Ahangar has talked to "Iran Petroleum" in details about North Azadegan and OICO-CNPC cooperation.

North Azadegan started oil production in 2016. Could you update us on the output level now?

Oil production has since been under way in this field. The field’s output is planned to stand at 75,000 b/d and we have fully met our target.

What are the modalities of your cooperation with CNPC?

CNPC is the contractor tasked with developing the first phase of this field. Based on the preliminary agreement, it was also supposed to handle the second phase of the development project. It was its suggestion to National Iranian Oil Company (NIOC) that it would operate the first phase and following finishing that, it would go ahead with the second phase development. NIOC accepted the proposal. The Chinese are currently going ahead with the project with minimum staff under the supervision of Petroleum Engineering and Development Company (PEDEC). CNPC is also accounting partially for operation costs and spare parts supply.

Of course, one reason for NIOC to award the project to CNPC was that the company was the first contractor for the development project, and it could eliminate any possible problems which may emerge during work in the minimum period of time possible.

NIOC had announced that it was willing to engage Iranian companies in the operation of oil fields. Does CNPC have an Iranian partner in the North Azadegan development?

Yes, sure! OICO is CNPC’s contractor in this project. It is among competent Iranian companies with good experience in this sector. It is noteworthy that there is potential in Iran for activities related to operation of this field. Therefore, it can be argued with certainty that Iranian contractors would handle the job in the best possible manner.   

How long has OICO been cooperating with CNPC?

It has been one year now. Of course, based on NIOC’s policy of engaging Iranian companies in the development of oil fields, in case for whatsoever reason CNPC is unwiring to continue such cooperation for the operation of this field, we will have no problem with continuing such cooperation with Iranian contractors. Meantime, OICO has displayed good performance in the past one year. The awarding of North Azadegan’s operation to an Iranian contractor was the first experience of NIOC in this field, which I think has so far been successful. Of course, Iranian companies have so far been sporadically present in the development of oil and gas fields, but it is the first time that a field development is being awarded to an Iranian company in full. Should CNPC refuse to handle the project, OICO will go ahead and NIOC will supervise the project.

However, the presence of CNPC as the operator of this field would have two advantages for us. First, this company is a contractor and it is convinced that it would be compensated if it pushes ahead with production. Second, North Azadegan is the first successful experience of CNPC in Iran, which would boost its reputation in Iran. That is why it has saved on spendings on this project. A technically qualified team appointed by CNPC is monitoring OICO’s activities and whenever needed, they would take manufacturers in. For us as the client, it is also important that the rate of recovery would be preserved and the installations be safeguarded. These factors are also instrumental for CNPC to reach its financial objectives.

Given the escalation of unilateral US sanctions against Iran, how likely is CNPC to stop working in North Azadegan?

Our cooperation with CNPC has so far been under way in operating North Azadegan. Of course, we have agreed that after one year of working, CNPC would stay on if it expresses willingness at the discretion of NIOC. We have already agreed for CNPC’s involvement into 2019 in the North Azadegan development.

How much should CNPC recoup for costs pertaining to the first phase of North Azadegan?

Under the agreement, reimbursement will be over in four years, two years of which still remain. So far, money has been wired without any problem.

The North Azadegan is located in the Hoor al-Azim Lagoon. Have any safety measures been adopted under the current circumstances?

As you mentioned, North Azadegan’s location is special. We are exactly in the middle of Hoor al-Azim. That is why from the very beginning we were highly sensitive to the HSE issue. We asked CNPC as the contractor of the development project to comply with standards with regard to the installations and workplace. Both NIOC and Khuzestan’s Department of the Environment were strictly monitoring the job. International standards have been respected.

You said that oil production has continued in North Azadegan for three years now. This field is jointly owned by Iran and Iraq. Do you still envision maximum efficient recovery from this field?

North Azadegan’s oil is ultra-heavy. Therefore, its installations have been designed such that we would have maximum efficient recovery from this field. The drilling of oil wells in North Azadegan is such that we would have maximum efficient output. We have even envisaged downhole lifting in order to maximize recovery from the field. After three years of production in a row, our wells did not face any pressure fall-off, indicating that our reservoirs are in good conditions.

The current rate of recovery from North Azadegan is about 7%, which is predicted to reach 11% if we manage the reservoirs properly. To reach that figure, we must have enough capacity. We may need specific pumps, but we are facing restrictions now. However, since there are leading pump manufacturing companies in Iran, we can handle the case through reliance on domestic manufacturing mechanism.

Do you worry about lagging behind Iraq in terms of recovery from North Azadegan as the United States tightens sanctions against Iran?

We don’t worry about oil recovery from North Azadegan. Over the past three years, production has continued and we have outdone the Iraqi side. Even a single barrel has not been cut off our output. North Azadegan is among the first oil fields whose master development plan was formulated by NIOC experts. The contractor is now convinced that the proven reserves of the oil field would potentially increase by 20%.

When will you start the overhaul of the field?

Whereas three years have passed since the field started production, we are planning to start overhaul in some installations of North Azadegan. Fortunately, sanctions will not affect our overhaul, because we started purchasing our spare parts two years ago and for the sectors which we think may cause problems; we are now in talks with some domestic manufacturers to supply us with necessary parts. However, we don’t think we would face a halt in production. In general, I would like to say that oil production in North Azadegan will continue without any risk even under toughest conditions.

How satisfied are you with CNPC performance in the North Azadegan development?

I think that the Chinese had good performance in North Azadegan. Of course, we have to accept that the Chinese companies are different from European and American ones; however, they are doing their best in order to accomplish the job in the best possible manner. Our technical installations have been up and running over the past three years without any glitch, and our production is nearly 100%. We have not had any production decline so far and our reservoir management has been such to guarantee maximum efficient recovery. In North Azadegan, all our performances have been based on maximum efficient recovery and we have achieved good results.

How will Azadegan’s output be affected, should CNPC quit its activity?

Nothing, at all. Until recently NIOC was in charge of operation of oil fields, but under NIOC’s new policy, Iranian contractors would handle recovery from these fields under NIOC supervision. In this specific project, since under the previous buyback agreement, CNPC would be allowed to develop the second phase at NIOC’s discretion, the operation was assigned to the Chinese. Now if for whatsoever reason they decide to quit work in Iran, we will have replacement plans. Iranian contractors are certainly able to operate the field, as we had already operated similar projects.

The North Azadegan oil field, covering 460 square kilometers of the greater Azadegan field, is located about 120 kilometers west of the city of Ahvaz. It is jointly owned by Iran and Iraq. It is estimated to hold about 6.5 billion barrels of oil in place.

Courtesy of Iran Petroleum