“Aside from having their own political agendas against the U.S., both China and Russia have two of the only five Permanent Member seats [the others being the U.S., the U.K., and France] on the United Nations Security Council, so the importance of their support is multi-layered,” Mehrdad Emadi, head of risk analysis and energy derivatives markets consultancy, Betamatrix, in London, told OilPrice.com.
At the top of the list of these oil and gas sites is the Abadan oil field find announced recently, Iran’s 1st oil discovery in the south-western Abadan region. Aside from stating that the oil was ‘found at a depth of 3,570 m in an exploratory well and is very light and sweet’, Iran’s Petroleum Minister, Bijan Zanganeh, has not revealed any further details. OilPrice.com, though, can shed further details on the find that although very close to the Iraqi border, is not a shared field. At this early stage of exploration, NIOC believes that there are at least 1 bln barrels of recoverable oil reserves on the site, and possibly substantially more. There is also a very significant amount of associated gas as well.
Crude oil production is due to hit the 50,000 barrels per day (bpd) level within the next 18 months, based on the standard recovery rate of Iranian oil wells in the West Karoun region of 5 %. Serious enhanced oil recovery (EOR) techniques will not be used for the foreseeable future, as it would cause considerable disruption to the city of Abadan itself but, even without it, Iran’s Petroleum Ministry believes that production can be increased with relative ease to around 140,000 bpd within 24 months, with the right partners. From that point there is a lot of scope for further increases in output, based on higher reserves and/or an increase in the rate of recovery.
This fits in neatly with the NIOC’s mandate from the Petroleum Ministry to increase the average recovery rate across the nearby West Karoun oil fields from 5 % to at least 25 %, a figure more in line with the rates in similar fields in the Middle East. In this context, the ease of recovering oil in Iran is on a par with that of neighbouring Iraq and Saudi Arabia, at $1-2 per barrel lifting cost excluding capital expenditure and $4-6 per barrel including capital expenditure. A 25 % recovery rate is eminently achievable, given that state-owned oil giant, Saudi Aramco, announced plans at the end of last year to increase the average recovery rate of its reserves to 70 % from the current 50 %.
At least during the 1st phase of development, the associated gas will just be flared, although the plan is to monetise this as well after the 1st phase has been completed, particularly with the Abadan refinery on the doorstep. Even before the Abadan oil and gas discovery was announced, the Sinopec and NIOEC were making progress on the $1.06 billion upgrade of the 420,000+ bpd capacity Abadan refinery, Iran’s oldest and largest.
Transfer of technology – that would later be indigenised by Iran - would be specified in any development contracts for these fields, as has been the norm since the initial agreement of the Joint Comprehensive Plan of Action (JCPOA) nuclear deal in 2015, incl. that for the Ferdowsi oil field in the Persian Gulf. This field – located west of the South Pars gas field, 190 km from the port of Bushehr, and 88 km from the coastline - is estimated to be not just the largest field with heavy crude oil in Iran but also in the Middle East as a whole, holding about 37 billion barrels of heavy crude oil.
The latest technology is required to recover this heavy and ultra-heavy crude oil in the fractured carbonated reservoirs and significant gas reserves projected in the Dalan and Kangan layers. The current oil production projections are for around 10,000 bpd in the 1st phase, rising to at least 300,000 bpd at the end of phase 3. To this end, negotiations with a range of Chinese and Russian oil firms are ongoing on the basis that full development of the Ferdowsi field would need 5 to 7 years, OilPrice.com understands.
Author: Simon Watkins