Almost all associated gas production in Iran is either flared or re-injected into the oil production fields. There are often regulations that dictate when produced associated gas can be flared or not. However, with the increasing environmental concerns, putting an end to flaring of associated gas, the most wasteful aspect of oil production, remains an elusive goal. When restrictions occur, associated gas must somehow be reinjected or exported, otherwise oil production must stop. While associated gas is being reinjected by National Iranian Oil Company in huge volumes to provide enhanced oil recovery in existing fields, they are looking for more profitable ways to put associated gases to more sophisticated use. In fact, the reinjection option can appear attractive at first sight, offering the added advantages of maintaining reservoir pressure, but the costs are high for the drilling and completion of the injection wells, the subsurface equipment, and the topsides equipment required to clean, pressurize and inject the gas. All of this is sunk cost since no monetary value is gained from the gas until it is sold.
Several technologies have been evaluated and proposed for monetizing associated gas resources during the project’s feasibility study phase. However, continued technological growth has created the viability of FLNG, where it will allow to safely produce high-quality, commercially competitive, and economically extractable natural gas on demand from offshore oil fields.
The project structure is formulated whether to build or lease an FLNG facility, where both scenarios are currently under detailed evaluations. Moreover, to the supply side, NIOC is willing to sign the gas supply and purchasing agreement (GSPA) for the associated gases produced from the Iran offshore oil fields for long term. Of the main prerequisites of this contract is to submit letter of interest from sub-contractors and international parties who are interested in investing in this project.