Tehran-Jakarta to Broaden Oil Ties
Indonesia is a longtime buyer of Iran's liquefied petroleum gas (LPG) and crude oil. For the first time since the removal of sanctions on Iran, an Iranian oil tanker recently headed to Indonesia for the delivery of an oil cargo.
Indonesia's deputy minister of energy and mineral resources Arcandra Tahar and Indonesia's Pertamina upstream director Syamsu Alam met with Iran's Minister of Petroleum Bijan Zangeneh in Tehran in late February. They stressed the need for oil cooperation in the two sectors of crude oil and petroleum products trading and the Indonesians' possible contribution to the development of oil fields in Iran.
After the meeting in his office, Zangeneh told reporters that Iran and Indonesia had been broadening their relations particularly in the energy sector following the implementation of the Joint Comprehensive Plan of Action (JCPOA), the official name of Iran's nuclear deal with six world powers.
The Iranian minister said Indonesia was among big markets in Southeast Asia in crude oil and LPG, noting that this issue could not be ignored by producers of oil and oil products.
Zangeneh said Indonesia had started buying crude oil and LPG from Iran for the first time since the sanctions were lifted, adding that each phase of South Pars gas field could produce 500,000 tons of LPG to be exported.
Currently, more than 90% of Iran's population is covered by gas supply network; therefore, LPG is no longer profitable on domestic market. That indicates shift to exports.
Regarding the volume of oil Indonesia had purchased from Iran, Zangeneh said: "For the time being, Indonesia has not made any commitment about the volume of oil purchase. They have now imported a one-million-barrel cargo from Iran and as they say if they see it proper to their refineries they will keep purchasing from Iran."
"Although Indonesia is a producer it is a net importer of oil and LPG. Therefore, this country can be a new oil market for Iran," said the minister.
Indonesia Willing to Develop Iran Oil Fields
But the grounds for cooperation between Iran and Indonesia are not limited to the purchase of oil cargoes. Zangeneh said Iran was willing to see Indonesian companies contribute to the development of oil fields particularly in enhancing their recovery rate.
Recently, National Iranian Oil Company (NIOC) and Pertamina signed a memorandum of understanding to study development of two operating fields – Ab Teimour and Mansouri – in southern Iran. To that effect, Zangeneh said: "Pertamina has submitted its technical proposals on manner of enhancing the recovery rate and crude oil production capacity in these two fields along with initial estimates about costs based on data it has received from Iran."
A team of experts from Pertamina is expected to visit Iran in the near future, Zangeneh said, adding: "Until that time, Iran will be studying Pertamina's proposal for the development of Ab Teimour and Mansouri fields. After the conclusion of technical issues we will enter financial issues."
Pertamina Completes Studies
Gholam-Reza Manouchehri, deputy managing director of NIOC, who was also present in the meeting, told reporters that Pertamina had accepted to be involved in the development of oil fields in Iran under 20-year new-style oil contracts.
"Six months after signing the MoU and receiving information from National Iranian South Oil Company (NISOC), this Indonesian company conducted good studies on Ab Teimour and Mansouri fields and it has presented its pre-MDP in two books," he said.
According to this pre-master development plan, the number of wells in Mansouri field will rise from the current 81 to 365, while its recovery rate will jump to 14% from the current 2.35%.
Moreover, oil production will rise from the current 65,000 b/d to 365,000 b/d over a 13-year period.
Regarding the plan for the development of Ab Teimour field, Manouchehri said: "The number of wells in this field will increase from the current 50 to 257 and the field's total output which has now reached 334 million barrels will reach 1.696 billion barrels. The rate of recovery will rise from 2.27% to 12%."
In that event, oil production capacity in Ab Teimour field will reach 300,000 b/d, he said, adding that the field would have an output of 205,000 b/d during an eight-year period.
Manouchehri referred to the use of electric submersible pumps (ESP) for artificial lifting, downhole measures like acid fracturing and water injection as methods which Pertamina would apply to enhance the rate of recovery in Mansouri and Ab Teimour fields.
According to Manouchehri, Pertamina's technical and economic analysis including proposals for investment and operation costs about Ab Teimour and Mansouri fields would be assessed by NIOC, Reservoir Engineering Committee and Technical Review Committee.
"In the light of good relations between Tehran and Jakarta, in case these proposals turn out to be attractive, negotiations with Pertamina will continue," said Manouchehri.
He highlighted Pertamina's willingness to operate projects in Iran's upstream oil industry and its endowment with improved oil recovery (IOR) and enhanced oil recovery (EOR) technologies, saying: "All these issues encourage us to push ahead with our negotiations with Pertamina. But the final decision for signing an agreement lies with the Ministry of Petroleum and the government."
Manouchehri said even under new-style oil contracts, oil fields would be put out to tender.
"However, it is possible that we award one of these fields through negotiations," he said.
Foreign Firms Bidding for Ab Teimour, Mansouri
In addition to Pertamina, Russia's Lukoil has also signed an MoU with NIOC to conduct studies on the development of Ab Teimour and Mansouri fields.
"Therefore, in order to choose one or two international companies to develop these two fields there is a competitive environment," said Zangeneh.
He said that Denmark's Maersk has offered to develop Ab Teimour, adding: "We cannot tell companies that want to develop these fields to form partnership because their proposals are often basically different. Therefore, there must be competition."
Talks with Total Continue
Regarding claims by some foreign companies about slowed negotiations with Iran, Zangeneh said: "No company has slowed down the talks, but the French company Total has said it will make its final decision when the fate of contracts would be decided from the viewpoint of sanctions or the European Union's way of support."
He said that negotiations were still under way with Total for the development of Phase 11 of South Pars gas field.
"Of course Total is currently conducting preliminary activities for the construction of jacket and the platform jackups," he added.
Asked when Iran would hold a tender for oil projects, Zangeneh said: "The tender for Azadegan oil field has almost started, but our tenders are limited and they will not be public and we will invite only a limited number of companies."