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Iran signs $1.3 billion deal to double output at South Azadegan oil field

Highlights

South Azadegan oil field output now about 140,000 b/d

Iran earlier in July signed $300 million Yaran oil field deal

Another deal for Farzad gas field will be signed 'soon'

Tehran — Iran awarded a $1.3 billion development plan to more than double oil production at the South Azadegan field, the second oil project signed this month with local companies as US sanctions bar IOC's from stepping into its energy sector.

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The contract was awarded to Petropars, and signed with Petroleum Engineering & Development to boost production capacity to 320,000 b/d from 140,000 b/d over 30 months, according to the country's oil ministry. The field is on the border with Iraq. Earlier this month, Iran awarded a $300 million contract to develop the Yaran oil field to another local contractor Persia Oil and Gas Industry Development Co.

South Azadegan oil field has a long history in being handed over to IOCs. In 2004, Japan's Inpex signed a $2 billion deal to develop the field but it fell apart only two years later on fear for US sanctions, which again broke a $2.5 billion deal with China's CNPC. CNPC's five-year delay in implementation of the project lead to Oil Minister Bijan Zanganeh's decision to expel the Chinese in 2014.

"With the current oil recovery rate of a total of 27 billion barrels oil in place in South Azadegan, only 1.5 billion barrels are recoverable. It means 25.5 billion will remain unused. This is a technological weakness," Zanganeh said at the signing ceremony, according to the ministry's news service Shana. He said that the recovery rate could rise by 10% from the current 6%. The project will also produce 200 million cf/d of natural gas.

The West Karun region which includes Azadegan yields around 400,000 b/d. The area bordering Iraq from the south and east also includes Yadavaran, Yaran and Azar oil fields.

Petropars, he said, has done $23 billion worth of work on the offshore South Pars gas field. Petropars and PEDEC also signed a $300 million side-contract to construct a central treatment export plant for the field.

He also said a contract to develop the offshore Farzad gas field will be signed soon, again with Iranian companies because "under the current circumstances no foreign country would be willing to sign any contract in any area," Zanganeh said. India had been negotiating for the fields for years before the sanctions.