Iran faces energy crisis as oil output declines amid sanctions, president says

Iran's energy shortage has neared a point of crisis due to a continuous decline in oil output amid US sanctions, President Masoud Pezeshkian said Dec. 2, with the country struggling for investment to maintain wells and other infrastructure, while domestic fuel demand keeps rising.

"The imbalance trend since several past administrations has arrived at a crisis. Today we cannot even inject gas into oil wells to extract oil," Pezeshkian said in a televised interview.

"We face bad imbalances of production against consumption including gas, electricity, water... we have monetary imbalance too," Pezeshkian added, referring to a growing shortage of energy resources.

"They are all on a level of possibly turning to a crisis," he said.

In the light of the situation, oil minister Mohsen Paknejad aims to raise production and enhance the oil recovery rate, according to an August-September report published recently by the ministry.

The report pointed to a 426,000 b/d crude output fall from 2018 to date in the wake of the US sanctions on the OPEC member's oil industry.

"Should this trend go on, Iran would see its oil production drop sharply to 2.75 million b/d in four years," the report said.

"That is due to the rising trend of petroleum product consumption; the foregoing production would be enough only for the refining sector and domestic purposes, in which case about 950,000 b/d would be left for exports, which would pose serious challenges to Iran's income generation," the report added.

Boosting output

According to the minister, through the workover of existing fields, acidizing, perforation and injection of solvents into wells suffering from production decline, and the acceleration of production capacity projects by drilling new wells in the developed fields that "are estimated to need $3 billion in investment, we will see the oil fields' production capacity rise from the current 3.4 million b/d to 3.85 million b/d."

The oil ministry plans to pump more oil from the country's onshore oil fields near the Iraqi border including South Azadegan, Yadavaran, Yaran, Sohrab as well as the Sepehr and Jofair oil fields with a planned 56,000 b/d output hike.

Paknejad's four-year plan involves increased output from 12 oil fields -- Yadavaran, Sohrab, Aban and West Paydar, Sepher and Jofeyr, Shadegan, Kupal, Cheshmeh Khosh, Dalpari and East Paydar fields as well as the South Pars Oil Layer. The idea is to bring about an extra 257,000 b/d production capacity and enhance output by 150,000 b/d, the report said.

Paknejad's next proposed plan involves developing eight fields—Azadegan, Changuleh, Azar, Band Karkheh, Sumar, Saman, Delavaran, and Masjed Soleiman—for an additional 250,000 b/d.

Azadegan is currently producing 144,000 b/d, and 26 new wells are in the works, which will add 30,000 b/d of capacity, while 20 wells are to be rehabilitated to add another 20,000 b/d.

Further plans for a total 870,000 b/d rise in production will require $25 billion.

To this end, the ministry is considering signing development agreements for 14 oil reservoirs. Paknejad's plan involves increased recovery from the Yadavaran, Dehloran and Danan, Esfandiar, Ab Teymour (Bangestan layer), Mansouri (Bangestan layer), Ahvaz (Bangestan layer), Maroun (Asmari and Bangestan layers), Gachsaran, Bibi Hakimieh, Sousangerd, Darquain and Abouzar oil fields.

However, the country has been struggling to fund these plans. Amid a lack of investment from the West, the country has turned to its strategic allies, China and Russia, but there have been no signs of progress on previously signed agreements.