Friday, March 21, 2025
Iran signed $17 billion in contracts March 8 to implement a pressure-boosting project at the South Pars gas field, an effort to reverse the impending decline in output from the field and prevent further winter heat and power disasters such as the one the country is now undergoing. But the contract won’t produce more natural gas until at least March 2029, so Iranians will likely face four more winters with too little natural gas to fill all the demand for home heating, electricity generation and industry.
The government’s solution this winter has been to slash supplies going to industry, idling many manufacturing plants, in order to fill heating needs and electricity demands. It has also frequently closed schools and government offices to lower demand for heat and power. But there are reasons to believe the Iranian contractors do not have mastery of the technology required to do what they are being hired to do.
The agreement was signed between the National Iranian Oil Company (NIOC) and four domestic firms: Petropars; Khatam al-Anbiya Construction Headquarters (part of the Pasdaran); Oil Industries’ Engineering and Construction Co. (OIEC); and MAPNA Group. The project aims to compensate for pressure declines, maintain maximum gas production, reduce imbalances in gas and gasoline supply, and prevent gas migration to Qatar from the field, which is shared between the two countries.
At the signing, no one announced where Iran would obtain the $17 billion needed to finance the giant project. According to the project plan, the South Pars field will be divided into seven pressureboosting hubs, each requiring the construction of approximately 60,000 tons of structures. In total, 420,000 tons of infrastructure will be built, with 70 percent of the necessary materials sourced domestically.
Oil Minister Mohsen Paknejad, speaking at the signing ceremony, said the country aims to increase raw gas production to 1.34 billion cubic meters per day by the end of the program. Achieving this target requires both the development of new gas fields and maintenance projects to prevent production decline. Iran’s current natural gas output stood at 870 million cubic meters per day in the month of Bahman (January 20 through February 18), mostly from South Pars.
So, the goal for South Pars alone would represent a growth of 54 percent. Dalga Khatinoglu, an Azerbaijani who writes on energy issues for many news outlets, writes for Iran International that this project doesn’t have good prospects. Notably, he reports, these same four Iranian businesses signed a similar agreement a year ago, but for undisclosed reasons, a new contract has now been signed.
The shared field with Qatar, which holds 14 trillion cubic meters of gas reserves on the Iranian side, has entered the second half of its lifespan and has been experiencing pressure and production decline since last year. Without the installation of pressure-boosting facilities, its output is expected to drop by 10 billion cubic meters annually, unable to meet even domestic needs, Khatinoglu reports. Previously, France’s Total, China’s CNPC, and Iran’s Petropars had signed a $5 billion contract to develop Phase 11 of South Pars and install a pressure boosting facility.
However, after Donald Trump withdrew from the JCPOA nuclear deal in 2018, both Total and CNPC abandoned the project. That left Petropars solely responsible for the development. Consequently, Phase 11 of South Pars currently produces far below the targeted 50 million cubic meters, as the Iranian company has failed even to drill the necessary wells, Khatinoglu wrote.
In the past decade, Petropars also developed Phase 12 of South Pars, aiming for 85 mcm/d production capacity. However, a confidential document from the National Iranian Gas Company (NIGC), seen by Khatinoglu, reveals that current production from this phase stands at half that amount. Aside from Petropars, which Khatinoglu said has demonstrated poor performance in Phases 11 and 12, Khatam al Anbiya has signed dozens of oil and gas contracts with the Iranian government over the past years, none of which has been successfully implemented. A document from Iran’s Oil Ministry, which Khatinoglu said he has reviewed, indicates that even if the $17 billion contract with domestic companies is implemented, it will slow down the production decline in the Iranian section of South Pars—but the decline will continue, nonetheless.
Details of Iran’s $17 billion contract with the four domestic companies indicate that instead of constructing 20,000-ton platforms, Iran plans to build smaller 4,000-to-5,000-ton platforms but in greater numbers. Additionally, the compressors planned for these platforms will have a capacity of 30 megawatts—only half the size of the massive compressors required.
However, Khatinoglu writes, Iran has no prior experience in building even 4,000– 5,000-ton platforms, and officials have stated that they are still developing the necessary infrastructure for such construction. The gasfield shared between Iran and Qatar is by far the largest gasfield in the world with 5- 1/2 times as much recoverable reserves as the second largest gasfield, which is in Russia, and 45-1/2 times as much gas as in the largest gasfield found in the United States.
Experts estimate that reaching this production goal will require a total investment of $75 billion. Of this, $53 billion will be allocated for new gas field developments, while $22 billion will be dedicated to maintaining production capacity, including the South Pars pressure-boosting project. Paknejad emphasized that to reach the 1.34 billion cubic meters per day target within the next four years, Iran will need to invest approximately $19 billion annually.
Securing this investment will require precise planning and the optimal use of financial and monetary resources, he said, using very vague terminology. Without this project to boost natural gas output starting in March 2029, the output from South Pars would already have plateaued and begun shrinking.
