South Pars is the world’s largest gas field which is shared by Iran and Qatar in Persian Gulf waters.

With 14.2 trillion cubic meters of gas in its reservoirs, the field is estimated to hold 8 percent of the world’s total gas reserves.

The following is an excerpt from an exclusive interview between Shana and Mr. Mohammad Meshkinfam, the CEO of the Pars Oil and Gas Company (POGC), concerning the field and its development.

-What are the remaining phases of South Pars right now and which one will be fully operational this year?

To answer this question, I should remind you that late last year, of the four production chains of Phases 13 and 22 to 24 of South Pars, two chains consisting of four platforms and two 32-inch offshore pipelines with a capacity of two billion cubic feet ( 56 million cubic meters) came on stream, and Iranian Minister of Petroleum Bijan Zangeneh also announced at the inauguration of these phases that two other chains of these phases would become operational in 2019. We are trying to bring on stream these two trains with a capacity of 2 billion cubic feet per day before winter this year.

-When will Phase 14 be completed?

The offshore section of the phase will be completed this year. As I speak to you right now, Platform B is ready for launch. By October, the planned output of the platform with a capacity of 500 million cubic feet per day (14.1 million cubic meters) will be transferred to Phase 12 refinery as the closest refinery to Phase 14.

Drilling work is now under way to install Platform D of Phase 14 as the last platform of this phase. We are doing our best to complete installation of the platform by October. Thus, with the installation of two platforms in 2018 and two platforms in 2019, four Phase 14 platforms with a daily capacity of two billion cubic feet will be in production by the end of this calendar year to March 2020.

-Will the Phase 14 refinery be completed by the end of this calendar year?

Probably not. We are trying to launch the refinery’s utility unit the end of this year. Speaking of the gas trains of this phase, our plan is that by late this year or early next year, the first sweetening train of this phase will be in production, to be followed by other trains every three months. In other words, Phase 14 will be completed by the end of the next Iranian calendar year to March 2021.

As the leader of a consortium to develop Phase 14, the Industrial Development & Renovation Organization of Iran (IDRO Group) has received criticism for its performance in the project. What plans do you have for this company?

See, Pars Oil and Gas Company, on behalf of the National Iranian Oil Company, is pursuing development of the South Pars project as an employer. Therefore, taking major decisions and replacing the main contractors are not in the hands of Pars Oil and Gas Company and fall under NIOC jurisdiction.

-What is your suggestion?

We (Pars Oil and Gas Company) will continue to work with this contractor until the matter is settled.

- What is the current state of Phase 11 as the last phase of South Pars joint field? Are the negotiations with Chinese Company (CNPCI) as a member of the phase’s developing consortium continuing?

Negotiations and correspondence with the company are in line with the terms of the contract and are in good state. Both we (the National Iranian Oil Company) and the Chinese company (CNPCI) are trying to not breach the terms of the contract. God willing, the fate of this phase and how it would be implemented will be determined soon. Because we have not yet reached a final conclusion, I cannot explain any more.

- Is Petropars technically and financially able to develop the project (estimated to cost $4.8 billion) if CNPCI officially pulls out of it?
Yes. Petropars is a desirable option for the South Pars Phase 11 development project and is ready to start developing this phase as soon as possible. This company has been involved in the South Pars Phase 11 development project from the beginning. If another company enters this project, it will be time-consuming as we should consider contractual issues with them. Petropars has already undergone these steps and is ready to operate the project. In terms of financing, I must say that the full amount of the required investment is not necessary in the beginning and the project can begin with smaller amounts. For example, sufficient funding is now available for the drilling section, and Petropars can start drilling operations; only contractual discussions with Petropars have to be sorted out.

-Mr. Engineer, you firmly stated that Petropars could develop Phase 11 project. Why did you not sign the project’s contract with Petropars from the very beginning before signing the contract with Total and CNPCI in 2017?

The answer to your question is simple. The geographical location of Phase 11 causes a drop in production due to the borderline of this phase with Qatar and the simultaneous gas recovery by Iran and Qatar. We had anticipated that production of this block would fall under pressure one year and a half after production started (which is now less than a year), meaning that pressure would fall immediately after production began. The result was that, unlike other phases of South Pars, the two blocks had to be fitted with a high-pressure platform from the beginning. Petropars has no experience building pressure compressors. Therefore, the plan was that Total, with international experience and technical know-how, would install a pressure platform for Phase 11 blocks so that in addition to using compressors in this phase it would be used as a model for other blocks in South Pars. That is to say we had intended to kill two birds with one stone.

I must note again that gas production from the South Pars joint gas field is declining year by year, and we have to consider production maintenance in other blocks. So far, we have traditionally recovered from the blocks and have created a lot of expectations in the country; right now, the field supplies 80 percent of the country’s total demand for gas. We must understand that this amount will not last forever, as we have reached the summit of gas recovery in the South Pars joint gas field; therefore, we must expect a year-on-year drop in production from the field. As a result, from now on, we need to worry about maintaining production. This concern was reflected in signing the Phase 11 contract by the Ministry of Petroleum.

The last point that I should add to answer this question is that the weight of platforms currently being installed in South Pars is 2,500 tons, while the pressure platform that was planned to be installed by Total was 20,000 tons, which is eight times that of conventional platforms installed in South Pars. There are no infrastructures to build such platforms in the years of such companies as Iran Marine Industrial Company, Iranian Offshore Engineering and Construction Company, Iran Shipbuilding & Offshore Industries Complex, etc.. These companies have never built such platforms. We had also emphasized that this pressure platform should be built inside Iran. We had also arranged for Total to do this in Iran so that its technical knowledge could be transferred to the country. The company also had plans to strengthen infrastructure at the yards of Iran Marin Industrial Company and the Iranian Offshore Engineering and Construction Company. We were expecting that along with the construction of the Phase 11 pressure platform, our yards be upgraded so that we could build our own South Pars gas pressure platforms for other phases, which, unfortunately, failed due to reasons you know better.

-What has happened since 2017 that you thing Petropars can do the project?

Petropars is not going to build a platform to enhance gas pressure. The company will carry out Phase 11 development like other projects it has accomplished so far and will transport the gas to land. The issue of pressure will be dealt with later.

-What are you planning to do regarding the pressure platform?

To build the pressure platform, we now have a basic design that a French company devised for us before the sanctions were back. With this plan, we expect to be able to follow basic design with a domestic company (which is, of course, very difficult) or a company, so that a template will be provided for all phases of South Pars.

-Did the French company do the basic design in parallel with Total?

Exactly.

-According to this plan, what is to be done?

Various options are on the table; for instance, a pressure boosting platform could be dedicated to each south pars platform. However, this would cost a great deal given that we have 38 platforms in South Pars. Another option which we (Pars Oil and Gas) proposed to the consultants of the project and was also approved, is installing a pressure boosting complex somewhere in the field where the pipelines are the closest so that in practice, the pressure of a collection of the platforms can be enhanced at one point. Accordingly, we expect to need three pressure-boosting complexes at sea, meaning that each hub would enhance gas pressure for 10 to 12 platforms.

-How much do you estimate implementing this project would cost?

Our forecast is around $20 billion.

-Are domestic companies capable of implementing such a plan?

Not only in Iran, but also in the Middle East, there is no such technology. Based on the surveys we conducted prior to signing a contract with Total for the development of South Pars Phase 11, there were only three pressure boosting platforms in the world, one of which was built by Total, which is why we chose Total for the talks.

-What did Total do for the project after it signed the deal in 2017 and before it pulled out of the contract?

It carried out fundamental studies and pressure-boosting studies and, in parallel, held a tender for selection of the contractor of the jacket, drilling and piping sections. It also determined the contractor of the sections and was about to submit the project to the contractor which was unfortunately hit by the sanctions.

-How much did it spend?

According to estimates, it spent a total of $100 million.

-Has the production slump started in South Pars gas field?

Yes it has started, but its percentage is low. The number is expected to become significant in the next four to five years.

-How much production decline will there be?

Production will drop by about 28 million cubic meters per year which is tantamount to production of a phase. But the point I have to make here is that we did not want Total to know about the production decline in the talks, because they would not offer us the pressure platform plan, which would ruin our plans. Unfortunately, they learned about this fact which significantly impacted the talks. 

-How much do pressure platforms prevent production from falling?

Let me give you an example here: the wellhead pressure for the transfer of one billion cubic feet of gas to land is conventionally at 120 bar; now if this is reduced to 100 bar, that amount of gas could not easily be shipped to land; if pressure declines to 90 bar, you can hardly send 700 mcm to land. This would mean reduced productivity. That is, production decreases proportionally over time as the pressure drops in the wellhead. This is where the role of the pressure platforms becomes clear. Installation of these platforms prevents a drop in production.

-Are there compressors to prevent the production decline?

There are a number of compressors inside the country that specialize in light and sweet gas, but there is no compressor for offshore gas that has problems such as sourness and humidity. If companies like MAPNA and Oil Turbo Compressor (OTC) can build compressors to address these problems, it would be helpful. Space constraints, of course, are another problem in offshore operations, therefore, the compressors must be tailor-made in size and weight to be able to be installed on platforms.

-Does Pars Oil and Gas Company (POGC) have the expertise and ability needed to maintain production?

Yes it does. Some work has already begun, including acidization of South Pars wells. This year, 10 to 11 wells have been acidized and production from SPD5 platform has been carried out by perforation of K1 layer of South Pars. Thus, a two-year delay in pressure drop was achieved. By doing such things, we are trying to prevent drop in pressure and production until we get the technology required for building pressure platforms.

-Given the annual drop in production pressure in South Pars, wouldn't the expectations created for gas supply be a problem in the future?

You see, besides South Pars, we have other fields like North Pars, Golshan, Ferdowsi, Kish as well as other gas fields, so it's not like the Ministry of Petroleum would ignore the commitments it has made to the country. Development of South Pars was our priority, given its being a joint field; of course, after we ensure production from the field, we would start production at other fields seriously.

-Does Pars Oil and Gas Company need foreign companies to maintain production?

There are two methods for maintaining production: short-term methods that include digging additional wells, laying down extra pipelines, and acidizing wells. These methods are now on schedule; there is also a long-term method which is, as I said before, to achieve the technical knowhow of building pressure platforms.

To give you an example, in European countries that are poor in hydrocarbon resources, they are making every effort to make the most out of their fields. Some countries even continue production until pressure falls as low as 5 bar by using pressure-boosting techniques. In the South Pars gas field, we need to think about very low pressure levels. Our plan is for 30 bar pressure from currently 120 bar.

-What is the value of the items produced in each phase of South Pars?

By considering the price of 10 cents per cubic meter for gas and $50/barrel for gas condensates, $5 million is generated from the field per day. This means that the daily value of production from 26 South Pars phases is currently at $130 million.

-What about South Pars Combined Cycle Power Plant?

The plant's items were imported before the sanctions were reinstated, and operations are now in full swing. We expect to launch one train of three trains of the power plant by March 2020. The plant, which is recognized as a green project in the world, is a purely environmental project.

-What is the state of the negotiations with the Indians for the Farzad gas field?

We have had a lot of correspondence with them. They have not yet announced their definitive opinion. However, along with the correspondence with the Indians, negotiations are under way with Petropars.

-Does it mean that the Indians are no longer in the project?

The road is open for the Indians and they can return.

-What is the state of the development of the South Pars oil layer?

We have been approached by a consortium of domestic and foreign companies to develop the project. Talks with them are seriously continuing and you will soon hear some good news about the project.

-Mr. Engineer, are domestic companies capable of developing the South Pars oil layer as they claim?

Domestic companies have no problem developing the surface section of ​​the project, but they are unlikely to be able to develop the offshore section of the field and the layer which require special drilling technology and tools. The South Pars oil layer is located at a depth of 1000 meters above the South Pars reservoir, which is scattered as oil spots throughout the field. Developer of the layer needs to be a company that is equipped with the required technology for such operations. They must be able to do 8 km of horizontal drilling in a confined space. Which Iranian contractor has this ability?!

-How about the negotiation for development of the Balal gas field?

The development contract for the field is ready for signature and it will be signed as soon as the National Iranian Oil Company announces. This field is to be developed by domestic companies.

-Mr. engineer, what is the difference between the South Pars of the year 2019 and the South Pars of the year 2013?

Any fair-minded person will notice the changes in South Pars in these years with a simple review; I will note a few examples. Gas recovery from the South Pars joint field has increased from 285 million cubic meters per day in 2013 to 630 million cubic meters at present. In 2013, there were 11 platforms operating which reached 32 in 2019. In 2013, there were 20 refinery trains operating in the field which have now reached 50, with 30 refinery trains added in the last six years. These figures are stunning in the maritime pipeline and wells, too. You can do the comparison.

I was an expert during the previous administration and helped the oil industry; I'm not a politician and I'm a technocrat. Unfortunately, in the past, there was no management integrity in the oil industry and they didn't know what they were going to do.

-How much does Qatar currently recover from this joint gas field?

It produces about 600 million cubic meters per day, and Iran's daily production is about 630 mcm.

Interview by Roya Khaleghi