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Iran’s first oil recovery race is against Iraq

3 September 2016 9:48

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Iran will soon tender the drilling of 20 wells in its South Azadegan oil field which is the first reservoir on tap for development under the country’s post-sanction plans. 

The National Iranian Drilling Company (NIDC) has already been awarded the drilling of 20 wells in South Azadegan which it has to complete in two years.

NIDC cannot participate in the new bidding round in which eight companies are vying for rights to drill 20 new wells in the field, Executive Manager of the South Azadegan development project Mahmoud Marashi told the Shana news agency.

On Tuesday, Managing Director of the National Iranian Oil company Ali Kardor said the first tender since the lifting of sanctions on Iran will take place between Oct. 14 and Oct. 21, with South Azadegan topping the list for development.

The priority is to develop jointly-owned oil and gas fields which are being dried out by Iran’s neighbors, including Yaran, Azadegan and Yadavaran.

Azadegan is the world’s third largest oil field with in-place reserves of about 33.2 billion barrels and recoverable resources of about 6 billion barrels. According to Shana, South Azadegan holds in-situ reserves of over 25 billion barrels, of which 2 billion are recoverable.


An oil rig at South Azadegan oil field 

 

Iran shares South Azadegan with Iraq which has been producing 210,000 barrels per day from the field since April 2014. Iraq is targeting a production plateau of 1.8 million bpd from the field, having awarded it to a consortium led by the Royal Dutch Shell.

Iran first awarded the development of South Azadegan to Japan’s Inpex in 2001 but had to terminate it after five years. The country terminated another contract with China’s CNPC after seeing the company drag its feet on developing the field.

In March, Zangeneh said French oil and gas firm Total was studying its participation in the development of South Azadegan after signing a confidentiality agreement with Iran.

Iran is currently producing 110,000 bpd of oil from about 40 wells in the field, according to local media reports. The completion of another 40 wells will raise recovery to 320,000 bpd in the next two years.

New oil and gas projects will be ceded under a new contract model which officials have described as very flexible, involving integrated exploration, development and production.

On Tuesday, Kardor said the Iran Petroleum Contract will last for 20 years and include the fee per barrel that is paid as profit to the company.

Unlike Iran’s former buyback deals, there will be no ceiling on the capital expenditure, with officials saying everything would depend on the behavior of the fields, and the period of time.

Oil companies would have the chance in the annual work program and budget to revise the scope of the work and the cost according to changes.

The new contract, however, has many critics who warn it could expose Iran to hefty fines and other punishments. Some of them have even drawn parallels with the country’s oil concessions to the UK under the 1901 D’Arcy Agreement which Iranians believe squandered their national wealth.

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