Iran, Saudi Arabia ink deal to develop joint oilfield....

Iran, Saudi Arabia ink deal to develop joint oilfield....

Iran and Saudi Arabia have agreed to develop a gasfield which straddles their mutual maritime border, a rare positive sign amid growing military tensions in the Gulf and other disputes over divided resources.

Iranian Oil Minister Rostam Qasemi said on 6th January that Tehran and Riyadh have already signed a deal to develop the Farzad A field, which is shared between them. They are also set to sign a deal on developing the nearby Farzad B gasfield as well as the Arash oilfield. Development plans for all three fields will be released before mid-March, according to the National Iranian Oil Company (NIOC).

The news about the Arash field is somewhat surprising: very recently, the Iranian government announced that it would begin unilaterally developing the field (which lies between Iran, Saudi Arabia and Kuwait) unless Kuwait finally agreed to joint development. That announcement followed a warning by a senior Iranian MP that Arab states were 'stealing' Iranian energy reserves from disputed fields.

Jointly developing the fields is part of an Iranian strategy to increase domestic gas and oil production in the face of tightening international sanctions. Iran is also rushing ahead with production on the giant South Pars field (shared with Qatar), where NIOC is working around the clock to bring subsequent production phases onstream.

Building a healthy working relationship with the Saudis will also help to reduce tensions between them over Iran's nuclear programme and its threats to close the Strait of Hormuz in reaction to any Western or Israeli airstrike. Iran's stance has alarmed Gulf Arab states, so working together on energy production will help to reassure Riyadh that Tehran is committed to a normal relationship....

Iran has warned Kuwait that it will unilaterally proceed with full-scale drilling at the disputed Arash gas field in the Persian Gulf, if Kuwait fails to agree on joint development. The warning comes amid heightened tension in the Persian Gulf between Iran and its neighbours as well as the US.

Head of the Iranian Offshore Oil Company Mahmoud Zirakchianzadeh told state media that “if Iran's positive diplomacy is turned down, we will be carrying on our efforts at Arash field unilaterally”. There was no immediate response from Kuwait. The Iranian statement comes just two weeks after a senior Iranian MP accused Arab states of stealing oil and gas from shared fields in the Persian Gulf.

Emad Hosseini specifically referred to the Arash field in his comments, in which he accused Saudi Arabia, Kuwait and the United Arab Emirates of working together to exploit joint fields to Iran's cost .There are at least fifteen fields shared between Iran and its Gulf Arab neighbours, many lying close to maritime boundaries which are themselves often in dispute.

Negotiations on the Arash field have been ongoing since 2006, when Iran and Kuwait agreed in principle to jointly develop the field. In March 2010 they re-confirmed their commitment to joint development, but at the beginning of last month Tehran announced that it would begin drilling four wells at the field.

The maritime border between Iran and Kuwait remains unconfirmed, despite numerous rounds of talks between the two sides. Although essentially a technical issue, political tensions in the Gulf and the presence of joint gas fields has stymied progress on defining the border....

IRAN, a natural gas giant...

http://americanfootprints.com/wp/2009/08/engaging-the-muslim-world-the-struggle-for-islamic-oil/

In recent days and weeks, Iran has found itself in the news on a fairly regular basis, particularly now that it appears that they are ramping up their nuclear program and messing with the British Embassy. Iran is often overlooked as an energy producing nation, while most people are aware that Iran is a member of OPEC, they are not aware of the significance of Iran's oil and natural gas reserves. Hopefully this posting will put Iran's place in the energy world into context.

Let's open with some background information on the country. Iran is located along the north shore of the Persian Gulf, a very strategically important geographic location since the country is in partial control of the entry to the Gulf of Oman, the narrowest part of the access and egress from the Persian Gulf. Iran is not an Arab county, the majority of Iran's population of 77,891,000 people are Persian. Iran has a very young population; the median age of both males and females is only 26.8 years compared to 36.9 years in the United States. Iran's economy relies heavily on the oil and natural sector which provides the majority of government revenues. Iran suffers from one of the world's highest unemployment rates (139th out of 199 countries) with 13.2 percent unemployment in 2010. Surprisingly, Iran's government is one of the most fiscally responsible in the world, in 2010, Iran's government ran a budget surplus that reached 6 percent of GDP (11th place in the world) and public debt is only 16.3 percent of GDP, enviable by any standard.

Now let's look at Iran's main industry, oil and gas. Iran is one of the world's leading producers of both natural gas and oil; it is OPEC's second largest oil producer and exporter after Saudi Arabia and, in 2010, was the world's third largest exporter of oil after Saudi Arabia and Russia. Here is a map showing Iran's main oil and gas fields and pipeline infrastructure. Note that the vast majority of the country’s producing oil and gas fields are located along the Persian Gulf. Note the huge South Pars/North Dome gas field (in red); this is the world's largest natural gas field shared by Iran and Qatar:

In this posting, I’m going to focus on Iran’s natural gas reserves. Let’s start out by taking a look at the world's top natural gas reserve holders:

As I mentioned earlier, Iran and Qatar jointly own the North Dome Field and South Pars Field, a wonder of the natural gas world. Here's a more detailed map of the fields:

The combined field was discovered in 1990 by the National Iranian Oil Company (NIOC), the second largest oil company in the world after Saudi Aramco. It covers an area of 9700 square kilometres of which 3700 kilometres are situated in Iranian territory. The field is part of the north-trending Qatar Arch with most of the gas trapped in Permian-Triassic formations. The total reserves for the field are estimated to be around 2000 trillion cubic feet (TCF) and it contains an additional 50 billion barrels of condensate. With in-place reserves of 360 billion barrels of oil equivalent, the field is larger than the world's largest oil field, Ghawar (170 billion barrels of oil-in-place) located in Saudi Arabia. It is anticipated that the gas recovery factor is about 70 percent resulting in total recoverable gas reserves of 1260 TCF. Using a 70 percent recovery factor results in the combined field containing 19 percent of the world's total gas reserves. Interestingly enough, the fields also contain the world's largest reserves of helium totalling 10 billion cubic metres or about 25 percent of the world's total helium reserves.

Let's look at Iran's share of this elephant. Iran owns 500 TCF of gas-in-place and approximately 360 TCF of recoverable gas. This is 36 percent of Iran's total gas reserves and 5.6 percent of the world's entire proven gas reserves. Let's step away from Iran for a moment to put these massive reserves into perspective. Here is the data showing the changes in proved natural gas reserves since the 1920's for the United States from the U.S. Energy Information Administration:

Iran's proven natural gas reserves in this one field alone are nearly twice that of the entire United States.

Iran's South Pars field also contains about 18 billion barrels of condensate-in-place with an estimated recovery factor of 50 percent. The gas produced is quite rich in liquids, yielding approximately 40 barrels of condensate per million cubic feet of gas. Wells are extremely productive with an average well producing 100 MMcf/day. Production began in July 2003 at a total rate of 1 BCF per day plus 40,000 barrels of gas condensates. Development of the field is taking place in 29 phases; Iran has signed development agreements with TotalFinaElf, Gazprom, Petronas, Agip, Statoil, Shell, Spain's Repsol, India Oil Corporation and China's Sinopec and CNPC among others. As I will detail below, sanctions by foreign governments have caused many of the aforementioned companies to abandon their development agreements with Iran. Here is a chart showing the phases, partnerships and current production levels along with Iran’s future plans for development:

The current political issues in Iran have impacted development of the South Pars field. Here is the latest press release from NIOC outlining their plans for future development, noting the use of Iranian contractors and the end of control over projects by foreign contractors:

"Iran plans to reach the maximum level of gas production from the South Pars Oil Field, a year before the end of Fifth development plan, he added. “All eight remaining phases of South Pars were entrusted to Iranian contractors and the foreign contractors have no longer any control over South Pars projects, the official stated. 
Although Tehran is trying to rely on Iranian contractors but it has no plan to discharge foreign companies because they can strengthen Iran’s national development plan, Suri expressed. Tehran plans to be self-sufficient in the oil industry, furthermore, Iran has a program to export technical services, he added. “The today mission of Pars Oil and Gas Company is to maintain the current 250- million cubic meter production. It plans to develop the North Pars, Golshan and Ferdowsi oil fields as a second priority. 
The Fifth Development Plan sets guidelines for the socio-economic development of Iran. The plan is part of 'Vision 2025', a strategy for long-term sustainable growth. Under the plan, following annual approval of the government’s budget, the Central Bank of Iran will forward a detailed monetary and credit policy to the Money and Credit Council (MCC) for approval. Thereafter, major elements of these policies will be incorporated into the five-year economic development plan. South Pars is the biggest gas field in the world, shared by Iran and Qatar. The South Pars field is the name of northern part of the joint located in Iranian waters and the North Dome is the name of southern part, located in Qatari waters. South Pars field was discovered in 1990.” (my bold)

In 2009, the National Iranian Oil Company announced that China National Petroleum Company signed a $4.7 billion contract to develop Phase 11 (out of 29 total phases) of development of the South Pars field. CNPC replaced Total as a partner; Total had signed a memorandum of agreement to develop the field in 2004, however, those nasty international sanctions interfered with Total's ability to develop the field. Iran had become increasingly concerned that a portion of their natural gas reserves were being competitively drained by Qatar.

China is also active in two exploration projects with NIOC as shown on these charts:

It's interesting to see that NIOC also partnered with Russian, Brazilian, Vietnamese, Italian and Spanish oil companies for various exploration projects throughout Iran.

Where is all of this natural gas going? Iran’s domestic demand for natural gas has risen by 550 percent over the past two decades with consumption keeping pace with production increases. Here is a graph showing the growth in both natural gas consumption and production:

In 2010, Iran produced roughly 6 TCF of marketed natural gas and consumed an estimated 5.1 TCF. Of the 7.7 TCF of gross natural gas produced, 1.2 TCF was reinjected into oil reservoirs as part of Iran’s plan to increase crude oil production through the use of enhanced oil recovery (EOR) techniques. Even with the massive and growing output from South Pars, it is unlikely that Iran will increase its exports of natural gas. In fact, despite having the world’s second largest natural gas reserves, Iran imported about 0.7 BCF/day of natural gas from Turkmenistan to satisfy demand in the northern part of the country.

As an aside, in January 2011, Iran's Petroleum Minister announced the discovery of a new onshore natural gas field located in southeastern Iran near Assaluyeh in Bushehr province. The field contains recoverable gas reserves of 7.4 TCF and an additional 7.7 million barrels of condensate in place.

One can readily see from this posting that Iran is sitting on a very strategic resource. The combination of huge reserves of both oil and natural gas may well make Iran a very, very tempting target for military intervention in the future. In this case, however, the issue is complicated by the presence of both Chinese and Russian economic interests in Iran’s natural resource base....

First casualty of another war in the Middle East will be economic recovery in U.S. and Europe.

Iran has threatened that it will retaliate against the Obama administration's proposed new economic sanctions on Iran's oil exports by blocking the flow of oil from the Persian Gulf. "If sanctions are adopted against Iranian oil," said Iran's Vice President Mohammad Reza Rahimi, "not a drop of oil will pass through the Strait of Hormuz," the narrow waterway at the mouth of the Persian Gulf, which one-fifth of the world's oil supply passes through daily.

To drive the point home, Iran has started a 10-day naval exercise in the Persian Gulf to show off how it could use small speedboats and a barrage of missiles to combat America's naval armada. And the U.S. Navy has responded, in the words of a spokeswoman: "Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated."

This is a significant escalation of tension between the United States and Iran, and the start of a more dangerous phase in the West's attempt to curtail Iran's nuclear program.

The new sanctions are a response to last month's alarming report on Iran's nuclear intentions by the United Nations nuclear watchdog agency, the International Atomic Energy Association. The Obama administration has ruled out military strikes to stop Iran's nuclear program in favor of tougher sanctions, which, once signed by the president, and if fully implemented, would sharply reduce Iran's oil revenue. The administration sees this added pressure on Iran's fragile economy as an effective alternative to military strikes.

If Iran's reaction is any indication, the administration is correct in its estimation. Sanctioning Iran's oil industry will cripple Iran's economy, and that in turn will threaten the stability of the clerical regime. It is for this reason that Iran is treating the proposed new sanctions as an act of war, and is issuing threats of its own to dissuade the United States from going through with the new sanctions.

The administration's strategy is based on the assumption that cutting Iran out of the oil market will not substantially impact world oil supply and prices. Saudi Arabia can step up production to cover the loss of Iran's export of 2 million barrels a day.

But it is not clear whether Saudi Arabia actually would increase production to compensate for the loss of Iranian oil. Iran has clearly started a charm offensive with Riyadh to influence the Saudi decision. Iran's intelligence minister recently visited Riyadh to reduce tensions between the two countries in the wake of the alleged Iranian plot to assassinate the Saudi ambassador to Washington, and the Iranian Navy has claimed that it rescued a Saudi ship from pirates.

In facing off against the U.S. and its European allies, Iran thinks it holds economic cards of its own and is announcing loud and clear that if push comes to shove, it intends to use them.

Iran notes that Western economies are under stress and predicts they could not afford higher oil prices. Even the threat of disruption in oil supply would send energy prices spiraling sky high, and that would plunge the already struggling economies of the United States and Europe into deeper recession. Iran is hoping to change the conversation in Western capitals from how tightly to squeeze Iran to what could be the cost of doing so.

Nor would economic woes caused by conflict in the Persian Gulf remain limited to the West. Persian Gulf exports already account for 60% of Asia's energy consumption. Economies from India to China would be impacted by a Persian Gulf oil cutoff and higher energy prices. Iran is in effect threatening global economic crisis.

Those advocating new sanctions on Iran's oil industry have said little about the potential cost to the global economy. The cutoff would also hurt Gulf Cooperation Council countries and could drag them into a conflict with Iran they have thus far avoided. Iran hopes its saber-rattling will persuade Asia's economic powerhouses and Persian Gulf emirates to pressure Washington to back away from the new sanctions.

War between the U.S. and Iran may very well start, not if and when Washington decides to strike against Iran's nuclear facilities, but because sanctions designed as the alternative to military action end up hastening its advent. That might prove to be the least desired outcome, for no better reason than the possibility that the first casualty of another war in the Middle East might very well be economic recovery in U.S. and Europe....

Iran, Turkey sign 1 billion euro gas pipeline deal

Iran, Turkey sign 1 bln euro gas pipeline deal

TEHRAN- July 2010 ) – Iran and Turkey signed a 1 billion euro ($1.29 billion) contract to build a pipeline that will transfer the Islamic state’s natural gas to Turkey, a statement by the Iranian Oil Ministry said on Friday.
“The one billion euros deal to build 660 km gas pipeline was signed on Thursday during the Iranian Oil Minister’s trip to Turkey,” the statement said.
The statement also said there were talks on exporting Iran’s natural gas to Europe via Turkey and other energy-related issues.

Turk Army Convoy Explosion Same Town As Iranian Pipeline Bombing...

Suspected Kurd rebels blow up Iran-Turkey gas pipeline Mined in pain attacks....

In rural areas of pain Dogubeyazit County during the passage of military vehicles was placed by terrorists to detonate explosives by remote control as a result of the search of the majors and captains, including four soldiers were injured.
Events today at 10.00 Dogubeyazit District Gendarme Commander, Gendarmerie Senior Captain Ufuk Gokmen’s determination is out in the task handed over to the Gendarmerie Major Zechariah liked with Sarıbıyık from the village gendarmerie outpost located the Fish Lake near Bezirhane village way has occurred. Igdir near the border region during the passage of military vehicles terrorists put off by remote control to detonate explosives had been.
The four soldiers in an explosion at a military vehicle were injured. The explosion injured soldiers District Gendarme Commander Captain Ufuk Gokmen and Specialist Sergeant Neset Fares’s helicopter was removed Erzurum Marshal Fevzi Cakmak Military Hospital, the Light wounded privates Samet Kara and Ali Şahin the Dogubayazit State Hospital, being treated was learned.

Governor: Remote Controlled Explosion....

Agri Governor Ali Yerlikaya, Dogubeyazit District Bezirhane Gendarmerie Station Command was sent by the two vehicles comprising the gendarmerie patrol today clockwise during Sarıbıyık villages near separatist terrorist organization by the members based explosives laid they said. During the detonation of explosives at a military vehicle passed four personnel injured while performing Yerlikaya Governor explaining the wounded were being transferred to the hospital, said the suspects were trying to be captured.

Iranian Petroleum Minister Masoud Mirkazemi visited Turkey last week to discuss Turkish-Iranian energy cooperation. The Iranian oil ministry announced that during the visit a deal was concluded with a Turkish private energy company, worth US$1.3 billion to build a pipeline from Iran to Turkey.

The projected 660 kilometer pipeline will be constructed within three years, allowing Iran to export 50 million to 60 million cubic meters (mcm) of gas daily to Turkey and Europe, by paying transit fees to Ankara.

Turkish Energy Minister Taner Yildiz clarified immediately that neither the Turkish government nor the state-owned pipeline company, BOTAS, was party to such an agreement. He noted earlier interest expressed by private companies in such a pipeline, and said that it might involve one of these companies and Iran. Nonetheless, it was unusual that he acted as though he had no knowledge of an agreement being signed, although it was publicized by the Iranian side.

Sitki Ayan, the chief executive of Som Petrol, the Turkish counterpart in the project, told the press that the company was party to a deal with Iran. He added that it will build a pipeline to the Turkish-Iranian border, and it was part of a larger multi-billion dollar project.

Iran has frequently expressed interest in exporting its gas to Europe, while Turkey has also stated its willingness to assist Iran. Ankara concluded an agreement with Tehran in November 2008 pertaining to the export of Iranian gas to Europe and to the joint exploitation of Iran's reserves. In particular, Turkey wanted to invest $5.5 billion in the South Pars field to produce 20-35 billion cubic meters (bcm) of gas annually. Ankara would receive operation rights for three offshore gas fields in South Pars.

Under United States pressure, Turkey shelved this agreement. It was rekindled in October 2009 during a visit to Tehran by Prime Minister Recep Tayyip Erdogan, defying objections from Washington.

Since October 2009, Turkey and Iran have held talks on the details of the agreement, yet the viability of this cooperation has proved to be controversial. Ankara argues that cooperation with Tehran was essential first and foremost to meet its energy needs. Iran is the second-largest supplier of natural gas to Turkey, following Russia. Moreover, such energy cooperation with Iran might also bolster European energy security, as Tehran could serve as a potential supplier for the European Union-backed Nabucco project. This argument is particularly relevant given the ongoing uncertainty concerning where Nabucco would secure its gas supplies.

Skeptics have suggested that Ankara's insistence on cooperation with Tehran was not realistic in the face of the US-led sanctions policy. Political disagreements aside, given Turkey's own limitations in this field, it might not be able to supply Iran with the sort of investment and technology needed to meet its requirements; hence, Iran could be no panacea to ensure European energy security in the short term.

The recently announced pipeline deal, provided that it succeeds, might secure fresh supplies to European markets. Yet several questions remain as to how it will be connected to the European grid. The most immediate alternative is the possible export of Iranian gas to Switzerland, which has been under consideration since 2008. Iran and a Swiss energy company signed a deal in March 2008. Following the Turkish-Iranian agreement, Turkey signed a memorandum of understanding with Switzerland, under which it would enable the transfer of up to 5.5 bcm of Iranian gas through its territory to Switzerland. The gas would use the proposed Trans-Adriatic Pipeline (TAP) network. Another option would be to integrate it with the Nabucco grid in the future.

The outcome of the talks on the joint development of the South Pars field, however, was not as promising. In March, Yildiz announced that Turkey commissioned feasibility studies and would have to make a final decision on whether to invest in South Pars within two weeks. It was rumored that the Iranian side also considered assigning the fields reserved for Turkey to domestic firms, as the possibility arose that the time period envisaged in the original agreement might expire.

Commenting on Mirkazemi's visit, Yildiz said that Turkey cancelled its plan to invest in the South Pars gas project, after failing to find common ground on the production and marketing of the gas. "In the future, there might be other possibilities to advance mutual interests in the South Pars field. Yet, the current project is over," Yildiz said.

Since these developments occurred against the background of a recent round of sanctions against Iran spearheaded by the US, it refocused attention on how Turkish energy cooperation with Iran is mired in Turkish-American relations.

The development of Iran's gas deposits has been hampered by the US policy of isolating the country. Partly because its quest to access foreign investments and advanced technology was thwarted, Iran not only failed to emerge as a leading exporter, but was also forced to import gas from Turkmenistan and, through a recent agreement, from Azerbaijan.

Although Turkey objected to US policy on the Iranian nuclear issue and voted against the UN Security Council resolution authorizing sanctions, it underlined that it would implement them. It is unclear whether this development played a direct role in Ankara's decision to cancel its investment in Iran. In any case, declining European interest in energy cooperation with Iran has possibly influenced this decision.

Since European countries do not necessarily view Iran as a supplier for Nabucco in the short term, the reduced interest might have affected Turkish policy. Moreover, European countries recently decided to tighten sanctions against Iran, including taking some restrictive measures in the oil and gas industry. This development may further restrict Ankara's room for maneuvering, given the questions over its ability to carry out investments with its own resources.