Statoil to operate Phases 6- 8 of South Pars development

Nov. 6, 2002
Statoil AS and Iran's PetroPars Ltd., signed a participation agreement designating Statoil as operator of offshore development in Phases 6, 7, and 8 of the South Pars gas development project

By Judy Clark
Associate Editor

HOUSTON, Nov. 6 -- Statoil AS and Iran's PetroPars Ltd., Tehran, have signed a participation agreement designating Statoil as operator of offshore development in Phases 6, 7, and 8 of the South Pars gas development project in the Persian Gulf. It also gives the Norwegian firm a share of up to 40% ownership interest in these phases of the project.

The agreement will take effect before Nov. 10, when Statoil takes over the operatorship. Statoil's agreement marks its first development contract in the Middle East and "is in line with Norwegian foreign policy, which encourages increased trade relations with Iran," Statoil said.

Offshore work is scheduled for the next 4 years, during which Statoil's capital commitment will be $300 million. The company's capital commitment and return will be covered from "sales revenues generated by condensate and LPG produced over a 4-year period from the start of production (in late 2004)," Statoil reported.

"Production capacity will be 100 MM cu m/day, with 80 MM cu m/d being exported to other Iranian oil fields for injection as pressure support. The remaining condensate and LPG will be sold," Statoil added.

The giant natural gas field will be developed with three offshore wellhead platforms in 70 m of water linked by three pipelines to an onshore gas treatment plant, a Statoil spokesperson reported.

PetroPars is undertaking Phase 1 of the South Pars development (expected to hold some 5.8 billion boe) and will serve as operator for development of the land-based gas treatment facilities in the Special Energy Economic Zone at Assaluyeh port.

Iran is speeding up the process for utilizing South Pars gas with a massive investment in the treatment complex, one of the largest gas construction projects in history, involving expenditures of $15-20 billion in a 5-7 year period. It will include liquids separation facilities, petrochemical projects, pipelines, and upstream planning and execution (OGJ Online, May 20, 2002).

PetroPars, established in 1998, is involved in 6 of the first 10 phases awarded for development, as either partner or operator. It is owned 60% by the National Iranian Oil Co., and 40% by Iran's Ministry of Industry agency, Industrial Development & Renovation Organization.

TotalFinaElf SA subsidiary Total South Pars, operator and a 40% interest holder in Phases 2 and 3 of the South Pars project, brought those phases on stream earlier this year. Its partners are Russia's OAO Gazprom 30% and Malaysia's Petronas 30% (OGJ Online, Mar. 19, 2002).

Development costs for the field reached a total of $2 billion. Production from Phases 2 and 3 is expected to plateau at 2 bcfd of gas and 80,000 b/d of condensate from 20 wells that are tied into two unmanned platforms. Gas and condensate from the field will be transported via two 32-in., 105 km pipelines to be treated onshore at the Assaluyeh processing facility.

Phases 4 and 5 are being undertaken by Agip Iran, a unit of Italy's ENI SPA, which has called tenders for subcontract work. This phase is expected to have an eventual output of 80,000 b/d of condensate, 1 million tonnes/year of LPG, and more than 1 million tonnes/year of ethane.

A consortium of South Korea's LG Group unit LG Construction Co. and Iran's Oil Industries Engineering & Construction reportedly signed a $1.6 billion contract in September for gas processing facilities in Phases 9 and 10. Although the two firms won the bid over France's Technip-Coflexip and Iran's Sunfire (Iran) Co. 11 months ago, the award was delayed several times because of political controversies within Iran's oil ministry.

LG reportedly will have a 40% stake in the project to develop Phases 9 and 10, and it is possible that Samsung Heavy Industries Co. Ltd. and Daewoo Shipbuilding & Marine Engineering Co. Ltd., South Korea, might also join the consortium.

Although South Pars gas will be used in Iran and the condensate exported, BP PLC, National Iranian Oil Co., and India's Reliance Industries Ltd. last year agreed to begin a (Phase 11-12) $10 million feasibility study of an LNG project in southern Iran based on South Pars gas (OGJ Online, Feb. 23, 01). Exports would go to India and other markets in Asia and Europe. Assaluyeh has grown so fast, however, that there is no longer room for an LNG terminal there, and new locations must be considered.

Total production from South Pars field may reach 25 billion boe at full development over 20 years (OGJ, Aug. 19, 2002, p. 22).