Development of South Pars is of high importance when it is known that the gas recovered from each phase would add one percent to Iran's gross domestic product (GDP), which means job creation and outdoing Qatar which jointly owns the field with Iran.
"Iran Petroleum" has conducted an interview with Ali Kardor, CEO of National Iranian Oil Company (NIOC), about South Pars development.
Q: Under the Rouhani administration, the Iranian Ministry of Petroleum prioritized South Pars development phases in a bid to accelerate the development of the giant offshore gas reservoir. Would you please explain about it?
A: When the 11th administration took office, Bijan Zangeneh (Iran's minister of petroleum) visited the South Pars development phases to get to know how much had been spent on each phase and to learn about related issues. Anyway after the new administration took office crude oil prices had fallen, we were under sanctions and our oil exports rate had declined. Therefore, NIOC's financial resources had declined sharply and we could not develop all phases together. Had we done so none of these phases would have reached production. Therefore, we decided to prioritize the phases and we allocated financial resources in priority to projects with a higher rate of progress so that they could reach production faster. Other projects received less finance.
Q: A major problem with the development of phases was financial shortages. How did petroleum ministry deal with the issue?
A: The financing of South Pars development had been partly done under the 10th Iranian administration. Under the 10th administration, upon an instruction by Supreme Leader [Ayatollah Ali Khamenei], $5 billion was allocated to the development of five phases. The 11th administration was also looking for permits to finance development of this field. The Islamic Consultative Assembly also helped the government in this field and on the strength of their note the Iranian Ministry of Petroleum and NIOC guaranteed that contractors operating joint oil and gas fields including South Pars could benefit from the National Development Fund of Iran (NDFI). Therefore, we managed to provide other financial resources than the NIOC domestic resources to the South Pars development, so that the progress of phases would pick up speed.
Q: How much has been invested in the completion and operation of phases 17&18, 19&20 and 21?
A: The completion and operation of these phases of South Pars have cost more than $18 billion: nearly $7 billion in Phases 17 and 18, $5.5 billion in Phase 19 and $5.3 billion in Phases 20&21.
Q: Would you please also speak about the importance of South Pars and its economic interests?
A: Operating each phase of South Pars will add one percent to the country's gross domestic product (GDP). South Pars supplies gas in the country and provides welfare for people in the winter. Furthermore, enhanced production from this field will help natural gas replace petroleum products, which will in turn lead to more export of oil products and directly impact job creation, economy, etc. Any delay in bringing these phases into operation means funneling profits to Qatar's market.
Q: How did the atmosphere created following the implementation of Iran's nuclear deal with six world powers, known as the Joint Comprehensive Plan of Action (JCPOA), contribute to the development of South Pars?
A: Facilitation of financial transactions and the possibility of opening letters of credit played an effective role in completing the process of development of South Pars phases. The post-JCPOA lifting of the ban on [buying] some compressors, valves and other equipment used in the projects, which had been stuck in European countries, United Arab Emirates, etc. helped accelerate the implementation of the projects.
In the wake of the implementation of the JCPOA, 10 compressors including four off-gas compressors and six propane refrigerant compressors were received from Siemens to be used in the development of Phase 12 of South Pars.
Six Siemens-made compressors were delivered in March 2016 to be used in the development of Phases 17 and 18. A large amount of pipelines, joints and Inconel valves for SP17, 18, 20 and 21, and air blowers in the sulfur production unit of SP20 and 21, all made by top European companies, were among other commodities that were delivered to these two phases in the first months of the current [calendar] year (which began on 20 March 2016). Placing an order for ethane recovery turboexpanders in the SP19, 20 and 21 development phases was another measure that would have been impossible without JCPOA.
Q: It seems that some phases of South Pars would face production decline in coming years. What’s your solution to deal with challenge?
A: That's true. That is why we have to use compressors and pressure-booster platforms in South Pars in order to avoid pressure fall-off. These platforms weigh 19,000 to 20,000 tons. Iranian companies can build platforms weighing up to 7,000 tons and the contractors' yards do not have the equipment to build pressure-booster platforms. Therefore, we have to apply special equipment and technology which Iranian companies lack. As foreign companies developed phases 2 and 3 of South Pars and the Iranian contactors were empowered in the next phases, Iranian companies could become more powerful throughout the construction of these platforms, and the technology for building pressure-booster platforms will be transferred into the country.
Q: How much gas will be added to Iran's output when SP17, 18, 19, 20 and 21 come on-stream?
A: According to the NIOC Directorate of Corporate Planning, in September 2013 when the 11th administration took office, SP17 and 18 had 78.53% progress. When the new administration took office, SP19 was 67.09% complete and SP20&21 was 51.87% complete. We are now witnessing their completion and operation. Their full operation will add more than 150 mcm/d to the South Pars output.
Q: How much has NDFI allocated to the South Pars development? Is it enough to rely on NDFI?
A: This [calendar] year, more than $3 billion was withdrawn from NDFI for the development of South Pars gas field. However, mere reliance on the NDFI resources is not a long-term and defendable approach. These resources will help the development of jointly owned fields until the way is cleared for attracting foreign investment.
NIOC is making efforts to apply a variety of investment attraction methods in order to reduce dependence on domestic financial resources. This company is facing numerous financial bottlenecks. In order to deal with development projects under such circumstances we need to develop skills to attract foreign investment and apply creative methods.
The profits gained from the issuance of NIOC bonds, which were printed last March, have been used for building utilities in the South Pars projects. In the integrated development plan for South Pars, enacted by the Economic Council, all activities needed for the development of remaining South Pars phases, except for Phase 11, have been envisaged.
Q: One of the largely used equipment, particularly in South Pars, is corrosion resistant alloy (CRA) coiled tubing. The grounds have recently been paved for the transfer of technology for manufacturing this type of tubing into the country. Would you please elaborate on this issue?
A: CRA coiled tubing is among the most consumed and the most expensive equipment used in the petroleum industry. Manufacturing this product requires access to state-of-the-art technologies and is among hi-tech industries. CRA coiled tubing has been imported to Iran ever since Iran's petroleum industry was born more than 100 years ago. The technology for its manufacturing is monopolized by several countries. Therefore, the tender bid for the procurement of 600 kilometers of CRA coiled tubing was recently held by Pars Oil and Gas Company. It was agreed that domestic and foreign manufacturers would cooperate to facilitate the transfer of technology for this widely consumed commodity into the country. The winner of the bids has been named and construction is set to start soon. NIOC is seriously pursuing the transfer of technology for building these tubings into the country and we hope to become CRA manufacturers in coming years.
Q: How do you assess the performance of Iranian contractors in the South Pars?
A: Naturally, domestic companies spend more time and budget than international companies to operate projects. Now imagine that international sanctions increased expenditure and prolonged the implementation of projects. But in the meantime, operation of these projects has resulted in more experience for domestic companies. We hope that after having acquired these experiences and through more interaction between Iranian and international companies we will witness in coming years lower costs and less time spent on the operation of projects by our contractors.
Q: What are NIOC plans for developing North Pars field?
A: Development of jointly owned fields is a priority in the petroleum industry and investments are now focused on these fields. North Pars is an independent field and we can develop it in the future, too. However, in case South Pars experiences pressure fall-off and pressure-booster platforms could not support necessary gas output we can use South Pars to make up for South Pars gas shortages. If not, we can use the North Pars gas for LNG and exports. Development of jointly owned fields remains a priority for NIOC and that is why all activities in South Pars are concentrated on maximum recovery from this field.
Courtesy of Iran Petroleum