Iran's Efforts to Increase Oil Recovery Rate

One of Iran's priorities over the past two decades has always been the issue of increasing the recovery rate from the country's oil and gas fields. Currently, Iran's discovered oil reserves are about 800 billion barrels, but this figure is reported as approximately 158 billion barrels in international statistics and by Iran itself, as only a small portion of the reserves in a field is usually recoverable. Given these statistics, Iran's oil recovery rate remains around 20 percent. According to reports, in the Fourth Development Plan, it was supposed that the oil recovery rate would increase by one percent, but no progress was made. In Article 130 of the Fifth Development Plan, which was considered until the year 1394 (2015), the increase in the recovery rate was also stated to be about one percent. Iran has practically not achieved any success in this area so far. Saeed Hafezi, CEO of the Offshore Oil Company, announced on Saturday, September 28, that "the oil fields in the continental shelf have a recovery rate ranging from 0.3 percent in the Resalat field to 20 percent in the Hengam field. All studies and target settings have been made to achieve a total production increase of 400,000 barrels, but it should be noted that this 400,000 barrels will not be added to the current production level, as we have a natural annual production decline of 10 to 12 percent." More than 80 percent of Iran's oil fields are in the second half of their lifespan, and according to the U.S. Energy Information Administration, 8 to 12 percent of their production decreases annually due to natural pressure decline in the oil reservoirs. To slow down the decline in oil production from these fields, Iran injects 34 billion cubic meters of gas into them annually, but this figure is very low and according to the Ministry of Oil, it needs to be doubled. Currently, one of Iran's major challenges in returning to pre-sanction oil production levels (an increase of one million barrels per day) is the decline in oil production from existing active fields. Meanwhile, recently, in the shadow of the comprehensive nuclear agreement and hope for the lifting of sanctions, Iran has also become hopeful that its delayed plans for increasing oil recovery rates and enhanced extraction can be implemented. Amir Hossein Zamaninia, Deputy Minister of International Affairs and Trade of the Ministry of Oil, announced on September 18, following the arrival of a large Austrian delegation in Tehran, that the Austrian oil company OMV is ready to cooperate with Iran after the sanctions and is prepared to assist in increasing extraction from Iran's oil reservoirs. After a meeting between Bijan Zangeneh, Iran's Minister of Oil, and Rainer Seele, CEO of OMV, the main focus of these negotiations in Iranian media was titled "increased extraction from reservoirs." According to Zamaninia, "This company has expressed its readiness to double the recovery rate from Iran's oil and gas reservoirs by employing new technologies." However, doubling the recovery rate is not an easy task and requires tens of billions of dollars in investment, a matter that is beyond the capacity of OMV, as this company has invested approximately $4 billion annually in recent years, which due to falling oil prices will reduce to less than $3 billion over the next three years. On the other hand, in a conversation I had on Saturday, September 28, with Robert Leshner, spokesperson for OMV, he stated that although the company has started negotiations with Iran and is closely monitoring developments around Iran, it has not yet made a final decision to re-enter Iran. Leshner mentioned that after the sanctions, the company did not close its office in Tehran but is still waiting for the lifting of sanctions and the situation thereafter. According to a report from British Petroleum, the average recovery rate of oil fields worldwide has been about 35 percent in recent years. In other words, even with a doubling of the oil recovery rate, Iran would only reach the current global average level. British Petroleum's assessment is that a 10 percent increase in the oil recovery rate means the possibility of extracting an additional one trillion barrels of oil available in the discovered fields worldwide. Iran currently holds more than 9 percent of the world's total extractable conventional oil reserves. At current oil prices, each one percent increase in the recovery rate would yield about $80 to $100 billion in additional revenue from oil extraction for Iran.