Alwaght- While in recent years tensions over production at joint oil and gas fields in the Persian Gulf have been overshadowing relations between Iran and the Arab countries, with the improvement of Iran-Saudi Arabia relations over the past few months, bilateral cooperation in energy sector is brewing. Recently, head of National Iranian Oil Company (NIOC) Mohsen Khojasteh Mehr suggested that there are no unsettled joint oil fields with Saudi Arabia.
“Now that we have started new relations with Saudi Arabia, the preliminary work for cooperation is starting,” he said.
Pointing to the latest measures of the NIOC in development of joint energy fields with Saudi Arabia, Khojasteh Mehr held that we have plans for all joint energy fields with Saudi Arabia and the bills have been passed for various operations including production increase, maintenance, and development of new projects has been approved. In Forozan Oil Field, two companies, Petropars and Maritime Facilities companies are producing oil and very soon we will declare new production rise.
He continued that Farzad B field deal is signed and “we are developing a new jacket and we hope that by the year end, it will be completed. The Economic Council has approved a development plan for this field and Petropars as a contractor is working on it.”
“We are fully ready to start the drilling operation of Arash field and we have approved significant financial resources for the development plan of this field in the board of directors of the National Oil Company and we will start the work as soon as the conditions are ready,” said NIOC head.
He continued:” Farzad A field development plan has been handed to the NIOC board of managers and in the near future, the jacket of the field will be constructed. Our development plans for Farzad A and B are comprehensive.”
Saudi Arabia, which has already voiced its readiness to increase cooperation at all levels with Iran, is also trying to expand relations with its new partner in the energy sector. In this regard, Saudi Energy Minister Abdulaziz bin Salman announced on Saturday announced Riyadh's official invitation to Tehran to discuss the joint Arash gas field, adding: "There are common interests in the gas fields there. Earlier, Saudi Arabia and Kuwait invited Iran to negotiate to determine the eastern border of the divided water zone, and these requests were not answered.”
Arash and Farzad gas fields
The discussions between Tehran and Riyadh are over the gas fields that have been a source of dispute for years. Arash gas field (known as Durra gas field in Saudi Arabia and Kuwait) was discovered by a Japanese energy company in 1968 and is shared by Iran, Saudi Arabia, and Kuwait. Earlier, Saudi Arabia and Kuwait had signed an agreement for the development of this field, according to which Kuwait Oil Company and Saudi Arabia's Aramco are taking necessary measures to develop this gas field for final production.
Arash oil and gas field is one of the undeveloped strategic fields of Iran and is shared with the neutral zone between Kuwait and Saudi Arabia. About 40 percent of this field is in Iranian waters and the rest is in the neutral zone between Kuwait and Saudi Arabia, reaching Kuwait's Durra gas field. This field has been in operation since 1975 and its natural gas reserves are estimated at 20 trillion cubic feet and the crude oil reserves in this field are estimated at nearly 310 million barrels. Originally, based on territorial calculations, Saudi Arabia had no share in this gas field, but wrested a share by threatening Kuwait.
In the past years, the NIOC drilled an exploratory well called "Arash Well No. 1" to determine the amount of reserves in the gas field. In 2001, after Iran began exploration operations in the Arash field, Kuwait immediately threatened to sue Tehran in international courts. After the visit of the Emir of Kuwait to Tehran at that time, Iran stopped the exploration activities and used the platform built for this field in other fields. Iran restarted exploration in 2012.
In March 2022, Kuwait and Saudi Arabia signed a deal to share the resources of the Arash gas field, which provoked Iran's protest. In response, Kuwait's foreign minister admitted that Arash gas field is a three-party field of Kuwait, Saudi Arabia and Iran. In June 2022, Iran's oil minister announced that Iran will soon start production in this gas field.
Farzad B field is located in the Persian Gulf and near the Iranian-Saudi sea bound) border, about 85 kilometers East of the Iranian province of Bushehr and 35 kilometers from Farzad A field. Its fixed gas reserve is around 29.3 trillion cubic meters and about 23 trillion cubic meters is Iran's share. In recent years, Petropars company has developed this field by signing contracts, but its production for export to the world markets has faced problems so far and Iran has not been able to earn much from this gas field.
Obstacles preventing Iran's benefits from shared gas fields
The difference between Tehran and Saudi Arabia and Kuwait is about the way of production in these common fields and the amount of share that each of them consider for themselves. Although most of Arash gas field is located in Iran's territory, Saudi Arabia and Kuwait previously claimed that Iran has no share in it and have tried to appropriate large amounts of this field. Therefore, in the current situation that the relations between Iran and the Arab world are developing, the three countries can strike a deal on the amount of their share by dialogue to pave the way for production.
Lack of major capital for development of these big energy fields is another obstacle to Iran benefiting from these fields. Saudi Arabia and Kuwait have no difficult job developing their share from the fields due to huge petrodollar wealth and partnership with world energy giants. Last week, Aramco and France's Total Energy signed an agreement worth $11 billion to build a new petrochemical facility, and it is believed that this agreement is for the production in joint gas fields with Iran.
Apart from the differences between Iran and the Arab monarchies, one of the obstacles that blocks Iran's benefits from its gas and oil fields in the Persian Gulf is the sanctions that frighten away big companies from entering the Iranian energy market. Due to the sanctions, Iran has been deprived of its share in the South Pars gas field, which is shared with Qatar, but the Qataris have been earning billions of dollars from gas sales in this joint field for years.
Economic experts believe that if Iran does not start production in Arash and Farzad gas fields within the next year, it can no longer enjoy these reserves in the next years because Saudi Arabia and Kuwait are draining these sources.
The more Saudi Arabia and Kuwait produce gas in these fields, the smaller Iranian share will grow and this is all because of sanctions. The same happened in joint gas field with Qatar.
It seems that Saudi Arabia intends to take advantage of the diplomatic progress and repeat Qatar scenario in Arash and Farzad fields.
Given the role of energy in today's world, Saudi Arabia and other countries are pushing to increase their reserves in order to play a significant role in the world's future energy developments.
