October 25, 2024
I ran announced in July that, despite having the second largest volume of natural gas reserves in the world, it plans to import 300 million cubic meters of gas annually from Russia. That struck many as illogical and just plain unreasonable.
A new study just published by the Washington-based Stimson Center says there is nothing illogical or unreasonable about it. The study says due to a shortage of capital investment and a lack of up-to-date technology, Iran is unable to pump all the natural gas it wants and needs. In December 2022, Iran’s then-Oil Minister Javad Oji warned that Iran would become a net energy importer if it failed to attract $240 billion in investment to its oil and gas sector.
The author of the report, Dr. Mohammad Salami, a research associate at the International Institute for Global Strategic Analysis, wrote that Iran has no access to that kind of money. But the problems are bigger than just money. Iran shares 28 fields with neighbors, of which 15 are located under the waters of the Persian Gulf. Iran shares 12 fields with Iraq, five with the United Arab Emirates, four with Saudi Arabia, four with Qatar, and one field each with Oman, Kuwait, and Turkmenistan. Salami wrote that the joint fields constitute 20 percent of extractable oil and 30 percent of Iran’s gas reserves.
However, according to the Ministry of Oil, only 15 of the 28 joint fields are active, and the other 13 fields have not been developed and reached the production stage. Iran’s slow progress is the result of its reliance on domestic investment, Salami writes. On average, in the last 2-1/2 years, $6.5 billion have been invested annually in the oil industry. According to the Majlis Research Center, annual investment in Iran’s upstream oil and gas projects dropped from around $18 billion in the 1990s to $7 billion in the early 2010s, and to just $3 billion each year since 2017.
The Oil Ministry and the US Energy Information Administration report that 80 percent of Iran’s oil production comes from old fields that are experiencing a decrease in pressure, which causes a yearly decline in production of from 8 to 10 percent. To stem a rapid decline in oil production, Iran needs to reinject nearly 300 million cubic meters of gas per day (MCM/d) into its old oilfields.
However, the latest available official data shows that in 2017 gas re-injection was at best 80-90 MCM/d. According to the Research Center in 2017, if the gas required for injection is not supplied, 2.3 to 2.7 billion barrels of crude oil will be trapped in the reservoir and will never be extracted. Since 2013, Iran has also prioritized the development of joint oil fields bordering Iraq.
Iran has drawn 90,000 barrels a day from these fields, and, by 2021, with the help of Chinese companies, it was supposed to increase production from the Yadavaran, Azadegan North and South, and Yaran North and South oilfields to 1.2 million barrels per day. Due to the lack of commitment by Chinese companies, however, Iran could only achieve 350,000 barrels per day, while Iraq’s oil production has been increasing.
Development of these five joint fields requires an investment of $11 billion and advanced Western technology. With current Iranian technology, only 5 to 10 percent of the 64 billion barrels of reserves in these fields can be extracted. Qatar has signed contracts worth $29 billion with Western companies to increase production by 30 percent by 2026, and it is expected that Qatar’s total gas production from South Pars will reach 740 MCM/d by 2030 while Iran’s production from this field is forecast to decline by over 30 percent, dropping to approximately 350 MCM/d due to a fall in pressure on the Iranian side.
The increase in gas extraction by Qatar has caused the gas reserves on its side to rise. Salami says Iran cannot preserve the helium extracted from the joint gasfield due to the lack of necessary technology. Qatar is equipped with this technology and that has enabled Doha to produce 35 percent of the world’s helium.
