West Karoun Oil Civilization
Oil is likely to gush out wherever you step. That is the simplest description of potentials and attractions in Wet Karoun oil region in western Iran. Massive oil fields including North Azadegan, South Azadegan, Yadavaran, North Yaran and South Yaran – all shared with neighboring Iraq – are located in West Karoun region. Some experts say, Iran’s new oil civilization will surface in West Karoun.
Petroleum Engineering and Development Company (PEDEC) administers West Karoun oil reservoirs. PEDEC Managing Director Abdorreza Hosseinnejad says 10 billion dollars in investment is estimated to be needed for the full development of West Karoun fields. In an interview with Iran Petroleum, Hosseinnejad explains the latest conditions of West Karoun fields.
Q: West Karoun is always viewed as one of the most important oil-rich regions in the country. The significance of development of the oil fields in West Karoun has been underscored over recent years. Would you please explain about these fields?
A: West Karoun enjoys great potentials and it can cause a revolution in Iran’s oil recovery enhancement. The significance of this oil-rich region is such that the President [Hassan Rouhani] and Petroleum Minister [Bijan Namdar Zangeneh] have designated the development of West Karoun oil fields as the most prioritized projects in Iran’s petroleum industry; however, this oil region has not been handled appropriately in recent years. Major efforts have been undertaken for attracting investment, but no important step has been taken due to certain restrictions.
According to Iran’s Petroleum Ministry’s plans, oil production from West Karoun fields is expected to reach 700,000 b/d in three years. We are trying to realize this objective.
The most outstanding feature of West Karoun fields is low-risk investment. The investment will return in less than three years.
Q: South Azadegan oil field is the most important in West Karoun. What happened after the expulsion of China National Petroleum Corporation (CNPC) following its failure to fulfill its obligations with regard to the development of South Azadegan?
A: CNPC’s several years of foot-dragging on the development of South Azadegan ended in the termination of cooperation with this contractor. Based on new decisions, South Azadegan oil field will be developed by National Iranian Oil Company (NIOC)’s financial assets. In the meantime, Iran welcomes the presence of qualified and committed foreign investors. In the first phase of the development of South Azadegan field, 320,000 b/d of crude will be recovered. For that purpose, 385 wells need to be drilled in this field. So far, 12 wells have been drilled. The initial budget approved for the development of South Azadegan is 500 million dollars plus 500 trillion rials.
After the Chinese contractor pulled out, National Iranian Drilling Company (NIDC) started operating two drilling rigs in this field. Ten more drilling rigs are to be installed in South Azadegan field by the end of July. Since the [Chinese] contractor had not correctly designed processing installations in this field, these substandard designs are being reviewed. So far, costs have been cut by 50 million dollars and this figure is forecasted to rise.
Q: Is South Azadegan field development being awarded to a new contractor?
A: Given the capabilities of NIDC and its affiliation with NIOC and also due to the installation of several rigs in West Karoun, the drilling of 50 wells in West Karoun have been assigned to NIDC. Moreover, a tender bid is to be held for the EPC or EPCF-based drilling of 40 wells in two months.
A tender bid has already been held for the purchase of downhole and wellhead equipment and the contractor for this section of the project will be soon picked. In order to accelerate the development of this field, some necessary commodities are purchased before the tender bid has been held. More than 80 percent of the commodities and equipment needed [for this project] is manufactured domestically and it accelerates activities.
Q: Would you please tell us about South Azadegan’s production capacity and its initial production?
A: This field’s production capacity is 600,000 b/d. In the first phase, it will be producing 320,000 b/d and the rest will be produced in the second phase. The initial production of this field is 50,000 b/d, but it can also produce 60,000 b/d.
Q: What should CNPC do after the termination of the contract?
A: Since the objectives set in the contract have not been realized and due to several years of delay, CNPC has to pay back all it has received. A contractor is paid when the project is done.
Q: Development of North Azadegan field has been also commissioned to CNPC. Would you please tell us about that?
A: The development of North Azadegan is 67 percent complete and the contractor of this field plans to supply the necessary equipment and commodities up to mid-July. We hope that this project will come on-stream next [calendar] year despite more than two years of delay.
The termination of contract with CNPC in South Azadegan field seems to have pushed this [Chinese] company to be more serious in the development of North Aadegan which would add 75,000 b/d of oil to the country’s production capacity.
Q: What are the plans PEDEC pursuing for the second phase of North and South Azadegan fields?
A: For the second phase of North and South Azadegan fields, we will use potential foreign and domestic investors. In the meantime, Petroleum Ministry is working out a mechanism to dip into the National Development Fund (NDF). The petroleum minister has held serious talks with the president and the first vice-president to that effect. We hope that we would reach conclusion in the first half of the current [calendar] year.
Q: What about the development of Yadavaran field?
A: China Petroleum & Chemical Corporation (Sinopec) is the contractor of Yadavaran field which is currently producing 25,000 b/d. Its production is planned to soar to 85,000 b/d in five months. But due to delays in the project, such a target looks unachievable. At present, 49 wells have been drilled with each well’s average production varying between 2,000 and 3,000 b/d.
Q: What about the second phase?
A: We don’t face any serious problem with regard to the second phase of the development of Yadvaran field and by drilling 10 wells; production rate of 85,000 b/d could be achieved.
Due to the possibility of massive oil in place in Yadavaran, PEDEC plans to find a qualified consultant to conduct accurate geological and reservoir studies. It seems that this field could be connected to other fields in West Karoun, including Azadegan.
Q: How much has North Yaran field progressed?
A: North Yaran field has progressed 16 percent, while it was expected to progress 36 percent. We are currently recovering some 3,000 b/d of oil from the first well of this field. A second well is being drilled to increase the production to 5,000 b/d.
North Yaran is being developed by Persia Oil and Gas Industries Development Company. The field will finally add 30,000 b/d of oil to the country’s oil production capacity.
But in South Yaran, we are a bit behind the schedule and we have to take action. Development of this field is 16 percent complete. A contract has been signed with NIDC for 22 wells. A tender bid is also to be held for construction of onshore facilities in South Yaran.
Q: Darkhoein is the sole independent field in West Karoun. Is its development under way?
A: Following the termination of contract with a former contractor due to its financial problems, several domestic and foreign investors have voiced readiness for presence in this project. The total investment needed for this project is 1.6 billion dollars. Only one installment has still to be paid to Italy’s Eni.
Q: What about other priority projects of PEDEC? Would you please tell us about Azar field as well as Omidieh and Goureh storage projects?
A: In Azar field, five wells have been drilled and if the necessary finance is provided, 30,000 b/d could be recovered from this field in nine months. Physical progress in Azar field is 20 percent, below the planned 36 percent. Dana Energy Group, along with its Taiwanese partner, has offered to develop this oil field.
In Omidieh project, we have had 90 percent progress and we are trying to implement this project this year. Omidieh storage capacity may be one million barrels. Goureh storage project is 85 percent completed. Its capacity is four million barrels. We predict to finish this project late this [calendar] year or early next [calendar] year.
Q: Kish gas field development is also a PEDEC priority project. How is work going on there?
A: So far, 600 million dollars has been invested in Kish field. We are planning for the recovery of 25 mcm of gas from this field.
In Kish field, 13 wells have so far been drilled and NIDC is to complete these wells. Earlier, the Kish gas was supposed to be transferred to Siri and then to Assaluyeh. But based on the recent talks between the petroleum minister and Akbar Torkan, secretary of Iran Free Zones Supreme Council, the gas is to be transferred to Goureh (Bandar Aftab) for primary processing before being fed into national pipeline.
The construction of infrastructure for this project like roads and ports has so far cost too much. The developer of Kish has been asked to reduce the number of processing units as much as possible and use new technology for desulfurization.
We are to hold a tender bid for the construction of onshore and offshore pipelines for this project. The necessary electricity is also being supplied by a 25-MW power plant with the cooperation of MAPNA Company.
Kish will produce as much gas as five phases of South Pars gas field. According to Iran’s petroleum minister, the project is expected to come online in October 2015.