Iran's new oil contract requirements for Iraqi oil recovery is still not clear

Ali Kardor, managing director of the Iranian Oil Company, said the new oil contract (IPC) in Iran was clear in all aspects, but the issue of working with foreign companies to improve oil recovery from the fields had yet to be resolved. "The new IPC model for oil contracts has been finalized, but the financial framework for enhanced oil recovery is not yet clear," he said.

The IPC is known as the National Iranian Oil and Gas Company's new contract model for projects aimed at attracting multinational companies to Iran's severely cash-starved oil industry. The IPC model is more attractive to the major players in the oil industry, but the Ministry of Petroleum aims to ensure that the new contract model ensures advanced oil extraction methods, enhances oil recovery and helps Iran maximize output from its vast oil and gas reserves.

Enhanced oil recovery refers to the use of various technologies to increase oil production in oil recovery. According to Mr Kador, Tehran is evaluating different methods of extraction to maximise output from each field's reserves. The responsibility of the field contractor is clear, but once the field is in production, the contractor needs to adopt a method to maintain and increase crude oil production. Some companies choose to inject water, while others prefer to inject gas.

Studies have shown that enhanced oil recovery methods can increase oil production up to 75 percent of proven reserves. Oil and gas fields usually have a life span of 10 to 50 years, depending on the size of the reserves and the geological structure. Production peaks two to three years after the field reaches its peak, after which it declines by 1-10% a year.

Kador emphasized that enhanced oil recovery is an important factor in obtaining the development rights, which have been agreed to in South Pars Block 11, but have been controversial.

French energy giant Total, the industry leader, plans to develop South Pars 11 within three years, producing 56 million cubic meters of gas a day from the offshore project.

The requirements for the first phase of development in South Perth 11 are clear, and the requirements for the second phase are clear, such as the installation of compressors on offshore platforms. These measures are clear, but for the field to be developed, the requirements are not clear.

According to authorities, the average recovery rate in Iran's oil fields is about 25%, but should reach 40%. Proven oil reserves are now estimated at 800 billion barrels. A 1% increase in EOR is equivalent to an additional 8 billion barrels of production, or $400 billion at current oil prices.

Iran signed its first IPC deal with Total in July, and plans to use the same model to hold tenders for dozens of its oil and gas fields. Three oil projects currently in the pipeline meet the requirements within the IPC framework: namely, the South Pars field and the Mansuri and Abtum fields in southern Kuzstan province.