According to the BP Statistical Review of World Energy 2020, Iran ranks fourth in the world with 156 billion barrels of proven oil reserves. According to the same report, Iran's R/P ratio among the countries of the region and fellow OPEC members is so low necessitating making efforts to pull up the level. Compared to global standards, this situation is mainly caused by the lack of development of the explored fields and the lack of optimal development and production from the fields being exploited.

Previously, developing oil fields and enhancing oil production in Iran was done with a reservoir-oriented approach, but in the new plan pursued by the National Iranian Oil Company (NIOC), oil production has become well-oriented which is economically better and boosts productivity. To recover oil from a new well, an average investment of about $10 million is needed, while in the plan to revive low-yield wells, with an investment of $1 million, a well can become productive; hence it leads to a 90% reduction in the cost of enhancing production level. According to experts, reviving low-yield wells is a shortcut to producing oil, so if only 10% of this project comes to fruition, 8-10% increase in oil production in the country will be achieved, which means an increase of 300-400,000 barrels per day in the country’s total crude oil production capacity.

Making Upstream Oil Industry Knowledge-Based

Currently, the plan to revive low-yield wells is being pursued by the Oil and Gas Innovation and Technology Park (OGITP). According to Mohammad Ismail Kefayati, head of OGITP, any number of companies that participate in this project could be attracted by the Park because it is a great work that can be translated into the onset of turning the upstream sector of oil industry knowledge-based.

In the park, room has been provided for the deployment of knowledge-based companies, and their support with the help of investors, and after obtaining improved output from low-yield wells or oil production from abandoned wells, a part of its revenues will be paid directly to the companies involved in the project. According to the existing demand for investment, it could be argued that such projects have economic justification, to the extent that even if the oil price drops to $20 per barrel, these projects will still remain technically viable.

On the other hand, this process requires 85 to 100 million dollars in capital, which, according to estimates, has full economic justification. The important point is that this process is one of the neglected investment opportunities and has been approved by the Economic Council as a key task in the oil industry. If the forecasts come true, a large supply of this oil will be witnessed within the next two or at most three years. This is despite the fact that even with a 50% success of the project, its efficiency and output will be beyond expectations, even though the type of technology used or the machinery or technical knowledge used in the projects would also matter.

In the process of higher efficiency of wells, a smart approach has been formulated with the centrality of innovation and many simple and complex solutions will be aggregated and presented, and of course, attraction for the entry of knowledge-based companies and financing firms has been provided. So far, following a recall, 48 companies have been registered and admitted.

$700m Credit

Currently, NIOC is primarily pursuing a national project to revive inactive and low-yield wells, known as the Propeller Scheme, which has been approved by the Economic Council and is in the final stages. Provided that everything goes on according to the plan, by September 2022, contracts will be signed with technology and knowledge-based companies in this regard. Activities begin afterwards and this will be the first time in the history of upstream oil industry of Iran that the capacity of technology and knowledge-based companies has been tapped in such a manner. The Economic Council has earmarked $700 million for reviving low-yield and abandoned wells for an annual production of 80 million barrels of oil, and after the recall and through legal procedures, nearly 40 companies have been recognized as eligible, and if their proposed plan is approved technically and economically, contracts will be signed with them for the development of low-yield wells.

120 Low-Risk wells up for Recovery

According to an NIOC announcement, there are 750 to 850 low-yield or abandoned wells in this plan, of which nearly 120 wells have been initially shortlisted because of having a lower risk for recovery. These wells are mostly in the oil-rich fields of the south. After screening, the wells that are easier to recover will be up for grabs for the companies.

The wells introduced in this plan are categorized as easy, medium and hard wells, and for all three categories of wells, a technical and economic model has been developed, each with a different tariff. According to experts, an investment of 7 to 12 million dollars and an average of 10 million dollars is needed to produce oil from a new well, while in the plan of reviving low-efficiency wells, with an investment of 1 million dollars, a well can become productive. This reduces costs by 90%. The financial model for implementation of the project is based on a tariff, and according to the head of OGITP, a specific tariff will be paid for each barrel of oil produced from low-yield wells and according to the classification of the wells.

High-Risk but Economically Justified

Despite the perceived risks, reviving low-yield wells has an economic justification. Considering the enthusiasm of technology companies to participate in this plan and the high demand that other companies have shown to join, it is expected that after signing the contract, the next and new call on companies will be made again for the same purpose. But the selection process of knowledge-based companies in this plan is one of the important issues. According to the officials, all the companies in this project are technological and knowledge-based and are screened with great care. Based on this, any company whose technology has been proven and claimed to be able to revive wells is accepted, unless they are unable to propose a technical and economic plan. Among the companies present in this project, there is an Iranian company, which according to Kefayati, was perceived as possessing the right technology and despite the low tariff, and is interested in participating in the project due to its high attractiveness and economic efficiency. At the same time, an Iranian university has also announced its readiness to revive low-yield wells, and two companies are also working in cooperation with the universities.

It is noteworthy that well production enhancement is one of the fastest and least expensive methods to enhance crude oil production in the world. Basically, methods of improving production are divided into three categories: Well Production Enhancement, Surface Facility Improvement, and Enhanced Oil Recovery; and their implementation period is respectively, at least six months, two years and three years. Well Production Enhancement methods can be implemented in wells that are productive but with low efficiency, as well as inactive wells. Every year, a percentage of the productive wells of NIOC are removed from the production group as inactive wells. Currently, several wells out of the total number of wells drilled by NIOC are classified as shutdown, abandoned and suspended wells and are not productive any more. Low-efficiency and inactive wells of crude oil producing companies are the best platform for researchers and technologists in the field of creating and implementing new well-based technologies, as well as the best opportunity to create start-up and technology and knowledge-based companies in the field of well services.

Courtesy of Iran Petroleum