Iran Oil Civilization in West Karoun
North Azadegan Development Manager
It is a great pleasure that after years of making efforts, we have reached a point where we can speak about West Karoun civilization. Work started in West Karoun oil civilization from South Azadegan field. But the first contracts were signed for the development of North Azadegan and Yadavaran fields.
Challenges
Development of North Azadegan, which is the last buy-back contract in Iran, was assigned to China's CNPCI when Iran was under sanctions. The project faced numerous challenges which led to delays in the development of the field. The primary challenge was the location of the bulk of the field in Hoor al-Azim Lagoon. It took more than one year to get permit from the Department of the Environment (DOE). But that was not the end of the job because the project was halted on numerous occasions by the DOE under different pretexts. The contract got frustrated with these issues.
Cluster Drilling
A total of 58 wells were drilled for the development of North Azadegan field. They include 50 wells envisaged for production. The remaining 8 wells are for enhanced oil recovery (EOR), improved oil recovery (IOR) and waste disposal. Notwithstanding certain problems pertaining to drilling operations, we are happy with the project as drilling was over after one year and a half by two Iranian and one Chinese companies. Meanwhile, more than 67% of drilling operations were conducted by Iranian contractors.
I have to recall that drilling operations in North Azadegan had their certain characteristics. Due to the location of the bulk of this field in Hoor al-Azim field, we were deep 4 to 5 meters in water in certain spots. Due to necessity of observing environmental considerations, cluster drilling was conducted in order to spare the lagoon any harm. In fact, 58 wells were spudded in 21 drilling basins.
Another point with drilling was the utilization of a new system for moving derricks. Since pony base system could not be effective in this area, Iranian engineers managed to design and manufacture automatic system for moving heavy onshore drilling rigs.
Technical Specifications
The contract for the development of North Azadegan field is a buy-back one (buyback, 2nd generation). It could be even referred to as the third generation buyback due to changes in the financing clause. This contact was an open tender deal aimed at producing 75,000 b/d of oil in the first phase. The API gravity of oil in this field varied between 17 and 19. In addition to crude oil, 35 mcf/d of gas was also recovered from the first phase of this field.
The operator of this field is Arvandan Oil and Gas Production Company and reimbursement will be carried out during a period of 4 to 6 years. Due to policies of the Ministry of Petroleum we had no early production at North Azadegan field.
2nd Phase Development
Development of Azadegan field was foreseen in two phases. Under the contract, the second phase is also up to the contractor of the first phase. But the Chinese contractor has to submit his proposal first to win approval before starting the second phase development.
For the second phase development too, a buyback contract is envisaged with a production target of 75,000 b/d. Since we had no early production from North Azadegan there is no precise information available about the behavior of the reservoir and the production of wells. The contractor has submitted a conservative proposal for the second phase development, including 25,000 b/d output and a high price. This proposal has not been accepted by senior Iranian officials.
Relying on the experience of North Azadegan field and the lifting of international sanctions, a lower price should be suggested. If the Chinese contractor pulls out of the second phase development, we will be able to put the development of this field out to tender under new-style oil contracts.
I also highlight the government's support for the development of this project, which resulted in a faster achievement of the objective. The government's support for such projects must be target-oriented, regulatory and facilitative. In the future, after the new model of oil contracts enters into force, the government's role will be very influential.
Of course when the contract was being signed for the development of North Azadegan field, the government's policy was based on foreign investment, and due to international sanctions against Iran's petroleum industry Chinese contractors were hired. Due to their inexperience in this sector, the Chinese contractors acknowledged that their technology would be less advanced than the technology of American and European companies. Having known all this, we signed the contracts for the development of North Azadegan and South Azadegan oil fields.
Irrespective of all problems, we are finally happy with the performance of the Chinese contractor because they finished the job. We are happy because Chinese companies willing to work with us in this sector need to boost the level of their technology to reach to that of international firms. We have many choices and they will need to prove their capabilities to win projects in Iran.
Another plan we pursue in the development of North Azadegan field for the objective of development of technical knowhow in the country is to apply the latest achievements in subsurface studies and smart assessment of reservoirs. We invited top professors from US and Europe and held regular training courses in Iran and we trained our manpower at Petroleum Engineering and Development Company (PEDEC) in order to hire them in this project.
Outstanding Features
One of the outstanding features in the development of Azadegan field is that the entire CPF is seen from one spot despite limited space. The sections separating oil, separating gas and water, desalting, gas and GTG (power plant) are planned next to each other. All safety considerations have been taken into consideration and we have had 40 million hours of work without any life-threatening or mutilating incident. The processing plant of this project was built based on the state-of-the-art technology with a capacity of 82,000 b/d. We will develop it in the second phase.
More than 230 kilometers of drilling have been done in this project while 5,000 buttresses have been installed. The capex for foreign investment is $2.55 billion and we will not exceed the capex.
I also refer to PEDEC public interest projects. First local manpower has been hired within the framework of job creation policy. The contractor has been tasked with providing its required manpower at 80% from local residents.