New Chance for Investment in Darquain
West Karoun has shot to prominence in recent years in Iran. Located along Iran-Iraq border, this area is expected to form a new petroleum civilization in Iran.
Iran now plans to boost its crude oil production by relying on the 11 oil fields located in the West Karoun area.
Darquain oil field has a major share in West Karoun. Darquain is located in Khuzestan Province, more specifically 45 kilometers north of Khorramshahr and 100 kilometers south of Ahvaz.
Darquain is currently producing 160,000 b/d of crude oil, which is expected to hit 220,000 b/d once its third phase becomes operational.
Darquain was among a group of 49 oil fields Iran has introduced for investment within the framework of the newly-developed oil contract structure – the Iran Petroleum Contract (IPC).
Darquain was discovered in 1964 after the drilling of one exploration well. It is estimated to hold over 5 billion barrels of oil in place, 1.3 billion barrels of which is recoverable. The Darquain oil is light with an API gravity of 39. Darquain supplies oil into Ahvaz-Abadan pipeline.
The investment envisioned for Phase 3 development of Darquain is estimated at $1.5 billion.
In Phase 3 of Darquain, two new reservoirs – Ilam and Sarvak – are planned to become operational. Furthermore, the undeveloped section of the Fahlyan reservoir is also envisioned in this project. Combined water and gas is to be injected into Sarvak and gas alone into Fahlyan.
Other activities required for Phase 3 development of Darquain include the drilling of 31 oil production wells, 6 gas injection wells, ground crude oil processing facilities including pipelines, processing installations, gas compressor stations, and infrastructure including tank farm, repair stations and roads.
Phase 1 and Phase 2 of Darquain have already been developed by Italy’s Eni under buyback deals. One of the best-in-class technologies, i.e. gas production simultaneously with the injection of associated petroleum gas into reservoirs, is currently applied in this oil field.
An agreement was signed with an Iranian consortium for the development of Phase 3 of Darquain in August 2011. That came after Eni decided to pull out of Iran due to the toughening of sanctions on Iran’s petroleum industry. Nonetheless, this consortium failed to develop Darquain and the project is now up for grabs by international investors and companies.
In Phase 1 and Phase 2 development of Darquain crude oil was recovered from the Fahlyan formations. In Phase 3, oil would be extracted from the Ilam and Sarvak layers, too.
Phase 1 of Darquain came on-stream in May 2005. Phase 2 drew an investment of about $1.3 billion, requiring also 7.5 million square meters of demining operations. Phase 2 of Darquain came on-stream in February 2011 with an output of 160,000 b/d.
The timeframe set for Phase 3 of Darquain was five years. Three years have already passed and the field is far from new development. According to plans, in the first stage 14,000 b/d of crude oil and in the second stage 46,000 b/d of heavy crude oil would be produced from the Ilam and Sarvak formations of this field.
Phase 3 of Darquain mainly relies on the heavy crude oil layers of Ilam and Sarvak, as well as the undeveloped sections of Fahlyan. Eni was authorized to conduct feasibility studies on Phase 3. The findings of Eni confirmed the possibility of heavy crude oil recovery from the Ilam and Sarvak layers.
Due to its heavy crude oil reserves, Phase 3 is essentially different from Phase 1 and Phase 2.
To that effect, negotiations with foreign companies and Iranian and foreign consortiums are on the agenda for Phase 3 development.
The recoverable crude oil from the Fahlyan, Ilam and Sarvak is initially estimated at 293 million barrels. The oil produced from Ilam and Sarvak will be gathered in clusters to be moved to new processing units which are independent from those built for Phase 1 and Phase 2. The processing units include separators, desalting facility and stabilization tower.