Iran is reported to own 159 billion barrels of crude oil in place. Overall, as far as crude oil and natural gas reserves are concerned, Iran holds 431 billion barrels of oil equivalent, ranking first in terms of hydrocarbon reserves in the world. However, due to the impact of sanctions on the economic and management sectors in recent years, Iran’s production and economy, particularly in the oil sector, has experienced tough conditions. In the wake of the US’s unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA), conditions became more difficult.

Iran’s newly appointed Minister of Petroleum Mohsen Paknejad has presented short-term and long-term plans for overcoming petroleum industry challenges. Noting that the Iranian petroleum industry is experiencing a tough time, requiring urgent action and decisive decisions, the minister said: “By operating production preservation and enhanced production projects including completion and operation of wells, overcoming challenges to production and renovation of installations, we intend to enhance oil production.”

He said Iran planned to add 400 tb/d to its oil production up to March 2025.

Solutions

Examining petroleum industry challenges shows that this industry faces a major imbalance affecting energy supply and associated revenue. In order to overcome these challenges, it is necessary for all ministries and organizations to be cooperative with a national view, regardless of sector-wise attitudes.

The main challenges taken into consideration by Paknejad are gas imbalance, challenges and barriers to crude oil recovery in light of global peak, gasoline imbalance, financial shortages in financing upstream oil and gas development projects, and international restrictions. He has insisted on finding proper solutions to existing challenges in the oil and gas sector.

One key point highlighted by Paknejad is the restoration and enhancement of Iran’s crude oil production capacity. After the JCPOA took effect in 2015 with sanctions removed, Iran raised its output to 3.826 mb/d. But after the US withdrawal in 2018 and the restoration of sanctions, the oil production rate declined. Currently, major obstacles to oil exports have been lifted, and Iran can maximize recovery from oil fields. Iran’s output currently stands at 3.4 mb/d.

According to Paknejad’s plan, any delay in implementing oil field development projects and insufficient implementation of plans to preserve production capacity constitute two major reasons behind output fall. Should this trend go on, Iran would see its oil production drop sharply to 2.75 mb/d in four years. That is due to the rising trend of petroleum products consumption, the foregoing production would be enough only for the refining sector and domestic purposes, in which case about 950 tb/d would be left for exports, which would pose serious challenges to Iran’s income generation.

Highlighting the possible problems in the way of the petroleum industry, Paknejad has offered his solutions that would bring Iran’s crude oil production up within four years. Mehdi Hosseini, an energy expert, told “Iran Petroleum” that national development and growth were dependent on the oil sector. “The Achilles’ heel of the Iranian economy and its growth lies in two major ministries. One is the Ministry of Petroleum to become the source of wealth generation and the other is the Ministry of Foreign Affairs to help resolve national issues through diplomacy,” he said. “In case these two ministers can interact and work together effectively, we will subsequently witness good days.”

Hosseini said: “From an expert view, the basic issues highlighted in the minister’s agenda are exactly what we need and we cannot ignore or play down.”

Short and Long-Term Plans

Paknejad has divided his plans into short-term and long-term ones. His short-term (one-year) plans include restoring the production capacity of oil fields through preservation projects. To that effect, he has said: “By making arrangements for the workover of existing fields, acidizing, perforation and injection of solvents into wells with production decline and accelerating production capacity projects, by drilling new wells in the developed fields that are estimated to need $3 billion in investment, we will see the oil fields’ production capacity rise from the current 3.4 mb/d to 3.85 mb/d.”
Another point highlighted in Paknejad’s short-term plans is accelerating production enhancement through agreements signed for improving the production capacity of fields. That involves the development of the South Azadegan, Yadavaran, Yaran, Sohrab as well as Sepehr and Jofair oil fields with a planned 56 tb/d output hike.

Paknejad’s long-term (four-year) plans lay emphasis on output enhancement and preservation. One of the key long-term plans presented by Paknejad is reaching a 4 tb/d output hike by completing IPC agreements for 12 oil fields. This plan mainly applies to agreements signed for enhanced recovery from the Yaravan, Sohrab, Aban and West Paydar, Sepher and Jofair, Shadegan, Kupal, Cheshmeh Khosh, Dalpari and East Paydari fields and the South Pars Oil Layer. The idea is to bring about a 257 tb/d production capacity increase and enhance output by 150 tb/d by full implementation of enhanced output projects.

Paknejad’s next proposed plan is about increasing output by more than 250 tb/d after the development of eight fields: Azadegan, Changuleh, Azar, Band Karkheh, Sumar, Saman, Delavaran and Masjed Soleiman. The objective is to increase output by 700 tb/d with a $15 billion investment.
Another perspective envisaged by Paknejad is to reach the final output of 870 tb/d with a $25 billion investment. To that end, he considers signing agreements for the development of 14 oil reservoirs. His plan involves enhanced recovery from the Yadavaran, Dehloran and Danan, Esfandiar, Ab Teimour (Bangestan), Mansouri (Bangestan), Ahvaz (Bangestan), Maroun (Asmari and Bangestan layers), Gachsaran, Bibi Hakimieh, Susangerd, Darquain and Abuzar oil fields.

Touching on Paknejad’s emphasis on enhanced oil recovery, Hosseini explained:“As far as developing oil fields is concerned, we should take into consideration several points. First and foremost, we have 1.8 mb/d of oil production projects that need to be implemented to bring our output to nearly 5 mb/d. These projects were adopted years ago and we’re still waiting for them to come online. However, I think that comparing our reserves with other countries, such an increase would be meager. Expert work has been done on this issue.”

“Another issue highlighted in Mr. Paknejad’s plans is to preserve our production capacity. We have big fields whose output is falling. Such massive fields as Ahvaz, Aghajari, Gachsaran, Maroun, and Bibi Hakimeh have been active for years and they are now on the decline. Therefore, we need to apply new technologies to keep this decline in check and maximize output for coming years,” said Hosseini.

Oil Installations Renovation

Another issue highlighted by Minister Paknejad pertains to the renovation of surface installations, which the minister estimates to require $17.5 billion in investment. Regarding this plan, the minister has said: “Given the aging installations of the petroleum industry, to boost crude oil production stability and upgrade the safety and performance of these installations, projects related to renovation, optimization, and reparation of existing offshore and onshore installations need to be drawn up.”

Another perspective considered by Paknejad has been investment in oil and gas production preservation. National Iranian Oil Company (NIOC) is forecast to need about $124 billion in financial resources over eight years for implementing development projects and preserving oil and gas fields’ output. Such investment may be provided through money and capital markets, the National Development Fund of Iran (NDFI), and investment agreements. Paknejad hopes for an $80 billion investment in this sector over four years.

Technically speaking, Hosseini said, Iran’s proven oil reserves add up to 600 billion barrels in place. The rate of recovery with old technologies and methods is 23-25%. “We can recover 150 billion barrels of crude oil and the rest would lie underground,” he said, adding: “If we can acquire modern technologies and increase our recovery rate to 35%, we would have added about 60 billion barrels, worth $6 trillion, to our national production and wealth. Therefore, one necessity would be to use new technologies to reach new oil and gas production capacity and finally export crude oil or petroleum products as I mentioned, we have defined projects for them.”

Foreign Investment Absorption
Paknejad has also laid emphasis specifically on awarding more agreements for upstream development projects, improving procedures for accelerating implementation, and completing projects underway. Therefore, attracting foreign investment by making investment in the oil and gas sector more attractive and agility of the structure of NIOC and its subsidiaries should be prioritized.

Increasing oil exports was another issue that Paknejad deems to be a must, and dependent on increased cooperation with target countries, including neighbors. Detailing this objective, he said: “In parallel with boosting diplomacy and enhancing cooperation with target nations and attracting necessary investment for oil and gas field development, NIOC should pursue the issue of oil and petroleum product exports. To that end, it is necessary to continue and expand cooperation with the traditional and current buyers of Iranian oil and petroleum products, negotiate with refinery owners, and present diverse packages to them, reimbursing costs spent on field development in the form of products and benefiting from the potential of private companies and other state organs for increased export.”

The Ministry of Petroleum is also expected to focus on increased international interaction and transfer of technology. Amid the expansion of the 4 th Industrial Revolution in the world, its main functionalities, particularly AI technologies, should be considered for use in the oil and gas industry. Highlighting the necessity of investment attraction, Hosseini said: “The main challenge in the way of our plans is investment. For each barrel of oil capacity building, we need a $20,000-25,000 investment. We need a big investment. The other issue is access to technology. We need modern technologies to preserve production and our potential in the oil and gas sector using modern technologies. Our existing equipment and technologies are outdated and they need to be upgraded and modernized.”

“Meantime, we need to develop new methods of recovery. Both of these issues are subject to sanctions. In the meantime, some conservative approaches in industrial management are putting a bake on our move. Our managers should freely make expert and specialized decisions,” said Hosseini.
He said the issue of sanctions should be resolved in the shortest possible time, for which there are fruitful solutions. “Through legal channels and by filing lawsuits with The Hague court, Security Council, and other fora, we may take action against these sanctions. Expert studies show that we may resolve the issue of sanctions in this way. Another issue is that our oil and gas industry is attractive to Western and particularly European buyers both geologically and in terms of low costs,” he said. “Therefore, we can introduce this attractiveness inside a country like the US and convince legislators in that country to make efforts to defeat sanctions. It is noteworthy that we have already tested this solution which has proven to be fruitful.”

Regarding the attraction of investment, Hosseini said: “Finally, by resolving the issue of sanctions, we will bring in significant investment. Even under sanctions, we can attract investment by promoting Iranian oil and gas attractions. Then, we can find access to state-of-the-art technology and implement enhanced output plans at an acceptable pace.”

Paknejad has also outlined the challenge of tough imbalance, saying: “Fuel production and consumption imbalance is a key element of imbalance challenge. It has wasted our national wealth specifically in gasoil and gasoline. Therefore, the possible solution for this sector is to resolve the issue of gasoline imbalance. Any decision on this subject must be taken with maximum sensitivity and after winning public confidence by using legal capacities.”
As has been specified in Paknejad’s plans, the main plans of this ministry are based on using Iran’s potential and capacity for production, which requires attracting more investment. Therefore, this ministry and other related organs must familiarize investors with the attractions of this sector and practice more interaction with other countries, particularly neighbors, to revive Iran’s valuable resources and benefit from its full potential for economic growth and upgrading Iran’s status.”

Source: Iran Petroleum