SHANA – Iran holds about 67 billion barrels of oil in place in the jointly owned oil fields in the West Karoun area. Until 2013, Iran was extracting nearly 50,000 b/d of oil from these fields which are shared with neighboring Iraq. But now Iran’s output has exceeded 300,000 b/d.
In the current calendar year to March 2018, the West Karoun output is set to rise anew.
Touraj Dehqani, CEO of Petroleum Engineering and Development Company (PEDEC), has said that “we welcome the presence of international companies in Iran in order to provide Iran with capital and technology”, but the process of development in West Karoun would not wait for foreign companies and would go ahead.
The oil fields located in West Karoun are all green fields, stretching from near the oil-rich city of Ahvaz in Khuzestan Province to Iran’s border with Iraq. If the West Karoun area is shaped like a rectangle, its length stretches from the western bank of Karoun River near Jofair to Iran-Iraq border and its width stretches from Chazabeh to Darquain.
West Karoun incorporates North Azadegan, South Azadegan, North Yaran, South Yaran and Yadavaran oil fields.
Prior to the time that the administration of President Hassan Rouhani took office in 2013, the oil production from the West Karoun fields had dropped to 45,000 b/d. A buyback deal had been signed with China’s CNPC for the development of the giant South Azadegan. Furthermore, buyback contracts had been signed with Iranian and Chinese companies for the development of North Azadegan, Yadavaran and North Yaran. South Yaran was being developed by PEDEC.
Due to National Iranian Oil Company (NIOC) restrictions resulting from tough sanctions imposed on Iran’s petroleum industry, there was little hope for output hike in these fields. The Petroleum Ministry had prioritized development of these fields, dismissing any pretext for decline in output.
Financial discipline, injection of financial resources, weekly gatherings for studying implementation of projects and following up on their progress in the presence of senior Petroleum Ministry and NIOC officials came to fruition within four years. In spite of the impact of international sanctions, oil recovery from the West Karoun area soared past 300,000 b/d. In the meantime, negotiations were held with foreign companies for the second phase development of oil fields in West Karoun.
In October 2009, NIOC struck a $2.5 billion buyback deal with CNPCI for the development of South Azadegan oil field. With final changes made into the master development plan (MDP), the project started in September 2012 after a revised MDP was approved.
South Azadegan is set to be developed in two phases; Phase 1 eyes 320,000 b/d of oil, while Phase 2 targets 600,000 b/d of oil.
The Chinese side did not honor the terms of the agreement, and NIOC had to dismiss it from the project in April 2014 after verbal and written notices. After CNPCI quit, NIOC assigned the job to 30 Iranian contractors. Three years later, they are recovering 100,000 b/d of oil from South Azadegan. By next March, this output is expected to increase by 70,000 b/d.
Alongside this development project by Iranian contractors, the necessity of faster development of South Azadegan and application of modern technologies to enhance the recovery rate prompted NIOC to offer this field for development under the newly-developed Iran Petroleum Contract (IPC) by foreign contractors in partnership with domestic companies.
South Azadegan holds 33 billion barrels of oil in place with a recovery rate of 5.5%, which is planned to reach 20% once the field is fully developed.
220,000 Output Hike in 3 Years
Alongside the development of South Azadegan by Iranian contractors, the pace of implementation of phase 1 development of Yadavaran by China’s Sinopec, South Azadegan by CNPPC and North Yaran by Persia Oil and Gas Industries Development Company (POGIDC) increased. All the three projects were inaugurated in November 2016, and the West Karoun oil recovery capacity reached 260,000 b/d. All these fields were not producing any oil until 2013.
The contract for the development of Yadavaran was signed in three phases with Sinopec. Under the buyback agreement, Yadavaran would produce 85,000 b/d of oil in Phase 1, 180,000 b/d in Phase 2 and 300,000 b/d in Phase 3. Feasibility studies conducted on the project indicated that the recovery rate from the Sarvak layer (heavy crude) was 6% and from the Fahlyan layer (light crude) was 14%. It is estimated to hold 34 billion barrels in place.
North Azadegan is located 120 kilometers west of Ahvaz along the border with Iraq. The contract for its development was signed with CNPC in two phases, each of which having 75,000 b/d capacity. North Azadegan is estimated to hold 5.6 billion barrels in place.
A buyback contract was signed with POGIDC for the recovery of 30,000 b/d from North Yaran, whose reserves are estimated at 1 billion barrels in place.
On the day of inauguration of the three aforesaid projects, Iran was recovering 115,000 b/d from Yadavaran, 75,000 b/d from North Azadegan and 30,000 b/d from North Yaran. The first phase recovery from Yadavaran was planned to reach 85,000 b/d, which finally reached 115,000 b/d under coordination between contractor and client.
The total investment for developing these fields was nearly $7 billion. Ali Kardor, CEO of NIOC, said at the inauguration of the three oil projects that Phase 1 of Yadavaran field had cost $3 billion, Phase 1 of North Azadegan $2.55 billion and North Yaran less than $600 million.
NIOC targets 1 mb/d production in West Karoun. Minister of Petroleum Bijan Zangeneh has said that reaching such output would be possible after attracting foreign investment and enhancing the rate of recovery.
PEDEC managing director Dehqani has welcomed the presence of multinational companies in Iran to provide the country with capital and technological knowhow, saying: “The process of development in West Karoun is not waiting for foreign companies and it is continuing seriously.”
Reaching a sustainable 1mb/d output from West Karoun in coming years would need $18 billion to $20 billion in investment. NIOC counts on foreign companies for such investment.
Agreement Talks Continue
NIOC is currently in talks with foreign companies for the second phase development of West Karoun fields.
In October 2016, a heads of agreement (HOA) was signed between NIOC and POGIDC for the development of Yaran. NIOC plans to award the development of Yaran (both North and South Yaran) to POGIDC.
PEDEC is currently in charge of developing South Yaran whose output has reached 10,000 b/d.
Besides talks with foreign companies for the second phase development of Yadavaran field under IPC model, negotiations are under way with Sinopec for the second phase development of the field. In case an agreement is reached, the second phase development will be attached to the first phase development under buyback.
As long as planning is under way for the integral development of the Azadegan field, progressive production hike from South Azadegan would be on the NIOC agenda. Once an agreement is signed for integral development, both North and South Azadegan would be given to contractor.
West Karoun fields are planned to be developed in two phases; phase 1 will see production from these fields exceed 500,000 b/d, while phase 2 would bring output to more than 1.2 mb/d.