Iran tempting for big oil over ‘low costs’
As Iran is preparing to present its new oil and gas prospects to international majors, speculations are already rising that the companies are already preparing for a rush to Tehran mainly because oil production costs in Iran are too low compared to other places.
The International Energy Agency (IEA) has announced in a report that Iran is one of the cheapest places in the world to tap new oil fields and pump from existing wells.
The IEA said the development cost in Iran is just a fraction of the US or Canada. In both countries, it said, the production of oil can cost between $59 and $114 a barrel whereas the expense in Iran is below $31 for each barrel of oil, the IEA added in its report.
It said the slump in crude prices makes Iran even more attractive to investors, specifically after assuming that sanctions against investments in the country’s oil industry will be soon lifted in light of a nuclear breakthrough that it reached with the P5+1 in Vienna back in July.
“Costs are low because they have giant fields which produce economies of scale, the terrain is mostly straightforward and reservoirs are highly prolific,” Robin Mills, a Dubai-based analyst at Manaar Energy Consulting, has told Bloomberg.
If prices stay low, production costs could drop even further in Iran and its neighbor Iraq, Mills added.
Bloomberg has described Iran’s new format of oil contracts that will be introduced within weeks as a “vastly improved version” of the previous format of contracts.
It further quoted international analysts as saying that the vast opportunities in Iran are expected to tempt oil companies to take up projects in its oil industry.
“In a world where oil majors have restricted areas where they can find large reserve bases to replace production in the future, Iran obviously cannot be overlooked,” Aneek Haq, an analyst at Exane BNP Paribas, has told Bloomberg.