Power forthe future

Modern oil exploration in Iran started in1901, with the first commercial oil discoverycoming at Masjid-I-Sulaiman seven yearslater. Today, Iran is one of the world'sleading hydrocarbon nations, producingmore than 3,600,000 B/D in 1997 andexporting just over 70% of that total.

Two-thirds of Iran – around one millionsquare kilometers – is covered bysedimentary strata that could contain oiland gas. Independent studies indicate thatthere are 20–30 billion barrels of oil still tobe found in the country. Unlocking thepotential of these reserves will ensure thatIran maintains its position as a major oil andgas producer.

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Figure 5.1: Driller George Bernard Reynolds, ‘master of the oil springs’,(far left) lunching in Iran. Reynolds ignored instructions to stop drilling andfound oil at Masjid-i-Sulaiman

Figure 5.2: The discovery well at Masjid-i-Sulaiman on the day commercialquantities of oil were found – May 26, 1908. This discovery was the firststep in a process that would transform the Middle East

T he Islamic Republic of Iran holdsaround 93 billion barrels of proven

oil reserves, roughly 9% of the world’stotal. In Iran, oil has been collected fromseeps for thousands of years. Iran wasone of the first countries in the world toproduce oil. Today, oil has become themain and vital source of the country’senergy and wealth through export.

The vast majority of Iran’s crude oil islocated in a number of giant, onshorefields in the Khuzestan region close tothe border with Iraq. More than half ofthe country’s 40 producing fieldscontain over one billion barrels of oil.

The onshore Ahwaz, Marun, Gachsaran,Agha Jari, and Bibi Hakimeh fields aloneaccount for about two-thirds of Iran’s oilproduction. Most of Iran’s crude oil ismedium gravity and low in sulfur.

Iran is OPEC’s second-largest oilproducer, with an average 1998 crude oiloutput of 3.6 MMB/D. The country’scurrent sustainable production capacitymay be as high as 4 MMB/D.

In December 1997, Iran’s Oil MinisterZanganeh stated that the country aimedto boost oil production capacity by200,000 to 250,000 B/D each year,possibly surpassing 6 MMB/D by 2010.

Iran’s production is limited by OPECpolicy. In June 1998, Iran agreed toreduce its production by 305,000 B/D. Asof April 1999, Iran’s production quotawas set at 3.359 MMB/D.

The geology of IranThe geological history of Iran’ssedimentary basins is a complex story.Two mountain ranges, the Alborz rangein the north and the Zagros range in thesouth, divide Iran into three geologicallydifferent regions. Compression along thenorthern edge of the Arabian tectonicplate, caused by its collision with Iran,created one of the richest fold belts inthe world.

The belt that runs from Turkey,parallelling the Iran–Iraq border all theway to the Straits of Hormuz, containssome of the world’s largest anticlinal oilreservoirs. For example, the Ahwazreservoir is around 70 km long. Thesehuge, structural fields have given longperiods of dependable oil and gasproduction. The Asmari, the Middle East’sfirst oil-producing horizon, was drilled in1908 and remains, more than 90 yearslater, the principal oil producer for Iran.

The fracture systems in many ofIran’s major reservoirs are complex andstill being defined. Geological andengineering studies of the Asmariprovided the oil industry withimportant knowledge and experience offractured carbonates that spreadaround the world. Detailed examinationof these structural features has helpedto reveal the fine-scale variationswithin each field, and so enhance oiland gas production.

The primary hydrocarbon provincesin Iran are distributed over a very largearea south and west of the Zagrosmountains. This tough workingenvironment has, over the past 60years, required a sophisticated andefficient logistics operation supportinga professionally organizedinfrastructure of oilfield services.Logistics, transportation and theinaccessibility of some fields make Irana challenging working environmentwhere oilfield engineers have to makefull and effective use of their problem-solving experience.

The early days History and politics explain why the firstMiddle East oil was discovered in Iran.At the beginning of the twentiethcentury, Iran was the only sovereignnation of the Middle East not under thedomination of the Turkish empire. Thecountry had been the subject ofgeological reports that suggested thepossibility of oil entrapment. British(1855) and French geologists (1892)independently provided reports thatencouraged William D’Arcy, a successfulgold speculator, into the oil business.

This decision resulted in the firstcommercial Middle East oil production.Perhaps the presence of oil seeps wasthe deciding factor for D’Arcy, who hadmade his fortune by buying anddeveloping a gold mine that its ownersbelieved they had exhausted.

In fact, oil seeps played a role in manyof the important oil discoveries of theMiddle East and elsewhere in the world.In those early years of oil exploration,seeps were some of the most importantcriteria for drilling and initialinvestment. Seeps were the essentialclues to oil at depth.

However, the Middle East oil seepshave a long historical record, being

mentioned by Herodotus in his History,by Strabo in his Geography and in otherancient texts.

Oil seeps were important clues, butdrilling operations in Iran were notwithout risk and the terrain wasconsidered too remote by most. Theleaders of European oil exploration andproduction, the Rothschild financialempire and Henri Deterding of RoyalDutch declined offers to join the earliestIranian drilling venture. As a result,D’Arcy financed the operation from hisown pocket.

Following the writings of the Frenchgeologist and archaeologist, Jacques deMorgan, the exploration efforts began in1903 with the drilling of wells on the ChiaSarkh anticline close to the Iran–Iraqborder north of Baghdad. It is a verylarge, simple, surface anticline withcopious seeps along its crest.Unfortunately, one of two wells drilled onthis structure came up dry while theother was a noncommercial producer.However, abundant shows of oil helped tomaintain interest in this prospect.

With funds running out, D’Arcy gainedsupport from the Burmah Oil Company,whose exploration program wasencouraged by the British Naval FuelCommittee needing fuel for the Britishfleet that was beginning to convert fromcoal to oil.

The next drill site selected was atMaidan-i-Naftan, the Plain of Oil and aspecific site, Masjid-i-Sulaiman, that tookits name from the nearby fire temple.However, the site was very remote anddrilling would require construction of aroad. This led to two more dry holesbeing drilled in more accessible Mamtain(in the Khuzestan area) in 1906.

D’Arcy’s driller, George BernardReynolds (Figure 5.1), chose the first siteon the Masjid-i-Sulaiman anticline. Thiswas spudded on January 22, 1908. Later, ageologist with Burmah Oil chose a secondsite after explaining the errors in thedriller’s choice. A little more than a weekbefore making an oil discovery, Burmah Oilsent instructions to Reynolds to shut downoperations. However, Reynolds ignoredthese instructions and his determinationwon the day when the Masjid-i-SulaimanNo 1 well came in, gushing oil 50 ft intothe air on May 26, 1908, from a depth of1180 ft. The first commercial oil producerin the Middle East, the Masjid-i-Sulaimanfield (Figures 5.2 and 5.3).

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The investment required to make oneof the world’s biggest oil fields acommercial operation, was huge andresulted in the incorporation of theAnglo-Persian Oil Company in 1909.Four years later a pipeline from Masjid-i-Sulaiman field to the coast at Abadanwas completed. This allowed the first oilto be exported. Almost one year later arefinery was completed at Abadan.

D’Arcy (and the Anglo-Persian OilCompany) had to wait until 1914 fortheir first profits – 14 years afterexploration began in Iran. He didreceive considerable support from theBritish Empire, including a detachmentof Bengal Lancers that went to Masjid-i-Sulaiman to protect the growing oiloperations considered critical to thenaval oil conversion championed byWinston Churchill, the First Lord of theBritish Admiralty.

A new deal or arrangement was madewith a 25-year supply contract and theBritish Government holding a controllinginterest of 51%. The subsidiary D’ArcyExplo Company became BritishPetroleum. Early success in Iranprompted further exploration work.

be the birthplace of modern oilfielddevelopment. New engineeringprinciples were implemented here,notably the use of wider well spacings.

Until this time, most oil fields hadbeen developed with wells spaced just afew meters apart. In 1928 Hugo Kamb, aworld authority on the petroleumindustry at that time, said that “theMasjid-i-Sulaiman field is probably themost efficiently developed oil pool in theworld” (Figure 5.6).

Careful assessment of early pressuremeasurements and their variation withdepth was a pioneering approach tounderstanding of the field’s behavior andcharacteristics. Many modern oilfieldmethods have been tested and refined inIran and other parts of the Middle East.

Oil nationalization The National Iranian Oil Company(NIOC) was established in 1951, and by1954 an exclusive oil explorationconcession had been granted to aconsortium of American and Europeanoil companies.

In 1955, the Exploration Division wasformed by NIOC. This department hadresponsibility for exploration andexploitation of oil and gas throughoutthe country, with the exception ofsouthwest Iran which lay in theconsortium’s concession area.

The consortium was abolished in 1973,and replaced by the Oil ServiceCompany of Iran (OSCI) that, underNIOC guidance and supervision,conducted exploration and productionactivities in southwest Iran.

Following the Islamic Revolution of1978, exploration and productionactivities were regrouped under twodirectorates (NIOC North and NIOC SouthFields) and a single affiliate company (theIran Offshore Oil Company).

In the mid-1970s, Iran’s oil exports(around 5 MMB/D) accounted for around15% of the world total. By 1981,

Figure 5.4: Early drilling operations in Iran were often dramatic. At Alborezthe flare from this well caused huge mud and ‘lava’ flows

These early exploration drillingprograms had mixed success but whenoil was found the results could bespectacular (Figure 5.4).

Carbonates come of ageIn the early days at Masjid-i-Sulaiman,most people believed that the oil wasbeing produced from the Gachsaranformation rather than the underlyingAsmari formation because most of theproducing wells were shallow. However,geological studies of cable tool cuttingsand correlation with Asmari outcrops,about 60 km from the field, proved thatthe Asmari carbonate was the prolificproducing formation.

The realization that oil was beingproduced from a carbonate formation hada major impact on exploration around theworld. Until this discovery, the world’sgeologists had focused their search forhydrocarbons in sandstone units.Excellent outcrop studies of fractureswere undertaken, but the realization thatthe surface fracture systems weresometimes misleading would not clearuntil the introduction of borehole

electrical imagery in the 1980s. However,the early engineering studies of fracturingwere conducted using state-of-the-artmethods and their results influenced theworldwide petroleum industry.

Geophysical pioneersSome of the earliest geophysical surveysfor petroleum exploration wereperformed in Iran (Figure 5.5). Torsion-balance gravity measurements,experimental magnetic surveys andelectromagnetic surveys were allconducted in the 1920s.

The new technique of seismicrefraction was imported, but thegreatest successes were achievedthrough local modifications andimprovements that finally allowed thetrue, subsurface, anticlinal structures tobe accurately mapped even when thesurface structure was misleading.

In the early 1930s, a jointgeological–engineering studydemonstrated that the Asmari in theMasjid-i-Sulaiman field was a singlehydraulic unit with good communicationthrough fractures. This field proved to

Figure 5.3: Masjid-i-Sulaiman, where a1908 gusherheralded the dawn ofthe Middle East’s oiland gas industry. Thesteam boiler in thebackground wasused to drive theoriginal drilling gear

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affairs. According to press reports, theplan called for “fundamental changes inmanagement”. Since January 1999, theoil ministry has been filing monthlyreports on the amounts of crude oil,refined products and gas exports. Thesewill help to track Iran’s actual revenuesfrom these sales.

The NIOC has recently focused onfrontier exploration efforts in the hopesof adding 1–2 billion barrels to provenreserves by the end of 1999. Thecompany’s current plans calls for drillinga large number of on- and offshoreexploration wells.

Since 1995, NIOC has made severalsignificant discoveries, including theDarkhoven field, which is locatedoffshore Abadan and contains 2.5 billionbarrels of low-sulfur, 39° API crude oil.NIOC planned to start production fromDarkhoven in 1999, with an initialproduction of 30,000 B/D and a secondphase peak of 60,000 B/D. This is achallenging field with target reservoirdepths greater than 15,000 ft. NearGanaveh, NIOC also found two onshoreoil fields holding combined reserves of100 million barrels.

Oilfield service in IranThe first Schlumberger operation in theIslamic Republic of Iran took place in1936 with the drilling of well Laleh-1 inthe Masjid-i-Sulaiman area. Theresistivity log shown in Figure 5.7 is theoldest surviving log from Iran and wasrecorded by Marcel and ConradSchlumberger in 1938.

World War II halted all loggingoperations in Iran. Schlumberger loggingoperations resumed in the 1940s andhave continued, without interruption, tothe present day.

In Iran, technology transfer has takenplace through best-practice training andthe deployment of technologicallyadvanced equipment and techniques.Many of the innovative and industry-leading products and services familiarto engineers operating in the Gulf ofMexico or the North Sea, are beingused to locate and bring Iranian oilfields into production quickly, safelyand cost-effectively.

Oilfield service companies are beingencouraged to forge close partnershipswith the NIOC. These partnerships coverthe installation and operation of data

Figure 5.6: Masjid-i-Sulaiman, the birthplace of modern,oilfield-development methods. This field was described in 1928as “the most efficiently developed oil pool in the world”

Figure 5.5: Geophysical operations in Iran began early with seismicrefraction techniques being ‘imported’ in 1920. Working conditionsfor the early field crews were extremely tough

production had dropped back to0.7 MMB/D – just 2.8% of the world total.Since 1981, however, there has been agradual but sustained improvement inproduction figures, which now stand atmore than 3.5 MMB/D.

Oil is a vital element in the modernIranian economy, accounting for around95% of foreign currency earnings.

The 1990s saw a move towardsinternational cooperation between thenational oil companies, and internationaloil and service companies. Of all the oil-producing countries in the Middle East,the Iranian oil and gas developmentpolicy has been one of the most radicaland forward looking.

The buy-back systemThe buy-back process began in 1995,with calls for international investment inoffshore fields. That initiative attractedjust two offers and only one – the SouthPars gas field development with Total –was implemented.

In March 1998, the NIOC revealedplans to extend the scope of projectsavailable to international companiesthrough buy-back schemes to incorporatesome of its onshore oil reserves. In July1998, Iran invited investment bids forabout 40 upstream projects and a singledownstream operation (upgrading therefinery at Abadan). Around 100 offerswere received.

With the world’s fourth largest oilreserves (at least 93 billion barrels) andsecond largest gas reserves (more than21 trillion cubic meters) Iran is in a verystrong position. The investment and newtechnology that will help NIOC to developthese vast reserves more efficiently arenow becoming available under the buy-back scheme. Gas projects will takepriority, with gas production projected toreach 300 Bcf/yr over the next five years.This increased production will be used toenhance oil recovery in declining onshorefields, for local industrial consumption,and for export.

In December 1998, President Khatamicalled for the modernization of Iran’s oilindustry and the discovery of new fields.In January 1999, Khatami approved aplan to restructure the industry,including decentralization and theseparation of policy from executive

processing and interpretation centers forpetrophysical, geological, geophysicaland reservoir applications. Cooperationhas helped to ensure the success ofextensive field studies on giant reservoirssuch as the Ahwaz and Marun fields.

Characterizing Iran’sreservoirsNIOC earth scientists, working inpartnership with GeoQuest have builtup extensive experience in analyzingthe reservoir properties andcharacteristics of Iranian oil fields such

as Ahwaz, Dorood, Marun and Soroush.Geologists, petrophysicists,geophysicists, reservoir engineers andtechnical support personnel worktogether in integrated asset teams todeal with a range of major challenges.

A detailed reservoir characterizationof Marun field evaluated fluid contacts,reservoir fluids, reservoir geology andpetrophysical logs. The project alsoexamined faulting, fracturing and otherstructural features. Detailed geologicaland reservoir models for Ahwaz fieldhelped to improve the accuracy ofpredictions about this field.

A full-field simulation of Dorood field,

Trillion cubic meters

OECDIran (21%)Iraq (3.1%)Kuwait (1.5%)Saudi Arabia (5.3%)UAE (5.8%)

24.6(17.6%)

45.2(32.4%)

13.9(10.0%)

56.0(40.0%)

Former SovietUnionOther

Middle East

Figure 5.8: With the world’s second largestnatural gas reserves, Iran is well positionedto supply the world’s changing energy needsin the next millennium

Figure 5.7: This resistivity log from explorationwell Laleh-1 was recorded in the 1930s byMarcel and Conrad Schlumberger and is thecountry’s oldest surviving well log

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based on extensive history matchingand detailed geological zonation studies,helped engineers to understand fluidmovements through the reservoir.

Production enhancementThe low permeability of some Iranianreservoirs has made them primecandidates for stimulation andfracturing. Integrated teams of specialistgeoscientists and engineers drawn fromservice companies work closely withNIOC technical staff to identify targetwells for production enhancement. Thissynergy is also used to design, plan andsteer wells and access undrainedreservoir zones.

Counting on experienceAccess to the right supportinfrastructure means that the Iranian oilindustry can expect the highest levels ofoilfield performance from servicecompanies. Recent projects carried outfor NIOC include the drilling ofhorizontal wells and assistance withmajor geophysical surveys.

Horizontal wells are crucial for theeffective development of many Iranianoil and gas reservoirs. The pace ofreservoir development in modern Iranmeans that Schlumberger has beenasked to support the drilling ofhorizontal wells on up to four rigssimultaneously, and provide state-of-the-art well plans, surveys and anti-collisioncalculations to ensure their success.

Offshore geophysical surveys arehelping to identify new oil and gasaccumulations and to delineate existingfields. Geco-Prakla currently providestraining in survey acquisition andprocessing techniques for the crew of theNIOC Pejwak (formerly the Geco Echo).

Gas - a natural developmentIran contains an estimated 812 Tcf ofnatural gas – the world’s second largestreserves after Russia (Figure 5.8). Thebulk of these Iranian gas reserves arelocated in nonassociated fields.However, large onshore oil fields containapproximately 120 Tcf of associated gas,dissolved in crude oil or in gas caps.

Iran’s largest nonassociated gasaccumulation is the South Pars field –an extension of Qatar’s 241-Tcf North

field. South Pars was first identified in1988 and originally appraised at128 Tcf in the early 1990s. However,NIOC-sponsored studies conducted inmid-1996 indicate that South Parscontains an estimated 240 Tcf, ofwhich a large fraction will berecoverable, and at least 3 billionbarrels of condensate.

Iran’s other major nonassociated gasreserves include the offshore 47-TcfNorth Pars gas field (a separatestructure from South Pars), the onshoreNar-Kangan fields, the 13-Tcf Aghar andDalan fields in Fars province, and theSarkhoun and Mand fields.

In 1996, Iran produced about 2.6 Tcfof natural gas. Of this, 1.3 Tcf wasmarketed, 1 Tcf reinjected, and 0.3 Tcfflared. In 1990, Iran began a gasutilization program designed to boostproduction to 10 Tcf per year by 2010,reduce flaring, provide gas for EORreinjection programs, and allow forincreased gas exports abroad.

Technology in actionNew techniques for the developmentand management of oil and gas fieldsare helping Iranian geoscientists andengineers to optimize their resourcemanagement strategies. Improvedunderstanding of reservoir architecture,petrophysical characteristics and flowpaths allows reservoir managers toachieve an optimum balance betweenproduction rates and total recoveryrates. The pioneering geophysicists ofthe 1920s laid the foundations forrecent developments such as advancedborehole geophysics and 3D and 4Dseismic surveys.

Modern oilfield technology hashelped Iran to open its oil and gasfields and establish huge reserves(Figure 5.9). The challengesencountered in those fields and theproblems solved by Iranian engineershave, in turn, helped to shape oilfieldmethods and to rewrite the rules ofexploration and development.

1980 1985 1990 1995 200050

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Figure 5.9: Iran’sdaily oil productionand reservesestimates. Moderntechnology hashelped to shapeIran’s oilfielddevelopmentprogram and ensureda steady increase inoil production

The Gulf

Henjam

BaihBH

Sarvestan

BushganNargesi

Gachsaran

Shurom

Alborz

ChiaSurkh

Sarkan

Kabir KuhMaleh Kuh

Qaleh Nar

MushtagAhwaz

Paydar

Lab-E-Safid

Par-I-Siah

Masjed Soleyman

Haft KolNaft-Safid

Lali

Zeldi

Ramin

Kabud

DananChashmehKhush

Dehluran

Abu Ghuraib

Darquain

NowruzAbuzar

Dorouti

Kuh-I-Mand

Sorosh

EsfandiarBB

ForoozanMarjan

Ab Tevmur

NaftKhaneh

Paris

FA Pars Kangan

Nar

Assaluyeh Lamard

Varavi

Bandubast

Aghar

Dalan

Halush

Veyzenhar

Tang Bijar

Emmam Hassan

Namaki

Gavarzin

Salakh

BukhaSaleh

W Bukha

Sarajeh

Tehran

Iran

Gas field

Gas pipeline

Oil pipeline

International border

Oil field

The oil and gas fields of Iran