TBY talks to Dr. GHOLAMREZAManouchehri, CEO of Petropars Ltd.
TBY What opportunities does the South Pars gas field offer?
DR. GHOLAMREZA MANOUCHEHRI The Iranian part of the South Pars field encompasses almost 14 trillion cubic meters (tcm) of gas (which measures some 500 trillion cubic feet [tcf]). It is a very rich field. There is a large portion of condensate, with some 18 billion barrels of condensate in the reservoir. Also, 1.5% of the gas comprises ethane, which is of great significance to petrochemicals, and we have a good portion of C3-C4, which makes it rich in terms of LPG as well. It is a sour gas with 5,000 parts per million (ppm) of sulfur content. Iran’s strategy has been to develop the field, as we are in need of the gas and we can export it in the form of LNG. On the other hand, the Qatari part of the field is developing very rapidly because Qatar began to develop it 10 years earlier than we did, and the migration of the gas in the Iranian field to the Qatari field was very probable due to the high pressure levels. So we started with phases located near the border. The whole area was divided into 28 phases, and each phase is expected to have a daily production of 1 billion cubic feet (BcF) of gas, 40,000 barrels of condensate, 1,500 tons of LPG per year, and 1.5 million tons of ethane per year. It presented Iran with a real opportunity to take a global role in gas and in substituting gas for other liquid products such as gasoline. That is the reason why the share of gas in our energy basket has risen to 65% from 10% in the last 30 years, and this could further increase in the future.
Iran’s total production of gas measures more than 135 billion cubic meters (bcm) per year, while Europe’s total import requirement is about 200 bcm per year. This means that our domestic consumption rate stands very high. In the future, we believe there will be more gas exploration, as so far the exploration activities have focused on oil, and we will be able to find more gas reserves. The portion of gas in our energy basket will also increase, and hopefully our ability to export will increase simultaneously. The strategy is to divert gas production to exports, not to domestic consumption.
Which new phases of the South Pars field are now being developed by your company? Has the financing of the new phases proved more difficult to secure?
We are now developing Phases 12 and 19. Petropars is responsible for the financing of projects, as we have contracts within a buy-back scheme. We have experienced some critical situations in financing the new phases. Many companies were ready to cooperate with us like OMV and Statoil; however, they had to withdraw. Now we have Sonangol from Angola. We have had long and productive negotiations with ONGC from India together with another private company in India. They are making the decision on whether to participate with their government, and we are waiting for a final answer. However, we have managed to secure the financing of the projects with the support of NICO and the indirect support of NIOC, and in 2009 we accelerated our activities. We have attained 38% progress on the Phase 12 project, and within two years we will have early production from it. Phase 19, on the other hand, is a very new contract that is directly financed by NIOC, and we have only just begun work. Based on the experiences we learned during the implementation of the other phases, we are now in the process of finalizing the basic engineering.
Are Petropars’s activities limited to the phases of South Pars gas field? Or is your company planning to expand its activities to other gas fields?
No, our projects are not limited to those of South Pars, and it has been one of our main visions to expand our activities within the Islamic Republic of Iran and internationally. We already have the Kish Project, in which Petropars acts as the main operator. We have two partners in this project. This project has a buy-back scheme and the Petroleum Engineering and Development Company (PEDEC), as an affiliate company of NIOC, is acting as the client for this project.
This field is located in the Persian Gulf, in the area of Kish Island. According to estimates, this field’s gas in place is approximately 48 tcf, with a recovery factor of 75%. The volume of condensate produced from this field is estimated to be 514 million barrels. We are finalizing the MDP of the project with our client, while we have started the work as the operator of the project.
What sort of expertise has Petropars gained from all of these projects?
Fortunately, Petropars has been capable of managing and running all these projects, and our competency lies in the upstream part of the value chain. The reservoir engineering section of the company is very competent in its field, and we are capable of carrying out everything related to geology, seismic interpretation, reservoir modeling, and calculations about the capacity of reservoirs. We also have a very qualified drilling team, and our record so far in Phase 12 has been as good as that of Statoil and other international companies.
Did the production in previous phases meet your expectations? Were they profitable undertakings for Petropars?
In Phases 4 and 5, the rate of return for Petropars was well below that of our foreign partner. We made a profit of $90 million. In Phases 6, 7, and 8 we split the profits with NICO, and it gained 90% of the remunerations. Out of that phase, Petropars earned a profit of only $100 million. Our expertise does not lie with the financing of the project, and we have to give much of the profit to the project’s financiers and partners. Currently, the value of the company amounts to about $500 million, which is already favorable for us. Yet, it can be improved and promoted in the future. The value of our contracts is more like $20 billion and we have a turnover of $2.5 billion annually. We have to increase our fixed assets so that we can conduct our business more confidently.
It has been a priority for Petropars to work with Iranian companies. How has this worked so far?
Petropars has taken a leadership role for Iranian companies so that they can build their capacities in onshore and offshore activities. Offshore, especially, has been a new area for Iranian companies. Like a mother who feeds and raises her children, we also help Iranian companies to grow and develop. Maybe, therefore, some of them grew bulkier than us. This will be our future strategy as well, although there is always a contradiction between the targets of the project and this strategy. Sometimes we have to increase the duration of a project because we are working with Iranian companies. On the other hand, it is a very good investment in the future.
In which areas do you work mostly with foreign companies?
We work with well-known foreign companies mainly in the basic engineering processes. For example, in previous phases we worked with Foster Wheeler and Worley Parsons of the UK, and Toyo of Japan. Our engineering, procurement, and construction (EPC) packages can amount up to $8 billion, and we usually offer them to consortia of local and foreign companies. International companies that have taken part in these consortia so far include Tecnimont from Italy, Daelim and Samsung from Korea, and JGC and Toyo from Japan, just to name a few. We normally buy our high-tech machinery from European and Japanese companies, such as our turbo compressors from Siemens, and for fixed equipment we collaborate with Iranian companies. We also have experts from India and Europe working with us.
What do you do to keep expertise in the country?
We have a very young and well-educated workforce, mainly coming from universities like Sharif and Tehran. In our company, these young professionals are provided with very good opportunities to interact with foreign experts through business tours and factory visits. We also have many applied workshops and on-the-job training courses for these young professionals. Further, we collaborate with universities for our training programs.
You have been collaborating with Petróleos de Venezuela in the Orinoco oil belt. What is the current status of this collaboration?
In the Orinoco oil belt, we benefit from our expertise in upstream studies. Quantification studies are ongoing in many blocks of the Ayacucho. Foreign companies also certified the results of our quantification studies. We also wanted to develop some of these regions, but the terms of the contracts were not so feasible for us. In the Dobokubi region of the Orinoco, now we are conducting feasibility studies and working on a new model of contract. We are also performing feasibility studies in Angola, Sudan, Chad, and Nigeria, all of which could easily turn into development projects.
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