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 IRAN
Arabia/Persian Gulf
Iran’s modern oil industry began in the early 20th
century when William Knox D’Arcy, an Australian entrepreneur, was
invited to explore the country. Knowledge of fields in the adjoining
Caspian region, and numerous oil seeps observed in the Zagros Foothills
led D’Arcy to sign a 60-year concession in 1901.
 D’Arcy’s company, along with Burmah Oil, discovered the
Masjid-i-Suleiman field in 1908. The two became the Anglo-Persian Oil
Company (ultimately BP) in 1914, with rights to the whole country
outside of Russian influence. It changed its name to the Anglo-Iranian
Oil Company in 1935 and was the sole operator in Iran up to 1951 when
its assets were nationalised and the National Iranian Oil Company (NIOC)
was established.
The size of reserves suggests that present capacity could
easily be maintained and substantially increased. However, the greatest
share will still have to come from fields that went onstream in 1966 or
earlier. These fields are not as prolific as they were and operations
required to improve recovery will be complicated and costly.
 Average well productivity has declined quite dramatically
since the 1970s (14,000 Bbls per day to around 5,000 Bbls per day). Gas
injection, which will require large-scale investment (plus huge gas
volumes to be tapped and piped), is needed to maintain production
levels.
Conversely, the giant Azagedan field with estimated
reserves of 26 Bn Bbls, discovered in 1999, is felt by many to point to
the potential for Iran to add new reserves. However, Azagedan was
identified many years ago but, being near the border with Iraq, remained
undrilled. In early 2004 a Japanese consortium led by Inpex signed a $2
billion development contract for the field but have not proceeded with
development.
Although Iran still has large oil and gas reserves the
fields require considerable capital investment so in the 1990s NIOC
began to try to engage foreign investors to participate. Most
significant was the passing, by the Iranian government, of a law to
allow foreign participation in so-called buy-back contracts under which
field developers are compensated with output before the fields return to
NIOC. The contracts initially covered the development of existing
fields, the redevelopment of old ones, and the installation of enhanced
oil recovery systems at mature, mostly onshore, fields.
EOR is necessary in Iran since the main reservoir, the
Asmari fractured limestone, has naturally low recovery factors, and is
subject to falling reservoir pressure and water encroachment.
Offshore: The first offshore oil discovery was the
Bahregansar field in 1960 followed by the giant Doroud field in 1961 and
by the time the Shah was removed in 1979 four joint ventures operating
offshore had brought 10 fields into production.
After the Revolution the state took control of almost all
Iran’s economic activity and NIOC took total responsibility for the oil
and gas projects. The first offshore buyback project was the development
of the Sirri A and E oil fields by TotalFinaElf, signed in 1995 and
completed in 2000. Since then 4 other offshore oil projects have begun.
The Balal field development was completed in 2001 also by
Total and it came onstream in January 2003. The main other offshore
areas where work is being carried out to increase oil production
capacity are the heavy oil Soroosh and Nowrooz fields by Shell and the
Doroud field by Total. Four platforms have been installed on the Soroush
and Nowrooz fields. Most of the increases in Iranian production capacity
in the last 3 years arose through these offshore projects.
Other companies are also negotiating with NIOC to develop
oil reservoirs in the South Pars field. In July 1998 the first
exploration bid round was held and five blocks were offered offshore
(East Kish, Farsi, Hormuz, Qeshn and West Kish) but none were licensed.
To assist in marketing the acreage in 2000 NIOC commissioned a seismic
survey of the whole of the Iranian Persian Gulf continental shelf, known
as Persian Carpet.
South Pars: The South Pars gas field was
discovered in 1991 after it had been determined that Qatar’s North field
extended into Iranian waters. It covers an area of 1,300 square kms in a
water depth of 65 m. NIOC’s ambitious plans to treble the country’s gas
production by 2010 rely almost solely on projects to develop South Pars,
which is believed to hold 12.5 Tcm of gas and 3.5 Bn Bbls of condensate.
The nearby North Pars, the second largest gas field in
the country, has estimated reserves of 1.4 Tcm of gas and there are
several other substantial undeveloped offshore fields. The first 12
phases of the South Pars development are underway (out of a total of 25
scheduled) and most will be undertaken by international companies under
buy-back terms.
First production was in June 2001 when Phase 2 came
onstream. It was followed by Phase 3 and then by a delayed Phase 1. Some
of the gas marketed will be converted to LNG whilst large quantities
will be used in onshore fields for injection.
Phases 4 and 5 were awarded to a consortium led by ENI in
August 2000 and came onstream in late 2004. Phases 6, 7 and 8, operated
by Statoil, calls for the installation of 3 platforms with 10 wells
each. The gas is destined for re-injection into the Agha Jari oil field.
Phases 9, 10, 11 and 12 were bid for in 2001. The contract to develop
phases 9 and 10 involving supplying treated gas and ethane to the
domestic network and condensates and LPGs, was awarded to Lucky Goldstar
of South Korea. Phases 13 to 14 could start up in 2012.
Other offshore: Other gas fields are being
considered for development. The North Pars field could ultimately
produce 40 Bcm per year but this gas will be used initially for
re-injection. The Salman offshore oil field is an extension of ABK in
Abu Dhabi and may have a production potential of 5 Bcm per year whilst
the 40 Bcm Henjam field, which is an extension of Oman’s Bukha
gas/condensate field, may also be developed.
The Elburz Mountains of Iran border the Caspian Sea in
the north of the country. The Sea became a focus of Iranian exploration
activity in the 1990s after Azerbaijan began to develop its deeper water
fields. Some, as yet undrilled, Azerbaijani prospects lie close the
disputed Iranian border.
In 1998 NIOC set up a subsidiary, Khazar Exploration and
Production Company (Kepco), which went on to engage a consortium led by
Shell to study the area (The South Caspian Exploration Study). Two
blocks were selected by Shell in early 2000 for which rights to drill
and develop fields were negotiated. Other exploration tracts were also
offered to the Iranian Pedrolan Development Company (Pedco), some in
disputed waters with both Azerbaijan and Turkmenistan. However, no
drilling has yet been carried out in the Iranian Caspian.
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