken over by foreign contractors, Kardor said, “Some think that reaching the production phase is enough. This is while the extraction rate in oilfields such as Norouz is only 5% and just 7% in Azadegan.”

Iran has been working on a new contractual framework, known as Iran Petroleum Contract, to bring back multinationals to its key oil and gas sector after years of underinvestment due to punitive sanctions imposed on its economy.

Officials say IPC is an upgrade to the buyback contract model used in Iran's petroleum industry over the past two decades. IPC offers more attractive terms and conditions, including higher rewards for risky projects as well as 20-year terms of cooperation that can be extended.

In late December 2015, Tehran unveiled 52 oil and gas projects worth an estimated $185 billion in a two-day conference that brought together more than 1,300 officials from 335 domestic and foreign companies.

Kardor said it is not technically correct to think 7% extraction rate is desirable. He stressed that Iran should increase oil recovery rate in Azadegan by 10%. According to the NIOC chief, the country does not possess the knowhow to achieve the goal.

Iran has lined up the giant South Azadegan Oilfield as the first of dozens of projects to be tendered under its new oil contracts.

"The bidding process for the sought-after onshore project will begin this month or in early October," Kardor was quoted as saying by Shana. Located 80 kilometers west of Ahvaz, the shared South Azadegan field with Iraq holds an estimated 33 billion barrels of oil in place.

Kardor expects two or three oil deals under the new contractual model by next March, which would attract an estimated $10 billion in foreign investment. Iran has signed seven preliminary agreements with foreign oil companies, including Austria's OMV, France's Total, Germany's Wintershall, Indonesia's Pertamina, Russia's Lukoil and Zarubezhneft, to study its oilfields.

Production from South Azadegan currently stands at 60,000 barrels per day, but plans call for raising output to 320,000 barrels a day within two years.

NIOC and France's Total signed a nondisclosure agreement in April, based on which the French major will propose its strategy to develop South Azadegan.

Total is not expected to be the sole foreign contractor in South Azadegan. The field’s second development phase reportedly requires $5 billion in investment, with some big names in negotiations for its drilling and production rights, including France's Entrepose Contracting and VINCI Construction Grands Projets, South Korean conglomerate Hyundai and Japan’s Marubeni.

The right to develop South Azadegan is apparently part of a package deal that also includes the export of 150,000 to 200,000 barrels of oil per day to Total, which agreement was announced in January.