Page 4 - MEOG Week 27 2022

MEOG COMMENTARY MEOG

Iran signs deal to fund Azadegan

expansion as it slashes OSPs

Iran has signed a deal with local banks for funding to expand output from the country’s
largest oilfield as traders say Iranian crude prices have been slashed to remain competitive.

IRAN THE National Iranian Oil Co. (NIOC) has NIOC’s subsidiary’s responsible for the field,
signed a deal with a group of local banks, oilfield Petroleum Engineering and Development Co.
developers and the National Development Fund (PEDEC) and Petropars, kicked off a 10-well
WHAT: of Iran (NDFI) to provide $7bn to expand capac- drilling campaign at South Azadegan in March.
Tehran has signed an ity at the supergiant Azadegan oilfield. North Azadegan is further behind in its
MoU for the financing The deal was announced shortly after Oil development having entered production in 2016.
and development of its Minister Javad Owji took to social media to say While the Ministry of Petroleum (MoP) had
Azadegan expansion that the field, Iran’s largest, would likely surpass previously set a target of 320,000 bpd for the first
project. output expectations. phase of South Azadegan by March 2023, with a
Meanwhile, traders have been quoted saying second development phase seen adding another
WHY: that the price for Iranian crude has been heavily 280,000 bpd, NIOC’s director of corporate plan-
The field is Iran’s biggest discounted to ensure parity with Urals flows. ning Karim Zobeidi said in May that output
and output is seen from the two fields would reach 220,000 bpd by
increasing from 190,000 Azadegan agreement that date. The latter figure was reiterated in this
bpd to nearly 600,000 On July 6, state media showed images of NIOC week’s announcement.
bpd as part of a wider CEO Mohsen Khojastehmehr signing the mem- Khojastehmehr said that the financing would
output expansion push. orandum of understanding (MoU) with officials cover plans to expand total output to 570,000
from a group of undisclosed financiers, accom- bpd, though Owji noted: “As an expert in oil and
WHAT NEXT: panied with comments from Owji who outlined gas reservoirs, I say that considering the high
As it increases plans for the expansion of Azadegan’s produc- capacity of this field, it is realistic to expect a pro-
production, Iran is likely tion capacity. duction level of over 590,000 bpd from this field.”
to have to undercut Home to around 32bn barrels of oil in place This figure has not been mentioned elsewhere,
competitors for market (OIP) across the Sarvak, Kazhdomi, Godvan though [it] is broadly in line with the original
share in Asia unless talks and Fahilan layers, Azadegan is Iran’s largest oil- target for the field.
in Vienna bear fruit. field and is split into two development projects The MoU follows comments by the NIOC
– south and north. The giant reservoir is shared head in May, suggesting that a contract for the
with Iraq, where it is known Majnoon (Insane) expansion of the two fields would be awarded
on account of its size. “to a consortium comprised of exploration and
Despite its great potential and nearly 200 production companies” in which each would
wells having already been drilled on the south- have an equal share. “The final contract is not an
ern site alone, recovery factors across the asset exclusive deal and we do not intend to award the
have slowed progress, with primary recovery on field to just one or two companies, but it will be
the Sarvak layer, which covers around 90% of the awarded to all of them,” Khojastehmehr added.
field’s reserves, just 5.1% in the south and 4.5% in Owji declared that the NIOC had negotiated
the north, according to NIOC. Secondary recov- with “five or six companies, a large domestic
ery rates are around 10% and 2.5% respectively. bank and the NDFI for an investment of $7bn
While the development of Azadegan has pre- […] according to the planning, many wells are
viously been split between the north and south going to be drilled in this field.” NIOC said that
projects, NIOC said that the agreement pertains a total of 420 production and injection wells
to the whole field. would be drilled with the project including the
Project tracking data compiled by Middle construction of five manifolds and the installa-
East Oil & Gas (MEOG) shows that South Aza- tion of 315,000-320,000 km of pipelines.
degan was running at 140,000 barrels per day
during 2021, with North Azadegan flowing at Funding frustrations
around 75,000 bpd. The Oil Minister told local media over the
However, Owji and Khojastehmehr both said weekend that the industry had previously failed
total output is currently in the region of 190,000 to invest in development projects due to US
bpd, suggesting that North Azadegan’s produc- sanctions.
tion has been constrained. “Unfortunately, in recent years, we have not

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