Questions about oil production capacity in Iran tend to mask the country's huge potential as a producer of natural gas.
Iran is second only to Russia in gas reserves, which National Iranian Gas Co. estimates at 20.7 trillion cu m. At current rates of production, that's a 300 year supply, five times the notional life of gas reserves worldwide.
Among hurdles to Iran's making greater use of its rich endowment of natural gas are where and how to sell gas not used inside the country. The marketing logistics problem is common to other Middle East holders of gas reserves and a reason behind the recent proliferation of proposals for pipeline and liquefied natural gas schemes targeting Europe and India,
But Iran's challenges are greater than most in the region. Political uncertainties and Islamic rules complicate long-term financing of transportation projects and raise questions about security of supply. As a result, Iran has remained mostly in the background of discussions about international trade of Middle Eastern gas.
The country's huge gas reserves, strategic location, and existing transport infrastructure nevertheless give it the potential to be a major gas trader if the other issues can be resolved.
Despite budget troubles, work on the Iranian gas system has progressed steadily in recent years, in part to restore oil production capacity that is heavily dependent on gas lift.
But Iranian officials are discussing schemes for exporting gas, one of them taking advantage of Iran's existing pipelines.
There have been numerous reports about progress in negotiations for part of that scheme, a pipeline from Iran to India. And the government has agreed with Turkmenistan on the route of a pipeline across Iran to carry as much as 1.085 tcf/year of Turkmen gas to Europe and Turkey.
OIL CAPACITY PLANS
National Iranian Oil Co. claims production capacities of 4.2 million b/d of crude oil and 66 billion cu m/year of natural gas. It estimates Iran's crude oil reserves at 92 billion bbl.
Oil production for most of this year has been about 3.6 million b/d, Iran's quota in the Organization of Petroleum Exporting Countries. How much the country can produce beyond that has been questioned outside Iran.
In October 1992, NIOC produced more than 4 million b/d for a week on a test basis. Doubts raised since then about sustainable capacity stem in part from Iran's financial troubles and from lack of progress on negotiations with possible foreign partners in key offshore projects.
Early this year, NIOC canceled the international agreement thought to have been the most advanced, a $1.7 billion development project for offshore South Pars gas field led by Italy's Technologie Progetti Lavori SpA and Saipem SpA. An earlier development agreement with a group of Japanese companies also stalled.
More recently, there have been persistent reports-all denied by Iranian officials-of difficulties in sustaining production even at the level of the OPEC quota.
The International Energy Agency's Monthly Oil Market Report for March alluded to possible pressure-maintenance problems in several of Iran's old oil fields. IEA's report for May said, "It appears likely that production difficulties in Iran's major onshore fields are constraining output."
The agency lowered its estimates for Iranian production by 60,000 b/d in April and 70,000 b/d in May to an average of 3.5 million b/d.
Mostafa Khoee, director of offshore production of NIOC and managing director of Iranian Offshore Oil Co., in January said crude oil production capacity amounts to 3.8 million b/d onshore and 400,000 b/d offshore. At the Middle East Petroleum and Gas Conference in Bahrain, he repeated the government's goal of restoring production capacity to 5 million b/d, 4.5 million b/d sustainable, and keeping it at that level for 5 years.
That had been the goal of the 5 year plan ending this year. Khoee said the next 5 year plan calls for the government to spend $16.6 billion from its general resources and $9 billion from foreign credit on oil and $3.8 billion on natural gas.
Further capacity expansion isn't likely soon.
"The outlook for crude oil prices and demand in the future (does) not justify further capacity expansions for us right now," Khoee said.
Offshore fields targeted for development, he said, include Abuzar, Sorush, Hendijan, Bahregansar, Nowruz, Resalat, Reshadat, Balal, and Sirri.
Khoee said the government continues to hold discussions with non-Iranian companies, which under Iran's constitution cannot hold equity positions in production but can work under service contracts. NIOC has offered to negotiate contracts for work in South and North Pars, Balal, Sirri E and A, and Hengam fields, all offshore.
Representatives of foreign-including U.S.-companies have visited NIOC recently in Tehran.
GAS DEVELOPMENT
At the January meeting at which Khoee spoke, a representative of Iran's Institute for Political and International Studies (IPIS) described recent gas industry developments and proposed a way for the country to increase exports.
Narsi Ghorban, an IPIS senior oil and gas analyst, said Iran consumes 29 billion cu m/year of gas internally, uses 20 billion cu m/year for reinjection programs, and exports 500 million cu m/year. Gas losses and flaring account for the balance against production of 60 billion cu m/year.
Most associated gas production comes from oil fields in the Khozestan area, averaging 29.6 million cu m/day in the Islamic year corresponding to 1992-93, according to National Iranian Gas Co. (NIGC) data cited by Ghorban. Other gas production, mostly nonassociated, is 21.5 million cu m/day from the Kangan area, 17.4 million cu m/day from Sarakhs, and 4.3 million cu m/day from Hormozgan.
More recently, production has begun from Dalan and Aghar gas fields and will reach peak flow in 1994-95, Ghorban said.
In related work, NIGC plans this year to commission a processing plant at Sarkhon in southern Iran, with a capacity of 15 million cu m/day. The plant will handle production from Sarkhon field and fields on the island of Qeshm.
Other gas plants and their capacities are Bidboland 23 million cu m/day, Khangiran 21 million cu m/day (eventually to increase to 35 million cu m/day), and Kangan 34 million cu m/day (eventually to increase to 80 million cu m/day).
Ghorban said Iranian gas processing capacity is to reach 178 million cu m/day by the end of the second 5 year plan in 1998-99, including planned expansions and first phase development of South Pars field.
GAS INJECTION
Gas injection in Iran's oil fields is scheduled to nearly double in the next 5 year plan.
Installed injection capacity totals 2.2 billion scfd in Gachsaran, Lab-e-Safied, Marun, and Karanj oil fields, Ghorban said. All the fields with gas injection are onshore.
Iran also has installed 11 NGL units to handle associated gas, with related gas gathering and booster stations having combined capacities of 11 MMcfd.
A late 1993 NIOC report listed these gas projects, and their capacities, as under way:
- Karanj gas injection, second phase, 230 MMscfd.
- Parsi gas injection, 400 MMscfd.
- Ramshir gas injection, 65 MMscfd.
- Bibi Hakimeh gas injection, 285 MMscfd.
- Kupal gas injection, 150 MMscfd.
- Gachsaran gas injection, fifth phase, 750 MMscfd (apparently the field total).
- Pazanan gas recycling, 750 MMscfd.
- Binak gas gathering, 130 MMscfd.
- Abe-Taimouir associated gas gathering, 25 MMscfd.
- Mansuri associated gas gathering, 88 MMscfd.
- Ahwaz Bangestan associated gas gathering, 60 MMscfd.
- Agar and Dalan gas field development, 1.2 MMscfd.
- Parsi field development, 4.2 billion scfd.
- Liquids production units at nine locations, 120,000 b/d.
The planned projects would add about 2.4 billion cfd to total gas injection capacity at Marun, Gachsaran, Karanj, Parsi, and other oil fields by 1998-99.
Iran's second 5 year plan, presented to the parliament last December, calls for the volume of gas delivered to NIGC for domestic use to increase from 29.2 billion cu M/year in 1993-94 to 50.9 billion cu m/year in 1989-99. The gas share of total hydrocarbon primary fuel use in Iran will increase to 41.5% from 33% during the period.
PROPOSAL FOR EXPORTS
At the meeting in Bahrain, Ghorban added a plan centered on Iran's reserves and existing pipeline network to the competition for a new scheme to export Middle Eastern gas.
The plan would make use of the underutilized Iran Gas Trunkline (IGAT), the two segments of which combined stretch from the Kangan area in the south to Astara on the border with Azerbaijan, and an existing east-west pipeline in northern Iran.
The 1,100 km, 40-42 in. IGAT I segment, completed in 1970 as a way to export associated gas from Agha Jari, Marun, and Ahwaz fields to the former Soviet Union, now carries gas for internal consumption. Capacity is 16.3 billion cu m/year. Annual carriage peaked in 1975-76 at 9.6 billion cu m.
Partly complete IGAT 11, designed to carry as much as 27 billion cu m/year of gas from southern gas fields to Astara for export to Western Europe via the FSU, now is used mostly for domestic purposes.
The complete part of IGAT II is 680 km of 56 in. pipeline from the southern gas fields to west of Isfahan, connecting with IGAT I near Bidboland. Ghorban said the second part of IGAT II is nearly complete: 600 km of 56 in. pipeline between Isfahan and Qazvin. IGAT II eventually will connect with the east-west pipeline near Rasht and could be extended parallel to IGAT I to Astara if warranted by the potential for exports.
Ghorban said NIGC reported total Iranian gas exports for 1992-93 of 510 million cu m. Gas exports to Azerbaijan recently ceased.
The eastern part of the east-west pipeline is 800 km of 30-36 in. pipeline from the Sarakhs gas fields on the border with Turkmenistan to Neka. The next segment is 370 km of 30 in. pipeline from Neka to a connection with the IGAT system at Rasht.
IPIS envisions a pipeline to connect Turkmenistan's gas fields near the Caspian Sea with the east-west line at Gorgan. The link could handle gas from other Central Asian countries, Ghorban said.
A 280 km, 30 in. pipeline has begun operations between Astara and Tabriz, and a 215 km, 20-24 in. line has been laid between Tabriz and Uroumieh near the border with Turkey. The lines pass within 115 km of Armenia and 100 km of Turkey and could be linked with those countries.
COMPLETING THE LOOP
Beyond those relatively short and cheap export extensions from pipe already in the ground, the IPIS proposal quickly becomes more ambitious.
It requires major pipeline construction to complete the loop inside Iran and to connect the network to distant markets.
The proposal includes a 600-700 km, 56 in. pipeline along the Persian Gulf coast between Kangan and Bandar Abbas at the Strait of Hormuz. The line could receive gas from Aghar, Bandobast, Varavi, Lamand, Goshu, Namaki, and Sarkhun fields onshore and North and South Pars fields offshore. The existing pipeline from Salakah and Gavarzin fields on Qeshm Island also could feed the long line.
A leg northward from near Bandar Abbas is under construction now and could serve as part of an eastern, north-south segment of the loop. The 430, 24 in. pipeline, which Ghorban said will be completed this year, runs from Sarkhun to Sar Cheshmeh and eventually will extend to Kerman.
A 1,100 km, 30 in. pipeline then would be needed to complete the eastern segment and close the Iranian loop.
Long export lines would branch off the loop. Ghorban mentioned the proposed export line to India, which he said could start at Bandar Abbas and follow the coast, with a 56 in. pipeline running 750 km to the border with Pakistan and a 42-52 in. line continuing into Pakistan and on to India.
Ghorban further suggested pipeline links to the system from Oman and Qatar, both of which are discussing export schemes for their natural gas. If completed as described by Ghorban, the Iranian loop and export outlets could provide those and other Middle Eastern countries as well as gas producers in Central Asia access to growing markets both in Europe, by way of the FSU, and India.
The project's main hurdle is political uncertainty, which raises doubts about financing, especially for the long export pipelines.
There are advantages, nevertheless: Iran's huge gas reserves and pipelines already in place. Parts of the IPIS vision could come true a piece at a time. It would be relatively inexpensive, for example, to lay the pipeline links necessary to connect Turkmen gas to Azerbaijan via the northern Iranian pipeline.
Larger pieces of the plan would require the type of large, more broadly international business deal that, thanks to wariness on both sides, so far has eluded Iran since the Islamic revolution of 1978-79.
Those questions notwithstanding, current and future gas activity in the Islamic republic represents a crucial piece of the Middle East's capacity picture.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
