Iran inks big deals to develop six oil fields

Iran inks big deals to develop six oil fields
Masjed Soleyman field to get a boost in investment. / CC: Tribune Tehran
By bne IntelliNews March 18, 2024

Iran has signed what it calls “the biggest deals in a decade” to develop six oil fields in the south and the west, a week after entering into $20bn contracts to boost pressure in the colossal South Pars gas field, Shana News Agency reported on March 17.

The upstream deals with local private firms, worth more than $13bn in investment, are aimed at expanding Iran’s crude output, which stands at 3.45mn barrels per day (bpd). They were signed during a ceremony attended by First Vice President Mohammad Mokhber and Oil Minister Javad Owji in Tehran.

The oil fields include Azadegan and Masjed Soleyman in southern Khuzestan province, Azar in western Ilam province, and Sumar, Saman, and Delavaran in western Kermanshah province. 

Owji said the contracts would add up to 400,000 more barrels to Iran’s daily crude output.

It is not clear what local technology companies will employ to develop these fields. If domestic companies have the necessary capabilities, the question arises as to why the development of these two highly intricate fields was previously entrusted to foreign oil giants.

Largest investment in Azadegan

The largest among these agreements involves the Azadegan oil field, jointly held by Iran and Iraq, where the “most massive investment” ever made by the incumbent Iranian government is set to occur. 

The National Iranian Oil Co. (NIOC) signed the deal with Dasht Azadegan Arvand Co.. The latter would develop Iran’s biggest oil field with an investment of $11.5bn to crank out nearly 2.6bn barrels of crude in 20 years.

The mega project, among other development plans, includes drilling 357 new oil wells. It is expected to create 60,000 direct and indirect job opportunities in the oil-rich province.

In early February, Owji inaugurated a development project that saw 60 new oil wells operational in Azadegan, adding 50,000 bpd to the field's daily production. Moreover, 180 additional wells are being dug in the mammoth oil field.        

Azadegan, the world’s tenth largest oil field, is estimated to hold around 32bn barrels of crude in place valued at valued at $2.6 trillion. The Iranian segment of the oil field, called Majnoon in Iraq, was once developed by the Chinese state-run oil major Sinopec Corp which withdrew after the US imposed sanctions on Iran in 2018.

Azadegan faces a complex situation as only 6% of its oil reserves can be extracted under normal circumstances. Without the application of advanced technology, 94% of the super-giant oil field’s reserves will forever remain untapped deep within the earth.

In addition to the development of Azadegan, a major project will be launched to transfer water from the Persian Gulf to the West Karun area for injection into the oil field’s oil wells to help boost crude extraction. 

Developing an old-timer

Another agreement, involving the state-owned NIOC and the Sina Energy Development Co., pertains to Iran's oldest oil field, Masjed Soleyman, which commenced crude production 115 years ago and is experiencing a substantial decline in output. Despite still containing some 6.3bn barrels of crude in its reservoirs in place, the oil field requires enhanced oil recovery (EOR) to remain productive.

The 14-year-long deal, worth $260mn, aims to maximise production in the northern wing of the old field where approximately 1.2bn barrels of oil are estimated to lie by extracting 21mn barrels through drilling 15 new oil wells and maintaining five existing ones. It is expected to bring in $1.35bn in revenues. 

The leading Chinese oil firm, China National Petroleum Corp (CNPC), initially took over to boost pressure in the underperforming field but abandoned the project.

Rivalry with Iraq over shared field

The NIOC also entered into a deal with Sarvak Azar Co., handing over the Azar oil field, shared with Iraq, to the private firm for development under a 20-year contract worth more than $1bn to produce 177mn barrels of crude.

The agreement requires the drilling of 19 new oil wells. The project is expected to generate $7bn in revenues for the government and create some 4,000 new jobs for the local community.

The Azar oil field, called by Iraqis Badra, is estimated to hold 4.4bn barrels of crude, mainly heavy, in two reservoirs located 4,500 metres under the ground.

Iran has drawn out 75mn barrels of crude from the joint field while rival Iraq has retrieved around 170mn barrels – twice more than the Islamic Republic.  

Iran had previously struck a deal with Russia's Gazprom for the development of the Azar oil field. However, the Russian energy giant dragged its feet in developing the field for several years, ultimately leading to the cancellation of the contract last year.

Trio to get shot in the arm 

Last but not least was an agreement between the NOIC and the two Iranian firms which saw Well Services of Iran and Petro Iranian Arvand assuming Sumar and two nearby Saman and Delavaran oil fields for development with an investment of $245.

As per the terms of the 20-year deal, the two companies will drill 10 new oil wells across the fields to produce 404mn barrels of oil.

The project aims to ensure feedstock for the Kermanshah refinery and is expected to earn the government $1.6 bn.     

More than 20 years ago, the Iranian Oil Ministry struck a deal to develop the Sumar oil field with Khatam al-Anbiya Construction Co. Nevertheless, the fate of the agreement remained uncertain.

Years later, Iran reached a memorandum of understanding (MoU) with Poland's oil and gas company producer PGNiG to develop the Sumar oil field, but the state-run company suspended its operation in 2018, fearing US sanctions.