10 September 2022 - 15:53
  • News Code: 461873
$7bn MOU Signed for Azadegan Development

TEHRAN (Shana) -- A $7 billion memorandum of understanding has been signed by National Iranian Oil Company (NIOC) and Iranian banks and E&P companies to develop the entire giant Azadegan oil field.

President Ebrahim Raeesi, overseeing the signing ceremony, said investing in production, benefiting from local technical capacity and investment would contribute to economic growth and national progress. Minister of Petroleum Javad Owji also said that development of the Azadegan field, which Iran shares with Iraq, would earn the country more than $115 billion in revenue. He said Azadegan’s output would reach 570,000 b/d over seven years.

The Azadegan oil field lies in Abadan Plain, about 80 km west of the city of Ahvaz and along the Iran-Iraq border, covering a total area of 1,500 square km. It is known to be Iran’s largest joint oil field with about 32 billion barrels of oil in place. Azadegan is also ranked the 10th largest oil field in the world. It is Iran’s most important greenfield with high capacity for oil output hike. The Iraqi side of this giant field is named Majnoon.

The MOU for Azadegan’s development was signed with six Iranian and as many E&P companies. Bank Melli Iran, Bank Mellat, Bank Tejarat, Bank Parsian, Bank Pasargad and Bank Shahr are to provide necessary investment for the project that would be developed by the “Khatam al-Anbia Construction Headquarters”, Persia Oil and Gas Industry Development Company, MAPNA Oil and Gas Development Company, Sina Energy Development Company, Petropars and Oil Industries and Engineering Construction Company (OIEC).     

Owji said Azadegan, divided into North Azadegan and South Azadegan, is currently supplying 190,000 b/d.

One of the reasons that led the Petroleum Ministry to sign this MOU with a consortium consisting of banks and Iranian E&P companies was the issue of financing because due to sanctions Iran is facing restrictions in attracting international capital. It has been decided to finance the project by Iranian banks and major economic holdings.

380,000 b/d Hike in 7 Years

With an investment of nearly $7 billion, the production capacity of this field will reach 220,000 b/d in the second year of its development, thereby bringing output to 570,000 b/d in the next seven years. That would also strengthen Iran’s position within the Organization of the Petroleum Exporting Countries (OPEC). Iran's oil production capacity is now nearly 4 mb/d.

Owji has said that with an oil barrel at $80, Azadegan would yield Iran over $115 billion in revenue over a 20-year period, let alone create 24,000 job opportunities.

The integrated development of the Azadegan field would require drilling more than 420 production and injection wells, building five manifolds and laying 315,000 to 320,000 km of pipeline, which would be entirely handled by local contractors and manufacturers.

Economic Mobilization

Raeesi said achieving an 8% economic growth rate required attracting investment in the production sector. He said the MOU signed for the development of the Azadegan field would mean that top companies would team up for a big project. 

He said implementation of the Azadegan development project would mean mobilizing internal capacity and enhancing private sector investors’ confidence to contribute to such big projects.

Minister Owji said investment was the main element in the development of the petroleum industry.

“One of the first measures taken by the Petroleum Ministry was drawing up an investment plan which showed that we would need at least $160 billion in investment in the petroleum industry over eight years,” he said.

MDP

Eight international companies had prepared a master development plan (MDP) for the development of Azadegan. Except for China’s CNPCI that developed part of the North Azadegan field, others pulled out of Iran due to sanctions. That prompted the 13th administration to go ahead with the project by relying on local knowhow and potential without waiting for international firms.

In the first step, the drilling fleet increased 60%, thereby bringing 20 wells to production. As Minister Owji and CEO of NIOC Mohsen Khojasteh-Mehr have said, completing the development of this field is a priority for the current administration.

Recovery Rate

In addition to development of this field, enhanced recovery from this giant reservoir is also envisaged. Water injection has been suggested as a method for enhanced oil recovery.

About 420 wells are planned to be drilled in the field, 187 of which expected to be used for water injection. That would constitute the largest water injection project in the country.

In order to supply necessary water, a 150-km pipeline will be built stretching from the Persian Gulf. Furthermore, transfer of this amount of oil requires laying 430 km of pipeline.

New Firm Eyed

The banks and companies involved in the MOU are expected to establish a joint company to be named Azadegan Exploration and Production Company (AEPCO), 80% held by 6 domestic banks and 20% by 6 E&P companies. 

AEPCO should invest $7 billion in the development of the field over a seven-year period. As the IPC model is envisaged for this project, AEPCO is not required to provide the necessary investment at the beginning of the project. The client is required to start reimbursing the contractor from the second year of work in proportion to the level of development and production. 

The Azadegan development project is more consequential than all projects handled by former administrations. France’s Total pulled out of the $4.8 billion South Pars gas project after investing only several million dollars, but in the Azadegan project, financing is entirely local.

According to estimates, the project would be yielding about $115 billion by the end of the 20-year time considered for development and production.

This project may create 24,000 direct and indirect jobs in the country.

Improved IRR

Another advantage with the Azadegan project pertains to the internal rate of return (IRR). The banks are also expected to invest in Petroleum Ministry projects. Beforehand, they only allocated facilities to projects.

This project would significantly increase domestic manufacturing potential in oil installations and provide an opportunity to equipment manufacturers and EPD and EPC contractors.

This major investment is entering the most generative section of the economy, which would bring about the highest yield for Iran. Iranian banks’ investment in this project is indicative of supporting domestic manufacturing, particularly knowledge-based job creation.

Courtesy of Iran Petroleum

News Code 461873

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