Focus on Raising Production From Five South Pars Phases

EghtesadOnline: South Pars Gas Field's development phases 17-21 will add more than 150 million cubic meters per day of gas from the giant offshore field when fully operative, said the CEO of National Iranian Oil Company, Ali Kardor.

News ID: ۷۴۱۸۹۷

03 June 2017

"We are now witnessing completion and operation," Kardor said, referring to the five phases inaugurated in April, according to a transcript Shana published of an interview by Iran Petroleum, Platts reported Tuesday.

In a separate Shana report, Iran Petroleum put South Pars' current gas output at 540 mcm/d, up from 280 mcm/d in 2013, when Hassan Rouhani first became president.

Development of the field started 15 years ago and has accelerated under Rouhani's administration, Financial Tribune reported.

To date, eight new South Pars phases have been brought on stream. Rouhani was reelected on May 19 for a second term. Project phase 12, hailed as the largest in Iran's history, as well as phases 15 and 16, were completed earlier.

The Oil Ministry has assigned top priority to the development of South Pars, which has gas reserves estimated at about 51 trillion cubic meters. The Persian Gulf field extends across Iran's maritime border with Qatar.

"After the new administration took office, oil prices had fallen, we were under sanctions and our oil export rate had declined. Therefore, NIOC's financial resources declined sharply and we could not develop all phases together," Kardor said. "Had we done so, none of these phases would have reached production."

Financial resources were allocated first to projects that had progressed the furthest so that they could start production faster, he added.

Funding Constraints

Funding was a serious obstacle to development, Kardor said. With sanctions still in place, about $3 billion in financial guarantees were extended to contractors by the National Development Fund of Iran to enable South Pars development work to proceed.

Total development costs for phases 17-21 was around $18 billion: nearly $7 billion for the combined phases 17 and 18, $5.5 billion for phase 19 and $5.3 billion for the combined phases 20 and 21, he said.

Each new South Pars phase will raise GDP by 1%, Kardor estimated, adding that incremental South Pars gas supplies would displace liquid fuels, allowing the country's oil exports to rise.

"Any delay in bringing these phases into operation means funneling profit into Qatar's market," he said.

Foreign Funding

The lifting of economic sanctions in January 2016 after Iran signed a nuclear deal with the six world powers sped up South Pars development by enabling Iran to import essential equipment that had been impounded in European countries and the UAE, Kardor said.

He added that long-term reliance on the National Development Fund of Iran for finance would be unfeasible.

"Reliance on the NDFI is not a long-term and defendable approach. These resources will help the development of jointly owned fields until the way is cleared for attracting foreign investment," he added.

"NIOC is trying to come up with ways to attract overseas investments in order to reduce dependence on domestic financial resources. This company is facing numerous financial bottlenecks. To handle projects under such circumstances we need to develop skills to attract foreign investment and apply creative methods," he said.

On the development of offshore North Pars gas field, Kardor said it was a project for future development as the field lay entirely within Iran's territorial waters. However, North Pars gas could be used to make up for any production shortfalls in the event of a decline in reservoir pressure, he added.