Will Iran’s new oil dis­cov­er­ies shift en­ergy geopol­i­tics?

Daily Sabah (Turkey) - - Opinion - OMID SHOKRI KALEHSAR* *Vis­it­ing re­search scholar in the Schar School of Pol­icy and Govern­ment at Ge­orge Ma­son Univer­sity, holds a Ph.D. in in­ter­na­tional re­la­tions

The de­clin­ing de­mand and in­creas­ing oil sup­ply in re­cent decades have led to oil abun­dance in the en­ergy mar­ket. One of the most im­por­tant fea­tures of this shift is the ex­pec­ta­tion of lower oil prices, which, in the short run, has neg­a­tive ef­fects on the eco­nomic and po­lit­i­cal sta­bil­ity of oil-ex­port­ing coun­tries with high de­pen­dence on oil rev­enues. As a re­sult of this new mar­ket order, the group of oil-ex­port­ing coun­tries is faced with the dual main­te­nance of short-term eco­nomic sta­bil­ity by sup­port­ing high oil prices and en­sur­ing the se­cu­rity of oil de­mand in the long run by adopt­ing mar­ket share poli­cies and lower prices.

The coro­n­avirus out­break has put all in­dus­trial and eco­nomic sec­tors around the world in trou­ble. De­spite the re­duced con­sump­tion, geopo­lit­i­cal events have not had as sig­nif­i­cant of an im­pact on the oil and en­ergy mar­kets as in the past. The an­nounce­ment of the dis­cov­ery of new oil fields has not caused much fluc­tu­a­tion in the mar­ket ei­ther.

At present, un­like some mem­ber coun­tries of the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries (OPEC), the ex­plo­ration rate of new oil and gas re­serves in Iran has reached 80%, so that in the cur­rent sit­u­a­tion, for ev­ery five ex­plo­ration wells drilled, four wells reach oil and gas re­serves.

With more than 155 bil­lion bar­rels of ex­tractable oil re­serves and more than 33.1 tril­lion cu­bic me­ters of nat­u­ral gas re­serves, Iran ranks first in the world in terms of to­tal oil and gas re­serves, which ac­cord­ing to es­ti­mates and tak­ing into ac­count the cur­rent trend of ex­trac­tion and no dis­cov­er­ies means that the coun­try will have at least 80 years of oil and at least another 150 years of nat­u­ral gas for pro­duc­tion and ex­port.

Seyyed Saleh Hendi, the di­rec­tor of the ex­plo­ration at the Na­tional Ira­nian Oil Com­pany (NIOC), an­nounced that out of 20 ex­plo­rations in the world last year, the first and third ex­plo­rations be­long to Iran. He said one of the most re­cently dis­cov­ered fields, the Eram gas field in the south­ern part of the Fars prov­ince, is worth $2.7 bil­lion with mil­lions of bar­rels of ex­ploitable oil. Up to 24% of the to­tal oil and gas field ex­plo­ration in 2019 be­longed to Iran, which is equiv­a­lent to 4.97 bil­lion bar­rels of crude oil. The oil field ex­plo­rations in Gor­gan, the cap­i­tal city of the north­ern prov­ince of Golestan, and, in the Moghan plain, which is lo­cated in the north­west­ern prov­ince of Ard­abil, have also strate­gic as­pects for the coun­try.

THE EX­PLO­RATION WORKS

It should be noted that Iran last year ranked first in the world in oil and gas ex­plo­ration. Ex­plo­ration is the first link in the value chain in the oil in­dus­try, which is one of the spe­cial busi­nesses with high risk and a large in­vest­ment.

All over the world, when oil prices fall, com­pa­nies run out of funds and the first thing they do is shut down some of the ex­plo­ration work, but in Iran, de­spite the bud­get deficit we had, the ex­plo­ration con­tin­ues as be­fore.

In 2019, al­most all ma­jor ex­plo­ration and pro­duc­tion (E&P) com­pa­nies in the world saw a de­cline in ex­plo­ration costs, but this year was Iran’s year of suc­cess, and ac­cord­ing to the U.K.based Wood Macken­zie In­sti­tute, Iran ranked first in oil and gas ex­plo­ration.

“The se­cond place in the field of ex­plo­ration went to the Rus­sian com­pany Gazprom, whose ex­plo­ration amount was equal to 3.18 bil­lion bar­rels of crude oil. Th­ese ex­plo­ration re­sources should be­come a source of wealth for the Ira­nian peo­ple and we should be able to cre­ate an oil-based and non-oil­based econ­omy.” Cur­rently, three of our oil and gas fields are be­ing tested, and if they are pos­i­tive, it will be another honor for Iran. In­ter­est­ingly, of the 20 ma­jor ex­plo­rations that took place in the world in 2019, 12 were un­der 500 mil­lion bar­rels.

“We do not con­sider fields below 500 mil­lion bar­rels as dis­cov­er­ies that we want to pub­lish in the me­dia or hold press con­fer­ences about or in­clude in the global sta­tis­tics,” Hendi added.

THE BORDER PROV­INCES

Re­gard­ing the importance of the new fields dis­cov­ered in Gor­gan and Moghan, Hendi be­lieves that the Gor­gan gas field, if ex­ploited, can sup­ply gas to the north­ern re­gions of the coun­try. In pre­vi­ous years, Iran im­ported gas from Turk­menistan to com­pen­sate for gas short­ages in the north­ern prov­inces. If Iran can bring the gas from this field to the ex­trac­tion stage, there will be no need to trans­fer gas from As­saluyeh in the south­ern prov­ince of Bushehr to the north of the coun­try.

If the Moghan oil field in Ard­abil can be ex­ploited, the oil needs of the re­fin­ery in Tabriz, the most pop­u­lous city of north­ern Iran, will be met and there will be no need to trans­fer oil from the south to the north. The prov­ince of Ard­abil is 18,050 square kilo­me­ters (6,969 square miles), which rep­re­sents 1.1% of Iran’s to­tal area.

Dur­ing the pres­i­dency of Mah­moud Ah­madine­jad in Iran, an agree­ment was signed be­tween the Ira­nian Min­istry of Oil and the Croa­t­ian en­ergy group, INA, to explore oil in the Moghan block. The con­tract was val­ued at $140 mil­lion, but though six years have passed since the con­tract was signed, the com­pany was un­able to op­er­ate in the field due to sanc­tions and was there­fore ex­cluded from the pro­ject.

The Ard­abil prov­ince, even though two decades have passed since it be­came a prov­ince, is still one of the most de­prived prov­inces in the coun­try, and so far, few im­por­tant and na­tional projects have been im­ple­mented in this prov­ince. How­ever, con­sid­er­ing the de­pri­va­tions of the oil-rich, south­west­ern prov­ince of Khuzes­tan in Iran, one should not ex­pect the Moghan oil field to make a sig­nif­i­cant change in the econ­omy of the Ard­abil prov­ince, even if ex­ploited. The ex­plo­ration of new oil and gas fields by Iran while the mar­ket is fac­ing an over­sup­ply of oil and gas and Iran is un­able to ac­tively par­tic­i­pate in the global en­ergy mar­ket due to sanc­tions, can­not cause much change in the re­gional en­ergy geopol­i­tics.

En­ergy re­sources are the sources of power in the field of in­ter­na­tional re­la­tions, which, if used prop­erly by gov­ern­ments, can both cre­ate so­cial wel­fare and im­prove eco­nomic con­di­tions and in­crease po­lit­i­cal in­flu­ence in the re­gion.

How­ever, the po­si­tion of en­ergy ex­ports in Iran’s for­eign pol­icy is not en­tirely clear, and the tense for­eign pol­icy has pre­vented Iran from us­ing the nec­es­sary fi­nan­cial re­sources and tech­nol­ogy to in­crease oil and gas pro­duc­tion ca­pac­ity in the cur­rent fields.

It is nat­u­ral that, given the con­tin­u­ing sanc­tions and de­clin­ing de­mand for oil and gas, Iran will have a dif­fi­cult time at­tract­ing the cap­i­tal and tech­nol­ogy needed for the newly dis­cov­ered fields. And it should not be over­looked that ma­jor en­ergy pro­duc­ers and en­ergy com­pa­nies in­vest not only in the oil and gas sec­tor but also in other en­ergy sources. And in­vest­ment in re­new­able en­ergy, as well as elec­tric and hy­dro­gen ve­hi­cles is in­creas­ing day by day.

A gas flare on an oil pro­duc­tion plat­form in the Soroush oil fields is seen along­side an Ira­nian flag in the Per­sian Gulf, Iran, July 25, 2015.

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