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March 20, Manifestation of Iran National Pride
“In the name of the happiness of the nation of Iran and in order to contribute to global peace, petroleum industry is declared national across the country without any exception.”
The above text is the scrap of legislation the Senate adopted on its last working day in 1951.
After this legislation was signed into law, Iran’s vital asset oil was declared national and this sweet memory was registered in the minds of Iranians.
Sometime after nationalization of oil and the concomitant departure of the Britons, the US orchestrated a coup in August 1953 against Iran’s democratically elected government in a bid to strengthen its foothold in Iran and dominate Iran’s petroleum industry – exploration, production and exports – under the cover of the Consortium Agreement. From 1953 to 1979 when the Islamic Revolution toppled the monarchy, a consortium of big oil companies (known as Seven Sisters) was in charge of production from Iran’s oil fields disregarding the interests of the Iranian people.
Analysts are of the view that Iran’s Islamic Revolution was a firm response by people to a regime that spent oil revenues on its own rule instead of serving people’s welfare. The regime’s black gold backfired and even oil service workers who lived in better conditions than others observed a general strike in order to accelerate the downfall of the Shah regime.
Following the Islamic Revolution, the first move by revolutionaries and technicians was to steer sophisticated oil production operations in the absence of foreign companies. The second step was moving towards self-sufficiency in production of oil industry-related commodities and equipment which were monopolized by Western companies. Due to inadequate infrastructure, that sounded difficult. The outbreak of Iraq-Iran war in 1980 added to problems as many oil facilities were destroyed during eight years of imposed war. What was urgently needed was the immediate reconstruction of facilities in order to resume production. The first signs of domestic manufacturing and indigenization of commodities came to the limelight during the first year of the imposed war in oil-rich regions in southern Iran.
Two important post-revolutionary events – leaving behind the crises stemming from the departure of Western oil companies and the outbreak of imposed war – promoted the fourth and fifth generations of the petroleum industry to become more experienced and overpower all challenges and realize the objectives of oil nationalization despite all pressures and sanctions. An industry which once symbolized dependence on the West turned into a venue for the blossoming of talents and creation of ideas.
The breakthroughs of this industry in recent years – including a 100 mcm/d gas production hike from the giant South Pars gas field, acceleration of drilling operations in West Karoun oil fields by Iranian engineers, completion and startup of desalination factory in Lab Sefid field as the first desalting unit made with domestically manufactured equipment, reduced dependence on foreign companies, insistence on self-reliance and support for domestic manufacturers – were all the outcome of potentialities of Iranians specializing in oil and gas sectors.
As Iran is marking the 64th anniversary of nationalization of petroleum industry, a bright horizon is awaiting this industry.
Under the aegis of efforts by Iranian oil service workers and government support, will Iran’s petroleum industry experience more honorable days by making up for shortcomings through attraction of domestic and foreign investment and interaction with the entire world.
Mohammad Nasseri
Director , public relations
National Iranian Oil Company
World Largest Oil Terminal in Iran
The Persian Gulf floating storage unit (FSU), which is one of the largest floating oil terminals in the world, was launched on February 8. Located in Bahregan Oil Center (BOC), this facility can store over 2.2 million barrels of crude oil.
Measuring 337 meters long, 60 meters wide and 33 meters high, the 51,400-ton terminal which has 21 storage tanks has been built by South Korea’s Samsung.
This terminal on average receives 200,000 b/d of crude oil from Soroush and Norouz oil fields. Two seven-kilometer pipelines supply oil to this facility. The storage unit is watertight and oil spill into the Persian Gulf is unlikely.
According to Iranian Offshore Oil Company (IOOC) which operates the FSU, no life-threatening accident occurred throughout the construction of the project thanks to the incorporation of fire alert and fire extinguishing systems.
FSU Startup
Saeed Hafezi, managing director of IOOC, said the terminal was launched despite international sanctions slapped on Iran. Addressing the project inauguration ceremony in the presence of Samsung representatives, Hafezi said the terminal has immediately started loading oil for exports.
He highlighted the sophisticated systems in the FSU, adding that all operations – including transport, installation and startup – have been conducted by Iranian experts while the constructor was required under the contract to do so.
Hafezi said IOOC has become a leading company in offshore exports.
The oil produced in Soroush and Norouz fields used to be exported through Sourena terminal, but the construction of the Persian Gulf FSU was planned as Sourena terminal was nearing the end of its life.
Hafezi said Sourena handled IOOC exports for more than four decades and that it is giving way to Persian Gulf FSU.
He predicted the FSU, which has cost $250 million, to be active for at least four decades. Hafezi said the standards and the insurance coverage for the storage facility are all Iranian.
He said that Sourena terminal is planned to be auctioned off.
Hafezi said IOOC is attracting investment through Engineering, Procurement, Construction and Financing Contract (EPCF) in order to reconstruct its oil terminals.
He said technical studies have already been conducted and that a tender is to be launched soon.
“Currently, there are 180 living quarters, production and operational offshore platforms in IOOC-run operation centers. After technical reviews, those in worse conditions will be prioritized for repair,” said Hafezi.
Samsung Interested in New Projects
Lee Beom-soon, a representative of Samsung, highlighted the effective cooperation of IOOC in the construction of this terminal. He expressed hope that this joint project would lead to long-term cooperation between Samsung and Iran’s oil and gas industry.
Lee said since the very beginning, international sanctions were hampering efforts to the construction of Persian Gulf FSU. He said the main objective behind this project was contribution to the development of Iran’s oil and gas projects through bilateral cooperation.
Lee said Iran’s petroleum industry is progressing fast, adding that there are numerous potentialities for cooperation.
Noting the high quality of the sophisticated equipment used in Persian Gulf FSU, the Korean industrialist said the systems used in this storage unit have been designed to bolster Iran’s oil exports.
Lee said Samsung takes pride in having constructed this storage facility.
Compliance with Standards
Mohammad-Ali Rahimieh, manager of BOC, said the contract for the construction of Persian Gulf FSU was signed in 2008. He said the Persian Gulf is like a very large crude carrier (VLCC) ready for Iran to export its crude oil.
He said all required standards have been met in the construction of Persian Gulf FSU. He said Soroush and Norouz oil, which has specific buyers, will be exported through this terminal.
Rahimieh said a pipeline, 20 inches in diameter, loads oil onto a tanker for exports.
He said Sourena exported 458 million barrels of crude oil throughout its life.
“Sourena exported 458 million barrels of oil within 844 cargoes since 2001 to February this year, in other words, five cargoes a day on average. Everything was done without accident,” said Rahimieh.
1mb/d Exports
Mohammad Ranjbar, manager of Persian Gulf FSU, said the floating storage unit facilitates export of up to 1 mb/d of oil. “This terminal can receive up to 200,000 b/d of oil from Soroush and Norouz fields,” he said as a Japanese oil tanker was loading oil for delivery to destinations.
He said the Persian Gulf FSU is among the biggest offshore structures in the world. He added that the facility cuts exports costs.
Ranjbar said this terminal is much more effective than Sourena terminal.
He said the construction of the terminal started in 2011. “This terminal was constructed by Korean companies, but startup of this equipment is an important issue and all this has been done by Iranian manpower.”
He said the facility is ready to provide full capacity services.
“Currently, all exports connections in the Persian Gulf have been installed and five pumps, each able to transfer 32,000 barrels per hour, are envisaged in the Persian Gulf. Two or three pumps are usually used in such cases,” said Ranjbar.
IOOC operates oil and gas reservoirs in six oil centers: Bahregan, Kharg, Lavan, Siri, Kish and Qeshm. Crude oil production platforms in the Persian Gulf, which are also being operated by IOOC, carry oil to terminals for exports.
The oil coming from Soroush and Norouz is stored in offshore platforms after being processed. Then, it is sent directly to the Persian Gulf FSU for exports.
Given the necessity of storing heavy crude oil produced by Soroush and Norouz fields and the necessity of replacing Sourena with FSU, the construction of an oil storage facility was considered. South Korea’s Samsung and STX companies were chosen by IOOC as contractor and subcontractor for the project.
The contract for this project was signed in September 2008. Construction operations started in May 2010 and ended in late 2011, two months ahead of schedule.
After construction, the terminal was moved towards Iran’s water and located in Soroush field north of Persian Gulf. It was installed on sheet piles which were earlier set 38 meters deep underwater.
Iran, Main Gas Supplier to Mideast
The Persian Gulf region holds around 730 billion barrels of proven oil and more than 70 tcm of natural gas reserves. Most countries in the Middle East sit atop huge oil reservoirs, but they lack independent gas reservoirs and mainly benefit from associated gas.
Iran and Qatar are the only two Middle Eastern countries with independent gas reservoirs; therefore, they are the only ones in the region to be able to export gas.
Given the shortage of independent gas reserves in the Arab countries of the Middle East and their growing need for this source of energy, Iran is facing fresh demands for gas delivery.
Ali-Reza Kameli, managing director of National Iranian Gas Exports Company (NIGEC), has said that the top priority for Iran’s gas exports is Persian Gulf countries.
“Persian Gulf littoral states like Oman, Kuwait, the United Arab Emirates, Saudi Arabia, Bahrain and Iraq have concluded that they have no other source of gas more stable than Iran’s,” he said.
Turkey is currently the only importer of Iran’s gas. Iran is expected to start pumping gas to neighboring Iraq in May. Iran will start delivering 4 mcm/d of gas to Iraq and it can raise the volume to 40 mcm/d in cold seasons.
Oman is another future destination for Iran’s gas. During a March 2014 visit to Oman by Iranian President Hassan Rouhani, the two countries signed an agreement for gas exports. The agreement requires Iran to export 10 bcm/year of gas to Oman.
Iran plans to continuously export gas to Oman for a 25-year period and Tehran will gain $60 billion from this volume of gas delivery.
Iran has also held preliminary talks with Kuwait and the United Arab Emirates for gas exports. These talks have yet to be finalized.
Iran has also built its own section of a pipeline for gas exports to Pakistan. As soon as Pakistan completes its own section of the project, gas flow will start.
Afghanistan is also a potential market for Iran’s gas exports. No official talks have so far been held for Iran to export gas to Afghanistan, but the private sector is willing to invest in this field.
Hamid-Reza Araqi, managing director of National Iranian Gas Company, has held out the possibility of Iran’s gas exports to Afghanistan.
“There is currently the possibility of gas supply to Afghanistan’s border towns through a 100-kilometer-long pipeline branching out from the gas network of South Khorasan province,” he said.
US Steel, Banks Affected by Cheap Oil
After a robust year, highlighted by US Steel Corp.'s first annual profit since 2008, the steel industry is facing an unexpected menace in tumbling oil prices, which have forced production cutbacks and even pressured prices for automotive steel.
At the heart of the problem is a build-up since last decade to supply oil and gas drillers. Like many others, steelmakers saw the US energy boom as their salvation. But with oil prices down more than 50% since last summer, energy companies have cut spending on projects requiring steel, and swiftly canceled orders with steel mills.
US Steel Corp. said it plans to idle plants in Illinois and Indiana, laying off 545 workers.
The cuts would take place in March and come on top of the planned layoff of 756 workers and possible closure of two plants in Ohio and Texas announced earlier. The company said those cuts had reflected lower oil prices and the resulting drop in demand for its steel pipe and tubular products used by the oil and gas sector.
The US banks also suffered losses due to plunging oil prices. In recent prices, the banks increased loans allocated for oil and energy sectors so that the contractors could purchase drilling and other necessary equipment.
Petchems, Condensate Make Up 50% of Iran Exports
Gas condensate and petrochemicals account for more than half of Iran’s total exports. Condensate earns Iran more than $13 billion, while petrochemical products bring in some $12 billion.
Last September, in a clear breach of the Geneva Accord, the United States imposed embargo on Iran’s gas condensate exports. However, Iran earned more than $13.65 billion from condensate up to February 9, 2015 with South Pars gas field having provided more than 99 percent. More than 9.3 million barrels of condensate was supplied by Phase 12 of South Pars, the offshore supergiant gas reservoir jointly operated by Iran and Qatar. These figures show 43% growth from a year ago.
Next year budget less dependent on oil income
A lawmaker in favor of next year’s general budget has said next year budget is less dependent on oil revenues in comparison with previous years’budgets.
Mohammadreza Tabesh said oil revenues make up just 540 trillion rials of total revenues of budget which shows the share of oil revenue in total budget has come down considerably. According to him, the government has assigned more funds to development of knowledge based economy including allocation of 300 million dollars to Innovation Fund for backing newly established companies working on scientific subjects.
Tabesh also said that science and technology sector’s credits have risen by
40 percent while 6 trillion rials have been allocated to removing deprivation, up by 70 percent against last year’s figure. Continuation of Healthcare Plan is another privilege of next year’s budget bill which will decrease the amounts people pay for health, he said.
Desulfurization Catalyst Knowledge at RIPI
Iran’s Research Institute of Petroleum Industry (RIPI) has developed technical knowledge for fabricating desulfurization catalysts from petroleum fractions, as well as the alumina base of these catalysts.
“Technical knowledge for the fabrication of desulfurization catalysts from petroleum fractions (naphtha and gasoil) and the alumina base of these catalysts has been developed at RIPI,” RIPI researcher Ahmad Fazlollahi said.
He said the technical savvy has been given to Pars Pigment and Catalyst (PP&C) company for commercialization.
“Desulfurization and denitrogenation processes in the oil refining industry are among the most important refining processes. They are done with the help of hydrogen catalysts,” he said.
Fazlollahi said these processes have been developed for refining units in order to counter the disturbing impacts of sulfur and nitrogen compounds of petroleum fractions on different catalytic compounds as well as their polluting nature.
“In both these processes, sulfur and nitrogen existing in petroleum fractions are converted into hydrogen sulfide and ammoniac with the help of catalysts, and they removed from petroleum fractions,” he said.
Higher Oil Prices to Benefit World
Iran’s petroleum minister, Bijan Namdar Zangeneh, has said that higher oil prices have three advantages for the world.
“Firstly, the production of expensive oil becomes economically viable; secondly, they (higher prices) make renewable energy viable and thirdly, they reduce and optimize consumption,” he said in a televised interview.
Asked how threatening shale oil is for Iran’s oil and OPEC, the minister said: “Iran’s oil lies within OPEC’s oil and it is among low-priced oils and its cost price is below $10 while the cost price for shale oil is $70 on average.”
Zangeneh also said market fundamentals are mainly to blame for crude oil price slumps even though political factors cannot be ruled out.
“The surplus oil in the market has been the main cause of price declines in recent months,” he said.
He said there is 2 million bpd of excess oil in the market which is expected to endure in the first six months of 2015.
“This has pushed down prices in the global market, not to mention the projections for August 2014 which had foreseen the situation.”
Zangeneh, however, said political factors also played a role.
“There is no doubt that political factors have had an effect to sustain the situation; but to what extent, one cannot say for sure,” he added.
The minister said while the United States had seized on the oil price decline to pressure Russia over Ukraine, Iran was less of a target.
“However, we think America and its allies had the intention to deal a blow to Iran,” he added.
Zangeneh also said that Iran has been pushing ahead with its oil projects regardless of sanctions.
“Even under the conditions of sanctions, Iran focused all its efforts on the development of petroleum industry projects particularly development of joint fields,” he said, highlighting development projects in the supergiant South Pars gas field which Iran and Qatar share in the Persian Gulf.
“We are not waiting for the sanctions to be lifted. We continue our job within the framework of our country’s economic policies,” said the minister.
Universities to Study Oil Fields
Iran’s deputy petroleum minister, Rokneddin Javadi, and chancellors of nine universities and research institutes have signed agreements for technological studies to be conducted on nine oil fields.
Javadi, who is managing director of National Iranian Oil Company (NIOC), said these agreements are signed so that the technological knowhow acquired by scientific centers in Iran would be used for enhanced recovery from oil fields.
He said that even one-percent increase in recovery rate would result in the extraction of 5 billion barrels of oil. He said such big volume of recovery would earn Iran significant revenues.
Mohammad-Ali Emadi, deputy head of NIOC for research and technology, said Iran is assigning studies on oil fields to universities for the first time in a century.
“The universities are expected to find an appropriate foreign partner to clear the way for the transfer of technology in the upstream sector,” he said.
Iran’s minister of petroleum has instructed NIOC to establish an advisory body to maximize recovery from the country’s oil and gas reservoirs.
In a letter to Petroleum Ministry’s Department of Research and Technology, Bijan Namdar Zangeneh recommended Iranian universities and research centers cooperating in oil and gas recovery with Ministry of Petroleum to recruit a qualified Iranian or foreign consultant to gather extraction data.
The advisory body will be comprised of veteran experts specializing in oil and gas recovery.
Ahvaz oil field is to be studied by RIPI, Karanj by Islamic Azad University, Kupal by Sharif University of Technology, Mansouri by Shiraz University, Gachsaran field by Petroleum University of Technology and Bibi Hakimieh to Enhanced Recovery Research Center. All these five oil fields are run by National Iranian South Oil Company (NISOC).
The Petroleum Engineering Institute of University of Tehran is to study South Azadegan oil field which is administered by Petroleum Engineering and Development Company (PEDEC). Amir-Kabir University of Technology is to handle Darkhoein field which is run by Arvadan Oil Company and Sahand University of Technology is to conduct studies on Soroush oil field which is run by Iranian Offshore Oil Company (IOOC).
RIPI, SOCAR Mull Oil Technology Cooperation
Iran’s Research Institute of Petroleum Industry (RIPI) and the State Oil Company of Azerbaijan Republic (SOCAR) have agreed to cooperate in petroleum technologies.
Following a second round of talks, RIPI and SOCAR agreed to offer mutual services and seek opportunities in markets in the countries in the region.
Amir-Abbas Hosseini, deputy head of RIPI for technology and international affairs, said: “In recent months, RIPI has reached preliminary agreements with this company in the upstream sector, extraction and drilling, downstream sector as well as energy and the environment.”
He highlighted the potentialities of SOCAR in offshore activities, saying the Azeri company has already had good performance in the Caspian Sea and has made significant progress in nanotechnology.
Hosseini said RIPI plans to use the products SOCAR has already used in the development of oil fields in Azerbaijan.
“Downhole equipment and pumps are among other successes of SOCAR and they are supposed to give us a new version of this equipment to use in resolving domestic problems,” he said.
Hosseini said enhanced oil recovery is another point the RIPI and SOCAR have agreed upon.
“Given the background and competence of RIPI in providing services with regard to petroleum core analysis, it was agreed that RIPI, as the reference in phase behavior (PVT), pressure and temperature, would meet the needs of SOCAR,” he said.
Hosseini said RIPI and SOCAR both enjoy great potentialities in nanotechnology, adding that they have agreed to share technological savvies.
Regarding the presence of RIPI in the markets of countries in the region, he said: “Given the capacities and potentialities of both sides, it was decided that we win foothold in some markets in the region and expand the capacities of RIPI across the region.”
He said RIPI and SOCAR reached agreement on conducting joint projects overseas and cooperating in the education sector. He added that technical teams from both sides are to enter negotiations for submitting a preliminary plan.
“An advantage with cooperation between the two sides is to use the experience and knowledge of oil experts in managing oil projects so that we can exchange and transfer technology alongside major oil companies in the world,” Hosseini said.
He said that RIPI and SOCAR reached agreement on environmental issues, adding that RIPI researchers, who have already removed oil pollutants in Siri Island, are able to implement projects in Azerbaijan and other Central Asian countries.
Senior managers from RIPI and SOCAR are expected to meet in late February and in early March.
SOCAR is one of the largest O&G corporations in the world, involved in production of oil and natural gas from both onshore and offshore fields in the Azerbaijani section of the Caspian Sea.
Oil on Wild Ride
An uncertain future is awaiting oil prices. Even experts are no longer able to predict whether the oil price would go up or not. The frustration of experts could be seen in their conflicting analyses. They estimate the price of black gold in a wide range between $30 and $200 a barrel.
After falling nearly 60% from a peak last June, the price of oil bounced back more than 20% as January turned to February. Then, it sunk 5%, closing just above $50. Oil has fallen or risen by 3% or more on 14 of 27 trading days so far, this year. By comparison, the stock market hasn’t had a move that big in more than three years.
Predicting prices is especially tricky now because the oil market has never quite looked like this. Oil price collapses of the past were triggered either by plummeting demand or an increase in supplies, and the latest one had both. Production in the US and elsewhere has been rising, while slower economic growth in China and weak economies in Europe and Japan means demand for oil isn’t growing as much as expected.
More Fluctuations
As recent trading indicates, any sign of reduced production inspires traders to buy oil, and every new sign of rising supplies sends prices lower. In a report, the US Energy Department, citing unusual uncertainty, said the price of oil could end up anywhere from $32 to $108 by December.
“There are many more laps to come on this roller coaster,” The Associated Press quoted Judith Dwarkin, chief economist at ITG Investment Research, as saying.
As oil prices bounce up and down, so will the price of gasoline, diesel and other fuels. Almost no one expects a return to the very high prices of the last four years, so drivers and shippers will continue to pay lower prices. It’s a question of how much less and for how long.
Three scenarios are bandied about.
Those expecting a quick and lasting price jump see mounting evidence that drillers in the US are pulling back quickly because they are no longer making money. A closely-watched survey by the oil services company Baker Hughes shows that the number of rigs actively drilling for oil fell to 1,140 last week, down 29% from a record high of 1,609 in October.
Oil companies have announced spending cuts in billions of dollars; oil service companies have announced layoffs of thousands of workers.
If companies stop drilling new wells in North Dakota and Texas, the centers of the US oil boom, overall US production could fall fast. Output from most of those wells declines far more quickly than production from more traditional wells. Analysts at Bernstein Research estimate US production declines at 30% a year without constant investment in new wells.
A quick decline in production would send prices higher by reducing global supplies. At the same time, demand could be on the rise. The US economy seems to be improving rapidly and demand for gasoline is increasing. Global demand may also rise somewhat simply because low prices tend to encourage more consumption.
If the oil bulls are right, it means prices for transportation fuels would rise and the slowdown in drilling activity in the US would perhaps be short-lived.
Others say oil production is still rising and demand isn’t yet catching up — a recipe for lower oil prices.
The oil bears argue that there are plenty of rigs still working and they are now focused only on the most prolific spots. Also, oil services companies are charging significantly less for equipment and expertise. This means oil companies may be able to keep oil supplies rising from already high levels despite low prices.
The Energy Department reported last week that there was a record 1.18 billion barrels of oil in storage in the US ITG’s Dwarkin estimates that in the first half of this year the world will be producing, on average, 2 million barrels per day more than it will be consuming.
Analysts at Bank of America Merrill Lynch say $32 per barrel is possible. Ed Morse, an analyst at Citi, called the recent rise in prices a “head fake” and predicts oil could plunge into the $20 range, the lowest since 2002.
The bears also don’t expect much increase in demand. Many developing nations are cutting back on fuel subsidies, which mean that consumers could be buying less fuel, not more. And demand in the US and other developed nations won’t go up much, they argue, because of environmental policies and high fuel taxes.
After its recent rise, some think oil may already be close to finding its level.
The International Energy Agency (IEA) said in a report that prices will stabilize in a range “higher than recent lows but substantially below the highs of the last three years.”
In the past, once production went off line it took years to bring it back. Now, the IEA said, drillers can quickly and easily tap shale deposits to bring new oil to market as soon as supplies fall or demand rises. That should help keep a lid on prices.
Tom Pugh, an analyst at Capital Economics, forecasts that Brent, the most important benchmark for global crude, will end the year around $60 per barrel, within $4 of where it closed Tuesday — and to be at $70 by the end of 2020.
That doesn’t mean, however, there won’t further be bumps along the way. “We wouldn’t be surprised to see larger price movements before the market settles down,” Pugh wrote.
$45-$60 Return
Back in May 2008, nobody — especially regulators — had a clue about what was causing crude oil prices to spike to $100-per-barrel-levels, and mostly everyone was inclined to either blame “China” or “speculators” or some combination of the two.
But Michael Masters, a portfolio manager at Masters Capital Management, had a simple proposition. In the Senate committee hearings organized to figure out exactly what was going on, Masters testified that it was his belief that a new class of investor — one he dubbed the passive “index speculator” — had bulldozed his way into the market and distorted the usual price discovery process.
Everything, Masters added, comes down to appreciating that “volume times price” is always a better investment than price alone.
“If you look at the returns in crude, where you typically had backwardation before index funds moved into commodities, that shifted to a situation where there was much more of a contango structure, which penalized those who were synthetically storing crude because the price in the future was higher than the price before, benefiting those storing actual crude,” he said.
“The point is there is all this stuff you have to deal with owning the price alone, which is really just speculation versus owning the means of production which benefits from volume increases, as well as price.”
But Masters said he is not completely against speculation.
“You need a little bit [of speculation] to grease the wheels of commerce,” he offered. “It’s just that when it’s all speculative flows it creates booms and busts and more volatility than is necessary for price formation to take place. If you put enough capital in anything, you destroy it.”
At this point in the cycle, it’s Masters’ opinion that the market has to appreciate that at $45-60 per barrel returns can still be generated and that will keep production and efficiency flowing.
“Everyone will cut the cost of what they are doing but they are going to keep doing what they’re doing and keep doing it more efficiently. If you cut the cost, the production will keep flowing,” he stressed. “You’re going to get the production, but with less economics for the E&P businesses and with less economics for your vendors. Things will get cheaper and people will simply make fewer returns.”
Gas Output Up in South Pars
South Pars holds 40% of Iran’s gas reserves. This reservoir, sprawling on 3,700 square kilometers, contains 14.2 tcm of gas and 19 billion barrels of gas condensate. The offshore reservoir, which is jointly operated by Iran and Qatar, can earn the Islamic Republic several trillion dollars in revenues. Over the past century, Iran has gained $880 billion from crude oil exports. At today’s price of around $50 a barrel, Iran’s 100-year revenues from oil sales would become $3.6 trillion, which is still lower than the $4.4 trillion estimated for South Pars.
If the gas recovered from South Pars is converted into other products to feed petrochemical industries, the earnings will be 10-fold higher. Coupled with revenues from South Pars oil layer, the real value of this national asset will become highly significant.
This gas reservoir is instrumental in boosting Iran’s national, regional and international status. Despite all sanctions and financial restrictions, Iran has managed to add around 100 mcm/d to its gas output from South Pars. Consequently, Iran’s gross national product will grow remarkably and that would be a big achievement for Iran’s economy. Phase 12 of development of South Pars is supplying more than 50 mcm/d of gas. Inauguration of this phase will allow the extraction of 3 bcf/d of sour and sweet gas. Furthermore, 120,000 b/d of condensate (more than 34 million barrels a year) and 750 tons of granulated solid sulfur will be produced from this phase. Therefore, Iran’s gas condensate production will grow more than 22% and its gas production more than 16% year-on-year.
Ali-Akbar Shabanpour, managing director of Pars Oil and Gas Company (POGC), said Phase 12 development became complicated in its final stages.
He said the new management team at POGC has paid contractors based on progress in the project.
He said an oil platform is now being launched less than five months after its installation, while that used to last 13 to 14 months.
Noting that POGC owes nothing to any of contractors for Phase 12, Shabanour said the sums paid to contractors in the past one year and a half has been spent on the project.
He said the construction of the fourth offshore platform of Phase 12 is the last step in the development project.
Shabanpour said Phase 12 supplied 66 mcm/d of gas during winter. “This phase made great contribution to winter fuel supply,” he said.
Shabanpour said the infrastructure, installation of equipment, connections and cable laying, installation of rotary equipment and instruments, pre-commissioning and commissioning are the steps taken for every development phase. He said the most complicated part is in the final 10% of each development phase.
Shabanpour said based on the initial contract with Petropars Company, domestic manufacturing had a 51% share. He added that this percentage has now reached 66.
He expressed regret that work on the project was slowed down between 2005 and 2009.
Shabanpour said $7.3 billion has so far been spent on Phase 12, adding that the project has earned the country $1.6 billion over the past one year.
He said Phase 12 is estimated to bring Iran $17 million in revenues every day.
Phases 15&16
Shabanpour said around 36 mcm of sweet gas is being produced in these phases from four terrains. Gas is fed into the refinery of these phases from phases 6-8 of South Pars.
Phases 17&18
Shabanpour said 8 to 9 mcm/d of gas is currently being produced in the first terrain of phase 17&18 of South Pars. He added that the production will double after the second train comes online.
He said the main plans POGC would follow in the next calendar year would be to raise production in different phases of South Pars to their rated capacity and commissioning Phase 19.
“Currently, Iran and Qatar are recovering 15 bcf/d and 22 bcf/d of gas, respectively from South Pars reservoir. Qatar is outpacing Iran,” he said.
Shabanpour said Iran is expected to bring its production from this field to 17 bcf/d by March 2016.
IOTC Exporting 6mb/d
Iran Oil Terminals Company (IOTC) is the last link in Iran’s oil and gas chain. It is operating in Kharg, Assaluyeh, Mahshahr and north of Iran. The main task assigned to this company is to receive, store, control both qualitatively and quantitatively and finally export crude oil, gas condensate and petroleum products. IOTC has grown into a well-known international brand as it deals with more than 1,000 vessels a year.
Iran Petroleum has conducted an exclusive interview with Pirouz Mousavi, managing director of IOTC. The full text is as follows:
Q: Would you please tell us about the export capacity of this company as its main mission?
A: Given the daily growing development of petroleum industry projects, particularly in South Pars, and the insistence of Iran’s petroleum minister on enhanced oil and gas production as the top priority of the petroleum industry, IOTC has in recent years undertaken the necessary measures to gradually boost the country’s production capacity. At present, this company is able to handle export of more than 6 mb/d of oil.
Q: The issue of oil and gas storage seems to have become a priority of Iran’s oil industry. This activity involves IOTC, too. Would you please tell us about the storage capacity of this company? What has the company done to boost its storage capacity?
A: We have to boost our storage capacities in order to be able to carry out our plans. To that effect, four storage tanks, with capacity of 1 million barrels each, were installed in Kharg Island in August 2014. We managed to increase our storage capacity by 4 million barrels. These new storage tanks have brought the IOTC storage capacity to 28 million barrels. We also plan to increase our storage capacity by 4 million barrels in Assaluyeh. These storage tanks are currently under construction.
Q: One of Iran’s Ministry of Petroleum’s plans is to develop Jask Port by building storage tanks and laying pipelines. Would you please tell us about that?
A: The 11th administration and the petroleum minister have insisted on the development of Jask. Besides laying a pipeline to carry oil from oil-rich regions in southern Iran to this region, a number of storage tanks are also to be built and crude oil exports from this region are to be followed up on. After these projects are completed, IOTC will start its activity and a new oil terminal will be established.
In collaboration with the private sector, oil refineries and petrochemical plants are to be built in Jask.
Q: Could you update us about the level of development in Jask?
A: Upon insistence of the Iran's minister of petroleum, job division has been conducted for this region and the priorities have been determined. By virtue of the president’s order, this project should come on-stream in two years.
Q: One of IOTC’s important plans is the issue of overhaul. How does the company deal with reparations which need to be done quickly?
A: That’s a good point you noted. Every year, we have to conduct a full inspection of installations of the company including pipelines and reservoirs. Given the high significance and risk of our job, this issue is very sensitive and complicated.
With regard to pipelines – an onshore and an offshore pipeline – we managed to carry out inspection by remote operated vehicle (ROV). This project which was designed to give assurances about the conditions of offshore pipelines involved scouring. More than 300 spots have been identified which need 100 meters of scouring. Several domestic contractors have expressed their readiness to handle the project. Soon, one of them will be selected to start reparations.
Another plan we have been following with regard to offshore pipelines has been inspection by pig running. A contractor has already been selected and operations will start soon.
In the onshore sector, all pipelines, measuring 38, 60 and 72 inches in diameter, are inspected routinely and they will be repaired soon, if necessary.
As far as storage tanks are concerned, every year 2.5 to 3 million liters of tanks need to be inspected annually.
Moreover, jetties 5&6 have already been repaired and are ready to resume work while jetties 12&13 are under repair. We also plan to have two jetties repaired by the end of the calendar year.
For the first time in the country, we managed to have two mooring points repaired. The reparation of the mooring buoys was done by IOTC engineers in Kharg Island in order to facilitate berthing more oil tankers.
Q: Do you have any plans to increase the number of vessels, as the company is to broaden its activities in coming years?
A: Yes, we have received permission for purchasing and building 8 vessels. Two vessels are to be purchased, while six others are to be manufactured for the first time in Iran. The possibility of the 360 degree rotation of the engine of these very large crude carriers enables them to leave jetties with flexibility.
Q: Would you please explain about the activities of this company as some new phases of South Pars are being commissioned?
A: Phase 12 has been exporting gas condensate. Moreover, gas condensate exports have started from phases 15&16, too. Assaluyeh has seen its gas condensate exports rise 20%. I have to note that with the development of other phases, IOTC is ready to enhance exports rate.
Q: IOTC has been among leading companies supporting Iranian manufacturers of commodities and equipment. Would you please explain more on this issue?
A: That’s right. In the past years, we mainly focused on the development of knowledge, research and technology and we have conducted numerous projects in cooperation with universities and research institutes. With regard to commodity and equipment, we have benefited from Iranian manufacturing. For example, for the first time, we produced microbe powder for fighting oil-contaminated soil in collaboration with one of Iranian universities. After successful field test, the powder was used by IOTC. National Iranian South Oil Company (NISOC) also requested to use it. We recently delivered 3 tons of the powder to this company.
Recently, a contract was signed with domestic manufacturers for the production of 20 SRJ devices which are made in Japan and used for resisting residues in storage tanks. Each system costs more than IRR 4 trillion, while its domestic manufacturing would cost half that amount.
Among other cases, I can also highlight the acquisition of technical knowledge, designing and manufacturing of metering and loading arms for the first time in the country. Here, I have no stress that we have managed to save IRR 70 billion by using domestically manufactured commodities and equipment.
Q: Given progress in nuclear talks between Iran and six world powers, foreign companies are likely to return to Iran to operate oil projects. Have you envisaged any plans for cooperation with these companies?
A: Yes, there are numerous opportunities for investment in IOTC. Enhancing the capacity of storage tanks, manufacturing of equipment which has not yet been made in the country and cooperation in development projects are among these opportunities.
Q: IOTC is equipped with one of the best oil terminal labs in the world. Would you please explain about that?
A: Yes. Our laboratory has been approved by all reference bodies in the world and is equipped with the state-of-the-art technology. It is known as the reference lab in the Middle East and is ready to provide services both domestically and overseas. We also plan to set up another lab in Assaluyeh to serve South Pars phases.
Q: IOTC recently attended an exclusive exhibition in Baghdad and put on display Iran’s petroleum industry technical and engineering capabilities. Why did you attend that exhibition and what do you think of the future of cooperation between Iran and Iraq in the petroleum industry?
A: The level of economic cooperation between Iran and Iraq is increasing and the petroleum industry is a strong point in this cooperation. Although common economic objectives constitute the main factor behind mutual industrial cooperation between the two countries, oil and gas sectors have always linked Iran and Iraq. There is hope for growing cooperation in the coming years. Propitious industrial opportunities in Iraq have been warmly welcomed by Iranian economic activists and these exhibitions provide a good venue for introducing these opportunities.
Meanwhile, a main challenge that both Iran and Iraq face with, stems from oil price fluctuations. Therefore, the Islamic Republic of Iran and Iraq have to move towards oil-independent economy. To that effect, providing marine services to oil tankers and vessels sailing in the Persian Gulf is a good platform for commercialization of the petroleum industry. Iraq enjoys good potential in its Basra oil terminal, while Iran has good infrastructure like Mahshahr exports terminal, Kharg oil terminal, Persian Gulf Floating Storage Unit in Bahregan Oil Center, and Jask oil terminal in the near future would be able to play this role effectively.
Meantime, destination markets have expanded significantly. To that effect, Iran and Iraq have to find their partners and broaden their ties. The route towards broadening ties between the two countries is irreversible. The leaders of both countries are determined to upgrade ties and in this regard, investors, businessmen and private sector activists in both countries are instrumental.
As petroleum industry managers, we have to provide the required ground for the development of activities and removal of existing obstacles in order to clear the way for mutual cooperation.
Crude oil storage, terminal operation, sea environment and bioremediation, upgrading crude oil, gas condensate and petroleum products’ exports processes as well as chemical lab services for crude oil and gas condensate were among IOTC potentialities showcased in Baghdad exhibition. These capabilities were welcomed by many Iraqi oil activists.
IOTC Exporting 6mb/d
Iran Oil Terminals Company (IOTC) is the last link in Iran’s oil and gas chain. It is operating in Kharg, Assaluyeh, Mahshahr and north of Iran. The main task assigned to this company is to receive, store, control both qualitatively and quantitatively and finally export crude oil, gas condensate and petroleum products. IOTC has grown into a well-known international brand as it deals with more than 1,000 vessels a year.
Iran Petroleum has conducted an exclusive interview with Pirouz Mousavi, managing director of IOTC. The full text is as follows:
Q: Would you please tell us about the export capacity of this company as its main mission?
A: Given the daily growing development of petroleum industry projects, particularly in South Pars, and the insistence of Iran’s petroleum minister on enhanced oil and gas production as the top priority of the petroleum industry, IOTC has in recent years undertaken the necessary measures to gradually boost the country’s production capacity. At present, this company is able to handle export of more than 6 mb/d of oil.
Q: The issue of oil and gas storage seems to have become a priority of Iran’s oil industry. This activity involves IOTC, too. Would you please tell us about the storage capacity of this company? What has the company done to boost its storage capacity?
A: We have to boost our storage capacities in order to be able to carry out our plans. To that effect, four storage tanks, with capacity of 1 million barrels each, were installed in Kharg Island in August 2014. We managed to increase our storage capacity by 4 million barrels. These new storage tanks have brought the IOTC storage capacity to 28 million barrels. We also plan to increase our storage capacity by 4 million barrels in Assaluyeh. These storage tanks are currently under construction.
Q: One of Iran’s Ministry of Petroleum’s plans is to develop Jask Port by building storage tanks and laying pipelines. Would you please tell us about that?
A: The 11th administration and the petroleum minister have insisted on the development of Jask. Besides laying a pipeline to carry oil from oil-rich regions in southern Iran to this region, a number of storage tanks are also to be built and crude oil exports from this region are to be followed up on. After these projects are completed, IOTC will start its activity and a new oil terminal will be established.
In collaboration with the private sector, oil refineries and petrochemical plants are to be built in Jask.
Q: Could you update us about the level of development in Jask?
A: Upon insistence of the Iran's minister of petroleum, job division has been conducted for this region and the priorities have been determined. By virtue of the president’s order, this project should come on-stream in two years.
Q: One of IOTC’s important plans is the issue of overhaul. How does the company deal with reparations which need to be done quickly?
A: That’s a good point you noted. Every year, we have to conduct a full inspection of installations of the company including pipelines and reservoirs. Given the high significance and risk of our job, this issue is very sensitive and complicated.
With regard to pipelines – an onshore and an offshore pipeline – we managed to carry out inspection by remote operated vehicle (ROV). This project which was designed to give assurances about the conditions of offshore pipelines involved scouring. More than 300 spots have been identified which need 100 meters of scouring. Several domestic contractors have expressed their readiness to handle the project. Soon, one of them will be selected to start reparations.
Another plan we have been following with regard to offshore pipelines has been inspection by pig running. A contractor has already been selected and operations will start soon.
In the onshore sector, all pipelines, measuring 38, 60 and 72 inches in diameter, are inspected routinely and they will be repaired soon, if necessary.
As far as storage tanks are concerned, every year 2.5 to 3 million liters of tanks need to be inspected annually.
Moreover, jetties 5&6 have already been repaired and are ready to resume work while jetties 12&13 are under repair. We also plan to have two jetties repaired by the end of the calendar year.
For the first time in the country, we managed to have two mooring points repaired. The reparation of the mooring buoys was done by IOTC engineers in Kharg Island in order to facilitate berthing more oil tankers.
Q: Do you have any plans to increase the number of vessels, as the company is to broaden its activities in coming years?
A: Yes, we have received permission for purchasing and building 8 vessels. Two vessels are to be purchased, while six others are to be manufactured for the first time in Iran. The possibility of the 360 degree rotation of the engine of these very large crude carriers enables them to leave jetties with flexibility.
Q: Would you please explain about the activities of this company as some new phases of South Pars are being commissioned?
A: Phase 12 has been exporting gas condensate. Moreover, gas condensate exports have started from phases 15&16, too. Assaluyeh has seen its gas condensate exports rise 20%. I have to note that with the development of other phases, IOTC is ready to enhance exports rate.
Q: IOTC has been among leading companies supporting Iranian manufacturers of commodities and equipment. Would you please explain more on this issue?
A: That’s right. In the past years, we mainly focused on the development of knowledge, research and technology and we have conducted numerous projects in cooperation with universities and research institutes. With regard to commodity and equipment, we have benefited from Iranian manufacturing. For example, for the first time, we produced microbe powder for fighting oil-contaminated soil in collaboration with one of Iranian universities. After successful field test, the powder was used by IOTC. National Iranian South Oil Company (NISOC) also requested to use it. We recently delivered 3 tons of the powder to this company.
Recently, a contract was signed with domestic manufacturers for the production of 20 SRJ devices which are made in Japan and used for resisting residues in storage tanks. Each system costs more than IRR 4 trillion, while its domestic manufacturing would cost half that amount.
Among other cases, I can also highlight the acquisition of technical knowledge, designing and manufacturing of metering and loading arms for the first time in the country. Here, I have no stress that we have managed to save IRR 70 billion by using domestically manufactured commodities and equipment.
Q: Given progress in nuclear talks between Iran and six world powers, foreign companies are likely to return to Iran to operate oil projects. Have you envisaged any plans for cooperation with these companies?
A: Yes, there are numerous opportunities for investment in IOTC. Enhancing the capacity of storage tanks, manufacturing of equipment which has not yet been made in the country and cooperation in development projects are among these opportunities.
Q: IOTC is equipped with one of the best oil terminal labs in the world. Would you please explain about that?
A: Yes. Our laboratory has been approved by all reference bodies in the world and is equipped with the state-of-the-art technology. It is known as the reference lab in the Middle East and is ready to provide services both domestically and overseas. We also plan to set up another lab in Assaluyeh to serve South Pars phases.
Q: IOTC recently attended an exclusive exhibition in Baghdad and put on display Iran’s petroleum industry technical and engineering capabilities. Why did you attend that exhibition and what do you think of the future of cooperation between Iran and Iraq in the petroleum industry?
A: The level of economic cooperation between Iran and Iraq is increasing and the petroleum industry is a strong point in this cooperation. Although common economic objectives constitute the main factor behind mutual industrial cooperation between the two countries, oil and gas sectors have always linked Iran and Iraq. There is hope for growing cooperation in the coming years. Propitious industrial opportunities in Iraq have been warmly welcomed by Iranian economic activists and these exhibitions provide a good venue for introducing these opportunities.
Meanwhile, a main challenge that both Iran and Iraq face with, stems from oil price fluctuations. Therefore, the Islamic Republic of Iran and Iraq have to move towards oil-independent economy. To that effect, providing marine services to oil tankers and vessels sailing in the Persian Gulf is a good platform for commercialization of the petroleum industry. Iraq enjoys good potential in its Basra oil terminal, while Iran has good infrastructure like Mahshahr exports terminal, Kharg oil terminal, Persian Gulf Floating Storage Unit in Bahregan Oil Center, and Jask oil terminal in the near future would be able to play this role effectively.
Meantime, destination markets have expanded significantly. To that effect, Iran and Iraq have to find their partners and broaden their ties. The route towards broadening ties between the two countries is irreversible. The leaders of both countries are determined to upgrade ties and in this regard, investors, businessmen and private sector activists in both countries are instrumental.
As petroleum industry managers, we have to provide the required ground for the development of activities and removal of existing obstacles in order to clear the way for mutual cooperation.
Crude oil storage, terminal operation, sea environment and bioremediation, upgrading crude oil, gas condensate and petroleum products’ exports processes as well as chemical lab services for crude oil and gas condensate were among IOTC potentialities showcased in Baghdad exhibition. These capabilities were welcomed by many Iraqi oil activists.
Iran, Iraq Seek Broader Energy Ties
The Iraqi capital, Baghdad, hosted an exclusive exhibition in February showcasing Iran’s industrial products and services. A total of 250 Iranian companies including energy firms attended the event.
Iran’s petroleum industry was presented in the exhibition by a number of companies including Iran Oil Terminals Company (IOTC), National Iranian Oil Refining and Distribution Company (NIORDC) and Iran’s Offshore Engineering and Construction Company (IOEC).
On the sidelines of the exhibition, several projects were proposed for cooperation between Iranian and Iraqi oil companies.
Iran’s exhibition in Baghdad was inaugurated by Iranian first vice-president, Es’haq Jahangiri.
Addressing businessmen on the sidelines of the event, he said that Iranian and Iraqi officials are both determined to upgrade the level of relations. “To that effect, economic activists and businessmen of both countries can play a leading and determining role.”
Jahangiri said Iranian and Iraqi officials are expected to remove obstacles to further economic cooperation between the two countries.
“On behalf of the Iranian government, I emphasize the serious determination of the country for upgrading economic and trade ties with Iraq and I am sure that the Iraqi government officials and the prime minister are determined enough to that effect,” he said.
Jahangiri said the road towards development of Iran-Iraq relations is irreversible, and more efforts have to be made for broader relations.
Oil-Independent Economy
Jahangiri referred to the sharp fall in oil prices, saying: “Oil price slump poses a serious challenge to both Iran and Iraq. Therefore, the two countries have to take serious steps for boosting economy and industry without reliance on oil.”
“Economic interaction between investors, businessmen and industrialists in Iran and Iraq contributes effectively to broader relations between the two countries,” he said.
Iran, Iraq Industry Ministers Meet
Iran’s minister of industry, mine and trade, Mohammad-Reza Nematzadeh, and his Iraqi counterpart met on the sidelines of the exhibition and exchanged views about development of cooperation between the two countries in different sectors.
The ministers reviewed such suggestions as Iran sharing experience with Iraq in privatization, development of cooperation in mine exploration and geology, reconstruction of old and decrepit industries, joint venture projects, exchange of industrial delegates, development of technical and management training and encouraging the presence of Iranian companies in Iraq.
Oil Joint Ventures
Chief among issues mentioned by Iranian officials are proposed cooperation in reconstruction, renovation and construction of refineries in different cities of Iraq. Iran’s gas delivery to Kuwait via Iraq was also discussed and the Iraqi side agreed to cooperate to that effect. The Iraqi oil minister invited qualified Iranian companies to bid for Iraqi oil projects.
Iran National Standards
Iraq also recognized Iran’s national standards for export of commodities to Iraq. For the introduction of Iranian commodities to Iraqi businessmen, a permanent Iran trade center was proposed to be set up in Iraq. Iraqi officials promised to be cooperative and provide the necessary facilities to that effect.
Development of trade transactions between the two countries, request from Iran for holding regular exhibitions in different cities of Iraq, Iran’s supply of basic commodities to Iraq, removal of obstacles to delivery of Iranian goods to Iraq, exchange of trade delegates, following up on the finalization of agreements signed between the two countries and joint ventures were among other issues discussed in meetings between Iranian and Iraqi officials.
IOTC attended Baghdad exhibition on behalf of National Iranian Oil Company (NIOC) and as the exemplary company in providing technical and engineering services in oil, gas condensate and petroleum products’ exports as well as lab services.
Crude oil storage, terminal operation, marine environment and bioremediation, upgrading crude oil, gas condensate and petroleum products’ exports processes as well as chemical lab services for crude oil and gas condensate were among IOTC potentialities showcased in the exhibition. These capabilities were welcomed by many Iraqi oil activists.
Amir Kabir Semisubmersible Drilling Rig; Iran’s Asset in Caspian Sea
By Mahnaz Mohammadi
Amir Kabir semisubmersible drilling rig has got 8 anchors, weighing 20 tons each. A similar one exists only in the Gulf of Mexico. Amir Kabir drilling rig which is domestically manufactured is currently operating deep in Caspian Sea waters.
This drilling rig is exploring oil in Sardar-e-Jangal oil field in Caspian Sea. The rig is being operated thoroughly by Iranians, and it has so far drilled two exploration wells. The second well has just proven to contain oil.
An increase in Iran’s oil reserves and a boost in Iran’s bargaining power in international energy markets are among the results of Iran’s access to oil in the Caspian Sea. Based on positive results achieved from drilling exploration wells in Caspian Sea, exploration activities are expected to continue in the inland sea.
Here, exploration activities in deep waters of Caspian Sea are briefly reviewed.
Drilling at the depth of 3,500 meters in Caspian Sea resulted in the discovery of Sardar-e-Jangal oil field. The type of oil in this reservoir is light and of high quality. It would win many buyers. Sardar-e-Jangal is estimated to hold two billion barrels of oil with API 38. With a recovery rate of 25%, 500 million barrels of oil are recoverable from this field.
Following the discovery of the second oil well, these estimates are to change. Ali Osouli, managing director of Khazar Exploration and Production Company (KEPCO), has said that production from this field would be beyond estimates.
Oil recovery from Sardar-e-Jangal is much more different than extraction from other offshore fields because this field is located in Caspian Sea’s deep waters.
KEPCO is one of five upstream companies involved in exploration and production under National Iranian Oil Company (NIOC). KEPCO is tasked with exploration, development and production of oil and gas in the Caspian Sea and three northern provinces of Mazandaran, Guilan and Golestan. Monitoring the environmental issues related to oil and gas exploration and development in Caspian Sea are among other objectives of KEPCO.
Hydrocarbon in Caspian Sea
Caspian Sea is divided into three regions in terms of oil and gas reserves: Northern, Middle and Southern Caspian.
The Northern–Middle boundary is the Mangyshlak Threshold, which runs through Chechen Island and Cape Tiub-Karagan. The Middle–Southern boundary is the Apsheron Threshold, a sill of tectonic origin between the Eurasian continent and an oceanic remnant that runs through Zhiloi Island and Cape Kuuli. The Garabogazköl Bay is the saline eastern inlet of the Caspian, which is part of Turkmenistan and at times has been a lake in its own right due to the isthmus that cuts it off from the Caspian.
The Northern Caspian only includes the Caspian shelf, and is very shallow; it accounts for less than 1% of the total water volume with an average depth of only 5-6 meters (16–20 ft). The sea noticeably drops off towards the Middle Caspian, where the average depth is 190 meters (620 ft). The Southern Caspian is the deepest, with oceanic depths of over 1,000 meters (3,300 ft). The Middle and Southern Caspian account for 33% and 66% of the total water volume, respectively. The northern portion of the Caspian Sea typically freezes in the winter and in the coldest winters ice forms in the south, as well.
Based on the geologic reach of the Caspian basins, this report considers the North Caucasus oblast (province) to be the only part of Russia in the Caspian region. Although Iran abuts the Caspian Sea and is one of the Caspian's coastal countries, this report will focus mainly on offshore Iranian assets, since geologically the Caspian ends at the northern tip of Iran. Iran's main centers of oil and natural gas production are far removed from both the Caspian basins and the regional energy infrastructure network.
Extraction
A main characteristic of hydrocarbon reservoirs in the southern basin of Caspian Sea is related to changes in the hydrocarbon phase. Depending on the type of tectonic activities, quartz sedimentary series could be determining. Anywhere the quartz sediments are thick, there is naturally significant subsidence. In such zones, gas and condensate reservoirs take shape. In the zones with relative paleohigh in quaternary, oil reservoirs are formed.
Information about oil and natural gas reserves in Caspian Sea dates back to ancient times. From 600 BC to 12th century, Zoroastrians used to travel to Baku in Apsheron peninsula to worship a fire temple which burnt natural gas. There is evidence of oil having been a commercial commodity in the 10th century. Some reports say Baku used to export oil in the 13th century. In his travelogue, Venetian merchant traveler Marco Polo refers to an oil gush near Armenia.
The world’s first offshore wells and machine-drilled wells were made in Bibi-Heybat Bay, near Baku, Azerbaijan. In 1873, exploration and development of oil began in some of the largest fields known to exist in the world at that time on the Absheron peninsula near the villages of Balakhanli, Sabunchi, Ramana and Bibi Heybat.
By the turn of the 20th century, Baku was the center of international oil industry. In 1920, when the Bolsheviks captured Azerbaijan, all private property – including oil wells and factories – was confiscated. Afterwards, the republic's entire oil industry came under the control of the Soviet Union.
46 Structures in Southern Caspian
According to studies, Iran has identified more than 46 blocks in the Caspian waters, eight of which have been focused upon. Most of these structures are located 500 to 800 meters deep under water. Exploration drilling was done in these depths in order to complete exploration data.
Data gathering required some tools. For this purpose, construction of Amir Kabir oil rig as well as 16,000-horsepower Caspian-1, Caspian-2 and Caspian-3 vessels were considered. Despite all difficulties and restrictions, Iranian engineers managed to conduct drilling exploration operations in two years.
Some of activities conducted with regard to oil exploration in Caspian Sea are the construction of Amir Kabir oil rig, construction of multipurpose vessels, construction of logistics base for exploration, conducting operations to identify exploration blocks 6, 8 and 29 on 75 square kilometers in 2009, conducing AVO processing method in order to identify sandstone layer and assess its thickness and examine the existence of hydrocarbon in this layer, special processing to identify surface gas packages, oil exploration at the depth of 2,584 meters during the drilling of the first oil exploration well in Sardar-e-Jangal in 2012, conducing 2D seismic testing in Golestan province and revising studies conducted by South Caspian Study Group in order to study the volume of 28 out of 46 structures.
Exploration drilling has been conducted in Caspian Sea despite special conditions like the depth of water (700 to 1,100 meters), low visibility due to dust in the seabed, specific geological conditions, formation of mud volcano and high-pressure water streams.
Seismic Tests in Iran Sector
Between 1999 and 2000, KEPCO teamed up with a consortium of Shell, Lasmo and Veba Oil to study the Iranian sector of Caspian Sea. South Caspian Study Group (SCSG) was established to conduct the relevant studies. The main achievement of this study group was its finding about hydrocarbon in Iran’s sector.
An objective pursued by SCSG was to see if there was oil system in Iran’s sector of Caspian Sea. During 22 months, 2D seismic testing was conducted on 10,000 kilometers. SCSG also studied data related to 26 wells drilled by Azerbaijan and Turkmenistan in Caspian Sea and compared the formations in the wells of those countries with those in the wells drilled in Iran. Moreover, geochemical studies on oil leaks and consistency between these leaks and source rocks in neighboring countries were among other activities of this study group. Following geological and geophysical studies, 86 geological structures were explored in Caspian Sea, 46 of which were in better conditions. Eight were finally selected to undergo comprehensive study for exploration and production. To that effect, drilling operations were started on one of these eight blocks in February 2009. The result was the discovery of Sardar-e-Jangal reservoir.
Geological Hazards; Deepwater Drilling Challenges
The main challenge to geologists operating in the Iranian sector of the Caspian Sea is the non-existence of adjacent oil well or field for correlation.
In order to identify geological structures, formations or hydrocarbon reservoirs, the similarities between the wells being spudded and the wells drilled 500 meter to 2 kilometers farther are taken into account. The nearest field with useful data is Azerbaijan’s Shah Deniz which is nearly 170 kilometers away from Sardar-e-Jangal. That increases geological risks.
Since the sea environment is the main factor in designing marine structures, the Caspian Sea is being modeled by Iran-Astara oceanography mooring which is the only one in the Caspian waters.
This project was proposed by the Engineering and Manufacturing Directorate of KEPCO last year to provide highly valuable data. Meanwhile, due to the necessity of more precise meteorological data which the Meteorology Organization cannot provide, a second oceanography mooring is also planned to be purchased.
Another project was also introduced for supervising the steering of platforms and logistic vessels, managing maintenance and reparation of KEPCO fleet, safeguarding national assets and complying with international regulations.
KEPCO’s Planning and Project Control Section has drafted qualitative and quantitative objectives of the company’s 20-year following constructive interaction with different directorates.
The long-term plan defines objectives for KEPCO to realize from 2012 to 2032. The plan includes perspective, missions, macro objectives, key values, long-term, mid-term and short-term strategies and goals.
KEPCO’s Research and Technology Department approved a project for using advanced technologies in deepwater operations in order to manufacture equipment and revise measures of the past years.
This section was also pursuing a project for exploration, development and production studies in the Caspian Sea and three littoral provinces.
Another project is also under way to deal with possible crises and oil pollution leak. A roadmap has been devised for acquiring technology for deepwater exploration operations.
KEPCO Safety and Security System Implementation
In the meantime, a safety and security management project has been introduced in compliance with international obligations for the KEPCO fleet.
Other activities include location of land in the Caspian shores for development project. At the order of the Petroleum Ministry in 2004, studies were conducted on 300 ha of land in the northern city of Roudsar.
KEPCO’s Engineering and Manufacturing Directorate has completed the company’s drilling fleet by adding a relief and rescue vessel, two multi-purpose vessels, two pollution-removing vessels and a speed vessel.
Before taking the delivery of these vessels, comprehensive studies were conducted and options were examined. The vessels were purchased after the National Iranian Oil Company gave its nod.
Amir Kabir Rig Moved
After the drilling of the first well and the discovery of Sardar-e-Jangal in Caspian Sea, Amir Kabir oil rig was planned to be moved to a predetermined spot for discovery and acquisition of new hydrocarbon resources.
This operation was conducted by Iranian oil service workers with the help of Caspian-1 and Caspian-2 vessels. It was the first of kind in Caspian Sea’s deep waters. The whole operation lasted 36 working days.
Second Well Gushes Oil
After the end of drilling of the second exploration well in Sardar-e-Jangal at the depth of 3,500 meters, production tests were successfully conducted there and all exploration and appraisal objectives behind the drilling of the second well were realized.
Throughout these operations, data about pressure, temperature, amount of oil and the ratio of gas to oil as well as surface sampling of oil and gas and other production parameters were gathered.
The findings of these studies indicate that the first and second wells drilled there are similar in terms of the API of their oil.
What distinguishes the second from the first well was that production tests were carried out on three layers of the second one. The second well, 2,500 meters, is also deeper than the first one.
Amir Kabir Semisubmersible Drilling Rig; Iran’s Asset in Caspian Sea
By Mahnaz Mohammadi
Amir Kabir semisubmersible drilling rig has got 8 anchors, weighing 20 tons each. A similar one exists only in the Gulf of Mexico. Amir Kabir drilling rig which is domestically manufactured is currently operating deep in Caspian Sea waters.
This drilling rig is exploring oil in Sardar-e-Jangal oil field in Caspian Sea. The rig is being operated thoroughly by Iranians, and it has so far drilled two exploration wells. The second well has just proven to contain oil.
An increase in Iran’s oil reserves and a boost in Iran’s bargaining power in international energy markets are among the results of Iran’s access to oil in the Caspian Sea. Based on positive results achieved from drilling exploration wells in Caspian Sea, exploration activities are expected to continue in the inland sea.
Here, exploration activities in deep waters of Caspian Sea are briefly reviewed.
Drilling at the depth of 3,500 meters in Caspian Sea resulted in the discovery of Sardar-e-Jangal oil field. The type of oil in this reservoir is light and of high quality. It would win many buyers. Sardar-e-Jangal is estimated to hold two billion barrels of oil with API 38. With a recovery rate of 25%, 500 million barrels of oil are recoverable from this field.
Following the discovery of the second oil well, these estimates are to change. Ali Osouli, managing director of Khazar Exploration and Production Company (KEPCO), has said that production from this field would be beyond estimates.
Oil recovery from Sardar-e-Jangal is much more different than extraction from other offshore fields because this field is located in Caspian Sea’s deep waters.
KEPCO is one of five upstream companies involved in exploration and production under National Iranian Oil Company (NIOC). KEPCO is tasked with exploration, development and production of oil and gas in the Caspian Sea and three northern provinces of Mazandaran, Guilan and Golestan. Monitoring the environmental issues related to oil and gas exploration and development in Caspian Sea are among other objectives of KEPCO.
Hydrocarbon in Caspian Sea
Caspian Sea is divided into three regions in terms of oil and gas reserves: Northern, Middle and Southern Caspian.
The Northern–Middle boundary is the Mangyshlak Threshold, which runs through Chechen Island and Cape Tiub-Karagan. The Middle–Southern boundary is the Apsheron Threshold, a sill of tectonic origin between the Eurasian continent and an oceanic remnant that runs through Zhiloi Island and Cape Kuuli. The Garabogazköl Bay is the saline eastern inlet of the Caspian, which is part of Turkmenistan and at times has been a lake in its own right due to the isthmus that cuts it off from the Caspian.
The Northern Caspian only includes the Caspian shelf, and is very shallow; it accounts for less than 1% of the total water volume with an average depth of only 5-6 meters (16–20 ft). The sea noticeably drops off towards the Middle Caspian, where the average depth is 190 meters (620 ft). The Southern Caspian is the deepest, with oceanic depths of over 1,000 meters (3,300 ft). The Middle and Southern Caspian account for 33% and 66% of the total water volume, respectively. The northern portion of the Caspian Sea typically freezes in the winter and in the coldest winters ice forms in the south, as well.
Based on the geologic reach of the Caspian basins, this report considers the North Caucasus oblast (province) to be the only part of Russia in the Caspian region. Although Iran abuts the Caspian Sea and is one of the Caspian's coastal countries, this report will focus mainly on offshore Iranian assets, since geologically the Caspian ends at the northern tip of Iran. Iran's main centers of oil and natural gas production are far removed from both the Caspian basins and the regional energy infrastructure network.
Extraction
A main characteristic of hydrocarbon reservoirs in the southern basin of Caspian Sea is related to changes in the hydrocarbon phase. Depending on the type of tectonic activities, quartz sedimentary series could be determining. Anywhere the quartz sediments are thick, there is naturally significant subsidence. In such zones, gas and condensate reservoirs take shape. In the zones with relative paleohigh in quaternary, oil reservoirs are formed.
Information about oil and natural gas reserves in Caspian Sea dates back to ancient times. From 600 BC to 12th century, Zoroastrians used to travel to Baku in Apsheron peninsula to worship a fire temple which burnt natural gas. There is evidence of oil having been a commercial commodity in the 10th century. Some reports say Baku used to export oil in the 13th century. In his travelogue, Venetian merchant traveler Marco Polo refers to an oil gush near Armenia.
The world’s first offshore wells and machine-drilled wells were made in Bibi-Heybat Bay, near Baku, Azerbaijan. In 1873, exploration and development of oil began in some of the largest fields known to exist in the world at that time on the Absheron peninsula near the villages of Balakhanli, Sabunchi, Ramana and Bibi Heybat.
By the turn of the 20th century, Baku was the center of international oil industry. In 1920, when the Bolsheviks captured Azerbaijan, all private property – including oil wells and factories – was confiscated. Afterwards, the republic's entire oil industry came under the control of the Soviet Union.
46 Structures in Southern Caspian
According to studies, Iran has identified more than 46 blocks in the Caspian waters, eight of which have been focused upon. Most of these structures are located 500 to 800 meters deep under water. Exploration drilling was done in these depths in order to complete exploration data.
Data gathering required some tools. For this purpose, construction of Amir Kabir oil rig as well as 16,000-horsepower Caspian-1, Caspian-2 and Caspian-3 vessels were considered. Despite all difficulties and restrictions, Iranian engineers managed to conduct drilling exploration operations in two years.
Some of activities conducted with regard to oil exploration in Caspian Sea are the construction of Amir Kabir oil rig, construction of multipurpose vessels, construction of logistics base for exploration, conducting operations to identify exploration blocks 6, 8 and 29 on 75 square kilometers in 2009, conducing AVO processing method in order to identify sandstone layer and assess its thickness and examine the existence of hydrocarbon in this layer, special processing to identify surface gas packages, oil exploration at the depth of 2,584 meters during the drilling of the first oil exploration well in Sardar-e-Jangal in 2012, conducing 2D seismic testing in Golestan province and revising studies conducted by South Caspian Study Group in order to study the volume of 28 out of 46 structures.
Exploration drilling has been conducted in Caspian Sea despite special conditions like the depth of water (700 to 1,100 meters), low visibility due to dust in the seabed, specific geological conditions, formation of mud volcano and high-pressure water streams.
Seismic Tests in Iran Sector
Between 1999 and 2000, KEPCO teamed up with a consortium of Shell, Lasmo and Veba Oil to study the Iranian sector of Caspian Sea. South Caspian Study Group (SCSG) was established to conduct the relevant studies. The main achievement of this study group was its finding about hydrocarbon in Iran’s sector.
An objective pursued by SCSG was to see if there was oil system in Iran’s sector of Caspian Sea. During 22 months, 2D seismic testing was conducted on 10,000 kilometers. SCSG also studied data related to 26 wells drilled by Azerbaijan and Turkmenistan in Caspian Sea and compared the formations in the wells of those countries with those in the wells drilled in Iran. Moreover, geochemical studies on oil leaks and consistency between these leaks and source rocks in neighboring countries were among other activities of this study group. Following geological and geophysical studies, 86 geological structures were explored in Caspian Sea, 46 of which were in better conditions. Eight were finally selected to undergo comprehensive study for exploration and production. To that effect, drilling operations were started on one of these eight blocks in February 2009. The result was the discovery of Sardar-e-Jangal reservoir.
Geological Hazards; Deepwater Drilling Challenges
The main challenge to geologists operating in the Iranian sector of the Caspian Sea is the non-existence of adjacent oil well or field for correlation.
In order to identify geological structures, formations or hydrocarbon reservoirs, the similarities between the wells being spudded and the wells drilled 500 meter to 2 kilometers farther are taken into account. The nearest field with useful data is Azerbaijan’s Shah Deniz which is nearly 170 kilometers away from Sardar-e-Jangal. That increases geological risks.
Since the sea environment is the main factor in designing marine structures, the Caspian Sea is being modeled by Iran-Astara oceanography mooring which is the only one in the Caspian waters.
This project was proposed by the Engineering and Manufacturing Directorate of KEPCO last year to provide highly valuable data. Meanwhile, due to the necessity of more precise meteorological data which the Meteorology Organization cannot provide, a second oceanography mooring is also planned to be purchased.
Another project was also introduced for supervising the steering of platforms and logistic vessels, managing maintenance and reparation of KEPCO fleet, safeguarding national assets and complying with international regulations.
KEPCO’s Planning and Project Control Section has drafted qualitative and quantitative objectives of the company’s 20-year following constructive interaction with different directorates.
The long-term plan defines objectives for KEPCO to realize from 2012 to 2032. The plan includes perspective, missions, macro objectives, key values, long-term, mid-term and short-term strategies and goals.
KEPCO’s Research and Technology Department approved a project for using advanced technologies in deepwater operations in order to manufacture equipment and revise measures of the past years.
This section was also pursuing a project for exploration, development and production studies in the Caspian Sea and three littoral provinces.
Another project is also under way to deal with possible crises and oil pollution leak. A roadmap has been devised for acquiring technology for deepwater exploration operations.
KEPCO Safety and Security System Implementation
In the meantime, a safety and security management project has been introduced in compliance with international obligations for the KEPCO fleet.
Other activities include location of land in the Caspian shores for development project. At the order of the Petroleum Ministry in 2004, studies were conducted on 300 ha of land in the northern city of Roudsar.
KEPCO’s Engineering and Manufacturing Directorate has completed the company’s drilling fleet by adding a relief and rescue vessel, two multi-purpose vessels, two pollution-removing vessels and a speed vessel.
Before taking the delivery of these vessels, comprehensive studies were conducted and options were examined. The vessels were purchased after the National Iranian Oil Company gave its nod.
Amir Kabir Rig Moved
After the drilling of the first well and the discovery of Sardar-e-Jangal in Caspian Sea, Amir Kabir oil rig was planned to be moved to a predetermined spot for discovery and acquisition of new hydrocarbon resources.
This operation was conducted by Iranian oil service workers with the help of Caspian-1 and Caspian-2 vessels. It was the first of kind in Caspian Sea’s deep waters. The whole operation lasted 36 working days.
Second Well Gushes Oil
After the end of drilling of the second exploration well in Sardar-e-Jangal at the depth of 3,500 meters, production tests were successfully conducted there and all exploration and appraisal objectives behind the drilling of the second well were realized.
Throughout these operations, data about pressure, temperature, amount of oil and the ratio of gas to oil as well as surface sampling of oil and gas and other production parameters were gathered.
The findings of these studies indicate that the first and second wells drilled there are similar in terms of the API of their oil.
What distinguishes the second from the first well was that production tests were carried out on three layers of the second one. The second well, 2,500 meters, is also deeper than the first one.
Refinery to Make Iran a Petrol Exporter
Oil products, particularly gasoline, are among largely consumed strategic products in Iran. Despite fuel rationing plan and gasoline price hikes, the consumption of this energy carrier has not declined and has even grown in recent years.
Self-sufficiency in gasoline production has long been on the agenda of the Iranian government. To that effect, Iran has invested $9 billion in old and new oil refineries in order to increase their gasoline production and reduce their sulfur output. Refining projects worth $14 billion have been worked out in recent years, $9 billion of which has already been realized leading to a 1,500-ton cut in sulfur production.
Isfahan, Lavan, Tabriz and Bandar Abbas are among old refineries in Iran. In recent years, they have conducted quality improvement projects in order to boost their petroleum products, particularly gasoline, production. Pars, Anahita and Persian Gulf Star are new refinery projects in Iran. Among them, Persian Gulf Star is very important because it would bring an end to Iran’s gasoline imports and make Iran an exporter of this energy commodity. Completion of Persian Gulf Star Refinery has become a top priority for Iran’s Ministry of Petroleum. If this national project is not implemented, Iran will be exposed to the threat of gasoline embargo and concomitant economic and social pressures.
Operation of Persian Gulf Star Refinery will increase Iran’s gasoline production by 35 million liters a day and its gasoil production by 14 ml/d.
During New Year public holidays in March, Iranians consume at most 70 ml/d; therefore, the startup of Persian Gulf Star Refinery will definitely promote Iran to the status of a gasoline exporter. Persian Gulf Star Refinery will be also producing 1.3 ml/d of heating gasoil, 2 ml/d of liquefied petroleum gas, 3 ml/d of jet fuel and 130 tons a day of sulfur.
Less than a month ago, Iran’s First Vice President Es’haq Jahangiri and Minister of Petroleum Bijan Namdar Zangeneh visited the refinery project and ordered the acceleration of efforts for the project to come on-stream as soon as possible.
The refinery is located in a good position. The advantages of this facility include access to the giant offshore South Pars gas field, proximity to sea and easy transfer of products.
When it was first decided for the refinery to be built on 340 ha of land, two LCs were opened and its stocks were divided between Indonesia’s Star Petrogas, Oil Industry Pension Fund, National Iranian Oil Refining and Distribution Company and Persian Gulf Star Oil Company. But later on, the Indonesian company transferred 34% of its shares to Social Security Organization and it held only 15%.
This refinery is expected to process 360,000 b/d of gas condensate supplied by nine phases of South Pars gas field to produce light oil products. So far, 3.8 billion Euros has been invested in this project which still needs 650 million Euros. National Development Fund of Iran (NDFI) has agreed to provide this sum.
80% Progress
The refinery project is 82% completed and the first phase of the project is expected to become operational later this year.
Gas condensate is a low-density mixture of hydrocarbon liquids that are present as gaseous components in the raw natural gas produced from many natural gas fields. It condenses out of the raw gas if the temperature is reduced to below the hydrocarbon dew point temperature of the raw gas.
The natural gas condensate is also referred to as simply condensate, or gas condensate, or sometimes natural gasoline because it contains hydrocarbons within the gasoline boiling range.
Condensate is often considered as a byproduct in natural gas recovery operations, but it is even more valuable than crude oil.
According to technical surveys, nearly 60% of gas condensates are transformed into naphtha and 30% into gasoil after processing. Based on the current price of gas condensate, gasoil and gasoline, the estimated margins from processing of each barrel of gas condensate is around $20, or fourth time the margin of refineries fed with crude oil.
Gas condensate is a very valuable feedstock for refineries running with unsophisticated technologies.
Iran has been facing sanctions over the past three decades. Over these years, Iranian officials have tried their best to cut Iran’s dependence on oil. Last calendar year to March 2014, Iran decided to cut gas condensate exports so that this product would be processed in the country. By virtue of Iran’s general economic policies, moving towards completion of the value chain of oil and gas and exporting products instead of raw materials would be instrumental in enhancing the country’s revenue and strengthening the country against the impacts of fluctuations in oil and gas prices. Therefore, it is necessary for the value chain of oil and gas condensates to be completed through boosting the capacity of oil refineries. To that effect, Iran’s Ministry of Petroleum intends to totally stop exporting gas condensate in four years. Development of the country’s refining capacity, with priority given to gas condensate, could earn Iran billions of dollars in revenue.
To that end, Persian Gulf Star Refinery with the capacity of 360,000 b/d, Pars refinery with the capacity of 120,000 b/d, eight 60,000-b/d refineries known as Siraf Refining Park and a number of mini-refineries with capacities below 20,000 b/d are expected to come online and be fed with gas condensate.
Countdown for Euro-3 Gasoline at Bandar Abbas Refinery
Given daily growing consumption of gasoline and its significant role in economic growth and development, in case oil producing countries manage to become self-reliant in the production of this valuable product they would be able to meet their domestic demand, save hard currency and even export their surplus production. In Iran, Abadan, Isfahan, Arak, Bandar Abbas, Tehran, Tabriz, Shiraz, Kermanshah and Lavan oil refineries produce gasoline. The output capacity in these oil refineries already exceeds 64 million liters a day.
In recent years, a number of these refineries have undertaken projects to increase their gasoline production capacity. In coming years, new gasoline production projects are to be implemented in Isfahan and Bandar Abbas refineries and the first phase of Persian Gulf Star Refinery is to come on-stream. These projects would help Iran meet its domestic demand and export its surplus production.
Currently, a project is under way at Bandar Abbas refinery for the recovery of 6 ml/d of gasoline and 7.95 ml/d of gasoline in compliance with euro-5 standards. This project is expected to come online later this year. Led by the National Iranian Oil Engineering and Construction Company (NIOEC), the project is 93% completed. The total investment envisaged for this project is 400 million Euros plus IRR 7 trillion and so far 329 million Euros plus IRR 7.45 trillion.
A heavy naphtha hydrogen refining unit with a capacity of 25,000 b/d, light naphtha refining unit with a capacity of 20,000 b/d, isomerization unit with a capacity of 20,000 b/d and a CCR unit with a 25,000 b/d capacity are among the most important units in this project. The technology used for basic designing of these units has been taken from two French companies Axens and Prosernat. The main advantages of this project include reducing the benzene content to less than 1%, reducing sulfur content in oil products to less than 10 ppm, enhancing octane to 90 or 95 and reducing aromatic compounds to below 35%. All these advantages are in the interest of the environment.
Hamid Sharif Razi, executive director of NIOEC, said Bandar Abbas refinery was launched in 1997 with a capacity of 232,000 barrels of crude oil. He said the capacity was brought to 320,000 b/d in 2004.
The official said a consortium of Iranian companies was set up in 2007 to increase gasoline production and boost the quality of petroleum products at Bandar Abbas refinery.
He said that European companies handled only 3% of the total project, adding that the utility units of this plant will become operational in March or April.
Sharif Razi said the feedstock needed for this plant is supplied by Bandar Abbas refinery. The feedstock is light and heavy naphtha.
“By separating sulfur from petroleum products, this project allows daily production of 120 tons of granulated sulfur, which would allow exporting this product,” he added.
Sharif Razi said utility units should be first commissioned and then production will start.
Petchem Output at 43mt in Iran
Iran has seen its gas production rise by more than 100 mcm/d, thanks to phases 12, 15&16 and 17&18 of the giant offshore South Pars gas field. Oil experts believe that such big jump in Iran’s gas production could bring about a major development in all sectors, particularly in feedstock supply to petrochemical plants. Some petrochemical plants are not running at full capacity due to shortage of feedstock.
Ali-Mohammad Bosaqzadeh, director of control at National Petrochemical Company, told Iran Petroleum in an interview that Iranian petrochemical plants are set to see their output rise.
He said Iran has produced nearly 40 million tons of petrochemicals since last March, adding that the figure is expected to reach 43 million tons this March.
Bosaqzadeh said 13 million tons of petrochemicals were sold on domestic market, while 13 million tons were exported. He said domestic sale of petrochemicals earned Iran IRR 290,000 billion, while petrochemical exports generated $9 billion in revenue.
Iran sits on 33.6 tcm of gas and the country’s petrochemical industry needs to acquire state-of-the-art technology and finance in order to win foothold in world markets.
According to the latest estimates, Iran needs to attract around $70 billion in finance for its upstream and downstream sectors. Some 30% of this sum is related to downstream industries, particularly polymer and polypropylene.
Bosaqzadeh referred to one of the largest ethylene production plants in the Middle East with an annual production capacity of 2.3 million tons, saying: “Phase 1 of Kavian Petrochemical Plant is already in operation and the second phase is to be commissioned in the near future. Under normal circumstances, launching this phase needs a compressor, a turbine and five furnaces,” he said.
He added that the second phase of this petrochemical plant is predicted to come on-stream in March, as new phases of the South Pars field start production.
Bosaqzadeh said West Ethylene Pipeline is one of the projects of Iran’s petrochemical sector. He added that the first phase of this pipeline, stretching from Assaluyeh to Kermanshah, commissioned more than a year ago.
He said that Bandar Imam Special Zone, Kermanshah Polymer Plant, Ilam and Lorestan petrochemical plants would use ethylene supplied by this pipeline soon.
Bosaqzadeh said the second phase of the pipeline, which runs from Kermanshah to Mahabad, is close to being commissioned as some preparations are now under way. The second phase is 400 kilometers long.
The methane feedstock needed for old and new petrochemical plants in Iran is becoming ready as new phases of South Pars are starting production.
Liquefied natural gas (LNG) or associated gas will be also used to feed petrochemical plants.
Bosaqzadeh also said that new facilities have been launched at Fajr Petrochemical Plant, Nouri Petrochemical Plant, Takht-e Jamshid Petrochemical Plant, Lorestan Petrochemical Plant and Damavand Petrochemical Plant.
Regarding the role of NPC in preventing the sale of raw materials, he said that projects have been envisaged for that purpose in the country.
He said NPC and Ministry of Industry, Mine and Trade are coordinating efforts to activate the downstream chain in order to guarantee the return of capital. “That would help infrastructure projects at petrochemical plants,” he said.
Bosaqzadeh said Iran’s petrochemical production has increased 10% year-on-year.
He said Iranian petrochemical companies are running at 70% of their rated capacity, adding that the percentage is expected to reach 80 percent next calendar year which starts on March 21.
“We are also making efforts to finish overhaul of downstream and upstream sectors at petrochemical plants in the shortest possible time and at good quality,” he said.
Undoubtedly, the most competitive condition for investment in Iran’s petrochemical sector is access to feedstock like natural gas, ethane, naphtha and gas condensate in big volumes and at competitive price.
The capacity of Iran’s refining industries and gas transmission is around 600 mcm/d which would soar to 1,000 mcm/d within the upcoming years.
Iran will have access to sufficient ethane to feed its petrochemical plants and win market toeholds for petrochemical products.
Besides easy access to petrochemical feedstock, Iran enjoys other advantages which should not be ignored. A growing domestic market for petrochemicals, access to skilled manpower, extensive communications infrastructure, sharing border with 15 countries particularly in Central Asia and Caucasus, special economic petrochemical zones, political stability, pro-investment regulations, facilities like tax exemption for investors and an active chain of petrochemical plants are among them. These factors can contribute to the development of downstream and upstream sectors. It would be also possible for investors to seek help from the National Development Fund of Iran (NDFI).
Diversity in Petchem Products
Over recent years, Iran’s petrochemical industry has been seriously seeking to diversify its products by producing methanol, urea and ammoniac. To that effect, propylene and relevant downstream units seem to be of higher significance. Over the past two years, new petrochemical projects have been located based on spatial planning. The priority is now to erect petrochemical plants near sea.
Marzieh Shah-Daei, project manager at National Petrochemical Company (NPC), has said that location of petrochemical plants is up to the NPC’s Projects Directorate.
She said that propylene plants are currently prioritized, adding that negotiations have started with some Chinese companies for acquiring license for GDP units.
Shah-Daei said there are many methanol production units among half-finished petrochemical projects, adding: “It is estimated that around 25 million tons of methanol would be produced and that would affect the methanol market. Therefore, in order to generate value-added from methanol, we are mulling methanol-to-olefins (MTO) and methanol-to-propylene (MTP) projects.”
She said propylene is largely used and is of high value-added. “Over the past two years, we have concluded that we should further think of establishing MTO and MTP units and developing downstream industries.”
She said that 60 half-finished petrochemical projects are under way with their progress varying between 1% and 98%. She said these projects have been categorized based on the level of their progress, adding that 15 projects are more than 60% completed.
$33b Investment
Shah-Daei said $33.4 billion in investment was needed for financing 60 half-finished petrochemical projects in Iran, adding: “By implementing these projects, Iran’s petrochemical production capacity will go from the current 60 million tons to 120 million tons.”
She said seven petrochemical projects are prioritized to come on-stream by the end of the next calendar year in March 2016. She said these projects would add 2.7 million tons to Iran’s petrochemical output capacity.
Shah-Daei said 36 new petrochemical projects are envisaged in Chabahar, Jask, Qeshm and Parsian within the framework of a planned 60-million-ton increase in the country’s petrochemical output.
“Iran envisages more than 105 mcm/d of methane, 2.8 million tons a year of ethane, 2.1 million tons a year of propane, butane and liquefied gas and 4 million tons a year of naphtha as feedstock for its new petrochemical projects in the future. Therefore, investors and domestic and foreign companies active in these projects will have no concern,” she said.
Venezuelans Replaced
Shah-Daei said the Venezuelan investor is unwilling to operate Veniran Apadana petrochemical project.
“We are looking for an investor to replace the [Venezuelan financier]. Of course, Persian Gulf Holding Company is currently managing this project,” she said.
Shah-Daei said 11 million euros plus IRR 350 billion have so far been invested in Veniran Apadana petrochemical project.
“After the exit of the foreign party from this project, Iran International Petrochemical Company, the main stakeholder in this project, will take care of investment in this project,” she said.
A total of 62 half-finished projects remain to be completed in the petrochemical sector. Among them, 15 are more than 60% completed and some others including Takht Jamshid, second phase of Kavian, Lorestan, Mahabad, Kurdestan, Hegmataneh, Kaveh, MEG Morvarid, Shohadaye Marvdasht, Pardis 3, first phase of Damavand, Karoun and Dalahou are expected to become operational this year.
Efforts are also under way for West Ethylene Pipeline to come online soon.
Iran is poised to see its petrochemical production capacity increase by 1.3 million tons by March 2015 and by 7.1 million tons by March 2016.
National Iranian Oil Company (NIOC) officials have promised to supply the entire ethane produced in the South Pars gas field to petrochemical plants. The South Pars ethane would be able to increase production from petrochemical plants in Assaluyeh by more than two million tons. If the aforesaid 14 projects become operational, some 8 million tons will be added to the country’s petrochemical production capacity.
Miandoab, Andimeshk, Bushehr, Masjed Soleyman, Sabalan, Loredegan, Hengam, Kharg, Genaveh, Dashtestan, Siraf, Petrokimia, Park Styrene, Veniran, Arg Shimi Parsa, Marjan, Gachsaran and Firouzabad petrochemical plans are expected to come on-stream in three to four years.
Following the recent awarding of Kharg NGL, Genaveh and Dashtestan petrochemical projects to Oil Pension Fund, one can hope that these projects would become operational.
Global Oil Market Developments
By Behrooz Baik Alizadeh
In the week ending on January23, 2015, crude oil prices rebounded partially. During that week, it was announced that the US drillers have significantly cut rig counts. According to Baker Hughes, the US rig count had declined by 209 over six weeks. Therefore, the market did not rule out the possibility of witnessing further fall in oil production in the near future.
The International Energy Agency (IEA) has announced that production growth rate in non-OPEC countries will decline. The agency estimated non-OPEC oil supply to decline by 350,000 b/d. It was the first time since July 2014 that the IEA has cut its estimate for non-OPEC production. The projections for lower production drove the prices up.
Meanwhile, President of the European Central Bank (ECB) Mario Draghi launched a government bond-buying program which will pump hundreds of billions in new money into a sagging Euro zone economy.
The ECB said it would purchase sovereign debt from this March until the end of September 2016.
Together with existing schemes to buy private debt and funnel hundreds of billions of Euros in cheap loans to banks, the new quantitative easing program will release 60 billion Euros ($68 billion) a month into the economy.
This mechanism has been worked out to curb deflation and recession in the Euro zone, but a better economy in the 19-nation zone is widely expected to benefit the prices.
During the week leading to January 23, 2015, oil prices remained under pressure due to supply glut. A 10.1-million barrel increase in the US crude oil inventories had impact on the crude oil prices. While the US refineries had reduced their operations to 85.5% of their capacity – the lowest since April 2013 – the US crude oil stockpiles topped 379.9 million barrels – the highest since May 2014. Crude stocks at the Cushing, Oklahoma delivery hub, rose 2.9 million barrels. Even the US gasoline stocks hit their highest level since February 2011.
During the above-mentioned week, the Money Manager (Speculative) category for NYMEX (WTI) Crude, net speculative length (combined futures and options contracts) decreased 11.2% from the previous week of 244,032 futures and options contracts to 216,704. That further contributed to weaker prices.
In the following week ending on January 30, crude oil prices edged up a bit. During that week, cold weather in the US caused higher demand for heating fuel and the crude oil prices rallied. Meantime, dollar depreciation boosted oil prices.
Oil companies were said to be planning a decline in their investment. Chevron said it would invest $35 billion in 2015, down 13% from the previous year. Such a drop in investment has been unprecedented since 2003. Baker Hughes still announced that 94 drilling rigs were shut down during that week. The number of drilling rigs in the US fell to their three-year low of 1,223. That strengthened the possibility of production fall in the US; therefore, the oil prices got a boost. It was speculated that Saudi Arabia intends to help stabilize the prices in cooperation with non-OPEC oil producers. To that effect, Saudi oil minister Ali al-Naimi is expected to meet with Russia’s Ambassador Oleg Ozerov, Finland’s Ambassador Pekka Voutilainen and Norway’s Ambassador Rolf Willy Hansen.
However, the market still maintained that oversupply was piling up pressure on oil prices. Even OPEC Secretary General Abdalla Salem el-Badri announced that the market faces a 1.5 mb/d oversupply. Under these circumstances, increased crude oil inventories in the US pressured the oil prices. According to the US Energy Information Administration (EIA), the US crude oil stocks increased to 406.7 million barrels, up 8.87 million barrels which was the highest since August 1982. Oil production the US reached its three-year high of 9.21 mb/d. Crude stocks at the Cushing, Oklahoma delivery hub, rose 2.09 million barrels to hit 38.9 mb/d.
A Bloomberg survey indicated that OPEC had raised its production during that week. According to Bloomberg, OPEC’s January production reached 30.905 mb/d, up 483,000 b/d month-on-month.
During that week, the Money Manager (Speculative) category for NYMEX (WTI) Crude, net speculative length (combined futures and options contracts) decreased from the previous week to 216,325 futures and options contracts. That further contributed to weaker prices.
In the week ending on February 6, crude oil prices kept rising and the OPEC basket price managed to soar past $50 a barrel for the first time since last June. United Steelworkers members who help run crude terminals at a California port embarked on the biggest oil workers’ strike since 1980, when a work stoppage lasted three months. United Steelworkers represents more than 200 refineries, oil terminals, pipelines and petrochemical plants in the US. Trade sources had said that the strike could cut fuel production in the US by 64%. As a result, crude oil prices jumped. The strike managed to disrupt 10% of US refining capacity up to the middle of that week.
The terrorist Islamic State of Iraq and the Levant (ISIL) attacked oil facilities in Iraq’s oil-rich city of Kirkuk and brought a halt to oil production at Khabbaz oil field located southwest of Kirkuk. Khabbaz produced 10,000 b/d oil and its production capacity could reach 15,000 b/d. ISIL militants had already seized the oil field for some time before losing its control to Iraqi government forces.
Some oil institutes believed that the slide in oil prices have affected oil production in the US because many oil wells in that country would produce losses if oil sells below $60 a barrel. These institutes held out the possibility of a halt in the US oil production in the second half of 2015. British Petroleum (BP) announced that it steer clear of any new investment, pushing oil prices higher. The dollar also gained ground and it contributed to higher crude oil prices. By the end of this week, the market still imagined that this oil price jump would be short-lived because the market fundamentals did not change tangibly and the market was oversupplied.
The impacts of fall in oil production in some parts of the world due to less drilling and investment could not be pushed into bold relief quickly. Estimates indicated that the oil market would face a 1.5 to 2 mb/d oversupply in the first quarter of the current year.
During the week leading to February 13, 2015, crude oil prices continued to rise. At the beginning of the week, negotiations with striking US oil service workers were announced to have failed. That was when anxieties about oil shortage in the US affected the prices.
During that week, Baker Hughes announced that 83 drilling rigs in the US stopped operating and the US rig count fell to 1,140, the lowest since December 2011. Oil and gas service company Weatherford International said it has been forced to axe 5,000 jobs during the first quarter of the year. Earlier, Schlumberger Limited, which is the world’s largest oilfield services company, announced job cuts.
The Organization of the Petroleum Exporting Countries sharply revised down its estimate for non-OPEC oil production in 2015. According to OPEC estimates, non-OPEC oil production stood at 850,000 b/d, down 420,000 b/d from the previous estimate. In the OPEC estimate, the US accounts for the highest amount of cut in non-OPEC production (130,000 b/d). The IEA also said that the US would be producing 200,000 barrels of oil below projections.
Loading on oil tankers in Iraq’s Basra terminal was halted due to bad weather conditions with 20 tankers waiting for 13 days. The trading advisory firm Petromatrix announced that bad weather could cut Iraq’s February oil exports by 1 mb/d. The Iraqi oil ministry announced that Iraq’s January oil exports were down 14 percent from December.
Libya’s oil production was reported to have fallen by 150,000 b/d in January and reached 300,000 b/d, the lowest since June last year.
These news items boosted oil prices.
Despite growing oil prices, market analysts still estimated that the crude prices would fall again. Citigroup predicted that oil would lose half of its value in trading in the second quarter of the year to reach $20 a barrel. Lower rig count in the US does not mean that the market oversupply would disappear. This institute predicted that the market would face a 700,000 b/d oversupply in the first quarter and an 800,000 b/d oversupply in the second quarter of 2015.
According to EIA, crude oil stocks in the US have increased by 4.87 million barrels; therefore, the US crude inventories have reached their all-time high.
During that week, the Money Manager (Speculative) category for NYMEX (WTI) Crude, net speculative length (combined futures and options contracts) shed 4,230 from futures and options contracts and pushed them down to 216,704 contracts. That indicated that they are not optimistic about future price hikes.
Global Oil Market Developments
By Behrooz Baik Alizadeh
In the week ending on January23, 2015, crude oil prices rebounded partially. During that week, it was announced that the US drillers have significantly cut rig counts. According to Baker Hughes, the US rig count had declined by 209 over six weeks. Therefore, the market did not rule out the possibility of witnessing further fall in oil production in the near future.
The International Energy Agency (IEA) has announced that production growth rate in non-OPEC countries will decline. The agency estimated non-OPEC oil supply to decline by 350,000 b/d. It was the first time since July 2014 that the IEA has cut its estimate for non-OPEC production. The projections for lower production drove the prices up.
Meanwhile, President of the European Central Bank (ECB) Mario Draghi launched a government bond-buying program which will pump hundreds of billions in new money into a sagging Euro zone economy.
The ECB said it would purchase sovereign debt from this March until the end of September 2016.
Together with existing schemes to buy private debt and funnel hundreds of billions of Euros in cheap loans to banks, the new quantitative easing program will release 60 billion Euros ($68 billion) a month into the economy.
This mechanism has been worked out to curb deflation and recession in the Euro zone, but a better economy in the 19-nation zone is widely expected to benefit the prices.
During the week leading to January 23, 2015, oil prices remained under pressure due to supply glut. A 10.1-million barrel increase in the US crude oil inventories had impact on the crude oil prices. While the US refineries had reduced their operations to 85.5% of their capacity – the lowest since April 2013 – the US crude oil stockpiles topped 379.9 million barrels – the highest since May 2014. Crude stocks at the Cushing, Oklahoma delivery hub, rose 2.9 million barrels. Even the US gasoline stocks hit their highest level since February 2011.
During the above-mentioned week, the Money Manager (Speculative) category for NYMEX (WTI) Crude, net speculative length (combined futures and options contracts) decreased 11.2% from the previous week of 244,032 futures and options contracts to 216,704. That further contributed to weaker prices.
In the following week ending on January 30, crude oil prices edged up a bit. During that week, cold weather in the US caused higher demand for heating fuel and the crude oil prices rallied. Meantime, dollar depreciation boosted oil prices.
Oil companies were said to be planning a decline in their investment. Chevron said it would invest $35 billion in 2015, down 13% from the previous year. Such a drop in investment has been unprecedented since 2003. Baker Hughes still announced that 94 drilling rigs were shut down during that week. The number of drilling rigs in the US fell to their three-year low of 1,223. That strengthened the possibility of production fall in the US; therefore, the oil prices got a boost. It was speculated that Saudi Arabia intends to help stabilize the prices in cooperation with non-OPEC oil producers. To that effect, Saudi oil minister Ali al-Naimi is expected to meet with Russia’s Ambassador Oleg Ozerov, Finland’s Ambassador Pekka Voutilainen and Norway’s Ambassador Rolf Willy Hansen.
However, the market still maintained that oversupply was piling up pressure on oil prices. Even OPEC Secretary General Abdalla Salem el-Badri announced that the market faces a 1.5 mb/d oversupply. Under these circumstances, increased crude oil inventories in the US pressured the oil prices. According to the US Energy Information Administration (EIA), the US crude oil stocks increased to 406.7 million barrels, up 8.87 million barrels which was the highest since August 1982. Oil production the US reached its three-year high of 9.21 mb/d. Crude stocks at the Cushing, Oklahoma delivery hub, rose 2.09 million barrels to hit 38.9 mb/d.
A Bloomberg survey indicated that OPEC had raised its production during that week. According to Bloomberg, OPEC’s January production reached 30.905 mb/d, up 483,000 b/d month-on-month.
During that week, the Money Manager (Speculative) category for NYMEX (WTI) Crude, net speculative length (combined futures and options contracts) decreased from the previous week to 216,325 futures and options contracts. That further contributed to weaker prices.
In the week ending on February 6, crude oil prices kept rising and the OPEC basket price managed to soar past $50 a barrel for the first time since last June. United Steelworkers members who help run crude terminals at a California port embarked on the biggest oil workers’ strike since 1980, when a work stoppage lasted three months. United Steelworkers represents more than 200 refineries, oil terminals, pipelines and petrochemical plants in the US. Trade sources had said that the strike could cut fuel production in the US by 64%. As a result, crude oil prices jumped. The strike managed to disrupt 10% of US refining capacity up to the middle of that week.
The terrorist Islamic State of Iraq and the Levant (ISIL) attacked oil facilities in Iraq’s oil-rich city of Kirkuk and brought a halt to oil production at Khabbaz oil field located southwest of Kirkuk. Khabbaz produced 10,000 b/d oil and its production capacity could reach 15,000 b/d. ISIL militants had already seized the oil field for some time before losing its control to Iraqi government forces.
Some oil institutes believed that the slide in oil prices have affected oil production in the US because many oil wells in that country would produce losses if oil sells below $60 a barrel. These institutes held out the possibility of a halt in the US oil production in the second half of 2015. British Petroleum (BP) announced that it steer clear of any new investment, pushing oil prices higher. The dollar also gained ground and it contributed to higher crude oil prices. By the end of this week, the market still imagined that this oil price jump would be short-lived because the market fundamentals did not change tangibly and the market was oversupplied.
The impacts of fall in oil production in some parts of the world due to less drilling and investment could not be pushed into bold relief quickly. Estimates indicated that the oil market would face a 1.5 to 2 mb/d oversupply in the first quarter of the current year.
During the week leading to February 13, 2015, crude oil prices continued to rise. At the beginning of the week, negotiations with striking US oil service workers were announced to have failed. That was when anxieties about oil shortage in the US affected the prices.
During that week, Baker Hughes announced that 83 drilling rigs in the US stopped operating and the US rig count fell to 1,140, the lowest since December 2011. Oil and gas service company Weatherford International said it has been forced to axe 5,000 jobs during the first quarter of the year. Earlier, Schlumberger Limited, which is the world’s largest oilfield services company, announced job cuts.
The Organization of the Petroleum Exporting Countries sharply revised down its estimate for non-OPEC oil production in 2015. According to OPEC estimates, non-OPEC oil production stood at 850,000 b/d, down 420,000 b/d from the previous estimate. In the OPEC estimate, the US accounts for the highest amount of cut in non-OPEC production (130,000 b/d). The IEA also said that the US would be producing 200,000 barrels of oil below projections.
Loading on oil tankers in Iraq’s Basra terminal was halted due to bad weather conditions with 20 tankers waiting for 13 days. The trading advisory firm Petromatrix announced that bad weather could cut Iraq’s February oil exports by 1 mb/d. The Iraqi oil ministry announced that Iraq’s January oil exports were down 14 percent from December.
Libya’s oil production was reported to have fallen by 150,000 b/d in January and reached 300,000 b/d, the lowest since June last year.
These news items boosted oil prices.
Despite growing oil prices, market analysts still estimated that the crude prices would fall again. Citigroup predicted that oil would lose half of its value in trading in the second quarter of the year to reach $20 a barrel. Lower rig count in the US does not mean that the market oversupply would disappear. This institute predicted that the market would face a 700,000 b/d oversupply in the first quarter and an 800,000 b/d oversupply in the second quarter of 2015.
According to EIA, crude oil stocks in the US have increased by 4.87 million barrels; therefore, the US crude inventories have reached their all-time high.
During that week, the Money Manager (Speculative) category for NYMEX (WTI) Crude, net speculative length (combined futures and options contracts) shed 4,230 from futures and options contracts and pushed them down to 216,704 contracts. That indicated that they are not optimistic about future price hikes.
Sliding Oil Price Impact on Europe
By Shuaib Bahman
The fall in oil price has not only affected oil producing countries, but it has significantly the economy of consumers. Continuing and sharp fluctuations of oil prices have had impacts on the world economy which is ending towards recession and facing instability. Many oil consumers see ambiguous perspective ahead of themselves, due to plunging oil prices.
The slump in oil prices has affected the economy of most European countries and elicited conflicting reactions. Some view the oil price fall as positive for improving the economic growth in European countries, while some others only focus on the negative consequences of this issue. Given the influential status of European countries in the world economy, the present article seeks to analyze the positive and negative effects of oil price decline on these countries.
Positive Ramifications
From certain aspects, the global fall in oil prices is viewed as a golden opportunity for the 28-nation European Union. To that effect, the falling prices may result in the following positive results for the European bloc:
The first outcome of oil price slide in Europe was that Russia’s geopolitical ambitions were curbed to some extent. Since the bulk of Russia’s state revenues come from oil and gas sales, the fall in petrodollars put a brake on some of the Kremlin’s projects for Ukraine. Moreover, the fall in energy prices pushed Russia to envisage gas deal with Europe at a time the Europeans feared that Moscow may use energy as a weapon against them in winter. In this regard, the low oil prices forced Russia to keep pumping gas to Europe in order to make up for its budget deficit stemming from low oil prices. At a time Russia’s petrodollars had fallen, cutting energy supply to Europe could inflict another blow to the Russian economy. In the face of falling oil prices, Russia had no other option but to compromise with the European countries. One should keep in mind that Russia’s gas sales to Europe makes up more than half of its gas giant Gazprom’s revenues.
Meantime, the EU is the main buyer of Russia’s gas. Europe is currently spending more than one billion Euros ($1.1 billion) on energy imports. Due to the falling oil prices, Russia had to reduce the price of its gas delivery to Europe. Gazprom is slashing the price of its 2015 gas delivery to Europe by some 35% to $222 per 1,000 cubic meters. That would bring about positive ramifications for the economy of Europe.
The second positive effect for the Europeans was its direct impact on fuel prices in most of these countries. The results could be seen in the gasoline and gasoil markets. For instance, in the Netherlands where gasoline costs high, a change in 1.56 Euros per liter of gasoline is tangible. In Italy, gasoil is heavily taxed and has now fallen to 1.45 Euros now. In Luxembourg, gasoil is sold below one Euro.
The fall in the price of car fuel has been warmly welcomed by European citizens. For instance in France, the price of gasoline was down from 1.45 Euros to 1.25 Euros per liter. As a result, airfares have become cheaper. The price of other oil derivatives has also declined. Therefore, one can conclude that the oil price fall has alleviated economic pressure on the Europeans.
The third positive outcome of oil price fall for the European countries is that they can reconsider their energy policies. The European Commission had earlier defined its energy policy based on the following pillars:
At present, the EU can take advantage of the current environment created as a result of plunging oil and gas prices to push ahead with its project for the establishment of a Europe-wide energy forum.
One of the main elements in these projects is Europe’s dependence on Russia’s oil and gas reserves. This element has been affected by East-West tensions over Ukraine.
Negative Repercussions
Although falling oil prices could give rise to positive results for Europe’s economy, negative impacts are not ruled out. To that effect, the slump in oil prices could result in the following repercussions for European countries.
First, the slide in oil prices has brought about deflation in Europe and raised anxieties in the European Central Bank (ECB) about the possibility of an economic crisis. The main reason is the decline in inflation in eurozone and the emergence of deflation. The ECB had made relentless efforts to raise the inflation rate in the EU and particularly in the eurozone. But the sharp fall in oil prices hindered all efforts made by this European economic body.
Therefore, oil price fall has accelerated deflation which has long become a cause of concern for economic policymakers in Europe and could pose serious challenge to the economy of European governments. In case deflation continues in the EU, the dangerous cycle of profit loss, realistic pay rise, significant fall in prices, and fall in demand and further price fall would be likely.
The second negative impact of oil price fall in European countries is the decline in money supply and turnover. That would in the long term result in further fall in economic growth.
Given the fact that the eurozone is currently dealing with deflation, low oil prices may force fuel and refined products supplier companies to reduce the price of their products in the eurozone. That would naturally further reduce the amount of money in circulation in the economy of eurozone member states. That would become dangerous because demand for commodities and services will decline due to insufficient money in the cycle of economy. In that case, the purchasing power of people will decline and the general level of prices will start to fall. Under such circumstances, due to low demand for commodities and services, the economic growth in European countries and the eurozone will fall.
The third negative consequence of low oil price will involve companies active in the energy sector. These companies would face bankruptcy, and the financial markets in the world will be destabilized. For example, the fall in oil prices has imposed $4.41 billion in losses on British Petroleum (BP) during the last quarter of 2014. During the same period a year before, this British company recorded more than $1 billion in net profit. This company saw its net profit fall sharply in 2014 from the preceding year to reach $3.78 billion. BP’s net profit stood at $12.5 billion in 2013.
Under the influence of oil price fall, the net profit of Schlumberger, which is the largest company active in oil equipment and services, fell sharply. The net profit for this company was estimated at 260 million Euros for the last quarter of 2014, down from 1.66 billion Euros in 2013.
In total, oil companies have halted investment projects worth $2 trillion as the sharp decline in the oil price continues to hinder activities in the oil sector.
The sharp oil price plunge could negatively affect the activities of petrochemical plants in Europe. For example, North Sea oil fields will be shut down if oil prices fall several more dollars because in that case oil extraction will no longer be cost-effective and all relevant industries will be affected. If oil price remains unchanged below $46 a barrel, some producers in Britain will go bankrupt. The Scottish economy will also suffer an oil shock because oil production in North Sea costs more than $50 a barrel and any fall below $50 a barrel will produce losses. Therefore, oil producing countries will have to pay extra costs for the production of a barrel of oil if they intend to maintain their level of output.
In this regard, the conditions do not seem to be attractive enough for oil companies and in case oil prices keep falling a large number of producers will see their revenues fall. Any reduction in oil-related assets could accelerate move towards financial instability in the world. Oil price fall may also end in massive bankruptcy and the failure of companies in reimbursing their debts. That would have no other result but financial instability in the banks. Any decline in oil-related financial assets could negatively affect other types of assets too and lead to the spread of financial instability across other financial markets.
The fourth negative consequence of oil price fall is the emergence of wave of unemployment in European countries. For example, the oil price fall has forced BP to axe jobs. This company announced it would cut 300 jobs in North Sea so that the company would remain competitive. Schlumberger announced it would cut 9,000 jobs or 7.5% of its staff, in the face of falling oil prices.
In another case, France’s energy giant Total has adopted a measure to deal with record low oil prices. This company plans to reduce its investment to $24 billion in the exploration and operation sectors and also reduce the capacity of its refineries. That means the company would have to axe 2,000 jobs by the end of the year. Royal Dutch Shell also plans to slash 10% from its staff.
Around 17,000 jobs in the petroleum industry have been axed ever since oil prices started falling. Given the possibility of further oil price fall, that could intensify the unemployment rate in European countries and pose a serious challenge to their economies.
Two Aspects
In the short term, the fall in oil prices may prepare the ground for higher economic growth rate in Europe.
During the last quarter of 2014, the eurozone economy witnessed a quite good dynamism. The data provided by Eurostat agency showed that the economic growth in the eurozone stood at 0.3% between October and December.
Under the present circumstances, oil price fall is acting like a short-term economic prosperity plan for European countries because raw materials have acceptable price and this can help Europe improve its economic growth.
Moreover, the depreciation of the euro against the dollar coupled with oil price fall in world markets have made financiers optimistic about investment in the Eurozone. However, it seems that in the long term, oil price fall will reduce economic growth rate in industrialized European countries in Italy and Germany. The main reason is the fall in the level of investment in these countries and downturn in European stock markets.
One should bear in mind that before the start of the 2008 financial crisis in the world, oil market was witness to similar conditions. At that time, the oil prices fell and then the price of industrialized commodities declined sharply. The result was the strengthening of the US dollar and emergence of problems in the US economy and other financial markets.
A review of these events shows that everything is happening again because it has been historically registered that a decline in oil price means appreciation of the dollar and appreciation of the dollar implies the depreciation of the national currency of other countries. Therefore, faster growth of the dollar and the depreciation of currencies in some emerging economies, particularly those dependent on oil and commodity exports, will have negative consequences and a crisis similar to the 2008 tailspin is likely to strike Europe again.
Some economists in developed countries hold a positive view of the oil price fall and claim that this issue would reduce costs for both producers and consumers. However, the negative consequences of continuous sharp decline in the price of oil are likely to shadow its positive effects. This issue sounds reasonable particularly about European countries and it can pose serious challenges to their economy.
Sliding Oil Price Impact on Europe
By Shuaib Bahman
The fall in oil price has not only affected oil producing countries, but it has significantly the economy of consumers. Continuing and sharp fluctuations of oil prices have had impacts on the world economy which is ending towards recession and facing instability. Many oil consumers see ambiguous perspective ahead of themselves, due to plunging oil prices.
The slump in oil prices has affected the economy of most European countries and elicited conflicting reactions. Some view the oil price fall as positive for improving the economic growth in European countries, while some others only focus on the negative consequences of this issue. Given the influential status of European countries in the world economy, the present article seeks to analyze the positive and negative effects of oil price decline on these countries.
Positive Ramifications
From certain aspects, the global fall in oil prices is viewed as a golden opportunity for the 28-nation European Union. To that effect, the falling prices may result in the following positive results for the European bloc:
The first outcome of oil price slide in Europe was that Russia’s geopolitical ambitions were curbed to some extent. Since the bulk of Russia’s state revenues come from oil and gas sales, the fall in petrodollars put a brake on some of the Kremlin’s projects for Ukraine. Moreover, the fall in energy prices pushed Russia to envisage gas deal with Europe at a time the Europeans feared that Moscow may use energy as a weapon against them in winter. In this regard, the low oil prices forced Russia to keep pumping gas to Europe in order to make up for its budget deficit stemming from low oil prices. At a time Russia’s petrodollars had fallen, cutting energy supply to Europe could inflict another blow to the Russian economy. In the face of falling oil prices, Russia had no other option but to compromise with the European countries. One should keep in mind that Russia’s gas sales to Europe makes up more than half of its gas giant Gazprom’s revenues.
Meantime, the EU is the main buyer of Russia’s gas. Europe is currently spending more than one billion Euros ($1.1 billion) on energy imports. Due to the falling oil prices, Russia had to reduce the price of its gas delivery to Europe. Gazprom is slashing the price of its 2015 gas delivery to Europe by some 35% to $222 per 1,000 cubic meters. That would bring about positive ramifications for the economy of Europe.
The second positive effect for the Europeans was its direct impact on fuel prices in most of these countries. The results could be seen in the gasoline and gasoil markets. For instance, in the Netherlands where gasoline costs high, a change in 1.56 Euros per liter of gasoline is tangible. In Italy, gasoil is heavily taxed and has now fallen to 1.45 Euros now. In Luxembourg, gasoil is sold below one Euro.
The fall in the price of car fuel has been warmly welcomed by European citizens. For instance in France, the price of gasoline was down from 1.45 Euros to 1.25 Euros per liter. As a result, airfares have become cheaper. The price of other oil derivatives has also declined. Therefore, one can conclude that the oil price fall has alleviated economic pressure on the Europeans.
The third positive outcome of oil price fall for the European countries is that they can reconsider their energy policies. The European Commission had earlier defined its energy policy based on the following pillars:
At present, the EU can take advantage of the current environment created as a result of plunging oil and gas prices to push ahead with its project for the establishment of a Europe-wide energy forum.
One of the main elements in these projects is Europe’s dependence on Russia’s oil and gas reserves. This element has been affected by East-West tensions over Ukraine.
Negative Repercussions
Although falling oil prices could give rise to positive results for Europe’s economy, negative impacts are not ruled out. To that effect, the slump in oil prices could result in the following repercussions for European countries.
First, the slide in oil prices has brought about deflation in Europe and raised anxieties in the European Central Bank (ECB) about the possibility of an economic crisis. The main reason is the decline in inflation in eurozone and the emergence of deflation. The ECB had made relentless efforts to raise the inflation rate in the EU and particularly in the eurozone. But the sharp fall in oil prices hindered all efforts made by this European economic body.
Therefore, oil price fall has accelerated deflation which has long become a cause of concern for economic policymakers in Europe and could pose serious challenge to the economy of European governments. In case deflation continues in the EU, the dangerous cycle of profit loss, realistic pay rise, significant fall in prices, and fall in demand and further price fall would be likely.
The second negative impact of oil price fall in European countries is the decline in money supply and turnover. That would in the long term result in further fall in economic growth.
Given the fact that the eurozone is currently dealing with deflation, low oil prices may force fuel and refined products supplier companies to reduce the price of their products in the eurozone. That would naturally further reduce the amount of money in circulation in the economy of eurozone member states. That would become dangerous because demand for commodities and services will decline due to insufficient money in the cycle of economy. In that case, the purchasing power of people will decline and the general level of prices will start to fall. Under such circumstances, due to low demand for commodities and services, the economic growth in European countries and the eurozone will fall.
The third negative consequence of low oil price will involve companies active in the energy sector. These companies would face bankruptcy, and the financial markets in the world will be destabilized. For example, the fall in oil prices has imposed $4.41 billion in losses on British Petroleum (BP) during the last quarter of 2014. During the same period a year before, this British company recorded more than $1 billion in net profit. This company saw its net profit fall sharply in 2014 from the preceding year to reach $3.78 billion. BP’s net profit stood at $12.5 billion in 2013.
Under the influence of oil price fall, the net profit of Schlumberger, which is the largest company active in oil equipment and services, fell sharply. The net profit for this company was estimated at 260 million Euros for the last quarter of 2014, down from 1.66 billion Euros in 2013.
In total, oil companies have halted investment projects worth $2 trillion as the sharp decline in the oil price continues to hinder activities in the oil sector.
The sharp oil price plunge could negatively affect the activities of petrochemical plants in Europe. For example, North Sea oil fields will be shut down if oil prices fall several more dollars because in that case oil extraction will no longer be cost-effective and all relevant industries will be affected. If oil price remains unchanged below $46 a barrel, some producers in Britain will go bankrupt. The Scottish economy will also suffer an oil shock because oil production in North Sea costs more than $50 a barrel and any fall below $50 a barrel will produce losses. Therefore, oil producing countries will have to pay extra costs for the production of a barrel of oil if they intend to maintain their level of output.
In this regard, the conditions do not seem to be attractive enough for oil companies and in case oil prices keep falling a large number of producers will see their revenues fall. Any reduction in oil-related assets could accelerate move towards financial instability in the world. Oil price fall may also end in massive bankruptcy and the failure of companies in reimbursing their debts. That would have no other result but financial instability in the banks. Any decline in oil-related financial assets could negatively affect other types of assets too and lead to the spread of financial instability across other financial markets.
The fourth negative consequence of oil price fall is the emergence of wave of unemployment in European countries. For example, the oil price fall has forced BP to axe jobs. This company announced it would cut 300 jobs in North Sea so that the company would remain competitive. Schlumberger announced it would cut 9,000 jobs or 7.5% of its staff, in the face of falling oil prices.
In another case, France’s energy giant Total has adopted a measure to deal with record low oil prices. This company plans to reduce its investment to $24 billion in the exploration and operation sectors and also reduce the capacity of its refineries. That means the company would have to axe 2,000 jobs by the end of the year. Royal Dutch Shell also plans to slash 10% from its staff.
Around 17,000 jobs in the petroleum industry have been axed ever since oil prices started falling. Given the possibility of further oil price fall, that could intensify the unemployment rate in European countries and pose a serious challenge to their economies.
Two Aspects
In the short term, the fall in oil prices may prepare the ground for higher economic growth rate in Europe.
During the last quarter of 2014, the eurozone economy witnessed a quite good dynamism. The data provided by Eurostat agency showed that the economic growth in the eurozone stood at 0.3% between October and December.
Under the present circumstances, oil price fall is acting like a short-term economic prosperity plan for European countries because raw materials have acceptable price and this can help Europe improve its economic growth.
Moreover, the depreciation of the euro against the dollar coupled with oil price fall in world markets have made financiers optimistic about investment in the Eurozone. However, it seems that in the long term, oil price fall will reduce economic growth rate in industrialized European countries in Italy and Germany. The main reason is the fall in the level of investment in these countries and downturn in European stock markets.
One should bear in mind that before the start of the 2008 financial crisis in the world, oil market was witness to similar conditions. At that time, the oil prices fell and then the price of industrialized commodities declined sharply. The result was the strengthening of the US dollar and emergence of problems in the US economy and other financial markets.
A review of these events shows that everything is happening again because it has been historically registered that a decline in oil price means appreciation of the dollar and appreciation of the dollar implies the depreciation of the national currency of other countries. Therefore, faster growth of the dollar and the depreciation of currencies in some emerging economies, particularly those dependent on oil and commodity exports, will have negative consequences and a crisis similar to the 2008 tailspin is likely to strike Europe again.
Some economists in developed countries hold a positive view of the oil price fall and claim that this issue would reduce costs for both producers and consumers. However, the negative consequences of continuous sharp decline in the price of oil are likely to shadow its positive effects. This issue sounds reasonable particularly about European countries and it can pose serious challenges to their economy.
Bahamas Petroleum Act Moves a Step Closer
Bahamas Petroleum Co. (BPC) says it has completed studies ahead of a first planned drilling campaign offshore the Bahamas.
In December, a new Petroleum Act and associated regulations concerning oil exploration was submitted to the Bahamian parliament’s House of Assembly. A second reading is due during the coming weeks, followed by a consultation phase and third reading and subsequent passage via the senate into law.
BPC says it remains committed to starting drilling activities for its first exploration well as soon as possible. In anticipation of the new Petroleum Act becoming law, the company is discussing with the government what constitutes a safe and responsible planning period for a well and the subsequent commencement of operations.
Angola Bets on Deepwater Assets
Angola, the second largest oil producer in Africa, is heavily dependent on the oil sector, making it vulnerable to oil price fluctuations. Additionally, with offshore drilling costs Angola being very high, Douglas Westwood forecasts a resultant drop in deepwater completions in Angola in 2016.
Despite this set-back, Angola’s deep and ultra-deepwater projects are key to driving offshore production during a period of reduced spending and retrenchment, according to the analysts.
“We do not expect to see projects that are past the final investment decision being canceled, and many projects have been under construction for a number of years and will start up in the coming three years.
Drilling Starts at Gemini Offshore Norway
The semisubmersible Island Innovator has spudded a well on the Gemini prospect in the central Norwegian North Sea for operator Lundin Norway.
Well 16/1-24 in PL338C, 10 km (6.2 mi) southwest of the Edvard Grieg field, will test the reservoir properties and hydrocarbon potential of lower Paleocene sandstones of the Ty formation.
Lundin assesses prospective resources at 93 MMboe.
Drilling could last 40 days, with a planned TD of 2,192 m (7,191 ft) below mean sea level.
Meantime, Statoil has permission from the Norwegian Petroleum Directorate to drill an exploration well 6 km (3.7 mi) northwest of the Aasta Hansteen field in the Norwegian Sea.
The semisubmersible Transocean Spitsbergen will drill well 6706/12-2 in production license 218. This will be the fifth well on the concession since it was awarded in February 1996.
Indonesia Sanctions Lengo Gas Project
Indonesia’s government has approved KrisEnergy’s development plan for the Lengo gas field in the Bulu production sharing contract (PSC) offshore East Java.
The operator can now pursue formal negotiations for gas sales agreements with potential buyers.
Bulu extends over 697 sq km (269 sq mi) in three separate areas – Bulu A, Bulu B, and Bulu C – in the East Java basin in water depths of 50-60 m (164-197 ft). Lengo, in the Bulu A area, will be produced via four development wells and an unmanned wellhead platform, with a 20-in., 65-km (40-mi) subsea pipeline transporting the gas directly to shore.
Kupe Offshore New Zealand Output Up
Early testing results from the Kupe gas and oil field 30 km (18.6 mi) south of the Taranaki coast look promising, according to partner New Zealand Oil & Gas (NZOG).
Kupe operator Origin Energy conducted tests in December and January to compile information for an updated field development plan. It commissioned measurements of fluid contacts and additional perforations below existing perforations in two wells in order to enhance production and reservoir recovery.
The operation was logistically complex but came through on time and under budget, NZOG says.
Two Jackups to Join Turkmen Drilling Project
Dragon Oil is currently employing one platform-based and two jackup rigs to develop the Cheleken Contract Area (CCA) fields in the Turkmen sector of the Caspian Sea.
They will soon be joined by the newbuild jackup Caspian Driller, which is undergoing commissioning in the CCA ahead of starting operations on the Dzheitune (Lam) field. The lease and management contract for this rig lasts for five years, with an option to extend by up to two more years.
Of the fleet in operation, the Elima jackup, contracted until May 2016, is at present drilling the Dzheitune (Lam) 13/199 well.
The Neptune jackup, currently completing the Dzheitune (Lam) C/198 development well, will remain available until Dragon takes delivery of Mercury, another newbuild jackup, later this year. Mercury will then work for the company under the remainder of its three-year lease with the drilling contractor.
Land Rig 2 is contracted to drill on the Dzhygalybeg (Zhdanov) A platform until it completes eight slots allocated for drilling with a land rig on this platform.
Dragon says a program to acquire water injection facilities for installation on the Dzheitune (Lam) field is in the approval stage. These will be used for pressure maintenance, to sustain production rates, and to increase reserves recovery.
Last year, the company commissioned a jet pumping system for two wells on the Dzheitune (Lam) 13 platform. It has since procured more jet pumping systems for other platforms and commissioning is scheduled to start later in 1Q 2015, with a view to increase production and enhance recovery.
In parallel, the company is considering use of electric submersible pumps with a pilot application to start later this year.
Fabrication has started of a new eight-slot wellhead and production platform Dzheitune (Lam) E and associated pipelines. The platform will be suitable for use with a jackup drilling rig. The platform is expected to be completed in 1H 2016.
Pemex to Join Sempra Affiliate on LNG Project
Mexico's state oil company, Pemex, said it is taking a first step into the LNG business in association with IEnova, the Mexican affiliate of Sempra.
Pemex said it has signed a memorandum of understanding with IEnova for the development of a natural gas liquefaction project at Sempra LNG's existing Energia Costa Azul plant at Ensenada, Baja California.
The accord sets the terms for the scope of each party's participation in the project, including the development, structure and terms under which Pemex could become either a client or investor, the state company said in a statement.
The statement added that Pemex said the agreement will allow it to strengthen its position in world natural gas markets, "reaping the economic benefits of the differential in prices."
Pemex recently used similar reasoning when it announced it could bring natural gas from a pipeline along the Isthmus of Tehuantepec between its Pajaritos refinery on the Gulf to Salina Cruz on the Pacific. At the time, Pemex said it wanted to cash in on high gas prices in Asia by shipping LNG from a terminal on the Pacific.
ExxonMobil Starts Production in Sakhalin
ExxonMobil has started light oil production from the Sakhalin-1 project’s Arkutun-Dagi field offshore eastern Russia. This is the last of the three fields to be developed in the concession – the location is 25 km (16 mi) off the northeast coast of Sakhalin Island.
Peak production from the giant Berkut platform is expected to reach 90,000 b/d, lifting output from Sakhalin-1 to more than 200,000 b/d. The other two fields – Chayvo and Odoptu – began production in 2005 and 2010, respectively.
Production from Sakhalin-1’s Arkutun-Dagi field will be routed through the existing Chayvo onshore processing facility on Sakhalin Island and delivered through pipelines to the De-Kastri oil export terminal located in Khabarovsk Krai, Russia.
According to consortium partner Rosneft, Sakhalin-1 is the first large-scale shelf project carried out in the Russian Federation under the 1996 production-sharing agreement conditions.
Exxon Neftegas Ltd. is the Sakhalin-1 consortium operator with 30% interest. Its partners in the consortium include Sakhalin Oil and Gas Development Co.
Aramco Extends Bidding for Shale Gas
State energy firm Saudi Aramco has extended the deadline for companies to bid for work on its unconventional gas facilities in the north of the country, signaling it remains committed to developing shale gas deposits, industry sources said.
The project, known as System A, will involve building processing facilities, wellheads and pipelines for gas in Turaif, where a big mining project called Waad al-Shamal is under development. No estimate for the total value of the contracts was given.
"They extended the bid closing date now is in March," said a source, adding that Saudi Aramco had sent companies additional requirements that would need their study. Bids were originally due to close in early December and the deadline has been extended several times, most recently to March 15. There was no immediate comment from Saudi Aramco.
Meanwhile, several companies have prequalified for another unconventional gas project involving pipelines, also in northern Saudi Arabia. That project, known as System B, is five times as big as System A, according to one source.
The search for natural gas is a priority for Saudi Arabia as it struggles to keep pace with rapidly rising domestic demand for power and its strategically important petrochemicals industry. It has been inspired by the shale gas surge in the United States, which has been transformed from the world's largest gas importer to an exporter.
Saudi Aramco's CEO Khalid al-Falih told a conference in Riyadh last month that Aramco had invested $3 billion in developing unconventional gas resources and had earmarked an additional $7 billion for it.
He did not reveal detailed plans, but said: "Saudi Arabia will be the next frontier after the US, where shale and unconventional will make a significant contribution to our energy mix, especially gas."
So far, a mining project and a power plant for Saudi mining company Ma'aden is projected to take 200 million cubic feet per day of unconventional gas by 2018.
US Oil Rigs Tumble Again
US oil and gas rigs continued to fall despite still-rising levels of production.
Drillers idled 48 rigs (37 of which were oil rigs), dropping the number to 1,310 and marking the 11th consecutive decline, Baker Hughes reported. The total US rig count is down 32 percent since October, an unprecedented retreat. The median forecast from a Bloomberg survey of ten Rig Count Guesses on Twitter was for a decline of 52.
The Baker Hughes rig counts is a newly popular and controversial signal for US oil watchers. Rigs are used to explore for new deposits and to drill new wells. The theory goes that when oil rigs decline, fewer wells are drilled, less new oil is discovered, and oil production slows. That would be good news for investors hoping for a rise in crude prices after the oil crash.
But production isn't slowing yet, and new efficiencies in US drilling and pumping may make raw numbers of rigs in the field misleading. The US will pump 9.3 million barrels a day this year, the most since 1972, despite the fewest rigs in the field in almost four years, the Energy Information Administration forecast.
Most analysts didn't follow rig counts closely until a surge in US production led to a crash in oil prices by more than half since June.
Russia Eyes 2nd Gas Deal With China
Russia’s energy minister has said the country’s gas giant, Gazprom, is expected to finalize a second contract for delivering gas to China in coming months.
“I hope that in the coming months the contract will be ready for signing,” RIA Novosti quoted Energy Minister Alexander Novak as saying.
The new planned pipeline, known as the “Western route”, would cut through Russia’s Altai Republic to connect fields in western Siberia to northwest China.
It is expected to carry 30 billion cubic meters (bcm) of gas annually. The volume may go up to 100 bcm a year.
Russia and China signed a $400-billion gas deal last year with exports via the Power of Siberia pipeline, also known as the “Eastern route”, whose construction is expected to be over in 2018.
In November, Russia and China inked a framework agreement for the second contract.
Gazprom’s CEO Alexey Miller said recently that the gas giant will meet all its obligations with regard to supplying gas to China.
"The works at the Chayanda and the Power of Siberia are in full swing. All Gazprom’s obligations to start supplying gas to China will be fully met on time," Miller said.
US Proposes 1st Rules for Arctic Drilling
The Obama administration proposed standards on exploratory drilling for oil and gas in US Arctic waters that would add costs for energy companies but aim to protect against catastrophic spills.
The rules, proposed by the Department of Interior, require for the first time that energy companies have access to equipment to contain potential well blowouts, such as rigs that can drill so-called relief wells. The companies would also need to ensure quick access to capping stacks and containment domes, while drilling in the Chukchi and Beaufort seas off Alaska.
The costs of the rules would be about $1.2 billion over 10 years, the department estimated. The benefits of preventing or reducing the severity of an oil spill are difficult to quantify, it said.
The proposal comes in the wake of Royal Dutch Shell Plc's 2012 exploration season when the company lost control of the Kulluk drill rig, which drifted and ran aground in harsh, frigid waters. The rules, which could shorten drilling seasons, could also add costs to Statoil and ConocoPhillips which own leases in the Arctic. The companies are not currently drilling in the waters.
The rules are "designed to ensure safe energy exploration in unforgiving Arctic conditions," said Brian Salerno, head of the Bureau of Safety and Environmental Enforcement, an office of the Interior Department.
The Beaufort and Chukchi seas are a huge potential resource for the United States containing an estimated 21.5 billion barrels of oil and 93.4 trillion cubic feet of natural gas.
The public will have 60 days to comment on the rules which will not be finalized before this summer's drilling season.
A conservationist group applauded the plan. "It's a vast improvement to have Arctic-specific rules proposed so that companies will not be operating simply as they do in warmer, more developed Gulf of Mexico," said Marilyn Heiman, director of the Pew Charitable Trusts' US Arctic project.
Shell said it would review the rules, but added that the company takes "unprecedented steps" to ensure safe operations in the Arctic and that "often, that has meant going above and beyond" requirements.
Azerbaijan Sharply Devalues Currency
Azerbaijan’s central bank has sharply devalued the energy-rich country’s currency as falling oil prices and economic turmoil in Russia hit hard across the former Soviet Union.
The Azerbaijani manat lost 34 percent of its value against the dollar and 33.8 percent against the euro in the cut, with new exchange rates set at 1.05 manat and 1.195 manat respectively, the central bank said.
The move “aims at creating additional stimuli for economic diversification, boosting competitiveness and exports,” the regulator said in a statement.
With oil and gas accounting for 95 percent of the country’s exports and 70 percent of state revenues, the Azerbaijani economy has been under pressure from falling oil prices since June.
In December, the central bank spent some eight percent of its international reserves to defend the manat, and reportedly as much as $1 billion so far this year.
The central bank moved to abandon its currency peg to the dollar in favor of euro-dollar basket.
The central bank said that “the adjustment of the manat’s rate is also directed at neutralizing negative effects from the devaluation of national currencies of Azerbaijan’s trading partners.”
The plunging value of the Russian ruble and falling oil prices affected the national currencies of many ex-Soviet countries.
The Georgian lari fell to its lowest level since 2004.
It has lost 22.4 percent of its value against the greenback since November — a consequence of shrinking remittances from Russia and declining exports.
Chevron's 2014 Oil, Gas Reserves Slip
Chevron Corp, the second-largest US-based oil producer, said its oil and natural gas reserves fell one percent last year largely due to the sale of its stake in a Chad oil field.
The company had proved reserves of 11.1 billion barrels of oil equivalent on Dec. 31, about one percent lower than a year earlier.
Even as Chevron has five major projects coming online by the end of the decade, dwindling reserves have become a key concern for international energy companies, many of which have massive capital budgets to find and extract oil and natural gas.
San Ramon, California-based Chevron is also grappling with plunging crude oil prices , which Chief Executive John Watson said last month would lead to "significant cost reductions."
Other companies, too, such as Exxon Mobil, Royal Dutch Shell, have aggressively tried to balance cheap oil with the crucial need to find and develop new reserves that are increasingly found in remote places such as Papua New Guinea and the Arctic Circle.
At the end of 2014, about 20 percent of Chevron's reserves were in Kazakhstan and 19 percent in the United States, the largest single areas of holdings, Chevron said.
Last year, Chevron sold its stake in an oil concession and pipeline system in Chad's Doba Basin to the country's government for $1.3 billion.
The exit from the project, led by Exxon, was largely seen as a way to refocus cash toward Chevron's Permian shale holdings in Texas, considered one of the largest shale oil reserves in the world.
While Chevron has invested billions of dollars in global energy projects in recent years, investors have grown anxious as smaller independent rivals, including Whiting Petroleum and Continental Resources; have successfully developed US shale plays.
More than half of Chevron's 1.5 million Permian acres don't require royalty payouts to landowners, an advantage over rivals. Chevron is trying to lift Permian production to 250,000 barrels of oil equivalent per day by 2020.
"Proved reserves" refers to oil and natural gas reserves that can be successfully recovered using existing technology.
Oil May Briefly Drop to $20
Russia’s former finance minister, Aleksey Kudrin, does not rule out a brief drop in crude oil prices to 20 dollars per barrel.
In recent trading on the London Intercontinental Exchange, a barrel of Brent was trading at 60.41 dollars before the close. In January, Brent blend prices dropped as low as 48 dollar per barrel and even lower.
"I cannot rule out that at a certain point, for a very brief period, the price of oil may slump to 20 dollars," Kudrin told the media in Makhachkala. "I do not think most analysts agree this may last a while. At the moment the assumption is that oil prices will be somewhere between 60 and 80 dollars per barrel this year. That the price is now back to 60 dollars indicates nothing at all. It may turn either way."
Kudrin believes there are very many factors that keep putting downward pressures on oil prices.
"For two or three year we shall see the world getting used to new prices and businesses evaluating the new opportunities. The world will realize at last, what is the long-term price everybody will be prepared to agree to," Kudrin said.
The Russian government hopes that the oil price will stabilize at the current level, he recalled.
"Whenever I am asked for an opinion, I say that future prices are anyone’s guess. They may stay at 40 dollars per barrel for a long time, or they may be at 80 dollars," he concluded.
Earlier, Deputy Prime Minister Dmitry Medvedev said that in proposing adjustments to the budget the Cabinet of Ministers would proceed from a forecast price of 50 dollars per barrel. In that case the federal budget’s deficit will make up 3.8% of the GDP.
RIPI Competes with Oil Giants
By Mohammad Afshin
Today, downstream industries need more attention because of their contribution to development of refining and petrochemical products and their role in the development of products of higher quality. That could help bring about economic prosperity in oil and gas-rich countries.
Since opting for new processes and acquiring technical savvy are significant for this industrial sector, the countries active in downstream industries are required to benefit from research institutes in order to equip themselves with the state-of-the-art technology.
As a country rich in oil and gas, Iran has expanded its downstream activities and taken big steps by benefiting from its research institutes.
To that effect, the Research Institute of Petroleum Industry (RIPI) is one of the most important research centers in Iran. It has so far conducted numerous research projects in the downstream sector. Here, we introduce some of projects carried out at RIPI.
Aromatization Catalyst
The process of aromatization is instrumental in the petrochemical industry for developing aromatics. Petrochemical plants in Iran produce aromatics with the objective to produce such products as benzene, toluene, ortho-xylene, paraxylene and xylene mix. These plants are among Iran’s infrastructure and their products are used to feed downstream industries producing detergents, plastics, polyester fiber, plasticizers and paints.
Given the high level of consumption of catalysts and the significance of fabrication of aromatization catalysts in the country, the Catalyst Department of RIPI has drawn up a package for designing and producing this catalyst at the amount of 360 kilograms a day and given to a domestic company for mass production.
In the first stage, production of 50 kilograms of catalyst under the supervision of RIPI experts is envisaged. Comparing the results gained from physico-chemical tests and comparing the activity of this catalyst with those made overseas show that this catalyst can rival foreign ones. Currently, production of 200 tons of this catalyst is under way under supervision of RIPI experts. The Persian Gulf Star Refinery has been assigned the production of 300 tons of this catalyst.
Reforming Catalyst
Catalytic reforming is a well known procedure in the oil refining industry. It is used for boosting the quality of gasoline’s octane, production of aromatics for the petrochemical industries and hydrogen for industrial purposes. Every year, more than 150 tons of reforming catalysts is consumed in Iran’s refineries and petrochemical plants. This amount of consumption is set to rise significantly in coming years as Iran is developing refineries and petrochemical plants. Purchase of these catalysts from foreign producers costs millions of dollars a year.
Following successful production of this catalyst at RIPI, a package was drawn up for the production of 400 kilograms a day of this catalyst.
In recent years RIPI has made extensive efforts to indigenize this catalyst. In 2011, this catalyst was placed on the sanctions list of the US and European governments. Under the auspices of RIPI efforts and the support of National Iranian Oil Refining and Distribution Company (NIORDC), the technical savvy for the development of this catalyst has been given to a domestic company.
In the first phase, 200 kilograms of catalyst was produced under supervision of RIPI and petrochemical experts.
Comparing the results gained from physico-chemical tests and comparing the activity of this catalyst with those made overseas show that this catalyst can rival foreign ones. Ten tons of this catalyst has already been produced and shipped to Bandar Imam Petrochemical Plant.
Demercaptanization Catalyst
The organic sulfured compounds in crude oil, petroleum fractions, gas and gas condensate are among the main environment. Mercaptans are organic sulfides largely available in petroleum products. They often cause the quality of final products to decline and that is why the removal of sulfured compounds from oil hydrocarbons, referred to as sweetening operation, is a must. UOP and VNIUS are the only two companies possessing technology for demercaptanization. The technical knowledge for producing this catalyst has been defined at the catalyst and nanotechnology department of RIPI under the title “catalyst for optimized demercaptanization and sulfide hydrogen reduction from hydrocarbon fluids”.
This technical knowledge has been given to two domestic companies. It is currently in the stage of large-scale production in order to assess its performance in industrial units.
Naphtha Sulfurization Hydriodic Catalyst
In the structure of commercial catalysts, the base of catalysts is an important parameter. Such processes as hydrogen desulfurization and denitrogenation are among the most important refining processes in the refining industry to be done with the help of hydrogen catalysts.
The main reason behind these processes in refining units is to counter the impact of sulfur and nitrogen existing in petroleum fractions on catalytic processes and the polluting role of these compounds. In Iran, around 150 tons a year of these catalysts are consumed in refineries.
Now, the technical knowledge for the development of desulfurization catalysts from petroleum fractions and the alumina base of these catalysts has been drafted at RIPI and given to two Iranian companies.
Parsi Sol Technology
One of the main units in gas refineries is sweetening facility which generally uses amine solvents. Using solvents with higher efficiency, lower energy consumption and less operational problem have always been among the main concerns of refining industrialists. That is why big oil companies in the world have moved to develop formulated solvents in order to meet their requirements.
To that effect, the RIPI, in collaboration with the Research and Technology Directorate of National Iranian Gas Company, focused on the development of technical knowledge and creation of the necessary research infrastructure in 2006.
The Parsi Sol technology is in fact purification of natural gas. It involves formulation of sweetening solvents, designing a sweetening facility, management of solvents and marketing of solvents currently in use.
This technology is the outcome of a research project which is aimed at indigenizing technical knowledge for formulation of solvents needed for the purification of natural gas and establishment of the necessary infrastructure for designing sweetening facilities, defining methods of quantitative and qualitative analysis of amine solvents used in the oil, gas and petrochemical industries as well as development of methods for marketing solvents.
The technical knowledge developed for this formulation has been registered as Parsi Sol. This solvent is under field test at Masjed Soleyman oil refinery at industrial scale.
The effectiveness of this solvent has been proven and it works much better than a previous solvent developed by a Canadian company.
Currently, the RIPI is applying standardized analysis method to conduct all tests which were previously done by foreign companies. The RIPI’s tests are of high precision and accuracy.
Odorant
Odorant is a substance used for incorporating an odor into natural gas or liquefied gas. Since natural gas is odorless after refining, and will become dangerous in case of leak, by injecting this substance into natural gas or liquefied gas stream it can be used as a warning substance. Iran used to import odorants in order to meet its annual 600 tons demand. Due to the gas industry’s demand for this strategic substance, a contract has been signed for its production in Iran between the RIPI and the NIGC’s Directorate of Research and Technology.
The activities related to the selection of feedstock, place of installation and revision of standards of Iranian-made odorant was done in 2008. Then, during nine months, the development of technical knowledge and conceptual and basic designing for the establishment of a facility with a capacity of 800 tons a year were done by RIPI. In this project, light mercaptans available in gas condensate produced from South Pars gas field were used for the production of odorants. In this project, a poisonous and harmful substance has been used to produce a valuable product. Moreover, 15,000 b/d of mercaptan-free gas condensate is also achieved as a byproduct to be supplied on world markets.
Currently, this facility is being set up at the site of the first refinery of South Pars. The EPC project has been awarded to a domestic contractor for implementation under the supervision of NIGC and RIPI. The project is now more than 80% completed. Pipe racks, mechanical tools, transducers, underground pipes, surface pipes and other structures have been installed. The foundation for rotary equipment, laying cables and installation of electric equipment and instruments are under way. It is important to note that all mechanical equipment of this unit, including storage tanks, pressure vessels, reactors and towers which have been specially designed to resist corrosion, are domestically manufactured.
This technical knowledge, developed by the RIPI, will reach the industrial stage in the near future with the help of the NIGC’s Directorate of Research and Technology as a new step towards self-sufficiency in the country.
Electrostatic Crude Oil Desalter
The crude oil recovered from reservoirs always contains water and salts which need to be separated before the delivery of oil. Since the existence of water in crude oil and petroleum products has always posed a serious challenge to the petroleum industry, electrostatic desalter is used in crude oil production facilities and in oil and gas refineries to separate saline solution.
The RIPI started research on electrostatic crude oil desalters several years ago in order to indigenize this technology. So far, numerous research projects have been conducted and all of them have been registered in Iran for the first time. They include studying desalting mechanism, startup of desalting pilot and studying the performance of desalter for crude oil under different conditions, simulation of desalting CFD in order to study the hydrodynamic behavior of electrostatic desalter and also developing software for simulating desalting units.
At present, foreign companies are designing the desalting unit and the necessary items. However, some storage tanks are built and installed by Iranian companies under supervision of foreign companies. According to estimates provided by domestic manufacturing companies, more than half of the costs paid for the construction of desalting units is related to the right to use foreign license. Due to the high significance of this technology and the important status it enjoys in the processing of crude oil and given the country’s need for desalting units in oil production, access to technology of electrostatic crude oil desalting could save hard currency and prepare the ground for the optimization of performance of these units.
Given its experiences with regard to electrostatic crude oil desalting technology, the RIPI is now ready to cooperate in such fields as offering advice for improving the performance of desalting units, industrial projects for building desalting units, testing the behavior of crude oil with pilot system and building mobile pilot for conducting demulsifier field tests.
Plasma Technology
The RIPI started its activities in plasma technology in 2005 by suggesting a project for converting methane to ethylene with plasma technology. As the world turned to producing synthesis gas, this research institute conducted projects on dry reforming of methane by applying the plasma technology.
Thanks to its ten years of experience in plasma technology, the RIPI focused on a project in September 2012 to study the feasibility of destroying urban and dangerous garbage by plasma technology for transformation into energy.
In a short period of time, the RIPI and an Iranian company experienced in manufacturing plasma torches developed a small pilot and conducted different tests to finally manufacture this system. In the next step, the RIPI proposed the construction of one ton per day pilot and won the approval of Renewable Energy Technologies Committee in 2013. The pilot of this project is expected to be launched soon.
RIPI Competes with Oil Giants
By Mohammad Afshin
Today, downstream industries need more attention because of their contribution to development of refining and petrochemical products and their role in the development of products of higher quality. That could help bring about economic prosperity in oil and gas-rich countries.
Since opting for new processes and acquiring technical savvy are significant for this industrial sector, the countries active in downstream industries are required to benefit from research institutes in order to equip themselves with the state-of-the-art technology.
As a country rich in oil and gas, Iran has expanded its downstream activities and taken big steps by benefiting from its research institutes.
To that effect, the Research Institute of Petroleum Industry (RIPI) is one of the most important research centers in Iran. It has so far conducted numerous research projects in the downstream sector. Here, we introduce some of projects carried out at RIPI.
Aromatization Catalyst
The process of aromatization is instrumental in the petrochemical industry for developing aromatics. Petrochemical plants in Iran produce aromatics with the objective to produce such products as benzene, toluene, ortho-xylene, paraxylene and xylene mix. These plants are among Iran’s infrastructure and their products are used to feed downstream industries producing detergents, plastics, polyester fiber, plasticizers and paints.
Given the high level of consumption of catalysts and the significance of fabrication of aromatization catalysts in the country, the Catalyst Department of RIPI has drawn up a package for designing and producing this catalyst at the amount of 360 kilograms a day and given to a domestic company for mass production.
In the first stage, production of 50 kilograms of catalyst under the supervision of RIPI experts is envisaged. Comparing the results gained from physico-chemical tests and comparing the activity of this catalyst with those made overseas show that this catalyst can rival foreign ones. Currently, production of 200 tons of this catalyst is under way under supervision of RIPI experts. The Persian Gulf Star Refinery has been assigned the production of 300 tons of this catalyst.
Reforming Catalyst
Catalytic reforming is a well known procedure in the oil refining industry. It is used for boosting the quality of gasoline’s octane, production of aromatics for the petrochemical industries and hydrogen for industrial purposes. Every year, more than 150 tons of reforming catalysts is consumed in Iran’s refineries and petrochemical plants. This amount of consumption is set to rise significantly in coming years as Iran is developing refineries and petrochemical plants. Purchase of these catalysts from foreign producers costs millions of dollars a year.
Following successful production of this catalyst at RIPI, a package was drawn up for the production of 400 kilograms a day of this catalyst.
In recent years RIPI has made extensive efforts to indigenize this catalyst. In 2011, this catalyst was placed on the sanctions list of the US and European governments. Under the auspices of RIPI efforts and the support of National Iranian Oil Refining and Distribution Company (NIORDC), the technical savvy for the development of this catalyst has been given to a domestic company.
In the first phase, 200 kilograms of catalyst was produced under supervision of RIPI and petrochemical experts.
Comparing the results gained from physico-chemical tests and comparing the activity of this catalyst with those made overseas show that this catalyst can rival foreign ones. Ten tons of this catalyst has already been produced and shipped to Bandar Imam Petrochemical Plant.
Demercaptanization Catalyst
The organic sulfured compounds in crude oil, petroleum fractions, gas and gas condensate are among the main environment. Mercaptans are organic sulfides largely available in petroleum products. They often cause the quality of final products to decline and that is why the removal of sulfured compounds from oil hydrocarbons, referred to as sweetening operation, is a must. UOP and VNIUS are the only two companies possessing technology for demercaptanization. The technical knowledge for producing this catalyst has been defined at the catalyst and nanotechnology department of RIPI under the title “catalyst for optimized demercaptanization and sulfide hydrogen reduction from hydrocarbon fluids”.
This technical knowledge has been given to two domestic companies. It is currently in the stage of large-scale production in order to assess its performance in industrial units.
Naphtha Sulfurization Hydriodic Catalyst
In the structure of commercial catalysts, the base of catalysts is an important parameter. Such processes as hydrogen desulfurization and denitrogenation are among the most important refining processes in the refining industry to be done with the help of hydrogen catalysts.
The main reason behind these processes in refining units is to counter the impact of sulfur and nitrogen existing in petroleum fractions on catalytic processes and the polluting role of these compounds. In Iran, around 150 tons a year of these catalysts are consumed in refineries.
Now, the technical knowledge for the development of desulfurization catalysts from petroleum fractions and the alumina base of these catalysts has been drafted at RIPI and given to two Iranian companies.
Parsi Sol Technology
One of the main units in gas refineries is sweetening facility which generally uses amine solvents. Using solvents with higher efficiency, lower energy consumption and less operational problem have always been among the main concerns of refining industrialists. That is why big oil companies in the world have moved to develop formulated solvents in order to meet their requirements.
To that effect, the RIPI, in collaboration with the Research and Technology Directorate of National Iranian Gas Company, focused on the development of technical knowledge and creation of the necessary research infrastructure in 2006.
The Parsi Sol technology is in fact purification of natural gas. It involves formulation of sweetening solvents, designing a sweetening facility, management of solvents and marketing of solvents currently in use.
This technology is the outcome of a research project which is aimed at indigenizing technical knowledge for formulation of solvents needed for the purification of natural gas and establishment of the necessary infrastructure for designing sweetening facilities, defining methods of quantitative and qualitative analysis of amine solvents used in the oil, gas and petrochemical industries as well as development of methods for marketing solvents.
The technical knowledge developed for this formulation has been registered as Parsi Sol. This solvent is under field test at Masjed Soleyman oil refinery at industrial scale.
The effectiveness of this solvent has been proven and it works much better than a previous solvent developed by a Canadian company.
Currently, the RIPI is applying standardized analysis method to conduct all tests which were previously done by foreign companies. The RIPI’s tests are of high precision and accuracy.
Odorant
Odorant is a substance used for incorporating an odor into natural gas or liquefied gas. Since natural gas is odorless after refining, and will become dangerous in case of leak, by injecting this substance into natural gas or liquefied gas stream it can be used as a warning substance. Iran used to import odorants in order to meet its annual 600 tons demand. Due to the gas industry’s demand for this strategic substance, a contract has been signed for its production in Iran between the RIPI and the NIGC’s Directorate of Research and Technology.
The activities related to the selection of feedstock, place of installation and revision of standards of Iranian-made odorant was done in 2008. Then, during nine months, the development of technical knowledge and conceptual and basic designing for the establishment of a facility with a capacity of 800 tons a year were done by RIPI. In this project, light mercaptans available in gas condensate produced from South Pars gas field were used for the production of odorants. In this project, a poisonous and harmful substance has been used to produce a valuable product. Moreover, 15,000 b/d of mercaptan-free gas condensate is also achieved as a byproduct to be supplied on world markets.
Currently, this facility is being set up at the site of the first refinery of South Pars. The EPC project has been awarded to a domestic contractor for implementation under the supervision of NIGC and RIPI. The project is now more than 80% completed. Pipe racks, mechanical tools, transducers, underground pipes, surface pipes and other structures have been installed. The foundation for rotary equipment, laying cables and installation of electric equipment and instruments are under way. It is important to note that all mechanical equipment of this unit, including storage tanks, pressure vessels, reactors and towers which have been specially designed to resist corrosion, are domestically manufactured.
This technical knowledge, developed by the RIPI, will reach the industrial stage in the near future with the help of the NIGC’s Directorate of Research and Technology as a new step towards self-sufficiency in the country.
Electrostatic Crude Oil Desalter
The crude oil recovered from reservoirs always contains water and salts which need to be separated before the delivery of oil. Since the existence of water in crude oil and petroleum products has always posed a serious challenge to the petroleum industry, electrostatic desalter is used in crude oil production facilities and in oil and gas refineries to separate saline solution.
The RIPI started research on electrostatic crude oil desalters several years ago in order to indigenize this technology. So far, numerous research projects have been conducted and all of them have been registered in Iran for the first time. They include studying desalting mechanism, startup of desalting pilot and studying the performance of desalter for crude oil under different conditions, simulation of desalting CFD in order to study the hydrodynamic behavior of electrostatic desalter and also developing software for simulating desalting units.
At present, foreign companies are designing the desalting unit and the necessary items. However, some storage tanks are built and installed by Iranian companies under supervision of foreign companies. According to estimates provided by domestic manufacturing companies, more than half of the costs paid for the construction of desalting units is related to the right to use foreign license. Due to the high significance of this technology and the important status it enjoys in the processing of crude oil and given the country’s need for desalting units in oil production, access to technology of electrostatic crude oil desalting could save hard currency and prepare the ground for the optimization of performance of these units.
Given its experiences with regard to electrostatic crude oil desalting technology, the RIPI is now ready to cooperate in such fields as offering advice for improving the performance of desalting units, industrial projects for building desalting units, testing the behavior of crude oil with pilot system and building mobile pilot for conducting demulsifier field tests.
Plasma Technology
The RIPI started its activities in plasma technology in 2005 by suggesting a project for converting methane to ethylene with plasma technology. As the world turned to producing synthesis gas, this research institute conducted projects on dry reforming of methane by applying the plasma technology.
Thanks to its ten years of experience in plasma technology, the RIPI focused on a project in September 2012 to study the feasibility of destroying urban and dangerous garbage by plasma technology for transformation into energy.
In a short period of time, the RIPI and an Iranian company experienced in manufacturing plasma torches developed a small pilot and conducted different tests to finally manufacture this system. In the next step, the RIPI proposed the construction of one ton per day pilot and won the approval of Renewable Energy Technologies Committee in 2013. The pilot of this project is expected to be launched soon.
Research in Iran Gas Industry
Given the significance of research and technology in the oil, gas, refining and petrochemical industries in the world, Iran’s petroleum industry has been considering numerous research projects in recent years. The objective is to attain state-of-the-art technology with a view to becoming self-reliant in order to save currency spent on the purchase of technical savvy.
The Research and Technology Directorate of National Iranian Gas Company is spearheading efforts for scientific development and boosting technological potentialities in order to provide the necessary scientific background for meeting the needs of this industry.
Having defined priorities for research and technology, this directorate has moved to define objectives, strategies and policies for the NIGC. The priorities have been elucidated within the framework of gas industry technology roadmap for the 2025 horizon.
The main objectives followed by this directorate include elucidating the real status of Iran’s gas industry in international gas forums, long-term planning for drawing up a strategic document on research and technology, carrying out research project with focus on the needs of the gas industry and conducting research studies to clarify the path of development of gas industry technology in the country. This directorate has so far conducted numerous research projects and has many more under way. The present article aims at briefly reviewing the most important ones.
Membrane Technology in Natural Gas Treatment
Membrane technology is one of the most important ones used in gas sweetening. Due to its significance and extensive use in the gas industry, membrane technology has become the focus of research projects of the R&D Directorate of NIGC. This directorate started its activities in membrane technology by supporting research projects, dissertations and theses. Then, it defined a project under the title “Determining research priorities of NIGC in development and application of membrane technology in gas industry” in order to develop membrane technology for the gas industry. Then a research team classified membranes, modules and relevant substances. After that, a preliminary framework was set for defining limits for the activities of gas industry and different applications of membrane in refining natural gas. Based on the findings of the implementation of the project for determining the membrane technology priority, it would be crucial to master this technology in Iran.
In order to realize its objectives, the R&D Directorate of NIGC has devised a plan in collaboration with a number of Iranian universities of technology and RIPI in order to benefit from membrane technology in gas processing. Two parallel approaches are envisaged in this project. The first one involves acquiring capability for using commercial membranes existing in the world in order to sweeten sour gases in Iran and the second one entails acquiring technical savvy for developing membranes and fully indigenizing a technology. This project is defined in three phases. Any decision about continuation of the project will be made in the interval between phases.
Designing and building membrane module for test in the pilot unit, lab-scale manufacturing of PEBA composite membrane for gas sweetening and production of PEBA membrane for gas sweetening are among advantages of this project. Moreover, developing technical knowledge for natural gas processing by membrane technology to be used in natural gas sweetening units and indigenizing membrane technology on lab and pilot scales are among applications of this project.
Magnetic Flux Leakage (MFL)
Magnetic Flux Leakage (MFL), which is known as smart inspection pig, is widely used for inspecting oil and gas pipelines. MFL can move throughout the pipeline, and inspects it. At present, the new generation of MFLs has been indigenized in collaboration with NIGC and University of Tehran. Earlier, the technology of this product was possessed exclusively by the United States, Russia and Germany. The advantages of this project include indigenization of the new generation of MFLs as a tool for smart pig running in oil and gas pipelines by domestic companies, indigenization of all MFLs required for oil and gas pipeline inspection, lower dependence of Iran’s pipeline industry on foreign companies and preventing the exit of huge amounts of currency and information about Iran’s trunklines and pipelines every year.
Sulfur Applications
Today, it is important to convert surplus sulfur production in gas refineries to new products of higher value-added to be supplied on foreign markets. To that effect, the R&D Directorate of NIGC has submitted a project for different applications of sulfur and management of its consumption in collaboration with the RIPI and the Soil and Water Research Institute of Ministry of Agriculture. The advantages of this project include transformation of sulfur produced in refineries into new products of higher value added and avoiding the exit of hard currency, acquiring technical knowledge for producing sulfur products of higher value-added, preparing the ground for the development and spread of application of sulfur in agricultural soil conditioning, mastering technology for sulfur fertilizers and designing and building pilot unit to produce bentonite sulfur and bentonite sulfur enriched with iron, zinc and manganese.
This project is used for producing agricultural sulfur for conditioning soil and improving its farming properties, producing sulfur asphalt to reduce bitumen consumption by 30% and replacing bitumen with sulfur in asphalt production for roads pavement.
Absorbent Processes
The R&D Directorate of NIGC is currently working on a project to devise technical savvy for absorbent processes in collaboration with the RIPI and Tarbiat Modarres University.
Under this project, after conducting a comprehensive study on absorption processes in natural gas refining industry, a multi-purpose pilot will be designed and built. Such a pilot will allow dynamic test of absorbents used in the gas industry, as well as new absorbents. After conducting the necessary tests, a reliable technical knowledge for building industrial absorption units will be indigenized. That would avoid the exit of hard currency for purchasing foreign licenses. Indigenization of technical knowledge for designing absorption units and building industrial units are among applications of this project.
Process Tomography in Oil Pipelines
Tomography is a method which helps reconstruction of the image of distribution of different substances in an object based on measurements taken from around the periphery of an object. CT-SCAN and MRI techniques, which are widely used in medicine, are among the best known methods of tomography. Although these techniques enjoy relative advantages with regards to the quality of their output, they cost too much and they require using X-ray, gamma or strong magnetic fields. These factors have resulted in limited use of these techniques in other industries.
Electrical capacitance tomography (ECT) is a technique which provides a non-invasive, secure, low-cost and precise method for monitoring activities in the oil, gas and petrochemical industries.
The system designed and developed in this project can apply the ECT technique to conduct a tomography of the cross-section of a pipeline carrying a specific fluid or petroleum product and analyze it for a final monitoring of the products through reconstituted image of the cross-section of the pipeline. This system is also capable of separating the model of distribution of two phases of a fluid streaming in the cross-section of the pipeline carrying an oil product.
This is a fully non-contact operation which is carried out with an acceptable precision and speed. The data this system offers about the materials passing through the pipeline are comprehensive; therefore, it could be used as a modern system of flow analysis.
Given the potentialities of process tomography and particularly ECT technique, a variety of applications could be envisaged so as to cut costs and boost efficiency.
At present, different companies across the world are active in this field and they have developed various products since 2001. The price of products varies between $20,000 and above $100,000. The most important factor in setting price for these products is the high technological savvy incorporated in them. Given the potential for the growth of this technology in Iran, any foot-dragging in the development of this technology would result in high spending on these products in the near future.
In order to master this technology, experts at the R&D department of Iranian Oil Pipelines and Telecommunication Company (IOPTC) have been developing a system to monitor transfer of oil products through using process tomography.
Mansour Ahmadi Foroushani, head of the R&D department of IOPTC, says the design of this system on the lab scale is over, thanks to efforts by a research group comprised of students from Sharif University of Technology, Amir Kabir University of Technology and IOPTC researchers. The objective of this project is to design and manufacture the semi-industrial prototype of ECT system to be used in petroleum industry. It is already 70% completed.
The ECT technique is modern branch of process tomography and many international companies are applying this method.
This system will not be used exclusively by IOPTC because process tomography-based systems could be used in most industries related to oil, gas and chemical sectors. Many challenges of these sectors would be overcome by precise and low-cost methods.
Since Iran is an oil-rich country, this project could win big foothold in domestic and foreign markets and many branches of oil, gas, petrochemical, chemical and medical industries would be potential customers of this product.
Multi-phase flowmetry systems needed in the oil, gas and petrochemical industries, non-contact monitoring systems for industrial pipes, systems for controlling sensitive chemical processes and quick diagnosis and switching systems in pipelines carrying fluids are among examples of application of ECT-based systems.
The R&D department of IOPTC has currently five projects under way in line with its main strategies. The implementation of these projects costs IRR 20.76 billion plus 1,409,916 Euros.
Designing and manufacturing remote control system for medium-voltage electro-engine, upgrading the monitoring system for three electro-pumps of IOPTC, inspecting pipelines though magnetic mapping as well as detecting pipeline leaks and physical protection of oil products transmission corridor with fiber optics are among other projects under way by IOPTC. The research projects conducted by IOPTC are of a high diversity due to the activities of this company which is the largest pipeline company in the Middle East.
Meanwhile, a project for designing, manufacturing, and assessment of the performance of intelligent polymer platelets for blocking leaks in oil pipelines, as well as design and field assessment of effective corrosion for protection of IOPTC pipelines are among planned research projects of this company.
In compliance with the petroleum industry’s policy of preparing grounds for development of technology, Iranian oil companies have in recent years focused on research and technology.
The project described here is only one of hundreds of research projects conducted in Iran’s petroleum industry.
Naft Tehran FC at Asia Champions League
Naft Tehran soccer team, which represents the petroleum industry, has berthed a place in Asia Champions League for the first time.
Iran’s petroleum industry is an industrial and economic body, but it has not neglected other aspects like sports, culture and arts. Sports have long occupied a specific place in this industry. Many other branches of sports have found their way into Iran through petroleum industry. For example, when oil production started in southern Iran, sports like golf, badminton and tennis emerged for the first time in Iran. Football, one of the most attractive sports in the world, came to Iran through petroleum industry. It dates back to the discovery of oil in Masjed Soleyman.
Iran’s petroleum industry has long been active in football and it has won trophies throughout these years. Currently, Iran’s petroleum industry is being represented by Naft Tehran FC, Sanat Naft Abadan FC, Naft Masjed Soleyman FC, Naft and Gaz Gachsaran FC and Naft Omidieh FC in major leagues in the country. But the main focus is on the National Iranian Oil Company (NIOC)’s soccer team, Naft Tehran FC, in Iran’s premier league.
Despite its short history and its non-recruitment of national and international stars, Naft Tehran has managed to fare remarkably against Persepolis, Esteghlal and Sepahan teams which have longer history and experience in Iran's premier league. Last year, Iran’s former star Yahya Gol-Mohammadi led Naft Tehran to the third place in Iran’s premier league. The first and the second teams qualified straight into Asia Champions League, but Naft Tehran had to go into a playoff with Qatar’s El Jaish. The match was held at Tehran’s Azadi Stadium on February 17. Head coach Ali Mansourian, a former national team player, led Naft Tehran FC into victory.
The first half of the match ended in a goalless draw, but the second half started with Naft Tehran scoring against El Jaish. The Qataris sought to revenge and they created chances to score, but they were all repelled by Naft Tehran players. The game finally ended 1-0.
Naft Tehran’s lineup was as follows: Ali-Reza Biravand, Mojtaba Shiri, Amin Haj Mohammadi, Leonardo Padoani, Vahid Hamdinejad, Morteza Pour Ali Ganji, Ali-Reza Ezzati, Iman Mobali, Gholam-Reza Rezaei, Vahid Amiri and Arsalan Motahari.
El Jaish was represented by Anderson Martins, Lucas Mendes, Besik, Meftah, Li Keon-Hu, Metnani, Abd al-Ghadir, Ribero, Mubarak and Ricardo.
Naft Tehran will now have to face Saudi Arabia’s al-Shabab, the United Arab Emirates’ Al Ain and Uzbekistan’s Pakhtakor.
Last-Minute Defeat
One week after overpowering El Jaish, Naft Tehran FC played Pakhtakor of Uzbekistan. The match was held on February 24 at Pakhtakor Stadium in Tashkent. Naft Tehran, which showed a brilliant performance, was finally beaten 2-1 by the Uzbek team.
In the first half, Naft Tehran attacked the goal post of the Uzbeks. Mehdi Shiri shook the post, but the second half was calmer.
The Uzbeks scored their first goal in the second half. After that, one of Uzbek footballers was sent off and Ali Qorbani seized on this chance headed home the equalizer of the match.
Naft Tehran was encouraged to score more and attacked Pakhtakor several times, but nothing happened. Both teams were ready to accept the goalless draw, but the Uzbeks caught Iranians napping and scored a second goal.
This defeat put an end to Naft Tehran’s invulnerability following 21 wins in a row.
Iran Oil Nationalization and International Developments
Nationalization of Iran’s petroleum industry in 1951 is stuck in the minds of Iranians for good as it turned the page for Iran. The campaign for oil nationalization reached its culmination on March 20, 1951. The material and spiritual achievements of the victorious movement are always remembered by the Iranian nation. This victory was so important that it also affected countries in the region and changed the balance of power in oil-rich countries.
Mohammad Mossadeq, Iran’s prime minister who led the campaign for oil nationalization, travelled to Egypt on his way back to Iran after flying to The Hague to plead Iran’s cause at the International Court of Justice.
In Cairo, Mossadeq received rapturous welcome by his Egyptian counterpart Mustafa el-Nahhas Pasha. The Egyptian people, including workers, held a massive demonstration in support of the Iranian premier. The Britons feared that Nahhas Pasha would follow in the footsteps of Mossadeq to focus on Suez Canal. The British government conspired to dismiss the Egyptian prime minister. That largely affected the Egyptian army and people. A coup was fomented against King Farouk. General Muhammad Naguib and Jamal Abdul-Nasser came to power. After some time, Nasser was inspired by Iran’s oil nationalization and moved to nationalize Suez Canal. But Britain did not agree and it resorted to military action aided by France and Zionist regime. In the end, Britain-led military campaign was defeated and Suez Canal was nationalized. This colonial chain was torn apart.
Iraq
Iraq was also affected by oil nationalization in Iran. Iraq’s then prime minister Nuri al-Said was a lackey of Britain and he directed all currents in the region in favor of Britain. After nationalist General Abd al-Karim Qassim launched a coup against the government, some sort of nationalization, which was different from Iran’s, took shape in Iraq. General Qassim was killed in a coup and Saddam came to power.
There was no doubt among regional leaders that all these developments were stemming from nationalization of Iran’s petroleum industry. The nationalization movement and Britain’s reaction to this development made it clear to world nations that the relations between European and non-European countries are limited to colonialism. Some countries were not directly colonized by Britain, but they had to tolerate economic and cultural pressures from colonialist powers. Under such circumstances, India, Egypt and Indonesia moved to set up the Non-Aligned Movement (NAM).
The term “Third World” was also invented after nationalization of oil industry in Iran.
Role Model for NAM
In fact the first national reaction to unjust behavior of the big colonialist, Britain, was made by Iranians within the framework of nationalization of petroleum industry. Soon after, this national reaction became an example for colonized countries in the world to follow. Iran’s oil nationalization campaign triggered a great deal of political and social movements across the globe. Countries like Egypt, Yugoslavia, India and Indonesia, which were all directly or indirectly colonized by Britain, were inspired by the spirit of Iranians in cutting the hands of Britons off their oil resources. By establishing the NAM, these countries intended to show the two colonialist poles – Communists and Capitalists – that they are committed to neither of these poles.
Chile, a leading producer of copper in the world, also moved to nationalize its copper industry in 1957 under the influence of Iran’s oil nationalization and brought an end to Spain’s dominance.
Balance of Power
Injustice and inequality dominated relations between colonialist powers and their colonies. For example, the Britons used to belittle local workers in Iran’s oil city Abadan. Iranians were not engaged in many affairs and oil service workers did not have any chance to learn technical things. But the nationalization of oil changed everything in Iran.
An important outcome of nationalization of Iran’s petroleum industry was formation of parties and political and social groups. Before the nationalization movement, Iran Party was the only political party in the country. But after nationalization of oil, more political groups were established.
In India during the British dominance, parties were not allowed to be engaged in any political and social activity. But after India’s independence from Britain, more than 700 political parties became active.
Nationalization of oil in Iran triggered some sort of awakening among colonized countries across the globe and changed the balance of power between colonialists and their colonies forever.
Internal Effects
With nationalization of oil industry in Iran, Britain lost its exclusive dominance on Iran’s oil and that changed the fate of Iran’s oil. Before its nationalization, Iran’s petroleum industry was heavily dependent on foreign technology. Now it had to depend on Iranian engineers and workers to continue production and development. The nationalization resulted in remarkable phenomenal and spiritual achievements for the petroleum industry.
When oil was nationalized in Iran, the Britons could not believe that the Iranians would be able to run the petroleum industry. Therefore, they were waiting near Iran to be called back. But it did not happen and the Iranians managed to handle affairs by themselves. Even an oil manufacturing plant which failed to come on-stream under the Britons started production.
The oil nationalization gave a new form to the equation of Iran’s interactions with the entire world.
Reservoir Engineering
Iranians were always barred from gaining any knowledge about oil reservoir engineering. This branch of science was sophisticated and the British petroleum engineers never allowed Iranians learn about it. But after nationalization of oil, many Iranians moved to learn reservoir engineering. Many moved from other cities to Tehran and contributed to projects.
Thanks to oil nationalization, the agriculture sector emerged in the oil-rich Khuzestan province. Before nationalization, nobody was allowed to do farming in Khuzestan and particularly in the cities of Abadan and Khorramshahr. The province had become a non-arable desert. But after nationalization, Prime Minister Mossadeq authorized planting trees and agriculture and many farmers started growing rice. Today, Khuzestan is a source of agricultural products.
Other Industries
Before oil nationalization, there were not many industries active in the country. But after that, some of those who dissociated from the petroleum industry following the Consortium Agreement moved to found different industries in the country and Iran progressed towards industrialization.
Under Anglo-Iranian Oil Company, Iran depended on Britain for all its oil industry needs. But after oil nationalization, some of these requirements like foundry and installations were met domestically.
Narrowing Class Difference
Residents of Abadan, which housed the largest and the most important oil refinery in the world, were subject to class difference. For example, a district in Abadan was reserved to the Britons and public transportation was not allowed into that district. There were some restaurants and bakers exclusively for the British. The Iranians were not allowed into sports clubs built for the Britons.
But after the Britons left Abadan, the class differences were narrowed gradually and the construction of the first industrial park in Abadan provided equal conditions for oil service staff and workers.
After nationalization of oil industry in Iran and the signature of Consortium Agreement which was an immediate result of nationalization, oil industry staff were divided into four groups to run the country’s industry. Some went to oil-rich regions and started reservoir engineering, some started working in agriculture, and some established new industries in the country and some others developed Iran’s petroleum industry.
Iran Oil Nationalization and International Developments
Nationalization of Iran’s petroleum industry in 1951 is stuck in the minds of Iranians for good as it turned the page for Iran. The campaign for oil nationalization reached its culmination on March 20, 1951. The material and spiritual achievements of the victorious movement are always remembered by the Iranian nation. This victory was so important that it also affected countries in the region and changed the balance of power in oil-rich countries.
Mohammad Mossadeq, Iran’s prime minister who led the campaign for oil nationalization, travelled to Egypt on his way back to Iran after flying to The Hague to plead Iran’s cause at the International Court of Justice.
In Cairo, Mossadeq received rapturous welcome by his Egyptian counterpart Mustafa el-Nahhas Pasha. The Egyptian people, including workers, held a massive demonstration in support of the Iranian premier. The Britons feared that Nahhas Pasha would follow in the footsteps of Mossadeq to focus on Suez Canal. The British government conspired to dismiss the Egyptian prime minister. That largely affected the Egyptian army and people. A coup was fomented against King Farouk. General Muhammad Naguib and Jamal Abdul-Nasser came to power. After some time, Nasser was inspired by Iran’s oil nationalization and moved to nationalize Suez Canal. But Britain did not agree and it resorted to military action aided by France and Zionist regime. In the end, Britain-led military campaign was defeated and Suez Canal was nationalized. This colonial chain was torn apart.
Iraq
Iraq was also affected by oil nationalization in Iran. Iraq’s then prime minister Nuri al-Said was a lackey of Britain and he directed all currents in the region in favor of Britain. After nationalist General Abd al-Karim Qassim launched a coup against the government, some sort of nationalization, which was different from Iran’s, took shape in Iraq. General Qassim was killed in a coup and Saddam came to power.
There was no doubt among regional leaders that all these developments were stemming from nationalization of Iran’s petroleum industry. The nationalization movement and Britain’s reaction to this development made it clear to world nations that the relations between European and non-European countries are limited to colonialism. Some countries were not directly colonized by Britain, but they had to tolerate economic and cultural pressures from colonialist powers. Under such circumstances, India, Egypt and Indonesia moved to set up the Non-Aligned Movement (NAM).
The term “Third World” was also invented after nationalization of oil industry in Iran.
Role Model for NAM
In fact the first national reaction to unjust behavior of the big colonialist, Britain, was made by Iranians within the framework of nationalization of petroleum industry. Soon after, this national reaction became an example for colonized countries in the world to follow. Iran’s oil nationalization campaign triggered a great deal of political and social movements across the globe. Countries like Egypt, Yugoslavia, India and Indonesia, which were all directly or indirectly colonized by Britain, were inspired by the spirit of Iranians in cutting the hands of Britons off their oil resources. By establishing the NAM, these countries intended to show the two colonialist poles – Communists and Capitalists – that they are committed to neither of these poles.
Chile, a leading producer of copper in the world, also moved to nationalize its copper industry in 1957 under the influence of Iran’s oil nationalization and brought an end to Spain’s dominance.
Balance of Power
Injustice and inequality dominated relations between colonialist powers and their colonies. For example, the Britons used to belittle local workers in Iran’s oil city Abadan. Iranians were not engaged in many affairs and oil service workers did not have any chance to learn technical things. But the nationalization of oil changed everything in Iran.
An important outcome of nationalization of Iran’s petroleum industry was formation of parties and political and social groups. Before the nationalization movement, Iran Party was the only political party in the country. But after nationalization of oil, more political groups were established.
In India during the British dominance, parties were not allowed to be engaged in any political and social activity. But after India’s independence from Britain, more than 700 political parties became active.
Nationalization of oil in Iran triggered some sort of awakening among colonized countries across the globe and changed the balance of power between colonialists and their colonies forever.
Internal Effects
With nationalization of oil industry in Iran, Britain lost its exclusive dominance on Iran’s oil and that changed the fate of Iran’s oil. Before its nationalization, Iran’s petroleum industry was heavily dependent on foreign technology. Now it had to depend on Iranian engineers and workers to continue production and development. The nationalization resulted in remarkable phenomenal and spiritual achievements for the petroleum industry.
When oil was nationalized in Iran, the Britons could not believe that the Iranians would be able to run the petroleum industry. Therefore, they were waiting near Iran to be called back. But it did not happen and the Iranians managed to handle affairs by themselves. Even an oil manufacturing plant which failed to come on-stream under the Britons started production.
The oil nationalization gave a new form to the equation of Iran’s interactions with the entire world.
Reservoir Engineering
Iranians were always barred from gaining any knowledge about oil reservoir engineering. This branch of science was sophisticated and the British petroleum engineers never allowed Iranians learn about it. But after nationalization of oil, many Iranians moved to learn reservoir engineering. Many moved from other cities to Tehran and contributed to projects.
Thanks to oil nationalization, the agriculture sector emerged in the oil-rich Khuzestan province. Before nationalization, nobody was allowed to do farming in Khuzestan and particularly in the cities of Abadan and Khorramshahr. The province had become a non-arable desert. But after nationalization, Prime Minister Mossadeq authorized planting trees and agriculture and many farmers started growing rice. Today, Khuzestan is a source of agricultural products.
Other Industries
Before oil nationalization, there were not many industries active in the country. But after that, some of those who dissociated from the petroleum industry following the Consortium Agreement moved to found different industries in the country and Iran progressed towards industrialization.
Under Anglo-Iranian Oil Company, Iran depended on Britain for all its oil industry needs. But after oil nationalization, some of these requirements like foundry and installations were met domestically.
Narrowing Class Difference
Residents of Abadan, which housed the largest and the most important oil refinery in the world, were subject to class difference. For example, a district in Abadan was reserved to the Britons and public transportation was not allowed into that district. There were some restaurants and bakers exclusively for the British. The Iranians were not allowed into sports clubs built for the Britons.
But after the Britons left Abadan, the class differences were narrowed gradually and the construction of the first industrial park in Abadan provided equal conditions for oil service staff and workers.
After nationalization of oil industry in Iran and the signature of Consortium Agreement which was an immediate result of nationalization, oil industry staff were divided into four groups to run the country’s industry. Some went to oil-rich regions and started reservoir engineering, some started working in agriculture, and some established new industries in the country and some others developed Iran’s petroleum industry.
Meybod, Most Historic Town in Iran
The scorching sun in Yazd province rises from the town of Meybod. Everyone has the feeling that the warmth and shine felt across the province come from Meybod.
This densely populated but prosperous town is among the most important cities in Yazd province in central Iran. Meybod is silent in appearance, but is in fact the beating pulse of Yazd’s economy.
Meybod is seven millennia old and has long been considered an economic and strategic place in Iran. The most important jobs practiced in Yazd province have been ceramic making, pottery, rug weaving and cloth weaving.
Due to its prominent role in the history of Iran, Meybod houses different historic monuments. Due to the rich history of Meybod, Yazd has become the museum of Iran. One of the most ancient monuments in this province is Narin Castle which long served as fortress in Iran.
Oldest Evidence
Narin Castle is a mud-brick fort or castle. Structures like these constituted the government stronghold in some of the older towns of central Iran. Some of these castles incorporate mud bricks of the Medes period and of the Achaemenid and Sassanid dynasties.
The ruins of the structure stand 40 meters (130 ft) high from its base. Although built some 2,000 years ago, it contains what seems to be a type of plumbing system made out of mortar built into its massive walls. The structure also has a large underground chamber (filled now by rubble), possibly a prison. Four towers surround the entire complex, and a large gate furnishes access to a large courtyard. The structure seems to have been hit by numerous earthquakes throughout the ages.
Some believe that the Narin castles are descendants of ancient fire-temples; some of the castles in Narin and Meybod, in Yazd province, are also called narenj castles (orange castles), possibly by folk etymology. The castle at Meybod is currently under study. Yet this castle has not been faring very well.
Unfortunately today, the ruins of Narin Gahl'eh is nothing more but the site of a local garbage dump, and what is even more depressing is that Iran contains thousands of such structures, decaying in their own rubble.
Pigeon Loft
Due to the prosperity of agriculture in Meybod, pigeon’s dung was largely used to fertilize lands under the Qajar dynasty. A tower was built in Meybod to house pigeons. The tower is today serving as the building of Meybod governor’s office. The cylinder-shaped tower was built so as to block the infiltration of snakes. A gypsum strip covers the hatched body of this tower because snakes cannot crawl on gypsum and these strips do not let snakes into the dovecote.
Inside the loft, a structure has been built in order to strengthen the dovecote and avoid vibrations. The inside structure has been beautifully adorned.
Largest Dome Ice Chamber in Iran
The largest dome-shaped ice chamber is seen in the center of Meybod, just in front of Shah Abbasi Caravanserai. In ancient times, the ice produced in this refrigerator was used in summer to cool water and preserve food.
This building has remained intact and is considered a perfect example of the architectural style of its time. It is believed to date back to the Safavid era.
The surface of this ice pool expands about 8,000 square meters. The walls of the ice chamber are 2 meters thick and 8 meters tall. The southern, eastern and western walls are 42, 20 and 20 meters long respectively. The eastern wall has collapsed. An entrance measuring 2.2 meters wide and 2 meters high leads to the storage area and the dome. The axial plane of the dome is some 300 square meters with an approximate height of 15 meters. The storage area has a 13 meter diameter with a depth of 6 meters which is located below the dome. The thickness of the walls under the dome gradually dwindles down in thickness from the top so that the 2.4 meter wall narrows at the bottom of the pedestal to 25 centimeters. Rains and storms have somewhat damaged the northwestern side of the dome.
Shah Abbasi Caravanserai
Shah Abbasi Caravanserai tells us the story of tradition and customs of Iranian people. This caravanserai was built under Safavid era and enjoys a special status in terms of architecture.
This caravanserai is built on a square-shaped plan and houses a total of 100 rooms including 24 in its court. In the middle of the court, water streams from an aqueduct.
The entrance into the building goes through a roofed way. A large wooden door is installed at the entrance of the building to protect the travelers at night.
Now, a traditional restaurant has been built in the western hall of the monument. The western hall displays historic rugs woven many years ago.
There is also a big water reservoir near the caravanserai. A brick dome and four tall wind catchers are mounted over the reservoir.
Meybod, Most Historic Town in Iran
The scorching sun in Yazd province rises from the town of Meybod. Everyone has the feeling that the warmth and shine felt across the province come from Meybod.
This densely populated but prosperous town is among the most important cities in Yazd province in central Iran. Meybod is silent in appearance, but is in fact the beating pulse of Yazd’s economy.
Meybod is seven millennia old and has long been considered an economic and strategic place in Iran. The most important jobs practiced in Yazd province have been ceramic making, pottery, rug weaving and cloth weaving.
Due to its prominent role in the history of Iran, Meybod houses different historic monuments. Due to the rich history of Meybod, Yazd has become the museum of Iran. One of the most ancient monuments in this province is Narin Castle which long served as fortress in Iran.
Oldest Evidence
Narin Castle is a mud-brick fort or castle. Structures like these constituted the government stronghold in some of the older towns of central Iran. Some of these castles incorporate mud bricks of the Medes period and of the Achaemenid and Sassanid dynasties.
The ruins of the structure stand 40 meters (130 ft) high from its base. Although built some 2,000 years ago, it contains what seems to be a type of plumbing system made out of mortar built into its massive walls. The structure also has a large underground chamber (filled now by rubble), possibly a prison. Four towers surround the entire complex, and a large gate furnishes access to a large courtyard. The structure seems to have been hit by numerous earthquakes throughout the ages.
Some believe that the Narin castles are descendants of ancient fire-temples; some of the castles in Narin and Meybod, in Yazd province, are also called narenj castles (orange castles), possibly by folk etymology. The castle at Meybod is currently under study. Yet this castle has not been faring very well.
Unfortunately today, the ruins of Narin Gahl'eh is nothing more but the site of a local garbage dump, and what is even more depressing is that Iran contains thousands of such structures, decaying in their own rubble.
Pigeon Loft
Due to the prosperity of agriculture in Meybod, pigeon’s dung was largely used to fertilize lands under the Qajar dynasty. A tower was built in Meybod to house pigeons. The tower is today serving as the building of Meybod governor’s office. The cylinder-shaped tower was built so as to block the infiltration of snakes. A gypsum strip covers the hatched body of this tower because snakes cannot crawl on gypsum and these strips do not let snakes into the dovecote.
Inside the loft, a structure has been built in order to strengthen the dovecote and avoid vibrations. The inside structure has been beautifully adorned.
Largest Dome Ice Chamber in Iran
The largest dome-shaped ice chamber is seen in the center of Meybod, just in front of Shah Abbasi Caravanserai. In ancient times, the ice produced in this refrigerator was used in summer to cool water and preserve food.
This building has remained intact and is considered a perfect example of the architectural style of its time. It is believed to date back to the Safavid era.
The surface of this ice pool expands about 8,000 square meters. The walls of the ice chamber are 2 meters thick and 8 meters tall. The southern, eastern and western walls are 42, 20 and 20 meters long respectively. The eastern wall has collapsed. An entrance measuring 2.2 meters wide and 2 meters high leads to the storage area and the dome. The axial plane of the dome is some 300 square meters with an approximate height of 15 meters. The storage area has a 13 meter diameter with a depth of 6 meters which is located below the dome. The thickness of the walls under the dome gradually dwindles down in thickness from the top so that the 2.4 meter wall narrows at the bottom of the pedestal to 25 centimeters. Rains and storms have somewhat damaged the northwestern side of the dome.
Shah Abbasi Caravanserai
Shah Abbasi Caravanserai tells us the story of tradition and customs of Iranian people. This caravanserai was built under Safavid era and enjoys a special status in terms of architecture.
This caravanserai is built on a square-shaped plan and houses a total of 100 rooms including 24 in its court. In the middle of the court, water streams from an aqueduct.
The entrance into the building goes through a roofed way. A large wooden door is installed at the entrance of the building to protect the travelers at night.
Now, a traditional restaurant has been built in the western hall of the monument. The western hall displays historic rugs woven many years ago.
There is also a big water reservoir near the caravanserai. A brick dome and four tall wind catchers are mounted over the reservoir.
Meybod, Most Historic Town in Iran
The scorching sun in Yazd province rises from the town of Meybod. Everyone has the feeling that the warmth and shine felt across the province come from Meybod.
This densely populated but prosperous town is among the most important cities in Yazd province in central Iran. Meybod is silent in appearance, but is in fact the beating pulse of Yazd’s economy.
Meybod is seven millennia old and has long been considered an economic and strategic place in Iran. The most important jobs practiced in Yazd province have been ceramic making, pottery, rug weaving and cloth weaving.
Due to its prominent role in the history of Iran, Meybod houses different historic monuments. Due to the rich history of Meybod, Yazd has become the museum of Iran. One of the most ancient monuments in this province is Narin Castle which long served as fortress in Iran.
Oldest Evidence
Narin Castle is a mud-brick fort or castle. Structures like these constituted the government stronghold in some of the older towns of central Iran. Some of these castles incorporate mud bricks of the Medes period and of the Achaemenid and Sassanid dynasties.
The ruins of the structure stand 40 meters (130 ft) high from its base. Although built some 2,000 years ago, it contains what seems to be a type of plumbing system made out of mortar built into its massive walls. The structure also has a large underground chamber (filled now by rubble), possibly a prison. Four towers surround the entire complex, and a large gate furnishes access to a large courtyard. The structure seems to have been hit by numerous earthquakes throughout the ages.
Some believe that the Narin castles are descendants of ancient fire-temples; some of the castles in Narin and Meybod, in Yazd province, are also called narenj castles (orange castles), possibly by folk etymology. The castle at Meybod is currently under study. Yet this castle has not been faring very well.
Unfortunately today, the ruins of Narin Gahl'eh is nothing more but the site of a local garbage dump, and what is even more depressing is that Iran contains thousands of such structures, decaying in their own rubble.
Pigeon Loft
Due to the prosperity of agriculture in Meybod, pigeon’s dung was largely used to fertilize lands under the Qajar dynasty. A tower was built in Meybod to house pigeons. The tower is today serving as the building of Meybod governor’s office. The cylinder-shaped tower was built so as to block the infiltration of snakes. A gypsum strip covers the hatched body of this tower because snakes cannot crawl on gypsum and these strips do not let snakes into the dovecote.
Inside the loft, a structure has been built in order to strengthen the dovecote and avoid vibrations. The inside structure has been beautifully adorned.
Largest Dome Ice Chamber in Iran
The largest dome-shaped ice chamber is seen in the center of Meybod, just in front of Shah Abbasi Caravanserai. In ancient times, the ice produced in this refrigerator was used in summer to cool water and preserve food.
This building has remained intact and is considered a perfect example of the architectural style of its time. It is believed to date back to the Safavid era.
The surface of this ice pool expands about 8,000 square meters. The walls of the ice chamber are 2 meters thick and 8 meters tall. The southern, eastern and western walls are 42, 20 and 20 meters long respectively. The eastern wall has collapsed. An entrance measuring 2.2 meters wide and 2 meters high leads to the storage area and the dome. The axial plane of the dome is some 300 square meters with an approximate height of 15 meters. The storage area has a 13 meter diameter with a depth of 6 meters which is located below the dome. The thickness of the walls under the dome gradually dwindles down in thickness from the top so that the 2.4 meter wall narrows at the bottom of the pedestal to 25 centimeters. Rains and storms have somewhat damaged the northwestern side of the dome.
Shah Abbasi Caravanserai
Shah Abbasi Caravanserai tells us the story of tradition and customs of Iranian people. This caravanserai was built under Safavid era and enjoys a special status in terms of architecture.
This caravanserai is built on a square-shaped plan and houses a total of 100 rooms including 24 in its court. In the middle of the court, water streams from an aqueduct.
The entrance into the building goes through a roofed way. A large wooden door is installed at the entrance of the building to protect the travelers at night.
Now, a traditional restaurant has been built in the western hall of the monument. The western hall displays historic rugs woven many years ago.
There is also a big water reservoir near the caravanserai. A brick dome and four tall wind catchers are mounted over the reservoir.
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