26 November 2023 - 12:44
  • News ID: 633632
New contractual framework for low-yield wells

The average output of Iranian oil wells is 1.55 tb/d. Since the bulk of oil wells in Iran have already reached the second half of their lifecycle and would continue to see their production fall, the National Iranian Oil Company (NIOC) decided in 2021 to engage local technological companies to rehabilitate shut-in and low-yield wells. Amir Moqiseh, NIOC’s deputy director of investment and business, has said rehabilitation of each well would require $1 million, adding that a new model of contract, similar to the “Iran Petroleum Contract” (IPC), has been designed for low-yield and inactive wells.

Iran’s oil production capacity has reached 4 mb/d. Currently, 64% of Iranian oil wells are running without applying mandatory production cuts. According to NIOC data, 1% of wells are under workover, 18% are shut in, 2% remain suspended and 15% are mothballed.

Ali Barati, NIOC deputy director of supervision on oil and gas production, said about 15% of current oil wells could be rehabilitated. He added that rehabilitating low-yield wells would raise average output in coming years.

Mohammad Esmaeil Kefayati, the director of Petroleum Industry Innotech Park, said when the idea of rehabilitating low-yield wells was brought about two years ago, many were quick to think it was impossible.

“But today, we see that in light of NIOC’s reliance on local researchers and knowledge-based companies, it has become the largest knowledge-based project in Iran’s petroleum industry,” he said. “In our view, if we can rehabilitate even a single well, it would be a breakthrough. But we think numerous wells could be rehabilitated.”

Rehabilitation candidates were screened and finally, 100 oil wells were shortlisted and introduced to knowledge-based companies.

Referring to processing and transport facilities near low-yield oil wells, he said: “As soon as oil production increases by these wells, the extra output would be soon consumed locally or exported.”

NIOC would first introduce oil wells destined for rehabilitation to technological companies and then Innotech would agree with knowledge-based companies for rehabilitation agreements.

So far 8 agreements have been signed for the rehabilitation of low-yield wells, three of which have come into effect. Recently, 9 more low-yield wells were put out to tender for rehabilitation by knowledge-based companies.

Attractive project

Moqiseh said rehabilitation of low-yield oil wells was attractive to technological companies. That is why they have offered their bids during NIOC’s four foreign licensing rounds.

Currently, 4,000 oil wells are producing oil in Iran. In the first phase of rehabilitation, NIOC studied 750 wells, only to conclude that 100 wells could be rehabilitated.

The average investment envisaged for rehabilitating each well is $1 million. Moqiseh has estimated that the rehabilitation of 750 wells would earn Iran $3 billion in revenue.

How are contracts signed for rehabilitating low-yield and shut-in wells? Moqiseh said this contractual framework is the first VC in the upstream oil industry with no role for NIOC in designing the details.
He said that the Economic Council had envisaged good support for technological companies operating such projects, adding that figures may be revised to raise wages based on oil price hikes.

The economic and technical model is up to NIOC. The Directorate of Investment and Business is tasked with drawing up the text of the contract, while the Directorate of Supervision on Production is in charge of technical issues. Meantime, steering the project is up to Innotech.

Barati said the new contracts represented a good chance for Iranian technological companies because scientific centers have been developing technology for years, but nothing is seen in the petroleum industry. He added that knowledge-based companies were facing an exceptional opportunity.

One reason why NIOC is seeking to benefit from the capacity of knowledge-based companies is to use their creativity and innovation in rehabilitating low-yield and shut-in wells.

“Knowledge-based companies are not supposed to pursue the same old method. They can apply modern and creative methods to reach their production target while cutting expenditures,” he said.

Wells up for rehabilitation

During a national event held on 2 October in Tehran, production oil companies including Arvandan Oil and Gas Production Company (AOGPC), Iranian Central Oil Fields Company (ICOFC), National Iranian South Oil Company (NISOC), and Iranian Offshore Oil Company (IOOC) offered details on their subsidiaries as well as active and shut-in wells. They also noted challenges technological companies would be faced with in dealing with these wells.

Issa Nobari, head of research and division at AOGPC, said the recovery rate of the Sarvak reservoir of the Azadegan oil field stood a 4.4%.

He enumerated challenges lying ahead with regard to asphaltene sedimentation in well columns, reservoir pressure fall-off, and the impossibility of artificial lift in wells, adding: “In case modern technologies are used in low-yield wells of AOGPC, we will reach significant output hike. For instance, Well No. 100 started production in 2020, but it quickly experienced a pressure fall-off and low yield. The well is expected to see its output rise 300% if appropriate technology is applied.

AOGPC is in charge of West Karoun fields. Its recoverable oil reserves stand at 8.3 billion barrels and it aims to reach 900 tb/d output. In West Karoun, Darquain, South Azadegan, North Azadegan, Yaran, and Yadavaran are either operational or under development. The Jofair, Sepehr, Susangerd, Band Karkheh, Sohrab, and Arvand are undeveloped, while exploration wells have been drilled in the Omid, Moshtaq, Khorramshahr, Minou, Arman, and Mehr fields.

Saeed Attari, director of production engineering at IOOC, said the company was administering a total of 757 wells, including 638 oil wells, 54 gas wells, 63 water injection wells, and 2 gas injection wells.

He said that IOOC had 18 wells up for rehabilitation, noting that formation damage and weak reservoir rock were among the main problems.

IOOC is currently active in the Bahregan, Kharg, Lavan, Siri, Kish and Qeshm areas. It runs 123 reservoirs and 51 fields.

The representative of NISOC said the company had a total of 4,000 wells, including 3,000 active wells. He said that 2,250 wells were producing oil, adding that the NISOC was supplying 3 mb/d of oil.

NISOC runs 41 oil fields and 17 independent gas fields. It accounts for 80% of oil and 16% of gas production in Iran.

Iran Petroleum

News ID 633632


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