Iran prepares for oil export boom

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US, WASHINGTON (ORDO NEWS) — Against the backdrop of sanctions, Iran has focused on the oil sector, more precisely, on increasing the capacity of fields in Western Karun and on the huge fields that it shares with Iraq.

This strategy allows you to earn income even at low oil prices, the cost of production is $ 1-2 per barrel, just like in Saudi Arabia, and to compensate for any loss in supplies caused by the price war.

According to a senior source in the oil sector, working with the Iranian Ministry of Oil, Tehran expects Saudi Arabia to strive for fantastic supply levels to key potential buyers in the coming weeks, especially in the East.

This point of view seems quite reasonable, considering that last week Saudi Aramco rejected 3 applications from Asian oil refineries for the supply of additional volumes of oil in April.

The development of West Karun’s deposits implies not only the exploration and development of the largest known deposits in the oil-rich region – North and South Azadegan, North and South Yaran and Yadavaran, but also less significant deposits.

The development of the last segment of oil resources is necessary to achieve the goal stated by Iran’s Oil Minister Bijan Zanganeh: West Karun’s fields should bring at least 1 million barrels of oil per day when access to investment and technology is restored. Now the region produces one third of this volume. Nevertheless, even at this moment, the increase per barrel is perceived as 1% growth, when West Karun’s production is expanding, recoverable reserves increase by 670 million barrels. At an average price of Brent $ 30 per barrel, this gives Iran additional revenue of $ 20 billion.

Darquin, 45 km north of the city of Khorramshahr and 100 km south of the oil-rich city of Ahwaz in the province of Khuzestan, with an estimated minimum amount of 5 billion barrels, of which 1.3 billion barrels are considered recoverable, was originally developed by the Italian company ENI jointly with local partner Naftiran Intertrade. Light oil production began in 2005 at Darquin-1. Darquain-2 development started in early 2011.

Now Iran is preparing the ground for final negotiations with Chinese and Russian developers so that they play a central role in this area as soon as the global oil market comes to a balance.

Prior to the reintroduction of US sanctions in May 2018, the contract for the development of the field was one of the $ 30 billion “strategic” energy agreements agreed between Iran and Russia during the president’s visit.Vladimir Putin to Tehran in November 2017. It was assumed that he would attract Russian state heavyweights – Rosneft and Gazprom, an Iranian source said.

“The negotiations will show progress when the consequences of the coronavirus pandemic are fully taken into account, regardless of the recovery in demand in China, which is possible in the second half of this quarter. In addition, if the price war lasts, Iran will not enter into long-term deals right after that, since average price targets contracts will be low,” he added.

However, in preparation for a new contract that will be offered to any foreign Darquain developer, this will not be an unpopular contact with a buyback, but a new model of the Iranian oil contract (IPC).

The aim of the next stage – the development of D’arquian-3 – will be to produce up to 200 thousand barrels per day for 15 years after the start of the new contract. According to the Ministry of Oil, this will require additional funding of $ 1.5 billion.

“Before the public in Iran drew attention to the fact that China intends to take over the oil and gas sector, the Ministry of Oil and China agreed that it would be possible on preferential terms to select Total stake in South Pars. Stage 11, China must ensure that production from the fields of West Karun in 2 years it will grow up to 500 thousand barrels per day. It may happen that ENI returns. But, most likely, Russian firms will continue to work as contractors to avoid US sanctions against Iran. Thus, they will be in Useful position that will allow them to control the development, when the oil market return to equilibrium,” said the Iranian source.

The third phase of Darquian development will include not only the development of more complex Kalyan sites, but also the development of Ilam and Sarvak reservoirs. This is clear from previous ENI research. Water and gas will be pumped throughout the field.

According to Iranian sources, 31 oil wells, 6 gas wells, oil refining facilities, including pipelines, refineries, gas compressors, infrastructure, including oil storage tanks and roads, are already under implementation. As Jahangir Purhang, chief executive officer of the OGPC oil and gas company, said last week, based on these achievements, Darquain’s production grew by 20 thousand barrels per day over the past year.

Iran and Iraq have a number of large oil fields, which contain 14 billion barrels of recoverable oil. For a long time, Iran has been catching up with Iran over the use of the resources of these sites, given the previous period of long-term sanctions, especially when they were tightened in 2011/12.

However, now that Iraq is in political and economic chaos, not to mention its difficult relations with the United States, Tehran believes that the time has come to conduct more aggressive drilling.

Thus, when developing the Arvand field, the IPC model will be used not with a buyback contract. Located in Khuzestan province, 50 km south of Abadan, the field contains about 1 billion barrels of oil, with a recovery rate of 15%. According to the Ministry of Oil, there are at least 14 billion cubic meters of gas and 55 million barrels of gas condensate on its territory.

Discovered in 2008, it contains light oil. Due to the alleged simplicity of production and the relatively small scale, investments of only $ 135 million are needed to achieve stable daily production of about 20 thousand barrels per day. Although indicators can be increased due to improved methods of oil production.

“The Ministry of the Oil Industry considers this field to be an ideal factor due to which a large foreign player from China or Russia could return to an exploration and development contract, which is beneficial in itself, but which will also allow us to evaluate the reaction of the US and the Iranian people,” the source concluded in Iran.


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