Increasing Recovery Factor Key to Higher Oil Revenues

EghtesadOnline: Iran will miss out on substantial revenues from oil and gas fields unless it raises the rate of recovery from its underground hydrocarbon reservoirs with the help of advanced technical know-how, the former head of a committee responsible for designing the new Iran Petroleum Contract said.

News ID: ۷۴۲۷۸۲

16 July 2017

"The average rate of recovery from Iran's oilfields, standing currently at 24%, should reach 60%, otherwise the neighboring states will grab the lion's share of the revenue from the joint fields," Seyyed Mehdi Hosseini was also quoted as saying by Mehr News Agency on Saturday.

Pointing to the neighboring countries' substantial investments in joint oil and gas fields, Hosseini said, "Should we fail to implement enhanced recovery methods to increase production, especially in shared fields with Arab neighbors Iraq and Qatar in the south and southwest respectively, we will lose a huge source of revenue."

Reportedly, Iran's in-place oil reserves are estimated at 800 billion barrels. Raising the recovery rate by merely 1% is equivalent to adding 8 billion barrels to production, which would generate $400 billion at a rate of $45 for each barrel of oil, according to Financial Tribune.

Hosseini pointed to oilfields that are past their peak production, stressing the need to implement enhanced oil recovery techniques to draw the most from crude reservoirs before their permanent decline.

Dire Need

Criticizing those who believe oil initiatives should be developed only with the help of domestic expertise and foreign oilfield service companies ought to be used only in necessary cases, Hosseini said, "Such firms do not normally invest in projects, yet presently Iran's oil sector is in dire need of heavy investment. Moreover, most service companies are subsidiaries of multinationals, which have access not only to cutting-edge technology but also to unlimited financial resources."

According to the official, even if Iranian engineering firms were equipped with the much-needed know-how, they would require a financier to meet their financial needs.

Asked about domestic companies' role in deals concluded under the IPC framework, he said international energy giants like France's Total, Italy's Eni and the Anglo-Dutch Shell are obliged to meet at least 51% of their equipment needs through domestic manufacturers.

"Based on the IPC model, foreign firms are required to work alongside domestic companies and gradually hand over their cutting-edge drilling and exploration know-how to their Iranian partners," he said.

"Joining hands with energy giants provide our experts with a unique opportunity to update their knowledge."

Hosseini noted that complying with international standards helps strengthen Iran's position in global energy markets.

Developing Gas Sector

The official also opined that developing natural gas industry and making Persian Gulf littoral states depend on Iran's gas reserves will definitely help reinforce the country's influence in Middle East states that need Iran's gas reserves.

"Developing liquefied natural gas plans can change the country into not only an energy hub but also a key player in the region to affect gas prices," he said, stressing that as a result, Iran's political strength will grow and more states will defend their rights and stand up for them in international disputes. Iran holds the world's largest natural gas reserves after Russia.

Energy experts believe the LNG industry provides the means of entry to further markets, access to which would not be feasible through pipelines.