Majlis Research Center: National Oil Company's $60 Billion Debt

The Parliamentary Research Center reported in a report that the National Iranian Oil Company had a debt of $60 billion by the end of 2019.

This institution affiliated with the Islamic Consultative Assembly had reported in its previous report that the National Iranian Oil Company's debt was $50 billion by the end of 2018, thus adding about $10 billion to the company's debt in 2019. Statistics on the company's debt status last year have not yet been published.

$60 billion is equivalent to Iran’s total annual export revenue from oil, petroleum products, and gas in the pre-sanctions era. The Central Bank reported this figure at $21 billion last year, indicating a significant drop in the country’s oil revenues due to US sanctions.

The National Iranian Oil Company accounts for only 14.5 percent of the country's oil and gas export revenues, and it is unclear how the company will settle its heavy and growing debts in the future.

According to this report, published on the website of the Parliamentary Research Center, oil investments have fallen sharply during 2018 and 2019.

According to this report, only $3.3 billion was invested in the upstream oil sector (exploration and production sector) last year and only $3 billion in 2018, while this figure averaged nearly $8 billion per year in 2019-2023.

The Majlis Research Center has also warned that the country's fields are rapidly aging and declining in production, and the development of joint oil fields with Iran's neighbors has been severely delayed.

Previously, the Iranian Ministry of Oil and the US Energy Information Administration reported that more than 80% of Iran's active oil fields are in the second half of their life and that their production is decreasing by 8 to 12% each year due to pressure drop in oil reservoirs.

Over the past decade, Iran has tried to compensate for the decline in production from old fields by developing some new fields, such as the West Karun fields, which has turned into environmental crises. For example, it was recently reported that in order to reduce the costs of developing the West Karun fields and hand them over to Chinese companies, the Ministry of Oil obtained permission from the Supreme National Security Council to drain the Hur al-Azim wetland in 2010.

China's Sinopec and CNPC companies developed the Azadegan and Yadavaran fields in this region on a half-and-half basis and abandoned these projects after the development of the first phase.

Iran's active oil fields are not only facing aging and declining production, their recovery rate has also decreased, an issue that the Majlis Research Center has also pointed out.

Oil recovery factor means the percentage of a field's reserves that can be recovered in a natural state.

The report says that the recovery rate of Iran's oil fields was close to 29 percent in 2013, but it dropped to 27.5 percent in 2019. In other words, about 73.5 percent of Iran's oil field reserves cannot be recovered in their natural state.

Iran needs modern technologies and cooperation from Western companies to increase the recovery rate of its oil fields. If production from old fields continues without paying attention to these issues, only a quarter of the oil reserves in these fields will be extractable, and the rest will probably be buried forever in the earth and will never be able to be recovered.

Other countries, with the help of Western companies, have increased the recovery rate of their fields in due time and are not concerned about tens of billions of barrels of oil reserves being permanently buried in the earth and the loss of national resources.

For example, Saudi Arabia increased the oil recovery rate from the Ghawar field, which is the world's largest oil field and accounts for half of Saudi Arabia's oil production, to over 30 percent by 2015. In the same year, it took an important step to increase the Ghawar field's recovery rate to 50 percent by collecting the carbon dioxide extracted along with the oil and reinjecting it into the field.

Saudi Arabia hopes to increase the recovery rate of this field to 70% with more modern designs and technologies.

Source: Radio Farda