Iran's best Caspian Sea prospects are in deepwater, and rigs are scarce

Oil seeps, large traps, 14,000 sq km basin

Sep 1st, 2000
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Northern Iran's network of refineries are the main spur to deep-water development in the southern Caspian Sea
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Seismic newly acquired across Iran's South Caspian basin indicates "world class" geology, according to exploration co-venturer Lasmo. However, most of the structures imaged lie under water depths up to 900 meters, in a region where deepwater rigs are already scarce. .

Concerted exploration may have to wait until US-Iranian relations thaw. Speakers at the recent Iranian Oil, Gas & Petrochemicals Forum in London, organized by IBC Global Conferences, were confident this would happen soon, given the surge in Iranian upstream and downstream projects that are being driven by foreign investors. These include two new oilfield rehabilitation schemes in the Persian Gulf, and the proposed conversion of gas from the South Pars Field to LNG for the export market.

Dr. Peter Wells, Lasmo's Business Managing Director- Middle East, outlined progress in the southern Caspian. Here, the company signed an exploration study agreement in December 1998 with Shell and the National Iranian Oil Company (NIOC), with Veba joining also late last year. This group is attempting the first integrated evaluation of the South Caspian Basin, having acquired, processed, and interpreted 10,000 km of new seismic over a largely unexplored area.

The study phase is nearing completion, and the report should be finalized by next month. The quartet has already selected two blocks for exploration and will opt for a further four this fall, as per the terms of their agreement. Each block is around 2,000 sq km, and agreements will hopefully be signed by early next year, Wells said. "The service agreement covers exploration, development and production. That's new for Iran, but it's difficult in a high risk area like the Caspian not to have the three tied together."

Deep basin

Wells' paper stated that the South Caspian Basin is characterized chiefly by relatively young sediments and is surrounded by mountains. The basin's oil source rocks are Oligo-Miocene (7-30 million years old), at a depth of up to 13,000 meters. The basin is quite cold and unusually, the source rocks are still effective for oil generation at depths of around 10,000 meters.

There are many oil and gas seeps on and offshore. Some of these offshore seeps have been sampled, as have source rocks around the basin's western margin. Studies suggest the total potential source rock interval may be over 1,500 meters thick, with proven gray-black source rocks comprising some 200 meters of this. These could yield around 15 kg of petroleum per ton of rock or 5 million bbl/sq km.

The basin is around 14,000 sq km in area, suggesting that the source rocks may have supplied some 700 billion bbl of oil to the basin. This huge quantity is unlikely to be in the reservoirs today, but an unlimited oil charge is implicit in the basin. The amount of oil retained in the reservoirs will probably reflect the structures' sealing efficiency.

Work to date suggests that the northern, southern and western basin flanks will more likely contain oil than gas, but the partners must address to what degree gas has displaced oil in the basin's central area, in particular between Shakh Deniz and Alborz/ Abikh. In the north-central and eastern parts, gas is almost certainly being generated today in the deep synclines between structures.

Geological deposition

South Caspian reservoirs are late Miocene to Middle Pliocene (3.0-5.5 million years old). Total thickness of this interval is around 4,000 meters, and the sediments were deposited at a very high rate in just over 2 million years, in response to isolation of the basin and the dying out of the sea. The Caspian's sea level has fallen by 1,000 meters and was accompanied by the rapid advance of at least four large river systems.

The high sedimentation rate, combined with over-pressure and a low geothermal gradient, results in significant permeability and porosity down to well over 5,000 meters. Sandstone reservoir quality is in part dictated by the river systems from which they were deposited, as each river system was eroding different sediment types with varying quartz sediment volumes. Of these, the Volga sediments are the best quality, followed by the Amu Darya, Kura, and Sefid Rud.

Essentially, the basin is in north-south compression. The large structural trends are not inverted fault blocks, but buckle folds. The basin's two most significant trends are the northwest-southeast folds such as the Apsheron Ridge and the Kura Valley trends, and the northeast-southwest Alborz/Abikh trend, both of which may be over 2,000 meters high and 100 km long. There are also deep cross faults along which lie mud volcanoes.

All the most attractive prospects in under 100 meters water depth have already been drilled. The undrilled deepwater structures are characterized by thick sedimentary successions containing thick stacked "shallow-marine" reservoir-seal systems, large high relief traps, a deep oil window, and over-pressure, a combination rarely found elsewhere.

World class structures

The geology is world class, Wells added, but this is a deepwater area in a landlocked basin, where sovereignty is also challenged. Lasmo believes it could contain over 20 billion bbl of oil and more than 30 tcf of gas, similar in size to the North Sea. However, exploration costs will be high given the shortage locally of deepwater rigs, and Iran has no capability to drill at this water depth. A new rig could cost $250 million, and capital and operating expenditures and development costs would be around $5-7/bbl, compared with just $2/bbl for the Persian Gulf.

On the other hand, there is a tailor-made local market in northern Iran, with an extensive network of refineries, whereas oil piped westwards from Azerbaijan, for instance, faces a high export cost.

Wells suggested that an improvement in US/Iran relations could have a positive impact in overcoming these challenges. Also, the Caspian states and oil companies operating there could share the exploration risk. Ultimately, however, Iran will have to decide whether the development costs are worthwhile, as it bids to meet its OPEC quotas.

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