For more than two years, Iran’s monthly output has declined slowly but distinctly. On a few occasions, output has risen as a new oilfield has come onstream. But soon thereafter the decline resumes.
The government has been totally silent about the slipping output.
The problem is Iran’s aging oilfields. The National Iranian Oil Co. (NIOC) has not been able to manage its infrastructure to overcome the decline that sets in naturally in all aging fields.
Experts say part of the problem stems from sanctions. The major international oil firms have all withdrawn from Iran, so Iran no longer has the finances the foreigners bring with them to develop new fields.
More important, however, may be the technology the foreign firms have, which Iran does not enjoy now. It is not just the technology to exploit new fields, but the even more important technology needed to squeeze more oil out of aging fields.
Over the last two years, the decline has totaled 5 percent, from 3.78 to 3.60 million barrels a day in September. That is not a precipitous drop, but it is a painful drop that shows no sign of being reversed. Furthermore, as more Iranians buy cars and as more Iranians are added to the population and need to heat homes, the domestic demand for oil rises. That leaves less for export, which means less money for investment in keeping up the oil infrastructure.
But the Iranian state does not talk to its public about any of these problems. The media avoid mentioning the problem; the press has probably been ordered to remain silent.
In fact, the government doesn’t release its monthly production figures. The numbers in the accompanying chart are produced by Platts, an American-based industry publication, which interviews people in the industry each month to estimate Iranian output. Several different publications and the International Energy Agency in Paris all produce estimates. They differ modestly, but they all show a downward trend for Iranian output.
In recent years, the Iranian government has most commonly only used the figure of 4.2 million barrels a day as its production capacity—a figure few believe. Last week, in a change, the managing director of the National Iranian Southern Oil Co., Hormuz Qalavand, announced that national output stood at 3.92 million barrels a day. But even two years ago, Iran’s output was below 3.80 million barrels a day, according to Platts.
And the Platts figure of 3.60 million barrels a day in output now is more than 8 percent below Qalavand’s claim of 3.92 million. The official figures are a fantasy that seemingly serve no purpose other than to mislead the public about the government’s stewardship of Iran’s chief natural resource.
This week, Oil Minister Rostam Qasemi announced that by the end of the Fifth Development Plan in March 2015, Iranian oil output would climb to 5.2 million barrels a day by exploiting oilfields shared with neighboring countries.
It has been Iran’s priority since the 1990s to develop those shared oilfields, but little has actually been done in more than a decade.
Earlier, NIOC Managing Director Ahmad Qalebani said output would climb 150,000 barrels a day by next Now Ruz as projects now in development come on stream.
It is standard operating procedure for the Iranian government to issue statistics on future production of oil, electricity, steel and other products while avoiding numbers on current production.
Iran last week did, however, sign a new contract to develop a new oilfield. That was the Azar field in the Anaran block in Ilam province near the border with Iraq.
Russia’s Gazprom was supposed to develop that field under a memorandum of understanding signed in November 2009. But Gazprom never signed a contract or did any work. Last week, Iran booted Gazprom out. Iran has now signed a contract with Iranian firms to develop Azar,
The NIOC said $1.9 billion would be invested by an Iranian consortium comprised of the Oil Industries Engineering and Construction Co. (OIEC) and the Oil Pension Fund Investment Co. (OPIC). OPIC presumably will provide most of the capital.
An announcement said the field would produce 50,000 to 65,000 barrels a day once development is completed in six years.
Meanwhile, Iran suspended a second foreign firm for inactivity. This one was Chinese. The China National Petroleum Corp. (CNPC) holds a contract to develop Phase 11 of the giant South Pars gasfield. Iran has long complained that it has worked on the field in slow motion.
Last week, Musa Suri, managing director of the Pars Oil and Gas Co., said he was “suspending” CNPC from all work on the North Pars gasfield until CNPC has come up to speed in the work on the South Pars gasfield, which is much larger and more important to Iran.
It wasn’t clear why Suri thought the Chinese would work harder at South Pars if it was being disciplined at North Pars.
When European firms abandoned Iran’s oil and gas industry in recent years, Iran said that made no difference because Iran could rely on firms from other countries like Russia and China to pick up the slack.