PremiumIran needs $115B of investments for 50 oil, gas fields

Baku, Azerbaijan, Apr.28

By Dalga Khatinoglu – Trend:

Iranian deputy oil ministry Hossein Zamani-Nia said Apr.16 that $50-80B worth of foreign investment is expected to be attracted to Iran’s energy projects, including $10B into the petrochemical sector in near future.

In total, $185 billion worth of investments is needed, he said.

Zamani-Nia said $85 billion are planned to be invested in the upstream oil sector by 2021.

However, Homayoun Falakshahi, senior Iran analyst at Wood Mackenzie told Trend Apr.28 that “We estimate that National Iranian Oil Company (NIOC) would need $115 billion over 20 years to develop the 50 oil and gas fields it has shortlisted for investment under the IPC.”

“Despite much interest from international oil companies, it is unlikely that all of these projects will be awarded, so the actual level of investment will be a lot less. Because of ongoing US sanctions, international banks continue to be extremely cautious. This will make it difficult for Iran to attract the required capital, at least for now,” he said.

Iran introduced 49 oil and gas fields to foreign investors based on newly designed oil contract, called the Iran Petroleum Contract (IPC) in 2015, but it hasn’t issued tenders on them yet.

Previously, Iran's Oil Minister Bijan Namdar Zanganeh said that about $20-$30 billion worth of foreign investments are expected to be attracted based on the IPC.

About 80 percent of Iran’s active fields are in their second half life and lose 8-12 percent of productivity every year.

Iran says its old oil fields would lose 0.3 mb/d of productivity during this year, but 0.35 mb/d of oil would be added from new fields, like Azar, oil layer of South Pars, West Karoon block, etc.

Extension of OPEC deal favors Iran technically

Falakshahi says that Iran’s biggest potential clearly lies in the West Karun fields, which are huge and in early phases of development.

“Fields such as Azadegan or Yadavaran could produce more than 1 mb/d combined. However, new output from other fields is will also make a significant contribution – Azar and the South Pars Oil Layer will produce a combined 90 kbd by 2020”.

Iran has prioritized the development of West Karoon block, including North and South Azadegan fields, Yadavaran and North and South Yaran fields with 64 billion barrels of in-situ reserves, which currently share about 3 percent of the country's total crude oil production, halved since December 2016, according to an official document, seen by Trend.

* Wood Mackenzie’s estimations (mb/d)

*International Monetary Fund’s estimations (mb/d), based on Iran’s fiscal year, starts on March 21. Iran’s gas condensate output stands at 560,000 b/d and expected to reach 1 mb/d by 2022.

Falakshahi said that “for 2017 however, incremental output from these fields will be limited to around 100-150 kb/d. NIOC will fight against production decline in ageing reservoirs by drilling more and increasing gas re-injection. Increased gas production from South Pars will be allocated to be re-injected into oil fields”.

Currently Iran re-injects about 75-80 million cubic meters per day of gas to oil fields to maintain their production, but the needed re-injection volume is at least three times more than this figure.

Falakshahi said that “our estimate of crude production capacity for 2017 is 3.9 mb/d, although we believe NIOC will abide by the OPEC agreement, which, if extended for another six months, will allow Iran to produce 3.8 mb/d of crude oil.”

Coming to a five-year perspective of Iran’s oil output, which is claimed at 4.7 mb/d by Iranian officials, Falakshahi added that “we believe Iran’s crude oil production capacity is likely to increase to close to 4.3 mbd by 2022, provided Iran enjoys some success in the IPC process and awards a few major projects to investors (we have included Azadegan South Phase 2 and Ab-Teymour among other projects in this forecast).”