New Chapter in Iran-Germany Cooperation
German Firms to Help Iran Petchem
Sidelines of German Businessmen’s Visit
$2.3b Gas Pipeline Plan Signed
IOEC Ready for Partnership with Foreigners
Countdown for Phase 21 of South Pars
Global Economy Welcomes Iran Oil Return
Positive Effects of Sanction Relief
Post-Sanctions Iran’s Petchem Industry
OPEC; Consequences of Oil Price Fall
Global oil and Asian product market, July
Iran Vessel Gathers Persian Gulf Oil Pollutants
Petchem Co. Basketball Dreams of Asia Championship
History of Bakhtiari Oil Company
Persepolis, Glory of Ancient Persia
Oil Products Distribution in Marvdasht
Iran Oil Industry; Winner of Nuclear Deal
Long drawn-out intensive nuclear talks finally bore fruits after 22 months. On July 14, Iran and P 5+1 group strike a historic deal on the Joint Comprehensive Plan of Action (JCPOA).
Iran is one of the largest oil producers in the world. That is no secret to anyone. With such potentialities, it is normal to see that Iran’s budget has been based on oil from the very beginning.
During certain periods of time, Iranian politicians moved to minimize the economy’s dependence on oil, but that did not pay off.
In 2009, Iran’s budget depended on oil for nearly 90%. Well mindful of this fact and the significance of hydrocarbon reserves’ contribution to Iran’s sustainable development, the US and the European Union (EU) slapped sanctions on Iran’s energy sector with the pretext of curbing the Islamic Republic’s nuclear ambitions.
Under tough sanctions, Iran turned some of these threats into opportunities by letting Iranian industrialists and manufacturers create conditions for self-sufficiency in the country.
However, Iran’s petroleum industry will benefit from the historic nuclear agreement reached between Iran and the global powers – the US, France, Britain, Germany, Russia and China.
The West’s restrictions against Iran targeted banking and insurance sectors. This issue directly affected banking transactions and transfer of money gained from selling oil.
Once the JCPOA takes effect, Iran will have access to the bulk of its assets frozen abroad and the oil money blocked abroad will return into Iran’s state coffers.
A major obstacle to Iran’s oil industry development plan is insufficient finance. Therefore, the releasing Iran’s assets will help the oil sector within the framework of loans from National Development Fund of Iran (NDFI) or banking facilities for petroleum projects.
During the years of sanctions, Iranian oil contractor companies have grown and they have been steering key projects like the development of phases of the supergiant South Pars gas field. However, the potentialities for the development of Iran’s petroleum industry are so numerous that domestic companies cannot afford all projects alone. Foreign companies also need to be present in Iran’s oil projects.
Energy giants like Shell, Total and Eni have already voiced readiness to return to Iran after sanctions are removed.
The presence of these companies is expected to accelerate Iran’s oil projects, strengthen domestic companies, transfer in technology and create a competitive market which would benefit all parties.
Iran’s oil, gas and petrochemical industries are thirsty for investment. There are many oil, gas and petrochemical projects waiting for investment.
Iran’s petrochemical industry will need $80 billion in investment over the coming 10 years while the oil sector is expected to attract $120 billion over four to five years. The lifting of sanctions has created a good opportunity for companies involved in petrochemical and oil projects.
Commodities and equipment constitute another element of the petroleum industry and more than one million items are currently used in this industry. Although during years of sanctions, Iran’s petroleum ministry has turned to domestically manufactured equipment, production of some of this equipment is not economically justified.
With the removal of sanctions, Iran can transfer in technology under the aegis of cooperation between Iranian and foreign companies.
New Chapter in Iran-Germany Cooperation
Immediately after Iran’s recent nuclear deal with six world powers a high-ranking political, commercial and economic delegation from Germany visited Iran. The visit, which was led by German minister of economy Sigmar Gabriel, was an indication of the Germans’ willingness for presence in Iran. The development came more than a decade of breakup between Iran and Europe due to international sanctions. The Germans travelled to Tehran and announced their readiness for trade, economic and cultural cooperation with the Islamic Republic.
The 60-member German delegation travelled to Tehran at the invitation of Zangeneh. During their 3-day visit which started on July 19, the Germans were received by President Hassan Rouhani, Minister of Petroleum Bijan Zangeneh, Minister of Industry, Mine and Trade Mohammad-Reza Nematzadeh, Minister of Energy Hamid Chitchian, Governor of Central Bank of Iran Valiollah Seif, members of Iran Chamber of Commerce as well as senior petroleum industry managers.
The main German delegates included head of German Chamber of Commerce and managers from Siemens, Mercedes and Volkswagen.
After his arrival in Iran, Gabriel was received as a guest of honor by Zangeneh. During the several-hour meeting, the two sides spoke behind closed doors and then they discussed opportunities for cooperation in a conference.
Germany Constructive Role
Addressing Iran-Germany economic cooperation conference, Zangeneh said Iran feels committed to supplying energy to the world. He referred to Germany’s constructive role in Iran’s nuclear talks with world powers, saying Germany is a reliable partner for Iran. He expressed hope that the relations between the two countries would be revived after a long period of stagnation.
Referring to the planned unveiling of Iran Petroleum Contract (IPC) in September, Zangeneh said: “There are valuable grounds for cooperation with the Germans in various sectors: refining, gas storage, petrochemical, auto manufacturing and renewables.”
He said that Iran-Germany Business Council is expected to hold its fifth meeting soon.
“Cooperation between the two countries is not limited to big companies, but small and medium-sized companies in Germany and Iran will be present in the market of the two countries,” he added.
Zangeneh said Iran has changed since 15 years ago, adding: “German companies should take into account this point for their presence because we have gained good experience during years of sanctions. Therefore, it would be better for German companies to register a company in Iran for contractual work and choose Iranian partners.”
The minister said Iran’s gas production is expected to reach 1 bcm/d and its oil production would reach 4.7 mb/d. He said that Iran managed to enhance its gas production by 120 mcm/d last calendar year, despite tough sanctions.
Noting that Iran has qualified human resources who have graduated from universities, Zangeneh said German companies should be able to use them.
He stressed the need for the resolution of banking and insurance problems.
The minister also said that low-price petrochemical feedstock makes Iran’s petrochemical industry attractive to foreign companies.
Zangeneh said Iran-Germany Business
Council plans to hold a meeting after a 14-year hiatus.
Iran’s Industrial Renovation
Gabriel said his landmark visit to Iran would open a new chapter in cooperation between Iran and Germany in different economic, commercial and cultural sectors.
“Auto manufacturing, petrochemical production, renewable energies, energy efficiency and the environment are among sectors in which German companies are ready to cooperate with Iran,” he said.
Gabriel said Iran and Germany can resume economic cooperation, adding that more than 2,000 companies are members of Iran-
Germany Joint Chamber of Commerce. He said this high number of companies indicates the willingness of both parties for broadening economic interactions.
He said German companies will move to modernize Iran’s industries after sanctions are lifted on Iran.
“Not only are the Germans ready to sell products to Iran, but also they are looking for sustainable and lasting economic cooperation which could lie within the framework of selling technical knowhow and technology and training manpower,” he added.
Gabriel said the next step in Iran-Germany economic interaction would be next spring when the sanctions would have been fully lifted and foreign companies would have faced no restrictions for activity in Iran.
Readiness for Investment in Iran
Eric Schweitzer, President of the Association of Germany’s Chambers of Commerce and Industry, said in the conference that German companies are ready to invest in Iran’s oil and gas industry.
“Tehran and Berlin can resume cooperation through Iran-Germany Chamber of Commerce after a long hiatus and return to good old days,” he said.
Schweitzer referred to the four-decade history of establishment of Iran-Germany Chamber of Commerce, saying: “Economic and industrial cooperation between Iran and Germany started in 1857 and many German companies came to Iran in early 20th century.”
He said Iran is among Germany’s major non-European partners, although sanctions have reduced level of cooperation between the two sides.
Pointing to the fact that Iran holds the fourth largest crude oil and the first largest natural gas reserves in the world, Schweitzer said: “Under the aegis of cooperation between Iran and German companies, will we try to transform these potential reserves into practical opportunities.”
He said the removal of sanctions would create good platform for cooperation in energy, industry and environment sectors, adding that cooperation between Iranian and German economic and industrial activists is hoped to rise through Iran-Germany Chamber of Commerce.
He said Germany enjoys a specific economic position in Europe and in the world, adding that all German companies can find a way to cooperate with Iran through the chamber of commerce.
Schweitzer said the lifting of banking sanctions would let Iran-Germany Commercial Bank resume work in Hamburg.
Pointing to the presence of motivated and talented youths in Iran, he said Iran-Germany Chamber of Commerce can cooperate in technical training of youths.
Iran Private Sector Willing for Cooperation
Pedram Soltani, deputy head of Iran chambers of commerce, said the presence of Siemens, Mercedes and Volkswagen companies in the German delegation shows the significant position of Iran for these companies.
He added that petrochemical industries, power plant construction and telecom facilities are among potentialities of investment in Iran.
Soltani said communications between small and medium-sized industries in the two countries and exchange of commercial, industrial and specialized delegations would largely help Iran and Germany boost their ties. He said North-South Corridor, access to high seas and being located in the heart of a 300-million-strong region are among outstanding advantages of Iran.
He also said that governments are tasked with preparing the necessary grounds, guaranteeing economic security and the infrastructure, while the private sector is expected to explore economic opportunities and make investments.
“Iran’s Chamber of Commerce, Industries, Mines and Agriculture is ready to have close cooperation with Germany’s Chambers of Commerce and Industry to pave the required ground for the private sectors in both countries to find commercial and investment partners,” said Soltani.
German Firms to Help Iran Petchem
Iranian petroleum minister Bijan Zangeneh and visiting German economy minister Sigmar Gabriel held a press conference at the end of a joint conference between Iran’s Ministry of Petroleum and German delegation of businessmen in Tehran.
Zangeneh said $80 billion is planned to be invested in Iran’s petrochemical industry over the coming ten years, adding that this amount of investment will raise the value of petrochemical production in Iran to $70 billion from the current $25 billion a year.
Noting that an increase in Iran’s gas output would provide feedstock for petrochemical plants, he said most petrochemical plants in Iran have been constructed with technologies supplied by German companies.
Zangeneh said these companies would be of help to Iran’s petrochemical industry in the near future.
He referred to the development of the refining sector in the country, saying the country is eying high capacity in this sector.
“Our plan is to increase production by 1 mb/d in the near future and some German companies have voiced interest for presence in Iran’s upstream sector,” said the minister.
Zangeneh referred to LNG production as another plan pursued by Iran, saying a large number of machinery and equipment is needed for this purpose.
“Some equipment like turbocompressors was banned due to sanctions and we hope that this ban would be lifted soon,” he said.
Zangeneh said release of these turbocompressors would definitely help increase gas production, adding: “An increase in gas production will have positive effects on the environment because due to the shortage of gas we may have to use fuel oil.”
The minister also referred to underground gas storage as another activity of Iran, saying: “Given increased consumption in winter and reduced consumption in summer, underground gas storage is necessary. Given their good background, German companies can be of help in this regard.”
Zangeneh pointed to the relations between the two countries in the past and said Iran envisages cooperation with German companies for completing incomplete projects.
He said that banking support and finance by German banks is instrumental in cooperation.
“Banking and insurance issues need the approval of Hermes and Bafa and we hope that this process would be accelerated so that the hurdles would be removed,” he added.
Zangeneh noted that German companies have already been largely involved in Iran and that they could be decisive in the future.
“In addition to big companies, medium-sized and small-sized companies can also play a role in the future of Iran’s economy,” he said.
Iran Role in Germany Energy Supply
Gabriel, who is also German vice chancellor, said German economy needs raw materials.
“Along with other oil and gas producer countries, Iran can play a major role in supplying Germany its necessary energy. We also want cooperation in other economic and industrial sectors,” he said.
Gabriel said both sides should remain optimistic about better ties, adding that Iran’s nuclear agreement with six world powers encouraged German companies to rush for business with Iran.
He stressed the need for the resumption of longtime friendly relations between Iran and Germany, saying many German companies did not cut their interactions with Iran even under tough conditions of sanctions.
Gabriel said Iranian economic activists never lost hope in cooperating with Iran.
He called for Iran-Germany negotiations for the resumption of Iran-Germany Business Council, noting that Iran has changed over the past 15 years.
He said conditions should be prepared for foreign investment in Iran.
Gabriel said Germany is looking for win-win agreements, adding that German companies have to adapt themselves with the legal system of the country they are supposed to invest in.
He said Iran should settle its debts with Hermes before it would be able to benefit from its insurance services. He said a new account could be opened with Hermes if everything goes on as planned.
Gabriel said the international sanctions imposed on Iran over recent years have blocked cooperation between German banks and Iran. He, however, expressed optimism about the resolution of issues, noting that it may take some time.
He said German banks should be invited to Iran to settle issues as soon as possible.
Germany Instrumental in Nuclear Talks
German Vice Chancellor and Minister of Economy Sigmar Gabriel, who visited Iran at the invitation of Iran’s Minister of Petroleum Bijan Zangeneh, was received by Iranian President Hassan Rouhani.
At the start of the meeting, Rouhani said that many problems stem from trust building in meeting obligations. He added: “One of the most reliable ways for the implementation of the agreement reached between Iran and P5+1 group would be broader economic and trade ties between the two sides.”
“Businessmen, investors and different academic and scientific sectors of Iran have long been in contact with their German counterparts and we have always good memory of cooperation with the Germans,” he said.
Rouhani said the two countries can still develop relations in different economic and cultural fields as long as they go ahead with their political cooperation.
“Relations between the two nations are more essential than ever. Cooperation between universities, research and tourism centers can reconstruct the atmosphere of cooperation,” the president said.
He expressed happiness over the visit to Tehran of the German delegation following Iran’s historic nuclear deal, saying: “We hope that the German government, which played a positive role throughout the negotiations, would play its positive role in the expansion of relations between Iran and Europe.”
Rouhani highlighted Iran’s strategic position in the region including West-East connection, Central Asian countries’ access to high seas and West-East corridor, saying: “Close relations between Iran and Germany may establish closer ties between the entire region and Europe.”
“Given the existence of railway and developed roads, Iran can become the hub of production for the region and neighboring countries in case of investment,” he said.
Germany Eyes Return to Iran
For his part, Gabriel, who is also Vice Chancellor of Germany and energy minister, said developing business and economic ties between Iran and Germany is not a very difficult task.
The people of the two countries are highly skillful and have a strong tendency for advanced technologies; the current circumstances are unparalleled for boosting economic ties by the two countries, he said.
He said German tradesmen are keen to return to Iran and cooperate with their Iranian partners.
He welcomed the Vienna nuclear agreement which Germany regards as a new starting point for Tehran-Berlin ties and for relations between Iran and European countries.
Gabriel said the resolution of Iran’s nuclear issue is a new beginning for ties between Iran and Germany and also between Iran and Europe.
He said the first meeting of Iran-Germany Business Council is to be held in 2016, noting that the newly emerged opportunities should not be lost.
“German companies are not merely seeking to sell German products in Iran. They are also seeking to transfer technology and enhance the level of manpower skills in Iran,” he said.
Gabriel also said the German government supports investment by German companies in Iran.
Sidelines of German Businessmen’s Visit
The recent high-profile visit to Tehran of a high-ranking German economic delegation was of high significance for both sides. Many top businessmen attended the meeting presided over by Iran’s petroleum minister Bijan Zangeneh and German economy minister, Sigma Gabriel.
Besides them, a large number of German journalists and famous Iranian neurosurgeon Professor Samiei traveled to Tehran during the visit.
German Journalists
Senior German journalists came to Tehran to cover Gabriel’s visit. Martin Grivel, chief editor of Die Welt, had come in person. His presence was indicative of the significance of political and economic relations between Iran and Germany, particularly following the recently reached nuclear deal.
Grivel told Iran Petroleum that the nuclear agreement is a good opportunity for Germany to benefit from investment in Iran which is among the largest oil producers in the world. He said providing enhanced oil recovery technologies to Iran is one of objectives of Germany’s presence in Iran’s market.
The top journalist also said that German media have generally welcomed Iran’s nuclear agreement with six world powers. Many German papers and channels are of the view that this agreement would positively affect political and economic relations between Iran and Germany. He said that Iran enjoys very valuable potential in the petrochemical industry, making the country attractive for the Germans.
Medical Cooperation
Professor Samiei, who is based in Germany, was among the German delegates.
“No sanctions against science and technology will be successful,” he said, adding that Iran-Germany medical cooperation every during years of sanctions bears proof to this fact.
Samiei expressed hope that Iran and Germany would increase their cooperation in medical sector, as well as in political and economic issues.
5-Billion-Euro Export
Daniel Bernbeck, head of German-Iranian Chamber of Industry and Commerce, was among the guests in the meeting. He said that German delegation's visit to Tehran showed how much the Germans were interested in economic cooperation with Iran.
Bernbeck said a major obstacle to economic cooperation between Iran and Germany is banking system restrictions, expressing hope that they would be lifted soon.
He said Germany is ready to export five billion Euros of commodities and equipment to Iran, immediately after the removal of the sanctions.
Bernbeck speaks Persian fluently.
Germany Seeks Revival of Opportunities
At the end of the visit, foreign journalists cross-examined Zangeneh.
Asked what Iran and Germany would do after this visit, Zangeneh said: “Relations between the companies in two countries, particularly in operation projects, depend on the resolution of banking and insurance issues.”
He also said that the fifth meeting of Iran-Germany Business Council is planned to be held later this year, after a 14-year hiatus.
Zangeneh also said that Iran has never been a direct supplier of oil to Germany, adding that Iran can export oil to Germany directly.
“German companies are willing to be present in different petrochemical, oil and equipment supply sectors, which they have lost in recent years and which they are trying to regain,” he said.
Zangeneh said: “We are now at the beginning of a new road in the country’s economy and we have set a cornerstone whose success requires effort and endeavor.”
Regarding demand by some Europeans for presence in Iran, the minister said: “A large number of companies are willing to be present in Iran and negotiate with us.”
He noted that the German delegation was a political one visiting Tehran.
$200b Projects
Amir-Hossein Zamani-Nia, Iran’s deputy petroleum minister for international affairs and commerce, told journalists that there are many oil, gas and petrochemical projects up for investment.
He said that Iran’s petrochemical sector needs $80 billion in investment over the coming 10 years, adding that $120 billion worth of projects has been defined for the petroleum industry for the coming four to five years.
“These projects will be introduced at international level so that we would decide under competitive conditions which companies we could work with,” said Zamani-Nia.
Noting that the international atmosphere has changed vis-à-vis Iran, he said Iran will be signing oil contracts with foreign companies based on competitive conditions.
Zamani-Nia said the German delegation’s visit to Tehran proves a change in international attitude towards Iran.
“This visit shows Iran has returned to the status it deserves. Economic, commercial and cultural interactions will be also back to normal,” he said.
Asked about Iran’s planned oil and gas production hike after the removal of sanctions, Zamani-Nia said: “Iran is following up on enhancing production of crude oil and petroleum products and all contracts and projects will be presented at international level.”
In response to a question about the terms and conditions of contracts after sanctions have been lifted, he said: “We are now in a position for which we have the right to choose, and all contracts will be competitive.”
Zamani-Nia said Iran’s oil production is set to rise 500,000 b/d in the coming three to four months, adding that Iran would add 1mb/d to its oil output in one year.
Asked if OPEC would hold any emergency meeting after Iran increases its oil production, he said: “In the last OPEC [ministerial] meeting, Iran’s petroleum minister expressed his definite view to OPEC member states both orally and in written. Now we expect OPEC member states to open space for Iran’s oil.”
Regarding gas exports to Germany, he said that the gas export plan is a long-term one whose different economic aspects should be examined.
“At current prices, gas exports to Germany would not be a cost-effective project unless conditions are changed and gas exports would be done as LNG.”
Zamani-Nia said liquefied natural gas (LNG) exports would be economical “but at present, we don’t have an LNG industry with such a capacity.”
“Iran has a large-scale LNG plan which is stagnated due to the sanctions. In case of more understanding, Iran LNG projects would come on-stream and that will benefit both sides,” he said.
$185b Oil, Gas Projects Eyed
Following the signature of historic nuclear accord between Iran and six world powers, Iran is poised to return to the international community. The country’s economic opportunities have already won hearts and minds. Less than a week after the signature of the deal, German minister of economy led a high-ranking business delegation to Tehran to clear the way for economic and industrial cooperation between the two countries once sanctions are removed.
Economic delegations from Italy, France, Spain, Turkey, India and Poland are also scheduled to visit Tehran soon.
Iranian officials, accompanied by chief executives of 70 Iranian companies, attended a two-day Iran-Europe conference in Vienna on July 23 and July 24. Officials and industrialists from Austria, France, England, Germany and other European countries were present.
The senior Iranian officials who attended the conference were Mohammad-Reza Nematzadeh, the minister of industry, mine and trade, Mohammad Khazaee, a deputy minister of economy and finance, Akbar Komeijani, a deputy governor of Central Bank of Iran, and Amir-Hossein Zamani-Nia, the deputy minister of petroleum for international affairs.
Attraction of foreign investment, finance of projects, transfer of state-of-the-art technology and marketing of products were among the main topics of discussion between Iranian and European officials and industrialists.
Iran, a New Market
Iran outlined plans to rebuild its main industries and trade relationships following a nuclear agreement with world powers, saying it was targeting oil and gas projects worth $185 billion by 2020.
Nematzadeh said the Islamic Republic would focus on its oil and gas, metals and car industries with an eye to exporting to Europe after sanctions have been lifted, rather than simply importing Western technology.
"We are looking for a two-way trade as well as cooperation in development, design and engineering," Nematzadeh said.
"We are no longer interested in a unidirectional importation of goods and machinery from Europe," he said.
The minister said Iran plans to produce three million cars by 2025, one-third of which would be exported.
He said Iran plans to manufacture a car to be endorsed by international brands, adding that the country is looking for joint investment with car parts manufacturers.
Nematzadeh said Iran aimed to join the World Trade Organization once political obstacles were removed and would be interested in trade deals with Europe and central Asian countries.
$2b Projects Finalized
Khazaee said Iran had already completed negotiations with some European companies wanting to invest in the country.
"We are recently witnessing the return of European investors to the country. Some of these negotiations have concluded, and we have approved and granted them the foreign investment licenses and protections," Khazaei told the conference.
"Even in the past couple of weeks we have approved more than $2 billion of projects in Iran by European companies," he said, without naming the firms or providing further details.
Most European oil majors and oil service companies have so far expressed caution about the prospects of a windfall of deals in Iran, saying their compliance departments will want to first see sanctions being fully removed before any meaningful work can start on projects.
50 Projects
Zamani-Nia said Iran had identified nearly 50 oil and gas projects worth $185 billion that it hoped to sign by 2020.
In preparation for negotiations with possible foreign partners, he said Iran had defined a new model contract which it calls its integrated petroleum contract (IPC).
"This model contract addresses some of the deficiencies of the old buyback contract and it further aligns the short- and long-term interests of parties involved," Zamani-Nia said.
He said the deals would last 20-25 years - much longer than the previously less popular buybacks, which effectively were fee paying deals with global oil majors such as France's Total for services they performed on Iranian oil fields.
He said Iran would introduce the projects it has identified and the new contract model within 2-3 months.
For his part, Komeijani said Iran’s financial sector was offering opportunities for cooperation between domestic banks and foreign investors.
Petchem Sector
Petrochemical sector is among the most important sectors of Iran’s petroleum industry. It has always been attractive to foreign investors. A delegation led by a deputy head of National Petrochemical Company (NPC) attended the Vienna event.
Iran’s petrochemical sector would need between $70b and $80b in investment in order to be able to double its annual production to 120 million tons.
Addressing the conference, Issa Mashayekhi, managing-director of Petrochemical Commercial Company International’s (PCCI), said the first positive signals were received from outside borders after an interim deal reached between Iran and the six powers in late 2013.
He said that the recent endorsement of the Joint Comprehensive Plan of Action (JCPOA) at the United Nations Security Council would have positive psychological effects.
Poland Rushes for Investment in Iran
Polish Economy Minister Janusz Piechociński is to visit Iran in September along with a group of businesspeople, as part of Poland’s efforts to tap into the lucrative Iranian market.
“Our offer [to Iran] will rival those of our European partners,” Piechociński told a press conference, noting that Poland will have to compete with countries such as Germany to enter the market. The minister announced that 50-60 representatives of Polish firms will go with him on an economic mission as part of the recently announced Go Iran program.
The end of sanctions on the country is expected to be an opportunity for trade, in particular for Polish farmers.
During the visit, Piechociński will take part in a Polish-Iranian Business Forum in Tehran and will sign an agreement to create a joint Polish-Iranian committee as a forum for regular future economic contacts and consultations.
Due to economic sanctions in 2014 Polish exports to Iran amounted to just 34.9 million euros, while imports from Iran were worth 22.4 million euros.
Post-Sanctions Iran to Broaden Ties
Iran will expand its economic cooperation with the world owing to the planned removal of sanctions on the Islamic Republic, a senior nuclear negotiator said.
“Undoubtedly, after [the lifting of] the sanctions, we will witness a new era in Iran’s economic cooperation,” Abbas Araqchi said.
He added that the Vienna agreement will clear the way for economic cooperation between Iran and many other countries that had been deprived of cooperation with Iran due to the sanctions.
Araqchi said neighboring countries and “countries lying on our transit route will have a special place.”
He singled out Republic of Azerbaijan, saying Iran would be willing to boost ties with the breakaway republic of the former Soviet Union.
Araqchi said Azerbaijan can help Iran and Europe improve ties, adding that Azerbaijan will have a special place in Iran’s future economic interactions.
He also referred to the prospects of Iran-Turkey relations, saying: “Iran’s relations with Turkey are strong, deep-rooted and broad and the relations between the two countries will continue in full strength.”
Araqchi noted that there are some “serious” differences of view between Iran and Turkey on regional affairs, “but it does not mean that the relations between the two countries are off the track.”
“In the wake of Vienna agreement, this cooperation will be broader and further. Like Azerbaijan Republic, Turkey is located between Iran and Azerbaijan Republic and it will play a significant role in the expansion of trade relations between Iran and Europe,” he said. Araqchi said that the “progressive” relations which were developed between Iran and Turkey during years of sanctions will continue.
He also said that Iran’s relations with Russia and China are “strategic, positive, constructive, significant and progressive.”
Shell Eyes Iran Investment
With a nuclear deal in hand, Royal Dutch Shell said it is exploring the "immediate and long-term" implication of an opening Iranian oil door.
The announcement came after representatives from the five permanent members of the UN Security Council, Germany and Iran announced the signing of a breakthrough agreement.
Nureddin Wefati, a spokesperson for Middle East operations at Shell, said in response to email questions his company was setting the early stage for working with or in Iran.
"We are engaging with relevant governments to understand the immediate and long term impact of the latest agreement on the sanction regime, understanding that further steps are required before any sanctions are lifted or suspended," he said.
Shell maintained oil ties to Iran through pre-existing contracts before the European Union placed an embargo on Iranian crude oil mid-2012.
"Shell continues to comply with all relevant international sanctions," Wefati said. "At the same time, strictly within the boundaries of the law, we are interested in exploring the role Shell can play in developing Iran's energy potential."
South Pars Output Up 500 mcf/d
Production capacity of the South Pars gas field has enhanced by 500 mcf/d, managing director of Pars Oil and Gas Company said.
Ali-Akbar Shabanpour said production from the satellite platform of Phase of South Pars is under way at a trial rate of 400 mcf/d.
He said that following the successful completion of drilling of four new wells in the satellite platform of Phase 1 of South Pars and the equipment of production platform in this sector in line with production capacity, the volume of gas production in this platform increased by 500 mcf/d.
Shabanpour said the grounds are prepared for enhanced recovery from hydrocarbon reserves held in South Pars which is jointly operated by Iran and Qatar.
Iran sits on the world’s 4th largest oil reserves and the second largest gas reserves.
South Pars, divided into 29 development phases, contains 40 trillion cubic meters (tcm) of natural gas. It covers an area of 9,700 square kilometers, 3,700 square kilometers of which is in Iran’s territorial waters in the Persian Gulf. The remaining 6,000 square kilometers is situated in Qatar’s territorial waters.
The gas field is estimated to contain about eight percent of the world’s reserves, and approximately 18 billion barrels of condensate.
Investment in Iran Oil Sector Alluring
A deputy minister of petroleum has said that a 20% rate of return offered by Iran for investment in Iran’s petroleum sector is attractive for foreigners.
“In foreign countries, the rate of return on investment in banks is around one percent while this rate is at least 20% for investment in Iran’s petroleum industry projects,” Abbas Sha'ri-Moqaddam said.
He added that foreign investors have already shown interest in investing in Iran’s petroleum industry.
Sha'ri-Moqaddam, who is also head of National Petrochemical Company (NPC), said. However, he said the interest rate for banking deposits in Iran is around 27%, higher than the 20% for investment in oil projects.
He said the infrastructure should be prepared for the presence of foreign investors, adding that this infrastructure has requirements.
“If we intend to help potential financiers invest in Iran, we have to stick to three principles; first is setting price on feedstock for the long-term to be competitive with rival countries, second is the government’s preparation of the infrastructure and third is the stability of rules,” he added.
Sha'ri-Moqaddam said Management and Planning Organization (MPO), Ministry of Petroleum and Ministry of Industry, Mine and Trade are involved in petrochemical feedstock pricing.
He added that following the signature of a historic nuclear deal between Iran and six world powers, foreign investors are wondering about petrochemical feedstock price.
NPC managers have held talks with Asian and European investors in recent weeks for investment in Iran’s petrochemical industry.
Finance, technical knowhow and marketing of petrochemicals have been the main subjects of discussion between Iranian officials and foreign investors.
$2.3b Gas Pipeline Plan Signed
Iranian companies signed a $2.3 billion agreement to build 1,300 kilometers of pipeline which the country sees as its most important conduit for future gas exports to Europe.
The Iran Gas Trunkline-6 (IGAT-6), with the throughput from the massive South Pars field, will boost Iran’s exports through the neighboring Iraq.
Iranian Gas Engineering and Development Company (IGEDC) and Pasargad Energy Development Company signed on July 13 a BOT (build-operate-transfer) contract under which the project owner will provide 25% of finance and National Development Fund of Iran the rest.
The repayment will come from gas exports to Iraq, the Iraqi Kurdistan region and Turkey.
The contract includes building 590 kilometers of pipeline up to the border with Iraq in addition to five gas compressor stations in two years.
The construction of the pipeline for a length of 611 kilometers between Assaluyeh and Ahvaz has already completed.
IGEDC Chief Executive Alireza Gharibi said Iran’s gas exports to Iraq are planned to go through two lines to Baghdad and Basra near the border.
For Baghdad, a 42-inch pipeline stretches from Assaluyeh to Naftshahr on the border with Iraq.
In Iraq, the 120-km pipeline passes through the volatile Diyala province to feed a power station there before branching into two lines to supply two more plants in Baghdad.
Plans for exports were pushed back again last month over concerns about the security of the pipeline.
Iran is expected to initially deliver 4 million cubic meters of gas per day (mcm/d) before raising it to 35 mcm/d later to feed three electricity generation plants in Iraq.
Gharibi said final tests of the pipeline are underway and the gas flow is expected to begin in the next month.
The agreement for exports of the Iranian gas to Basra is also expected to be finalized in the “new future”, he added.
Italy’s SACE Waiting for Iran Nuclear Deal
Italy’s SACE is among leading Western companies that were operating oil projects in Iran before sanctions were imposed on the country. Giammarco Boccia, head of the Milan Branch of SACE, believes that a removal of sanctions against Iran would be a win-win deal.
Boccia recently talked to Iran Petroleum on the sidelines of an exhibition in Italy.
Q: Would you please tell us about SACE’s involvement in Iran’s oil projects before the sanctions were imposed?
A: I have to highlight the point that SACE had invested around $1 billion in Iran’s petroleum industry projects before the sanctions were enforced. But currently, we cannot invest in any project due to sanctions conditions in Iran and for the moment economic transactions between the two sides have been cut.
Q: What do you think of the perspectives of investment in Iran?
A: I do believe that Iran is one of the best and the most secure countries for investment and economic cooperation and in addition to this cooperation; some sort of cultural relationship has been under way between Iran and Italy. Iran is one of the largest economic markets in the world and the government of this country is one of the best to do economic deals with.
Q: What do you think of the removal of sanctions imposed on Iran?
A: Before the sanctions, SACE had good experience in Iran. We are a company helping private companies for economic transactions with other countries. In this regard, Iran has been one of our best and faithful clients. Therefore, the removal of sanctions imposed on Iran is desired by most private companies including SACE.
Q: What plans does SACE have for post-sanctions Iran?
A: Given the safety of investment in Iran, SACE is ready to make necessary plans for investment in Iran’s market soon after the sanctions are lifted. In my view, a removal of sanctions would be a win-win agreement.
IOEC Ready for Partnership with Foreigners
Iranian Offshore Engineering and Construction Company (IOEC) is a major Iranian company active in engineering, construction, installation and launch of offshore structures in the Middle East region. Benefiting from an advanced fleet, IOEC has successfully carried out major offshore projects. IOEC is today known as a renowned international company.
IOEC is known for its successful projects in the massive offshore South Pars gas field which Iran shares with Qatar in the Persian Gulf waters.
In order to provide more information about the activities of IOEC, Iran Petroleum has interviewed Gholam-Reza Manouchehri, IOEC managing director.
Q: Phase 12 is one of the major phases of South Pars, which has been recently launched. Would you please tell us about IOEC’s contribution to the operation of this phase?
A: In terms of capacity, Phase 13 equals three conventional phases in South Pars. It has the capacity to produce 3 bcf/d of gas and 120,000 b/d of gas condensate. Along with Phases 6, 7 and 8, it is the largest project in South Pars. The point with Phase 12 is that sweetening operations are done there. Phase 12 does not produce ethane and if needed, an ethane production unit should be included in this project.
The main point with Phase 12 is that it was launched under the conditions of toughest ever sanctions imposed on Iran and domestic manufacturers operated this project. The project was delayed one to two years, but it brought Iran’s petroleum industry major achievements under the aegis of cooperation on the part of Iranian companies involved in refining, drilling and offshore equipment sections.
IOEC laid pipelines in three platforms of Phase 12 of South Pars. To that effect, it laid around 450 kilometers of 32-inch diameter pipes and 450 kilometers of 4-inch diameter pipes. That involved the construction, transportation, installation and launch of three platforms – SVP12 A, SVP12 B and SVP12 C – with a capacity of 3 bcf. A satellite platform was also planned to be constructed in 12C, but it was not assigned to IOEC and no such platform was finally built.
IOEC has also purchased platforms, built offshore pipelines and handled engineering, construction, transport and installation activities as a subcontractor of Petropars Development Company (PEDCO).
This company managed to launch Platform 12A in March 2014 and Platforms 12B and 12C last winter. With a total capacity of 3 bcf of gas, these 3 platforms injected more than 2 bcf of gas into the country’s gas network.
Q: Now let’s talk about IOEC’s plans for Phases 13&14 and 19 of South Pars.
A: In Phase 14 of South Pars, IOEC is tasked with laying pipelines. The required pipes have already been purchased and the project has progressed around 65%. We hope that pipe laying in Phase 14 would finish before the end of the current calendar year and after the end of pipe laying in Phase 19. In Phase 13, IOEC is not a party to the contract, but negotiations have been held for the main contractor of this project so that pipe laying operations of this phase would be assigned to IOEC. A preliminary agreement has already been reached to that effect. After the end of work in Phase 21, Ministry of Petroleum will decide on the priority of Phase 13 or Phase 14. Phase 19 is among major projects whose first phase is to be launched this year. It has three platforms and two 32-inch diameter pipelines, all of which are operated by IOEC. At present, pipeline operations are over and only testing, preparation and startup of joints have yet to be done. Three platforms, under construction in Khorramshahr Yard, are 85% complete. One of these platforms is to be installed and launched in September. We hope that Phase 19 would start producing 1 bcf/d of gas before winter.
Q: Which stage are the operations for the installation of Phases 15&16 of South Pars in?
A: Operations for the installation of platforms in Phases 15&16 had been assigned to IOEC. One platform was assigned to SADRA and another one to ISOICO. The transport and installation of these platforms started before last winter.
Q: What has IOEC done in Phases 17&18 of South Pars?
A: In Phases 17&18, the entire pipe laying operations were assigned to IOEC. These operations included three pipelines connecting the main and onshore platforms and a pipeline connecting the platforms. So far, two 32-inch diameter pipelines have been constructed for carrying gas. Platforms in Phases 17&18 became ready for production last year. Platform 18A was ready for operation last winter. It was launched recently and its gas is used in Phase 16. Platform 17B is also completed and is ready to start operation. Platforms 17B and 18B have been assigned to SADRA, which are currently under construction in Bushehr Yard.
Q: Is IOEC, as an Iranian contractor, worried that its share of petroleum industry projects would decline once sanctions are lifted on Iran, and foreign companies would rush to operate projects in Iran?
A: Naturally, IOEC is worried about its future market, but given Ministry of Petroleum’s planned investment in the upstream sector; some offshore projects will be definitely assigned to us. Given its background of operating projects in India, IOEC is interested in finding a foothold in international markets. That could happen through connections with foreign companies with the objective of contribution to projects overseas. IOEC will be also able to bid for international tenders after the removal of sanctions. Therefore, after the sanctions are lifted, IOEC will eye presence in projects abroad, besides domestic projects.
Q: In case the sanctions are lifted on Iran’s petroleum industry, does IOEC have any plans for partnership with foreign companies?
A: Fortunately, under IPC (Iran Petroleum Contract), an Iranian partner is envisaged in upstream projects. IOEC will have a good chance for benefiting from these contracts. Due to its ability to lay heavy pipelines in Iran, this company will be the preferred one in offshore projects. Such facilities and specialized staff will persuade foreign companies to regard IOEC as partner or a contractor in offshore projects in Iran. We hope that the communications established with some of these companies now would provide good changes for IOEC so that this company would be able to serve other projects after completing its projects at South Pars.
Q: What are the facilities of IOEC in the offshore sector?
A: Work in the offshore sector requires facilities as well as software and hardware potentialities. Fortunately, IOEC is independent with regard to hardware facilities because of its possession of vessels necessary for transportation, installation and pipe laying. IOEC would be able to accomplish its projects with the help of its specialists and staff. At present, all pipe laying and installations in South Pars are done by IOEC and this company has gained valuable experiences over the past 20 years. Regarding access to software required for design, installation and operation of offshore facilities, IOEC is to a large extent familiar with international standards and intends to update itself through further interaction with foreign companies.
Q: Generally speaking, how do you assess Iran’s conditions in manufacturing parts and equipment for the offshore sector?
A: Over recent years, we have witnessed good progress in the manufacturing of equipment for the offshore oil industry and many of items and components purchased from abroad in the past years are now being manufactured domestically. One can say that 80% of the weight of platforms is supplied domestically and they cost us 50% lower than foreign ones. We hope that the share of domestic manufacturing would increase in the coming years.
In the International Oil, Gas, Refining and Petrochemical Exhibition, which was held in Tehran, the potential of Iranian manufacturing companies was effectively clear and companies like IOEC have to support manufacturing companies so that they would boost their capabilities.
IOEC Ready for Partnership with Foreigners
Iranian Offshore Engineering and Construction Company (IOEC) is a major Iranian company active in engineering, construction, installation and launch of offshore structures in the Middle East region. Benefiting from an advanced fleet, IOEC has successfully carried out major offshore projects. IOEC is today known as a renowned international company.
IOEC is known for its successful projects in the massive offshore South Pars gas field which Iran shares with Qatar in the Persian Gulf waters.
In order to provide more information about the activities of IOEC, Iran Petroleum has interviewed Gholam-Reza Manouchehri, IOEC managing director.
Q: Phase 12 is one of the major phases of South Pars, which has been recently launched. Would you please tell us about IOEC’s contribution to the operation of this phase?
A: In terms of capacity, Phase 13 equals three conventional phases in South Pars. It has the capacity to produce 3 bcf/d of gas and 120,000 b/d of gas condensate. Along with Phases 6, 7 and 8, it is the largest project in South Pars. The point with Phase 12 is that sweetening operations are done there. Phase 12 does not produce ethane and if needed, an ethane production unit should be included in this project.
The main point with Phase 12 is that it was launched under the conditions of toughest ever sanctions imposed on Iran and domestic manufacturers operated this project. The project was delayed one to two years, but it brought Iran’s petroleum industry major achievements under the aegis of cooperation on the part of Iranian companies involved in refining, drilling and offshore equipment sections.
IOEC laid pipelines in three platforms of Phase 12 of South Pars. To that effect, it laid around 450 kilometers of 32-inch diameter pipes and 450 kilometers of 4-inch diameter pipes. That involved the construction, transportation, installation and launch of three platforms – SVP12 A, SVP12 B and SVP12 C – with a capacity of 3 bcf. A satellite platform was also planned to be constructed in 12C, but it was not assigned to IOEC and no such platform was finally built.
IOEC has also purchased platforms, built offshore pipelines and handled engineering, construction, transport and installation activities as a subcontractor of Petropars Development Company (PEDCO).
This company managed to launch Platform 12A in March 2014 and Platforms 12B and 12C last winter. With a total capacity of 3 bcf of gas, these 3 platforms injected more than 2 bcf of gas into the country’s gas network.
Q: Now let’s talk about IOEC’s plans for Phases 13&14 and 19 of South Pars.
A: In Phase 14 of South Pars, IOEC is tasked with laying pipelines. The required pipes have already been purchased and the project has progressed around 65%. We hope that pipe laying in Phase 14 would finish before the end of the current calendar year and after the end of pipe laying in Phase 19. In Phase 13, IOEC is not a party to the contract, but negotiations have been held for the main contractor of this project so that pipe laying operations of this phase would be assigned to IOEC. A preliminary agreement has already been reached to that effect. After the end of work in Phase 21, Ministry of Petroleum will decide on the priority of Phase 13 or Phase 14. Phase 19 is among major projects whose first phase is to be launched this year. It has three platforms and two 32-inch diameter pipelines, all of which are operated by IOEC. At present, pipeline operations are over and only testing, preparation and startup of joints have yet to be done. Three platforms, under construction in Khorramshahr Yard, are 85% complete. One of these platforms is to be installed and launched in September. We hope that Phase 19 would start producing 1 bcf/d of gas before winter.
Q: Which stage are the operations for the installation of Phases 15&16 of South Pars in?
A: Operations for the installation of platforms in Phases 15&16 had been assigned to IOEC. One platform was assigned to SADRA and another one to ISOICO. The transport and installation of these platforms started before last winter.
Q: What has IOEC done in Phases 17&18 of South Pars?
A: In Phases 17&18, the entire pipe laying operations were assigned to IOEC. These operations included three pipelines connecting the main and onshore platforms and a pipeline connecting the platforms. So far, two 32-inch diameter pipelines have been constructed for carrying gas. Platforms in Phases 17&18 became ready for production last year. Platform 18A was ready for operation last winter. It was launched recently and its gas is used in Phase 16. Platform 17B is also completed and is ready to start operation. Platforms 17B and 18B have been assigned to SADRA, which are currently under construction in Bushehr Yard.
Q: Is IOEC, as an Iranian contractor, worried that its share of petroleum industry projects would decline once sanctions are lifted on Iran, and foreign companies would rush to operate projects in Iran?
A: Naturally, IOEC is worried about its future market, but given Ministry of Petroleum’s planned investment in the upstream sector; some offshore projects will be definitely assigned to us. Given its background of operating projects in India, IOEC is interested in finding a foothold in international markets. That could happen through connections with foreign companies with the objective of contribution to projects overseas. IOEC will be also able to bid for international tenders after the removal of sanctions. Therefore, after the sanctions are lifted, IOEC will eye presence in projects abroad, besides domestic projects.
Q: In case the sanctions are lifted on Iran’s petroleum industry, does IOEC have any plans for partnership with foreign companies?
A: Fortunately, under IPC (Iran Petroleum Contract), an Iranian partner is envisaged in upstream projects. IOEC will have a good chance for benefiting from these contracts. Due to its ability to lay heavy pipelines in Iran, this company will be the preferred one in offshore projects. Such facilities and specialized staff will persuade foreign companies to regard IOEC as partner or a contractor in offshore projects in Iran. We hope that the communications established with some of these companies now would provide good changes for IOEC so that this company would be able to serve other projects after completing its projects at South Pars.
Q: What are the facilities of IOEC in the offshore sector?
A: Work in the offshore sector requires facilities as well as software and hardware potentialities. Fortunately, IOEC is independent with regard to hardware facilities because of its possession of vessels necessary for transportation, installation and pipe laying. IOEC would be able to accomplish its projects with the help of its specialists and staff. At present, all pipe laying and installations in South Pars are done by IOEC and this company has gained valuable experiences over the past 20 years. Regarding access to software required for design, installation and operation of offshore facilities, IOEC is to a large extent familiar with international standards and intends to update itself through further interaction with foreign companies.
Q: Generally speaking, how do you assess Iran’s conditions in manufacturing parts and equipment for the offshore sector?
A: Over recent years, we have witnessed good progress in the manufacturing of equipment for the offshore oil industry and many of items and components purchased from abroad in the past years are now being manufactured domestically. One can say that 80% of the weight of platforms is supplied domestically and they cost us 50% lower than foreign ones. We hope that the share of domestic manufacturing would increase in the coming years.
In the International Oil, Gas, Refining and Petrochemical Exhibition, which was held in Tehran, the potential of Iranian manufacturing companies was effectively clear and companies like IOEC have to support manufacturing companies so that they would boost their capabilities.
Countdown for Phase 21 of South Pars
Since a decade ago, Iran has seen gas consumption by households and businesses treble in some provinces as soon as it gets cold in autumn and winter. Therefore, Iranian petroleum industry officials had to impose restrictions on gas distribution to households, industries, power plants and petrochemical plants in order to avoid any gas supply disruption.
Since two years ago, Iran has been supplying natural gas to power plants in order to contribute to clean air mainly in big cities.
Hamid-Reza Araqi, managing director of National Iranian Gas Company (NIGC), has said that natural gas currently makes up 70% of Iran’s energy. South Pars gas field, an offshore giant reservoir shared with neighboring Qatar, accounts for more than 60% of Iran’s gas needs.
Currently, Iran’s average gas consumption is four times bigger than the world’s average and nearly 18 times higher than Japan’s. Per capita gas consumption in Iran is 10 times higher than that of European countries. In winters, gas consumption in Iran equals the total gas consumption across the European Union. A review of gas consumption data shows how serious this issue is. Iran is the third largest consumer of gas in the world, behind the US and Russia.
Given this trend of consumption, imagine what would happen in the country if gas production is not increased to catch up with the growth in gas consumption by households, power plants and other industries. To that effect, Iran’s petroleum industry has focused on gas production hike in order to meet domestic demand and export gas.
Development of the offshore South Pars gas field is currently the most important project for Iranian petroleum industry officials. All Iranian officials are now determined to push ahead with the development of the remaining phases of South Pars in the shortest possible time. South Pars is now the top priority of Iran’s gas industry.
Qatar, which is operating its own share of South Pars, is currently recovering 650 mcm/d of gas, twice Iran’s recovery, from this field.
Despite sanctions and low oil price in global markets, the administration of President Hassan Rouhani has managed to push ahead with its gas projects in recent years. Iran’s petroleum industry managers have made great achievements by prioritizing the development phases of South Pars. For example, last winter, production from South Pars increased by 100 mcm/d. Development of new phases of South Pars is expected to raise the country’s output by another 100 mcm/d in the current calendar year to March 2016.
Phases 20&21 are expected to be producing over 20 mcm/d next winter. Iran’s petroleum industry has pinned hope on this double phase for gas production in cold days this year.
Phases 20&21 have already reported to have been completed at more than 76%. Iranian engineers are doing their utmost for the start of production by Phase 21. To that end, they have installed 171 pieces of 12-meter pipes per day. According to plans, installation of onshore and offshore pipelines in this phase is expected to be over in five months. Some time ago, shore pulling operations in Phases 20&21 of South Pars were done.
An important point with this project is the operation of its utility units over the coming two months. Boilers of this phase are also expected to become operational soon.
Offshore Section of Phases 20&21
In parallel with 77% progress in the onshore section of Phases 20&21 development of South Pars, the development of the offshore section of these phases has been defined in four areas.
The first terrain of sweetening in the refinery of these phases is to come on-stream this year. To that effect, efforts are under way for the operation of all platforms of these phases, each with a capacity of 1 bcf. Each of these platforms is 80% complete and of course they are 70% complete in construction.
Shore pulling in phases 20&21, offshore pipe laying in Phase 21, onshore pipe laying in both phases, installation of offshore structures and construction of top drives are the main four fields of work in the offshore section of Phases 20&21 of South Pars.
Shore pulling in Phase 20 of South Pars was done recently for 5.7 kilometers. After that, shore pulling was done in Phase 21. Then, ordinary pipe laying got under way. So far 17 kilometers of pipe laying has been done.
According to the latest reports, the pipeline for Phase 21 is 103 kilometers long; whose construction would last 2 to 3 months. Moreover, after the end of pipe-laying operations in Phase 21, 96 kilometers of pipe-laying will be done.
The load-up of pipes for the offshore section of Phases 20&21 is under way at Khorramshahr Yard. More than 4,800 branches of pipe (nearly 59 kilometers), out of a total of 16,798 branches, have already been loaded out. The load-out operations from Khorramshahr Yard to the site are still under way. To that effect, 12 barges are in charge of load-out of pipes in Phases 20&21 of South Pars.
The operators of the offshore sector of Phases 20&21 of South Pars are also implementing onshore pipe-laying operations. Preparatory operations like leveling of the ground and load-out and transportation of onshore pipelines have already been carried out.
With the installation of the fourth three-jacket platforms in Phases 20&21 of South Pars, the installation of all these jackets was over. Installation of fixtures including four jackets with buttress, four three-jacket top drives, two bridges and two flare structures is the third major action with regard to implementing this project. At present, the flare structure and the connection bridge of the platforms and flares of these phases have been installed.
Heavy Top-drives
At present, the offshore section of Phases 20&21 of South Pars is 72.22% done. According to the latest data, construction of the platforms in these phases is also 79% complete. Meantime, pipe-laying is more than 69% done. Construction of platform for Phase 21 is more than 73.5% complete.
Top-drives in Phase 20 is more than 65% done. The objective of development of Phases 20&21 of South Pars is to produce 50 mcm/d of natural gas for feeding national gas trunkline, 77,000 b/d of gas condensate, 400 tons a day of sulfur, 1.1 million tons of liquefied gas for export and one million tons a year of ethane for feeding petrochemical plants.
The Iranian Offshore Engineering and Construction Company (IOEC) is the contractor for the development of Phases 20&21 of South Pars gas field. IOEC is tasked with engineering, logistics, procurement, construction, installation and startup of platforms and offshore pipelines in the development phases.
IOEC installed the jacket for Phase 21 of South Pars in March 2012 and the jacket for Phase 20, a year later.
Deepwater Drilling in Iran
May 10, 2013 is marked in the history of Iran’s petroleum industry: Oil exploration in the Caspian Sea from what is today known as Sardar-e Jangal.
The existence of 2 billion barrels of recoverable oil with an API gravity of 38 degrees sketched out new horizons for Iran’s petroleum industry.
Immediately after proof of oil, exploration drilling operations started with the installation of Amir-Kabir Semi-Submersible Drilling Rig. After the second exploration well was flared off in this field, a new chance was identified for exploring hydrocarbon reserves in the Caspian Sea. After that, Amir Kabir Semi-Submersible Drilling Rig was moved to a new exploration position, known as Block 8-1.
Yousef Etemadi, director of exploration at Khazar Exploration and Production Company (KEPCO), said drilling in Block 8-1 means exploration of a new field in the Caspian Sea because the structure of this block is different from that of Block 6-2 where Sardar-e Jangal field is situated. KEPCO is in charge of exploration and recovery of hydrocarbon reserves in the Caspian Sea and its coasts.
Iran Petroleum invites its readers to have a glance at a review of hydrocarbon reserves exploration in the Caspian Sea.
Caspian Sea is known as the largest lake in the world. This land-locked lake houses numerous oil reservoirs. Geologists estimated that between 80 and 200 billion barrels of oil remain hidden across this sea. The oil-rich section of Caspian Sea starts from Absheron Island in southwest and continues as far away as Cheleken Island in southeast. The oil reservoirs encircle the Caspian Sea, stretching from the Republic of Azerbaijan to Turkmenistan.
History of Caspian Oil Exploration
Caspian Sea, in terms of oil and gas reserves, is divided into three sections: North Caspian Basin, Middle Caspian Basin and South Caspian Basin. In general, most of the offshore oil reserves are in the northern part of the Caspian Sea, while most of the offshore natural gas reserves are in the southern part of the Caspian Sea.
The salinity of Caspian Sea changes from the north to the south within a range of 1,0 to 13,5 parts per thousand. This difference is especially strongly present in the North Caspian. It is less obvious in other areas distinguished by self-relative homohalinity.
The isohaline 12,5% bending around the peninsula forms the ledge as if it moves more salty water masses to the east. This phenomenon is explained by freshening influence of the rivers' drain on the western coast of the Middle Caspian, which is allocated by branches of Main Caspian flow of cyclonic and anticyclonic directions.
The Middle Caspian Basin is home to mainly onshore oil deposits. The Middle Caspian Basin is divided into five regions.
Billions of barrels of oil have so far been proven to exist in the Middle Caspian Basin, with primary reservoirs consisting of Jurassic and Cretaceous rocks, while secondary reservoirs are found within the Tertiary.
Seismic data clearly illustrates that sediment thickness varies considerably from west to east, due to basin architecture and heterogeneities. In the deeper section from basement to base Jurassic, clear rift features can be seen; faulted basement blocks are present with deep graven infill of Triassic sediments. Evidence of compression and volcanism can be seen in this section through deep folds and strong amplitude seismic reflections within the South Mangyshlak Sub-basin.
Seismic data offshore Kazakhstan shows Jurassic strata directly overlying basement blocks, indicating areas where the Triassic is absent.
In the north, the mainly shallow water area forms part of the much larger North Caspian Basin which extends onshore some 400km to the north and east.
To the south of the Karpinsky Ridge - Mangyshlak Meganticline water depths increase dramatically and the geology also changes significantly. The area is structurally complex, being influenced by a number of tectonic events.
But, information about oil and natural gas reserves in the Caspian Sea dates back to ancient time. From 600 BC to 12 AD, Zoroastrians used to travel to Baku, located in Absheron Island in order to worship at a temple where a fire was burning all the time thanks to natural gas deposits hidden underground.
There is evidence showing that oil was a lucrative commodity in the 10th century. Throughout the 13th century, a large amount of oil was exported from Baku to other regions. The famous Italian merchant traveler, Marco Polo, refers to a large flow of oil in his description of Armenia, noting that a high number of camels was needed for carrying that amount of oil.
Industrial extraction of oil from the Caspian Sea Basin started in the 19th century, making up the bulk of oil extracted in the world. Following the collapse of the Union of Soviet Socialist Republics (USSR), each of breakaway republics moved to recover oil in their own section and after that, different estimates were presented of oil deposits in the Caspian Sea. Some believe that industrial recovery of oil from the Caspian Sea started in the Gulf of Baku in 1923.
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. Total recoverable reserves were more than 500 million tons. By 1900, Baku had more than 3,000 oil wells, 2,000 of which were producing at industrial levels.
Potential hydrocarbon reserves in the Caspian Sea have encouraged the littoral states to drill in the land-locked sea for recovering oil and gas. Like other littoral states, Iran has not hesitated to conduct drilling in the Caspian Sea waters. Evidence first emerged of hydrocarbon reserves in Gorgan and Gonbad-e Kavous in northern Iran. The first and the most important exploration activities in the Iranian coasts of the Caspian Sea were carried out in Alamdeh-Neka, Kheshtsar near Mahmoud-Abad and south of Qaemshahr.
From 1951 to 1978 and particularly after the formation of National Iranian Oil Company (NIOC), the first exploration well was spudded near Mahmoud-Abad. Up to 1970, 16 wells had been drilled near mud volcanoes. All these wells produced only natural gas and technical studies showed that continuation of these operations would be uneconomical.
In 1998, NIOC assigned seismic testing on 31,000 square kilometers of the southern part of the Caspian Sea to a consortium of Shell, Lasmo and Veba Oil.
Following the establishment of KEPCO in December 1997, this company was tasked with exploring, development and operation of oil and gas reservoirs in the Caspian Sea as well as in the three coastal provinces of Gorgan, Guilan and Mazandaran.
Exploration in Iran’s Caspian Section
In 1999 and 2000, the Shell-Lasmo-Veba Oil consortium was assigned a mission to study hydrocarbon deposits in the Iranian section of the Caspian Sea.
The three renowned companies established the South Caspian Study Group (SCSG) which concluded that the Iranian section was potentially rich in oil.
One of the objectives pursued by SCSG was to see if one could expect the existence of oil system (including source rock, reservoir rock and cap rock) in Iran’s Caspian Sea sector. After 10,000 kilometers of 2D seismic operations during 22 months, the feedback was positive.
The study group also reviewed data related to 26 wells drilled in Azerbaijan and Turkmenistan and compared the connection between the formations in wells drilled in Iran and in the two countries. Other activities of SCSG included geochemical study of oil leaks and examination of any similitude between these leaks and the source rocks in neighboring countries.
In the end, geological and geophysical studies laid bare 86 geological structures in the Caspian Sea with 46 of them in better conditions. Eight of them were picked as prioritized structures for exploration and production studies.
Iran’s Deepwater Drilling Success
Drilling in deep waters is totally different from drilling in shallow waters and onshore drilling. Since a few countries have already acquired the technology to drill in deep waters, Iran’s adhesion to this group is considered as a big success.
When the issue of drilling exploration well and more specifically drilling in Caspian Sea deep waters is at stake, it would be impossible to fix any specific period of time for drilling because for example drilling of the first well in Sardar-e Jangal field was hindered by such phenomena as saltwater blowout and gas blowout.
The employment of ROV underwater robot which is widely used in deepwater drilling is a specification of deepwater drilling.
New Exploration
During 2010 to 2014, two exploration wells have been drilled in the deep waters of the Caspian Sea. The first well was completed in 2012.
Explaining about the results of exploration in the first block of the Caspian Sea, Etemadi said: “In the first block, known as 6-2, two wells have been drilled and both have had positive results.”
The second exploration-appraisal well in this block was spudded up to a 3,500-meter depth.
Noting that the data obtained from the second well confirmed the data of the first well, Etemadi said: “Although the second well was some 1.5 kilometers away from the first well, the data we had obtained in the preliminary exploration from the Sardar-e Jangal reservoir was confirmed in the drilling of the second well.”
He said that the drilling of the second well is over and the Sardar-e Jangal has no extra exploration work. He added that new investment is to be attracted for the development of this field.
Etemadi said Iran is continuing its exploration activities in the Caspian Sea and is moving Amir Kabir Drilling Rig towards Block 8-1. He said KEPCO is determined to conduct exploration activities in the new block in the east of the Caspian Sea.
Etemadi said Block 8-1 is located in a spot where water is 500 meters deep, adding that the drilling for this new block is under way in Iran’s sovereign zone.
“Iran’s adhesion to the group of countries equipped with technical capacity of operation in deep waters has resulted in major achievements,” he said.
Etemadi enumerated some of these achievements as follows: Construction of Amir Kabir Semi-Submersible Drilling Rig with capability to drill in deep waters, construction of Caspian vessels with a capacity of transporting 160 tons, carrying out exploration activities in Caspian Sea deep waters.
Deepwater Drilling in Iran
May 10, 2013 is marked in the history of Iran’s petroleum industry: Oil exploration in the Caspian Sea from what is today known as Sardar-e Jangal.
The existence of 2 billion barrels of recoverable oil with an API gravity of 38 degrees sketched out new horizons for Iran’s petroleum industry.
Immediately after proof of oil, exploration drilling operations started with the installation of Amir-Kabir Semi-Submersible Drilling Rig. After the second exploration well was flared off in this field, a new chance was identified for exploring hydrocarbon reserves in the Caspian Sea. After that, Amir Kabir Semi-Submersible Drilling Rig was moved to a new exploration position, known as Block 8-1.
Yousef Etemadi, director of exploration at Khazar Exploration and Production Company (KEPCO), said drilling in Block 8-1 means exploration of a new field in the Caspian Sea because the structure of this block is different from that of Block 6-2 where Sardar-e Jangal field is situated. KEPCO is in charge of exploration and recovery of hydrocarbon reserves in the Caspian Sea and its coasts.
Iran Petroleum invites its readers to have a glance at a review of hydrocarbon reserves exploration in the Caspian Sea.
Caspian Sea is known as the largest lake in the world. This land-locked lake houses numerous oil reservoirs. Geologists estimated that between 80 and 200 billion barrels of oil remain hidden across this sea. The oil-rich section of Caspian Sea starts from Absheron Island in southwest and continues as far away as Cheleken Island in southeast. The oil reservoirs encircle the Caspian Sea, stretching from the Republic of Azerbaijan to Turkmenistan.
History of Caspian Oil Exploration
Caspian Sea, in terms of oil and gas reserves, is divided into three sections: North Caspian Basin, Middle Caspian Basin and South Caspian Basin. In general, most of the offshore oil reserves are in the northern part of the Caspian Sea, while most of the offshore natural gas reserves are in the southern part of the Caspian Sea.
The salinity of Caspian Sea changes from the north to the south within a range of 1,0 to 13,5 parts per thousand. This difference is especially strongly present in the North Caspian. It is less obvious in other areas distinguished by self-relative homohalinity.
The isohaline 12,5% bending around the peninsula forms the ledge as if it moves more salty water masses to the east. This phenomenon is explained by freshening influence of the rivers' drain on the western coast of the Middle Caspian, which is allocated by branches of Main Caspian flow of cyclonic and anticyclonic directions.
The Middle Caspian Basin is home to mainly onshore oil deposits. The Middle Caspian Basin is divided into five regions.
Billions of barrels of oil have so far been proven to exist in the Middle Caspian Basin, with primary reservoirs consisting of Jurassic and Cretaceous rocks, while secondary reservoirs are found within the Tertiary.
Seismic data clearly illustrates that sediment thickness varies considerably from west to east, due to basin architecture and heterogeneities. In the deeper section from basement to base Jurassic, clear rift features can be seen; faulted basement blocks are present with deep graven infill of Triassic sediments. Evidence of compression and volcanism can be seen in this section through deep folds and strong amplitude seismic reflections within the South Mangyshlak Sub-basin.
Seismic data offshore Kazakhstan shows Jurassic strata directly overlying basement blocks, indicating areas where the Triassic is absent.
In the north, the mainly shallow water area forms part of the much larger North Caspian Basin which extends onshore some 400km to the north and east.
To the south of the Karpinsky Ridge - Mangyshlak Meganticline water depths increase dramatically and the geology also changes significantly. The area is structurally complex, being influenced by a number of tectonic events.
But, information about oil and natural gas reserves in the Caspian Sea dates back to ancient time. From 600 BC to 12 AD, Zoroastrians used to travel to Baku, located in Absheron Island in order to worship at a temple where a fire was burning all the time thanks to natural gas deposits hidden underground.
There is evidence showing that oil was a lucrative commodity in the 10th century. Throughout the 13th century, a large amount of oil was exported from Baku to other regions. The famous Italian merchant traveler, Marco Polo, refers to a large flow of oil in his description of Armenia, noting that a high number of camels was needed for carrying that amount of oil.
Industrial extraction of oil from the Caspian Sea Basin started in the 19th century, making up the bulk of oil extracted in the world. Following the collapse of the Union of Soviet Socialist Republics (USSR), each of breakaway republics moved to recover oil in their own section and after that, different estimates were presented of oil deposits in the Caspian Sea. Some believe that industrial recovery of oil from the Caspian Sea started in the Gulf of Baku in 1923.
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. Total recoverable reserves were more than 500 million tons. By 1900, Baku had more than 3,000 oil wells, 2,000 of which were producing at industrial levels.
Potential hydrocarbon reserves in the Caspian Sea have encouraged the littoral states to drill in the land-locked sea for recovering oil and gas. Like other littoral states, Iran has not hesitated to conduct drilling in the Caspian Sea waters. Evidence first emerged of hydrocarbon reserves in Gorgan and Gonbad-e Kavous in northern Iran. The first and the most important exploration activities in the Iranian coasts of the Caspian Sea were carried out in Alamdeh-Neka, Kheshtsar near Mahmoud-Abad and south of Qaemshahr.
From 1951 to 1978 and particularly after the formation of National Iranian Oil Company (NIOC), the first exploration well was spudded near Mahmoud-Abad. Up to 1970, 16 wells had been drilled near mud volcanoes. All these wells produced only natural gas and technical studies showed that continuation of these operations would be uneconomical.
In 1998, NIOC assigned seismic testing on 31,000 square kilometers of the southern part of the Caspian Sea to a consortium of Shell, Lasmo and Veba Oil.
Following the establishment of KEPCO in December 1997, this company was tasked with exploring, development and operation of oil and gas reservoirs in the Caspian Sea as well as in the three coastal provinces of Gorgan, Guilan and Mazandaran.
Exploration in Iran’s Caspian Section
In 1999 and 2000, the Shell-Lasmo-Veba Oil consortium was assigned a mission to study hydrocarbon deposits in the Iranian section of the Caspian Sea.
The three renowned companies established the South Caspian Study Group (SCSG) which concluded that the Iranian section was potentially rich in oil.
One of the objectives pursued by SCSG was to see if one could expect the existence of oil system (including source rock, reservoir rock and cap rock) in Iran’s Caspian Sea sector. After 10,000 kilometers of 2D seismic operations during 22 months, the feedback was positive.
The study group also reviewed data related to 26 wells drilled in Azerbaijan and Turkmenistan and compared the connection between the formations in wells drilled in Iran and in the two countries. Other activities of SCSG included geochemical study of oil leaks and examination of any similitude between these leaks and the source rocks in neighboring countries.
In the end, geological and geophysical studies laid bare 86 geological structures in the Caspian Sea with 46 of them in better conditions. Eight of them were picked as prioritized structures for exploration and production studies.
Iran’s Deepwater Drilling Success
Drilling in deep waters is totally different from drilling in shallow waters and onshore drilling. Since a few countries have already acquired the technology to drill in deep waters, Iran’s adhesion to this group is considered as a big success.
When the issue of drilling exploration well and more specifically drilling in Caspian Sea deep waters is at stake, it would be impossible to fix any specific period of time for drilling because for example drilling of the first well in Sardar-e Jangal field was hindered by such phenomena as saltwater blowout and gas blowout.
The employment of ROV underwater robot which is widely used in deepwater drilling is a specification of deepwater drilling.
New Exploration
During 2010 to 2014, two exploration wells have been drilled in the deep waters of the Caspian Sea. The first well was completed in 2012.
Explaining about the results of exploration in the first block of the Caspian Sea, Etemadi said: “In the first block, known as 6-2, two wells have been drilled and both have had positive results.”
The second exploration-appraisal well in this block was spudded up to a 3,500-meter depth.
Noting that the data obtained from the second well confirmed the data of the first well, Etemadi said: “Although the second well was some 1.5 kilometers away from the first well, the data we had obtained in the preliminary exploration from the Sardar-e Jangal reservoir was confirmed in the drilling of the second well.”
He said that the drilling of the second well is over and the Sardar-e Jangal has no extra exploration work. He added that new investment is to be attracted for the development of this field.
Etemadi said Iran is continuing its exploration activities in the Caspian Sea and is moving Amir Kabir Drilling Rig towards Block 8-1. He said KEPCO is determined to conduct exploration activities in the new block in the east of the Caspian Sea.
Etemadi said Block 8-1 is located in a spot where water is 500 meters deep, adding that the drilling for this new block is under way in Iran’s sovereign zone.
“Iran’s adhesion to the group of countries equipped with technical capacity of operation in deep waters has resulted in major achievements,” he said.
Etemadi enumerated some of these achievements as follows: Construction of Amir Kabir Semi-Submersible Drilling Rig with capability to drill in deep waters, construction of Caspian vessels with a capacity of transporting 160 tons, carrying out exploration activities in Caspian Sea deep waters.
Global Economy Welcomes Iran Oil Return
By Ali-Reza Soltani
Iran’s nuclear deal with P 5+1 group heralds a new era for Iran’s and global economy. Iran is among countries enjoying high economic potentialities which have insufficiently contributed to boosting national economy through active and constructive links between Iran’s economy and the world economic system.
One may say that one of the main reasons behind the insistence by world powers on the conclusion of long drawn-out nuclear talks was for the purpose of bringing Iran back to the cycle of world economy and benefiting from its economic and even political potentialities with a view to helping stabilize international economic conditions in the strategically important Middle East region.
In fact, the important thing for the global economy is Iran’s fast return to the world energy market. Of course, such a return is vital for Iran and its economy. Meantime, what should be specifically taken into consideration is a quick but powerful return and not gradual and phased return.
International sanctions slashed Iran’s oil exports to below 1 mb/d. Iran was exporting 2.8 mb/d of oil before the sanctions were imposed. It seems that Iran’s quick and forceful return to oil market would be tough and costly, because revival of oil fields would take time, but this important objective is possible due to the preparation of psychological and hopeful grounds for petroleum industry activists on the one hand, and mobilization of financial resources and national facilities for activating the industry and implementing abandoned development projects for attracting foreign investment after the removal of sanctions, on the other.
Ministry of Petroleum has already announced that all sections of petroleum industry have been mobilized for boosting oil output and exports once the sanctions have been lifted. Other oil producers, particularly those who took Iran’s place during years of sanctions, are expected to resist Iran’s return and throw up stumbling blocks on the way of Iran’s return by resorting to political and psychological methods.
This issue will naturally fail to affect Iran’s serious determination for a strong return to oil market. Iran’s petroleum ministry has vowed to not take into account any hindrance and to push ahead with firm determination. In fact, the oil market and subsequently oil exporting countries will have to adapt themselves with Iran’s oil output and its return to the market. It will not be up to Iran to reconsider its plans to match the conditions and requirements of the oil market to head off further fall in prices.
A letter signed to OPEC secretary general by Iran’s petroleum minister during the last ministerial meeting of the Organization of the Petroleum Exporting Countries seriously unveiled this approach. OPEC and non-OPEC oil producers are expected to understand Iran’s conditions and requirements, and show necessary cooperation for Iran’s effective and low-cost return to the oil market through reducing their production and supply so that oil prices would not keep falling.
The important point is that Iran’s strong return to the oil market will be of help to the oil market security and stability besides contributing to the prosperity of industrial and financial sectors related to the petroleum industry.
With an increase in oil exports to world markets, other sectors of Iran’s petroleum industry will get out of stagnation. Chief among these sectors is National Iranian Tanker Company (NITC) which has the largest fleet in the world. Increased oil production and exports would be key to the return of this fleet to its period of glory. Removal of banking and industrial sanctions imposed on Iran’s petroleum industry and the return of foreign companies to Iran’s oil projects would help the prosperity of these sectors.
Despite concerns by some countries about oil production and supply, the world economy is widely expected to welcome and even support Iran’s planned return to the oil market. As it was said earlier, all objectives of Iran’s nuclear accord with the world powers are not of political and security nature. More strategic objectives like activation of Iran’s economy on the global scene and in particular the trading of Iran’s oil in world markets. This issue will be of help to international stability and security.
Over the past one century, oil has been Iran’s tool of communications with the world economy. When oil flows into Iran’s external trade, other economic potentialities of Iran will become active.
Iran’s economic potentials have remained intact in recent decades due to political challenges. Iran has an 80-million-strong attractive market. Moreover, due to its geographical position, Iran is a reliable transit route for the transfer of goods to Central Asian countries, Caucasus and even South Asia and West Asia. Iran is also among the top ten holders of mineral reserves in the world, not to mention its huge oil deposits. These advantages potentially create opportunities for investment in Iran, but they have scarcely been used so far.
Experts believe that Iran is potentially a haven for foreign investment due to its intact development potential. In their view, the resolution of political challenges will make Iran one of the best destinations for foreign investment in the near future. The factor strengthening this trend is Iran’s huge energy reserves, particularly oil and gas. In addition to high profitability and attractiveness for investment in Iran and supply of low-cost energy for new investment, other sectors have been a trust-building factor and guarantee for the return of foreign investors into Iran, both politically and economically. In fact, Iran’s active presence in the oil market and access to high oil revenues would motivate and encourage foreign investment in Iran, and the global economy will naturally welcome it.
On the other hand, the important thing for the global economy is the active and continuous presence of Iran in the global energy market. Sitting on around 158 billion barrels of oil, Iran is among the largest holders of oil reservoirs in the world. Iran also owns around 18% of the world gas reserves.
In other words, Iran sits atop the world’s largest hydrocarbon reserves. Therefore, without Iran’s oil, global markets are not experiencing realistic conditions and it causes volatility and uncertainty in markets due to psychological impacts.
The world economy could not ignore Iran’s oil and gas reserves and the global economy and oil markets are in the shadow of Iran’s oil reserves. Absence of Iran’s oil in world markets has turned into a specter looming over them, but Iran’s return to markets would stabilize the markets, make oil prices realistic and facilitate profitable investment in the upstream and downstream sectors and help create healthy conditions for rivalry between Iran and other leading oil producers.
In the end, what makes conditions conducive to the return of Iran’s oil to world markets is to help energy supply security and sustainability in the world. The more numerous and the more diverse oil supply sources in the world, the more balanced the market will be. Then, energy supply will be more secure. When the main sources of oil and gas distance themselves from markets for different reasons like war or embargo, oil markets will be exposed to serious threats.
Therefore, a return of Iran’s oil to global markets will be the factor of stability and security for the oil market and world economy.
Positive Effects of Sanction Relief
Following Iran’s nuclear agreement with P5+1 group, any restrictions on Iran’s petroleum industry would be lifted. Iran would be able to export crude oil, natural gas, condensate and petrochemicals without any restrictions.
Some analysts are wondering how long it would take Iran to regain its share of oil markets and return to its pre-sanctions position. Some others are asking how Iran’s return to oil market would affect the global supply and demand system.
To find answers to these questions, Iran Petroleum has interviewed Ali-Reza Yousefi, university professor specializing in international economics.
Q: Where does oil stand in the economy of Iran and other countries in the world?
A: There are currently three groups of oil exporters in the world. The first group comprised member states of the Organization of the Petroleum Exporting Countries (OPEC) with around 30 mb/d of oil exports. The second group is non-OPEC oil producers like Russia and Egypt and the third group consists of countries like China. The third group is neither OPEC nor non-OPEC, and is known as free countries. China is both buyer and exporter of oil and is subject to no specific law. It decides on its own about the price of oil, while it is the largest consumer of oil with 12 to 14 mb/d of consumption.
Iran is among the oil-rich countries in the region and its strategy is to follow the oil supply and demand market. In the 1970s, oil was a strategic commodity, but it is not any more. According to a survey by the Research Center of University of Tehran, the oil price was around $37 a barrel in 1976 and it has reached $60 after 37 years. During this period of time, the price of a commodity like maize has seen a 450-fold increase and maize is now a strategic commodity. Therefore, Iran would have gained 450 times more money had it invested in farmlands.
Q: How do you define the relationship between oil and Iran’s economy?
A: Following the 1953 coup against the Iranian government, the role of oil further came to the limelight in Iran’s economy. At the beginning, 40% of Iran’s economy was dependent on oil. In 1971, it was 65% and five years later it was around 88%. After the 1967 Iraq-Israel War, oil embargo against India, the US and Britain pushed oil prices up and Iran’s oil revenues rose accordingly. This trend remained unchanged after Iran’s revolution and the bulk of revenues needed for the administration of the country was provided by National Iranian Oil Company (NIOC).
In 1998, following an economic downturn in East Asia, oil prices sharply dropped to $9 a barrel. Iran’s government moved to make plans to wean the economy off oil revenues. Iran established the Supreme Council of Exports in that year. However, oil price hike in the following years made the economy dependent on oil once more. In 2006, under the 9th administration (Mahmoud Ahmadinejad), 81% of the country’s budget was based on petrodollars. Three years later, when the oil price was $147 a barrel, nearly 90% of Iran’s budget was dependent on oil.
Q: How have the sanctions affected Iran’s petroleum industry? How do you evaluate post-sanction conditions in Iran?
A: In recent years, Iran has been hit by four rounds of international sanctions imposed by the UN and 12 rounds of sanctions imposed by the European Union. In other words, two rounds of sanctions on average have been slapped on Iran every year. Iran’s oil, gas and petrochemical industries were targeted by 470 clauses in these resolutions. Now, in light of negotiations carried out by the 11th administration, there is high hope that the impacts of sanctions would be removed. These sanctions scared foreign investment away from Iran’s petroleum industry and oil production costs rose sharply. Meantime, Iran’s oil revenues were blocked abroad.
The way the sanctions are to be lifted is of high significance now. Over the past months, important measures were taken by Iran’s nuclear negotiating team in Geneva and Vienna. The lifting of all sanctions requires certain resolutions. I think that Iran is likely to face challenges over the removal of the sanctions. However, a good future is awaiting Iran’s petroleum industry after the removal of sanctions.
Q: After sanctions were imposed, Iran’s Ministry of Petroleum turned to domestic manufacturing. Over recent years, Iranian companies acquired special capabilities. What would happen to domestic manufacturing companies after sanctions are lifted?
A: The entry of foreign companies and their cooperation with domestic companies would improve the performance of Iranian companies. State-run companies like National Iranian Oil Company, National Iranian Gas Company and National Petrochemical Company have to offer more support for domestic companies and hire big as well as medium and small private companies in oil projects. In my view, the removal of sanctions is an opportunity for Iranian companies, because these companies would no longer have to deal with NIOC and they will jointly cooperate with foreign companies. That would help them boost the level of their technical knowhow.
Q: What do you think has caused oil price decline during the last two years? What are your projections?
A: The oil price fall in recent years has had political and economic reasons. Saudi Arabia and Kuwait cut the price of their exported oil in order to rival US shale production. The political aspect of oil price decline was aimed at harming Russia over the crisis in Ukraine. Global oil prices fell 55% in the past one year and Iran had to reduce its oil budget credit allocation ceiling. Now, Iran is supposed to derive 48% of its budget spending from non-oil resources. Oil revenues are likely to fall again in the future and the Persian Gulf states would face budget deficit. Bahrain, Kuwait, Qatar, the United Arab Emirates and even Saudi Arabia are already grappling with budget deficit. I personally believe that this oil crisis and the oil price crisis would seriously affect the economy of world countries in the future and the global economic growth will be slowed down. When oil price falls, oil revenues fall too and the main buyers, including EU, the US, Middle East and South Asia, will have to cut their purchases. That would slow down the economic growth of industrialized countries.
Q: How may Iran’s enhanced oil production affect global oil prices?
A: Today, oil has become a political product and not a strategic one. Even one barrel increase in production would cut prices. The International Monetary Fund (IMF) has announced the global economic growth rate at 4%. Greece, Albania, Hungary and Romania have announced their interest for exiting the euro zone. The EU is on the verge of collapse. Major economic crises are always created following a small challenge. In my view, an imminent crisis is escalating Iran’s economic stagnation. When global economic growth falls, oil consumption will also fall. Optimism puts oil prices between $50 and $60, while pessimism expects fresh fall in oil prices. We have to wait for a U-turn in oil prices. Under these circumstances, even if Iran decides to double its oil production oil prices would not be affected significantly.
Q: Which approach do you think Iran should adopt following the nuclear deal?
A: At first, Iran’s petroleum industry needs to be overhauled. It could not return to its pre-sanctions status in the world immediately after the sanctions are removed. I think that Iran’s petroleum industry should focus on the development of oil fields instead of focusing only on oil production hike because enhanced production would not produce good results now. I am opposed to enhanced production because the market is already oversupplied and the economic growth has been weakened. In my view, development and renovation of oil fields and investment in energy development are more important and NIOC should focus on this point. That would be taken into consideration by Ministry of Petroleum.
Q: What do you propose for Iran to get back its lost market share?
A: Iran’s petroleum industry should first focus on technology and modern procedures in order to be able to boost its power of competition in the future. At present, there is tight competition between countries for presence in global markets and Iran’s petroleum industry has to optimize its capabilities. In my view, NIOC should become more serious on marketing after the sanctions are lifted. It has to update its technology and technical knowhow and invest in marketing in order to find new markets and get back its lost market share.
Post-Sanctions Iran’s Petchem Industry
A nuclear accord reached on July 14 between Iran and P 5+1 group – the United States, France, Britain, Germany, Russia and China – was a victory for diplomacy of endurance and patience pursued by Iranians. After more than a decade of intensive negotiations with ups and downs, this agreement has revived hopes that Iran, rich in hydrocarbon reserves, would build a new alliance with the West. This nuclear agreement is win-win deal for Iran and the West. It provides an opportunity for interaction between Iran and the West through business and investment for the development of oil, gas and petrochemical industries.
Everyone is now making efforts for development in light of this atmosphere of tranquility. Iran’s Ministry of Petroleum, as a wing of Iran’s diplomacy, is accelerating a move that started two years ago.
Iran’s petroleum minister, Bijan Zangeneh, recently hosted a 60-member delegation of German businessmen headed by the country’s minister of economy. Delegations from other companies are also in the line to travel to Iran. Many foreign companies have already started negotiations and their visits are planned in the coming months. A high-ranking Iranian economic delegation recently attended “Iran-EU conference, Trade and Investment” forum in Vienna from July 23 to July 25.
Iranian and foreign analysts and oil managers are willing to know the prospect of Iran’s petroleum industry, particularly its petrochemical sector, after the lifting of the sanctions as European industrialists have always eyed Iran’s petrochemical products.
Iran’s petrochemical industry has been on the receiving end of the sanctions and restrictions, and it has hence been affected by both oil supply and demand market.
Iranian and foreign analysts believe that the signature of Iran’s nuclear deal and the planned termination of provisions of sanctions in the coming months would result in the renovation and development of petrochemical facilities and boost petrochemical output in the long-term.
These days, diplomats from Iran and the six global powers are determined to finalize the nuclear deal and implement it because the historic agreement would create myriad opportunities for investment in Iran, which would be beneficial to their own industries.
Iran’s petrochemical industry is among industries which would see significant changes in case it receives foreign investment.
In the wake of the nuclear deal with the P5+1 group, Iran is now ready to improve its petrochemical sector. However, businessmen would not be expecting any specific changes after Iran rejoins the world petrochemical trading market.
Chief executives of European oil majors like Royal/Dutch Shell and Italy’s Eni have voiced their interest in traveling to Iran to examine opportunities of investment. Tehran is also to hold Iran Petrochemical Forum (IPF).
Iran’s annual petrochemical production capacity currently stands at 60 million tons, 17 million tons of which is exported. The representatives of international companies based in Dubai have long been seeking to sign contracts with petrochemical producers in the region. That is why they have been regularly visiting Iran. Some of these companies have even established representative office in Tehran in order to start work immediately after the nuclear deal is implemented.
A merchant based in Dubai has said that representatives of Iranian petrochemical companies have been visiting Dubai over the past six months in order to make the necessary preparations for post-sanctions business.
Iran privatized some sectors of its petrochemical industry from 2011 to 2013 and representatives from newly established companies regularly attend international conferences in search of footholds in markets.
One of the biggest companies closely watching Iranian trade include Chinese giant Sinopec, a source at the company told Platts in April.
"Chinese companies have shown an interest in investing in Iran and we may see strong investments in the country once the sanctions are eased," van-Zeller Neto said.
Banking - the biggest impediment to the trading of Iranian petrochemicals since sanctions targeting the industry came into effect at the end of 2011 - has also shown signs of loosening up recently but stumbling blocks remain.
Iranian banks have challenged legally their placement on the list of sanctioned entities, and in January an EU court annulled an asset freeze imposed by the European bloc on Tehran-based Bank Tejarat.
Iran's central bank has also been reported to be in talks with financial institutions across the world to ensure smooth financial transactions, if a deal falls in place.
"Iranian trade will see a major change once the banks begin to open letters of credit for Iranian cargoes," an Indian trader said.
Tehran-based Iran Mercantile Exchange, which claims to have trading members from across the world, has listed several physically backed petrochemicals futures contracts for polymers and aromatics.
The exchange said 342,656 mt of various commodities with a total value of $180 million were traded on its platform recently.
Hassan I. Ahmed, partner and head of research at petrochemical advisory firm Alembic Global Advisors, sees a maximum of 1 mt/y of additional petrochemicals volume being exported out of Iran if sanctions are lifted.
"Apart from methanol exports, we do not see enough of a capacity buffer in other products to raise Iranian petrochemicals exports meaningfully from current levels," he said.
Iran's nameplate methanol production capacity is 5 mt/y and it exports about 43% of its products. Iran’s petrochemical production capacity is expected to see a significant growth over the coming ten years. Many of half-complete projects are to be revived after the removal of the sanctions and Iran would transfer in state-of-the-art technology.
Iran will be raising its polyethylene production capacity by at least two million tons in ten years. It is even possible for Iran to bring this enhancement to three million tons a year. Iran is currently producing 3.7 million tons of polyethylene per day.
Given the existence of 33.6 tcm of gas in Iran, the country’s petrochemical industry would need to acquire modern technologies, have access to financial resources and win toehold in world markets. The latest assessments show that Iran needs to attract around $70 billion for its upstream and downstream industries. To that effect, 30% of the required financial resources would go to downstream industries particularly polymers and more specifically polypropylene.
Doubtlessly, the most important competitive advantage for investment in and development of petrochemical industries in Iran is access to feedstock like natural gas, ethane, and naphtha and gas condensate in large volumes and at competitive price. At present, the capacity of gas processing and transmission in the country is estimated at 600 mcm/d, which would soon reach 1,000 mcm/d. Moreover, access to ethane as feedstock for petrochemical plants would be instrumental in strengthening Iran’s position as a producer of petrochemicals.
With the completion of phases of South Pars gas field and the startup of Phases 12-27 of this supergiant reservoir, Iran would be producing 650,000 b/d of gas condensate, 6.7 million tons a day of liquefied petroleum gas (LPG) (including propane and butane) and 4 million tons a year of ethane. Ethane will be completely serving petrochemical industry in Iran and other products would be either consumed domestically or exported.
In addition to easy access to feedstock for petrochemical plants, Iran enjoys other competitive advantages which could not be ignored. Iran’s growing domestic petrochemical market, access to specialized and skilled manpower, communications infrastructure, geographical position, sharing border with 15 countries particularly Central Asia and South Caucasus, special economic petrochemical zones, political stability, favorable investment laws, special investment facilities including tax exemptions and active petrochemical chains can all contribute to the development of downstream and upstream industries. Another positive point with Iran is its National Development Fund of Iran (NDFI) which would be interesting to potential investors.
In a report, Platts magazine said ground has been prepared to facilitate resumption of petrochemicals exports out of Iran “but traders do not expect Iranian products to impact the global petrochemicals scene for some time.”
"Iran has turned into a key priority for anyone involved in Middle East petrochemicals trade," said Eduardo van-Zeller Neto, Dubai-based Partner and Head of Oil and Chemicals, Middle East, at Roland Berger Strategy Consultants.
"Iran's methanol exports capacity may get raised once Kaveh methanol project comes online by end-2015 or early 2016," van-Zeller Neto said. Iran's Kaveh Methanol Company is building a 2.6 mt/y methanol plant at Bandar Dayyer.
Iranian petrochemicals production capacity is expected to rise sharply over the next 10 years, with the pace of expansion expected to gather momentum should sanctions be lifted as the introduction of new technology and the import of catalysts speeds up the construction of new plants.
According to a Platts analysis, Iranian annual polyethylene production capacity will rise by at least 2 mt over the next 10 years.
This figure could well reach 3 mt if the business environment stays favorable. Current Iranian PE capacity is about 3.7 mt/y.
The head of National Petrochemical Company has said the company is paving the ground for welcoming investors into the country’s petrochemical industry once the sanctions are removed.
“Very good schemes have been developed to endorse investors into the country’s in the petrochemical sector for Iran to see a giant leap in its petrochemical industry,” Abbas Sha'ri-Moqaddam, who is also deputy petroleum minister in petrochemical affairs, said, adding, “We invite all Iranian and foreign investors to step in and fund petrochemical projects.”
He said many leading countries in the petrochemical industry are prepared to return to Iran given the promising political outlook for Iran by the sanctions relief.
“We are prepared to endorse investors in all petrochemical development projects,” said the official.
He said setting long-term feedstock prices as well as providing petrochemical infrastructure and stabilizing regulations are the key levers to attracting foreign investors in the petrochemical sector, rather than the removal of sanctions.
He said there are 120 half-finished developmental petrochemical projects across the country of which 67 are prioritized by NPC for financing and operation.
Sha'ri-Moqaddam said Iran’s petrochemical sector needs around $70 billion in investment, adding that the sector would have to attract $7 billion a year over the coming ten years.
Gov’t Support
Over the past decade, preparation of required infrastructure for investment in the petrochemical sector has been slowed down due to the sanctions. The administration of President Hassan Rouhani has intensified its efforts to improve the conditions of petrochemical industry. If we review the events of the past several months we would notice many activities related to the petrochemical industry. In fact, the petrochemical industry will have a significant role in more profitability and boosting Iran’s position in regional economic ties. This industry needs more attention in light of powerful rivals.
Petrochemical industry could be looked as a tool for generating revenues as well as a tool for job creation and welfare in impoverished regions. The government’s focus on expansion of the infrastructure could be a sign of sympathy for this attitude. Given the specific circumstances of Iran with regard to energy commodities and hydrocarbon reservoirs, paying more attention to the petrochemical industry would be an important and strategic decision. In cooperation with the private sector, the government is currently preparing the required infrastructure in different coastal zones of the Persian Gulf and the Sea of Oman for domestic and foreign investment in the petrochemical industry. Iran’s petrochemical industry has always been cohesive enough to welcome domestic and foreign investment in the past decades.
Drawing up a roadmap for the petrochemical industry in the past one year has been a sign of planning and preparation for investment in and development of this industry. Foreign business delegations from different countries have been visiting Iran to explore opportunities for investment in light of the planned removal of international sanctions.
Iran’s petrochemical industry enjoys unique advantages and that is why many refer to Iran as the future paradise of petrochemical industry.
Big gas reservoirs and abundant feedstock, access to water resources in southern coasts and location on marine transport routes are among advantages for Iran to become an attractive place for potential investors in the petrochemical industry.
These advantages can make Iran a major petrochemical hub in the future and attract investors.
Mohammad-Hassan Peyvandi, deputy head of NPC, said: “Iran is the country which has all tools, capacities and resources for a profitable and active petrochemical industry. No other country in the world has all these advantages altogether.”
He said Iran enjoys a “new and unique” opportunity which is coveted by the entire world.
An improvement of Iran’s relations at international level and attraction of more investment would promise a better future for the petrochemical industry, said Peyvandi.
Post-Sanctions Iran’s Petchem Industry
A nuclear accord reached on July 14 between Iran and P 5+1 group – the United States, France, Britain, Germany, Russia and China – was a victory for diplomacy of endurance and patience pursued by Iranians. After more than a decade of intensive negotiations with ups and downs, this agreement has revived hopes that Iran, rich in hydrocarbon reserves, would build a new alliance with the West. This nuclear agreement is win-win deal for Iran and the West. It provides an opportunity for interaction between Iran and the West through business and investment for the development of oil, gas and petrochemical industries.
Everyone is now making efforts for development in light of this atmosphere of tranquility. Iran’s Ministry of Petroleum, as a wing of Iran’s diplomacy, is accelerating a move that started two years ago.
Iran’s petroleum minister, Bijan Zangeneh, recently hosted a 60-member delegation of German businessmen headed by the country’s minister of economy. Delegations from other companies are also in the line to travel to Iran. Many foreign companies have already started negotiations and their visits are planned in the coming months. A high-ranking Iranian economic delegation recently attended “Iran-EU conference, Trade and Investment” forum in Vienna from July 23 to July 25.
Iranian and foreign analysts and oil managers are willing to know the prospect of Iran’s petroleum industry, particularly its petrochemical sector, after the lifting of the sanctions as European industrialists have always eyed Iran’s petrochemical products.
Iran’s petrochemical industry has been on the receiving end of the sanctions and restrictions, and it has hence been affected by both oil supply and demand market.
Iranian and foreign analysts believe that the signature of Iran’s nuclear deal and the planned termination of provisions of sanctions in the coming months would result in the renovation and development of petrochemical facilities and boost petrochemical output in the long-term.
These days, diplomats from Iran and the six global powers are determined to finalize the nuclear deal and implement it because the historic agreement would create myriad opportunities for investment in Iran, which would be beneficial to their own industries.
Iran’s petrochemical industry is among industries which would see significant changes in case it receives foreign investment.
In the wake of the nuclear deal with the P5+1 group, Iran is now ready to improve its petrochemical sector. However, businessmen would not be expecting any specific changes after Iran rejoins the world petrochemical trading market.
Chief executives of European oil majors like Royal/Dutch Shell and Italy’s Eni have voiced their interest in traveling to Iran to examine opportunities of investment. Tehran is also to hold Iran Petrochemical Forum (IPF).
Iran’s annual petrochemical production capacity currently stands at 60 million tons, 17 million tons of which is exported. The representatives of international companies based in Dubai have long been seeking to sign contracts with petrochemical producers in the region. That is why they have been regularly visiting Iran. Some of these companies have even established representative office in Tehran in order to start work immediately after the nuclear deal is implemented.
A merchant based in Dubai has said that representatives of Iranian petrochemical companies have been visiting Dubai over the past six months in order to make the necessary preparations for post-sanctions business.
Iran privatized some sectors of its petrochemical industry from 2011 to 2013 and representatives from newly established companies regularly attend international conferences in search of footholds in markets.
One of the biggest companies closely watching Iranian trade include Chinese giant Sinopec, a source at the company told Platts in April.
"Chinese companies have shown an interest in investing in Iran and we may see strong investments in the country once the sanctions are eased," van-Zeller Neto said.
Banking - the biggest impediment to the trading of Iranian petrochemicals since sanctions targeting the industry came into effect at the end of 2011 - has also shown signs of loosening up recently but stumbling blocks remain.
Iranian banks have challenged legally their placement on the list of sanctioned entities, and in January an EU court annulled an asset freeze imposed by the European bloc on Tehran-based Bank Tejarat.
Iran's central bank has also been reported to be in talks with financial institutions across the world to ensure smooth financial transactions, if a deal falls in place.
"Iranian trade will see a major change once the banks begin to open letters of credit for Iranian cargoes," an Indian trader said.
Tehran-based Iran Mercantile Exchange, which claims to have trading members from across the world, has listed several physically backed petrochemicals futures contracts for polymers and aromatics.
The exchange said 342,656 mt of various commodities with a total value of $180 million were traded on its platform recently.
Hassan I. Ahmed, partner and head of research at petrochemical advisory firm Alembic Global Advisors, sees a maximum of 1 mt/y of additional petrochemicals volume being exported out of Iran if sanctions are lifted.
"Apart from methanol exports, we do not see enough of a capacity buffer in other products to raise Iranian petrochemicals exports meaningfully from current levels," he said.
Iran's nameplate methanol production capacity is 5 mt/y and it exports about 43% of its products. Iran’s petrochemical production capacity is expected to see a significant growth over the coming ten years. Many of half-complete projects are to be revived after the removal of the sanctions and Iran would transfer in state-of-the-art technology.
Iran will be raising its polyethylene production capacity by at least two million tons in ten years. It is even possible for Iran to bring this enhancement to three million tons a year. Iran is currently producing 3.7 million tons of polyethylene per day.
Given the existence of 33.6 tcm of gas in Iran, the country’s petrochemical industry would need to acquire modern technologies, have access to financial resources and win toehold in world markets. The latest assessments show that Iran needs to attract around $70 billion for its upstream and downstream industries. To that effect, 30% of the required financial resources would go to downstream industries particularly polymers and more specifically polypropylene.
Doubtlessly, the most important competitive advantage for investment in and development of petrochemical industries in Iran is access to feedstock like natural gas, ethane, and naphtha and gas condensate in large volumes and at competitive price. At present, the capacity of gas processing and transmission in the country is estimated at 600 mcm/d, which would soon reach 1,000 mcm/d. Moreover, access to ethane as feedstock for petrochemical plants would be instrumental in strengthening Iran’s position as a producer of petrochemicals.
With the completion of phases of South Pars gas field and the startup of Phases 12-27 of this supergiant reservoir, Iran would be producing 650,000 b/d of gas condensate, 6.7 million tons a day of liquefied petroleum gas (LPG) (including propane and butane) and 4 million tons a year of ethane. Ethane will be completely serving petrochemical industry in Iran and other products would be either consumed domestically or exported.
In addition to easy access to feedstock for petrochemical plants, Iran enjoys other competitive advantages which could not be ignored. Iran’s growing domestic petrochemical market, access to specialized and skilled manpower, communications infrastructure, geographical position, sharing border with 15 countries particularly Central Asia and South Caucasus, special economic petrochemical zones, political stability, favorable investment laws, special investment facilities including tax exemptions and active petrochemical chains can all contribute to the development of downstream and upstream industries. Another positive point with Iran is its National Development Fund of Iran (NDFI) which would be interesting to potential investors.
In a report, Platts magazine said ground has been prepared to facilitate resumption of petrochemicals exports out of Iran “but traders do not expect Iranian products to impact the global petrochemicals scene for some time.”
"Iran has turned into a key priority for anyone involved in Middle East petrochemicals trade," said Eduardo van-Zeller Neto, Dubai-based Partner and Head of Oil and Chemicals, Middle East, at Roland Berger Strategy Consultants.
"Iran's methanol exports capacity may get raised once Kaveh methanol project comes online by end-2015 or early 2016," van-Zeller Neto said. Iran's Kaveh Methanol Company is building a 2.6 mt/y methanol plant at Bandar Dayyer.
Iranian petrochemicals production capacity is expected to rise sharply over the next 10 years, with the pace of expansion expected to gather momentum should sanctions be lifted as the introduction of new technology and the import of catalysts speeds up the construction of new plants.
According to a Platts analysis, Iranian annual polyethylene production capacity will rise by at least 2 mt over the next 10 years.
This figure could well reach 3 mt if the business environment stays favorable. Current Iranian PE capacity is about 3.7 mt/y.
The head of National Petrochemical Company has said the company is paving the ground for welcoming investors into the country’s petrochemical industry once the sanctions are removed.
“Very good schemes have been developed to endorse investors into the country’s in the petrochemical sector for Iran to see a giant leap in its petrochemical industry,” Abbas Sha'ri-Moqaddam, who is also deputy petroleum minister in petrochemical affairs, said, adding, “We invite all Iranian and foreign investors to step in and fund petrochemical projects.”
He said many leading countries in the petrochemical industry are prepared to return to Iran given the promising political outlook for Iran by the sanctions relief.
“We are prepared to endorse investors in all petrochemical development projects,” said the official.
He said setting long-term feedstock prices as well as providing petrochemical infrastructure and stabilizing regulations are the key levers to attracting foreign investors in the petrochemical sector, rather than the removal of sanctions.
He said there are 120 half-finished developmental petrochemical projects across the country of which 67 are prioritized by NPC for financing and operation.
Sha'ri-Moqaddam said Iran’s petrochemical sector needs around $70 billion in investment, adding that the sector would have to attract $7 billion a year over the coming ten years.
Gov’t Support
Over the past decade, preparation of required infrastructure for investment in the petrochemical sector has been slowed down due to the sanctions. The administration of President Hassan Rouhani has intensified its efforts to improve the conditions of petrochemical industry. If we review the events of the past several months we would notice many activities related to the petrochemical industry. In fact, the petrochemical industry will have a significant role in more profitability and boosting Iran’s position in regional economic ties. This industry needs more attention in light of powerful rivals.
Petrochemical industry could be looked as a tool for generating revenues as well as a tool for job creation and welfare in impoverished regions. The government’s focus on expansion of the infrastructure could be a sign of sympathy for this attitude. Given the specific circumstances of Iran with regard to energy commodities and hydrocarbon reservoirs, paying more attention to the petrochemical industry would be an important and strategic decision. In cooperation with the private sector, the government is currently preparing the required infrastructure in different coastal zones of the Persian Gulf and the Sea of Oman for domestic and foreign investment in the petrochemical industry. Iran’s petrochemical industry has always been cohesive enough to welcome domestic and foreign investment in the past decades.
Drawing up a roadmap for the petrochemical industry in the past one year has been a sign of planning and preparation for investment in and development of this industry. Foreign business delegations from different countries have been visiting Iran to explore opportunities for investment in light of the planned removal of international sanctions.
Iran’s petrochemical industry enjoys unique advantages and that is why many refer to Iran as the future paradise of petrochemical industry.
Big gas reservoirs and abundant feedstock, access to water resources in southern coasts and location on marine transport routes are among advantages for Iran to become an attractive place for potential investors in the petrochemical industry.
These advantages can make Iran a major petrochemical hub in the future and attract investors.
Mohammad-Hassan Peyvandi, deputy head of NPC, said: “Iran is the country which has all tools, capacities and resources for a profitable and active petrochemical industry. No other country in the world has all these advantages altogether.”
He said Iran enjoys a “new and unique” opportunity which is coveted by the entire world.
An improvement of Iran’s relations at international level and attraction of more investment would promise a better future for the petrochemical industry, said Peyvandi.
Post-Sanctions Iran’s Petchem Industry
A nuclear accord reached on July 14 between Iran and P 5+1 group – the United States, France, Britain, Germany, Russia and China – was a victory for diplomacy of endurance and patience pursued by Iranians. After more than a decade of intensive negotiations with ups and downs, this agreement has revived hopes that Iran, rich in hydrocarbon reserves, would build a new alliance with the West. This nuclear agreement is win-win deal for Iran and the West. It provides an opportunity for interaction between Iran and the West through business and investment for the development of oil, gas and petrochemical industries.
Everyone is now making efforts for development in light of this atmosphere of tranquility. Iran’s Ministry of Petroleum, as a wing of Iran’s diplomacy, is accelerating a move that started two years ago.
Iran’s petroleum minister, Bijan Zangeneh, recently hosted a 60-member delegation of German businessmen headed by the country’s minister of economy. Delegations from other companies are also in the line to travel to Iran. Many foreign companies have already started negotiations and their visits are planned in the coming months. A high-ranking Iranian economic delegation recently attended “Iran-EU conference, Trade and Investment” forum in Vienna from July 23 to July 25.
Iranian and foreign analysts and oil managers are willing to know the prospect of Iran’s petroleum industry, particularly its petrochemical sector, after the lifting of the sanctions as European industrialists have always eyed Iran’s petrochemical products.
Iran’s petrochemical industry has been on the receiving end of the sanctions and restrictions, and it has hence been affected by both oil supply and demand market.
Iranian and foreign analysts believe that the signature of Iran’s nuclear deal and the planned termination of provisions of sanctions in the coming months would result in the renovation and development of petrochemical facilities and boost petrochemical output in the long-term.
These days, diplomats from Iran and the six global powers are determined to finalize the nuclear deal and implement it because the historic agreement would create myriad opportunities for investment in Iran, which would be beneficial to their own industries.
Iran’s petrochemical industry is among industries which would see significant changes in case it receives foreign investment.
In the wake of the nuclear deal with the P5+1 group, Iran is now ready to improve its petrochemical sector. However, businessmen would not be expecting any specific changes after Iran rejoins the world petrochemical trading market.
Chief executives of European oil majors like Royal/Dutch Shell and Italy’s Eni have voiced their interest in traveling to Iran to examine opportunities of investment. Tehran is also to hold Iran Petrochemical Forum (IPF).
Iran’s annual petrochemical production capacity currently stands at 60 million tons, 17 million tons of which is exported. The representatives of international companies based in Dubai have long been seeking to sign contracts with petrochemical producers in the region. That is why they have been regularly visiting Iran. Some of these companies have even established representative office in Tehran in order to start work immediately after the nuclear deal is implemented.
A merchant based in Dubai has said that representatives of Iranian petrochemical companies have been visiting Dubai over the past six months in order to make the necessary preparations for post-sanctions business.
Iran privatized some sectors of its petrochemical industry from 2011 to 2013 and representatives from newly established companies regularly attend international conferences in search of footholds in markets.
One of the biggest companies closely watching Iranian trade include Chinese giant Sinopec, a source at the company told Platts in April.
"Chinese companies have shown an interest in investing in Iran and we may see strong investments in the country once the sanctions are eased," van-Zeller Neto said.
Banking - the biggest impediment to the trading of Iranian petrochemicals since sanctions targeting the industry came into effect at the end of 2011 - has also shown signs of loosening up recently but stumbling blocks remain.
Iranian banks have challenged legally their placement on the list of sanctioned entities, and in January an EU court annulled an asset freeze imposed by the European bloc on Tehran-based Bank Tejarat.
Iran's central bank has also been reported to be in talks with financial institutions across the world to ensure smooth financial transactions, if a deal falls in place.
"Iranian trade will see a major change once the banks begin to open letters of credit for Iranian cargoes," an Indian trader said.
Tehran-based Iran Mercantile Exchange, which claims to have trading members from across the world, has listed several physically backed petrochemicals futures contracts for polymers and aromatics.
The exchange said 342,656 mt of various commodities with a total value of $180 million were traded on its platform recently.
Hassan I. Ahmed, partner and head of research at petrochemical advisory firm Alembic Global Advisors, sees a maximum of 1 mt/y of additional petrochemicals volume being exported out of Iran if sanctions are lifted.
"Apart from methanol exports, we do not see enough of a capacity buffer in other products to raise Iranian petrochemicals exports meaningfully from current levels," he said.
Iran's nameplate methanol production capacity is 5 mt/y and it exports about 43% of its products. Iran’s petrochemical production capacity is expected to see a significant growth over the coming ten years. Many of half-complete projects are to be revived after the removal of the sanctions and Iran would transfer in state-of-the-art technology.
Iran will be raising its polyethylene production capacity by at least two million tons in ten years. It is even possible for Iran to bring this enhancement to three million tons a year. Iran is currently producing 3.7 million tons of polyethylene per day.
Given the existence of 33.6 tcm of gas in Iran, the country’s petrochemical industry would need to acquire modern technologies, have access to financial resources and win toehold in world markets. The latest assessments show that Iran needs to attract around $70 billion for its upstream and downstream industries. To that effect, 30% of the required financial resources would go to downstream industries particularly polymers and more specifically polypropylene.
Doubtlessly, the most important competitive advantage for investment in and development of petrochemical industries in Iran is access to feedstock like natural gas, ethane, and naphtha and gas condensate in large volumes and at competitive price. At present, the capacity of gas processing and transmission in the country is estimated at 600 mcm/d, which would soon reach 1,000 mcm/d. Moreover, access to ethane as feedstock for petrochemical plants would be instrumental in strengthening Iran’s position as a producer of petrochemicals.
With the completion of phases of South Pars gas field and the startup of Phases 12-27 of this supergiant reservoir, Iran would be producing 650,000 b/d of gas condensate, 6.7 million tons a day of liquefied petroleum gas (LPG) (including propane and butane) and 4 million tons a year of ethane. Ethane will be completely serving petrochemical industry in Iran and other products would be either consumed domestically or exported.
In addition to easy access to feedstock for petrochemical plants, Iran enjoys other competitive advantages which could not be ignored. Iran’s growing domestic petrochemical market, access to specialized and skilled manpower, communications infrastructure, geographical position, sharing border with 15 countries particularly Central Asia and South Caucasus, special economic petrochemical zones, political stability, favorable investment laws, special investment facilities including tax exemptions and active petrochemical chains can all contribute to the development of downstream and upstream industries. Another positive point with Iran is its National Development Fund of Iran (NDFI) which would be interesting to potential investors.
In a report, Platts magazine said ground has been prepared to facilitate resumption of petrochemicals exports out of Iran “but traders do not expect Iranian products to impact the global petrochemicals scene for some time.”
"Iran has turned into a key priority for anyone involved in Middle East petrochemicals trade," said Eduardo van-Zeller Neto, Dubai-based Partner and Head of Oil and Chemicals, Middle East, at Roland Berger Strategy Consultants.
"Iran's methanol exports capacity may get raised once Kaveh methanol project comes online by end-2015 or early 2016," van-Zeller Neto said. Iran's Kaveh Methanol Company is building a 2.6 mt/y methanol plant at Bandar Dayyer.
Iranian petrochemicals production capacity is expected to rise sharply over the next 10 years, with the pace of expansion expected to gather momentum should sanctions be lifted as the introduction of new technology and the import of catalysts speeds up the construction of new plants.
According to a Platts analysis, Iranian annual polyethylene production capacity will rise by at least 2 mt over the next 10 years.
This figure could well reach 3 mt if the business environment stays favorable. Current Iranian PE capacity is about 3.7 mt/y.
The head of National Petrochemical Company has said the company is paving the ground for welcoming investors into the country’s petrochemical industry once the sanctions are removed.
“Very good schemes have been developed to endorse investors into the country’s in the petrochemical sector for Iran to see a giant leap in its petrochemical industry,” Abbas Sha'ri-Moqaddam, who is also deputy petroleum minister in petrochemical affairs, said, adding, “We invite all Iranian and foreign investors to step in and fund petrochemical projects.”
He said many leading countries in the petrochemical industry are prepared to return to Iran given the promising political outlook for Iran by the sanctions relief.
“We are prepared to endorse investors in all petrochemical development projects,” said the official.
He said setting long-term feedstock prices as well as providing petrochemical infrastructure and stabilizing regulations are the key levers to attracting foreign investors in the petrochemical sector, rather than the removal of sanctions.
He said there are 120 half-finished developmental petrochemical projects across the country of which 67 are prioritized by NPC for financing and operation.
Sha'ri-Moqaddam said Iran’s petrochemical sector needs around $70 billion in investment, adding that the sector would have to attract $7 billion a year over the coming ten years.
Gov’t Support
Over the past decade, preparation of required infrastructure for investment in the petrochemical sector has been slowed down due to the sanctions. The administration of President Hassan Rouhani has intensified its efforts to improve the conditions of petrochemical industry. If we review the events of the past several months we would notice many activities related to the petrochemical industry. In fact, the petrochemical industry will have a significant role in more profitability and boosting Iran’s position in regional economic ties. This industry needs more attention in light of powerful rivals.
Petrochemical industry could be looked as a tool for generating revenues as well as a tool for job creation and welfare in impoverished regions. The government’s focus on expansion of the infrastructure could be a sign of sympathy for this attitude. Given the specific circumstances of Iran with regard to energy commodities and hydrocarbon reservoirs, paying more attention to the petrochemical industry would be an important and strategic decision. In cooperation with the private sector, the government is currently preparing the required infrastructure in different coastal zones of the Persian Gulf and the Sea of Oman for domestic and foreign investment in the petrochemical industry. Iran’s petrochemical industry has always been cohesive enough to welcome domestic and foreign investment in the past decades.
Drawing up a roadmap for the petrochemical industry in the past one year has been a sign of planning and preparation for investment in and development of this industry. Foreign business delegations from different countries have been visiting Iran to explore opportunities for investment in light of the planned removal of international sanctions.
Iran’s petrochemical industry enjoys unique advantages and that is why many refer to Iran as the future paradise of petrochemical industry.
Big gas reservoirs and abundant feedstock, access to water resources in southern coasts and location on marine transport routes are among advantages for Iran to become an attractive place for potential investors in the petrochemical industry.
These advantages can make Iran a major petrochemical hub in the future and attract investors.
Mohammad-Hassan Peyvandi, deputy head of NPC, said: “Iran is the country which has all tools, capacities and resources for a profitable and active petrochemical industry. No other country in the world has all these advantages altogether.”
He said Iran enjoys a “new and unique” opportunity which is coveted by the entire world.
An improvement of Iran’s relations at international level and attraction of more investment would promise a better future for the petrochemical industry, said Peyvandi.
Sustainable Gas Supply
Last winter, National Iranian Gas Company (NIGC) managed to ensure sustainable gas supply. Without any restrictions, operational units processed gas produced in upstream facilities and transferred to consumers.
NIGC dispatching center announced in its monthly report last winter that the supply sustainability of gas transmission and refining facilities almost reached 99 percent.
In another report addressed to a group of European investors and manufacturers during their visit to NIGC, the gas supply sustainability was announced at 99% despite sanctions imposed on Iran.
In order to get more information about the conditions of gas operation units, Iran Petroleum has interviewed Abdol-Hossein Samari, deputy head of NIGC for operation.
Q: Would you please explain about the activities of NIGC Operations Department during last winter?
A: Thanks to activities done with regard to gas supply, we had a smooth winter. According to plans, upstream gas production capacity was expected to increase by 100 mcm and fortunately, 115 mcm of gas was delivered to NIGC and we managed to receive all this gas and feed it into national gas network after processing.
It was maybe the first winter when we had no preoccupation with regard to gas supply to consumers. In addition to housing and business sectors, the power plants and industries also received the necessary gas.
Of course, one may say that last winter was not as cold as the previous years. But had we had a winter as cold as the previous year, we could easily handle gas supply.
Q: NIGC is planned to see upstream gas production increase this year. Is NIGC ready to manage this enhanced production?
A: This year, gas production is envisaged to be increased as consumption is expected to rise in winter and NIGC is ready to deal with this enhanced production in order to feed more gas into national network and deliver it to consumers. We have to take initiatives to build capacity in the gas transmission systems.
We have plans for this year. We coordinate projects with the planning management directorate and the dispatching center. We also make the necessary modifications in the gas transmission network in order to increase the transmission rate.
The projects which are expected to come on-stream this year are related to the Iran Gas Trunkline 8 (IGAT-8), operated by Iran Gas Engineering and Development Company.
Naturally, we do overhaul and perform maintenance in summer, and this year is no exception.
Q: Would you please tell us about planned overhaul?
A: Fortunately, we are nearly 2% ahead of plan in the overhaul of refineries. Regarding transmission pipelines, 71 of 238 turbines operated by this company had to be overhauled. So far, 42 turbines have been overhauled and the rest are expected to be overhauled before the start of cold snap. We predict the turbine overhauls to be over by November. Moreover, pig running is needed in the transmission pipelines. It is already under way. When the pipelines are in operation pig running becomes very difficult, but pig running has been done after certain necessary measures were undertaken.
For the current calendar year, around 3,000 kilometers of pipeline is expected to undergo intelligent pig running. So far, everything has been done as planned. Now, we use 30-inch devices for pig running and we plan to use bigger sizes. Regarding overhaul, the most important thing we should do is to change the coating. But over the past one year, we have tried to focus on quality instead of thinking of coating. We have sought to manage quality.
Q: How much gas did gas treatment companies produce in the first quarter of the current calendar year?
A: Gas treatment plants produced 168 bcm of gas, 25 mcm (150 million barrels) of gas condensate, 1 million tons of ethane, two million tons of liquefied petroleum gas (LPG) and 1.5 million tons of ethane last year. Despite overhaul operations, these companies processed 43 bcm of gas in the first quarter of the current calendar year.
Over the same period, 8 mcm (48 million barrels) of gas condensate, 739 tons of LPG, 253,000 tons of sulfur and 398 tons of ethane were produced.
Although overhaul operations are under way at refineries, production is on the rise. Moreover, the record production was 538 mcm/d, registered in the first month of the current calendar year.
Q: What have treatment companies done for self-sufficiency in components?
A: In this regard, I can refer to the listing of spare parts, effective communications with research centers for acquiring technical knowhow, planning to shift from component manufacturing to equipment making, manufacturing of the sensitive components of air compressors and manufacturing of components for gas seals and mechanical seals. Meantime, the overhaul of gas turbines, which required us to send turbines abroad, is now assigned to domestic manufacturers. We have manufactured two flare tips at Hasheminejad refinery and we are self-sufficient in this regard. Flare tips need to be resistant to heat.
We have also experienced the manufacturing of 24-inch and 42-inch butterfly valves and we have managed to produce more than 50% of chemicals domestically. We have mastered up to 75% of the technical knowhow needed for some of these materials.
The manufacturing of all spare parts of pumps, industrial filters, components of automatic valves and control system cards has been done through reverse engineering.
Above all, NIGC Directorate of Research and Technology, in collaboration with the Research Institute of Petroleum Industry (RIPI), worked on amine formulation. We managed to find the formula for producing this highly consumed chemical substance at refineries.
Amine field test at Masjed Soleyman refinery was positive. But since the test was not difficult at Masjed Soleyman refinery we have decided to conduct a new field test at Ilam refinery in order to examine this formulation under difficult conditions, too.
Today, one of the most important equipment we often use at NIGC is turbine and gas compressor.
In order to domestically manufacture this equipment, NIGC has signed long-term deals with Oil Turbocompressor Company (OTC) and it has taken steps towards domestic manufacturing of turbines.
NIGC have provided this chance to domestic manufacturers and within the framework of establishment of OTC, we distributed responsibilities and finally managed to become self-sufficient in the manufacturing of turbines which we had to purchase from abroad.
We are becoming self-sufficient in the procurement of all equipment by domestic companies and today there is nothing for us to worry about in this part of gas transmission systems. These turbines are even used at refineries.
Q: What has been done for the second phase of Ilam refinery?
A: In this project, it seems that there are acceptable conditions in the upstream sector and NIGC is getting ready for the second phase of Ilam refinery.
Q: What about a 200% increase in feedstock supply to Fajr Jam refinery by South Pars gas reservoir?
A: In order to implement the country’s economic policies and benefit from all capacities and with regards to the Ministry of Petroleum’s prioritization of joint fields, NIGC decided to supply more feedstock to Fajr Jam refinery from South Pars. This project has currently a capacity of 25 mcm.
Q: Would you please tell us about the activities of your office with regard to storage?
A: During the first quarter, 543 mcm of gas was injected into Shourijeh underground storage facility and 477 mcm into Sarajeh underground storage facility. But that is not our maximum capacity and we prefer to use our experience at treatment facilities in Sarajeh so that we would enhance the capacity of the operating units instead of adding a new terrain.
Our recovery and injection capacity is more than what is happening now and that is because what should have been done in parallel in the upstream sector, specifically in the drilling of wells, has not been done. In other words, if the number of upstream wells increases we would be able to bring the storage capacity to over 20 mcm/d, which was around 15 mcm/d last calendar year.
Regarding other projects, Nasrabad project in Kashan and Yourtesha project in Varamin are under study. There are low-risk hydrocarbon fields with better conditions.
Another important project we have under way is Qezel Tappeh. We have first to drill the first well so that we would see the conditions for underground storage. Qezel Tappeh project was defined earlier, but it was started recently.
Due to depth and high pressure, this project has specific conditions. That is why we were also willing to cooperate with Khazar Exploration and Production Company which has already gathered the data of this reservoir in order to revise drilling activities.
Ministry of Petroleum also plans to specify five fields for underground storage. NIGC would help storage operations. These fields are mainly located in the west of the country.
Q: Now, please tell us about exports. Is there necessary infrastructure for enhancing gas exports to Turkey?
A: Tabriz station, which had the capacity of 35 mcm/d of gas, has doubled its output by launching new electroengines. That would facilitate increased gas exports to Turkey at a sustainable level.
Q: Which plans do you have for the sustainability of gas network in the north of the country this year?
A: In order to guarantee sustained gas supply to the north of the country, which mainly stretches from Birjand (a city in northeast Iran) to Gorgan, we plan to launch Dasht station which would be of help to sustained gas supply in the north of the country.
Sustainable Gas Supply
Last winter, National Iranian Gas Company (NIGC) managed to ensure sustainable gas supply. Without any restrictions, operational units processed gas produced in upstream facilities and transferred to consumers.
NIGC dispatching center announced in its monthly report last winter that the supply sustainability of gas transmission and refining facilities almost reached 99 percent.
In another report addressed to a group of European investors and manufacturers during their visit to NIGC, the gas supply sustainability was announced at 99% despite sanctions imposed on Iran.
In order to get more information about the conditions of gas operation units, Iran Petroleum has interviewed Abdol-Hossein Samari, deputy head of NIGC for operation.
Q: Would you please explain about the activities of NIGC Operations Department during last winter?
A: Thanks to activities done with regard to gas supply, we had a smooth winter. According to plans, upstream gas production capacity was expected to increase by 100 mcm and fortunately, 115 mcm of gas was delivered to NIGC and we managed to receive all this gas and feed it into national gas network after processing.
It was maybe the first winter when we had no preoccupation with regard to gas supply to consumers. In addition to housing and business sectors, the power plants and industries also received the necessary gas.
Of course, one may say that last winter was not as cold as the previous years. But had we had a winter as cold as the previous year, we could easily handle gas supply.
Q: NIGC is planned to see upstream gas production increase this year. Is NIGC ready to manage this enhanced production?
A: This year, gas production is envisaged to be increased as consumption is expected to rise in winter and NIGC is ready to deal with this enhanced production in order to feed more gas into national network and deliver it to consumers. We have to take initiatives to build capacity in the gas transmission systems.
We have plans for this year. We coordinate projects with the planning management directorate and the dispatching center. We also make the necessary modifications in the gas transmission network in order to increase the transmission rate.
The projects which are expected to come on-stream this year are related to the Iran Gas Trunkline 8 (IGAT-8), operated by Iran Gas Engineering and Development Company.
Naturally, we do overhaul and perform maintenance in summer, and this year is no exception.
Q: Would you please tell us about planned overhaul?
A: Fortunately, we are nearly 2% ahead of plan in the overhaul of refineries. Regarding transmission pipelines, 71 of 238 turbines operated by this company had to be overhauled. So far, 42 turbines have been overhauled and the rest are expected to be overhauled before the start of cold snap. We predict the turbine overhauls to be over by November. Moreover, pig running is needed in the transmission pipelines. It is already under way. When the pipelines are in operation pig running becomes very difficult, but pig running has been done after certain necessary measures were undertaken.
For the current calendar year, around 3,000 kilometers of pipeline is expected to undergo intelligent pig running. So far, everything has been done as planned. Now, we use 30-inch devices for pig running and we plan to use bigger sizes. Regarding overhaul, the most important thing we should do is to change the coating. But over the past one year, we have tried to focus on quality instead of thinking of coating. We have sought to manage quality.
Q: How much gas did gas treatment companies produce in the first quarter of the current calendar year?
A: Gas treatment plants produced 168 bcm of gas, 25 mcm (150 million barrels) of gas condensate, 1 million tons of ethane, two million tons of liquefied petroleum gas (LPG) and 1.5 million tons of ethane last year. Despite overhaul operations, these companies processed 43 bcm of gas in the first quarter of the current calendar year.
Over the same period, 8 mcm (48 million barrels) of gas condensate, 739 tons of LPG, 253,000 tons of sulfur and 398 tons of ethane were produced.
Although overhaul operations are under way at refineries, production is on the rise. Moreover, the record production was 538 mcm/d, registered in the first month of the current calendar year.
Q: What have treatment companies done for self-sufficiency in components?
A: In this regard, I can refer to the listing of spare parts, effective communications with research centers for acquiring technical knowhow, planning to shift from component manufacturing to equipment making, manufacturing of the sensitive components of air compressors and manufacturing of components for gas seals and mechanical seals. Meantime, the overhaul of gas turbines, which required us to send turbines abroad, is now assigned to domestic manufacturers. We have manufactured two flare tips at Hasheminejad refinery and we are self-sufficient in this regard. Flare tips need to be resistant to heat.
We have also experienced the manufacturing of 24-inch and 42-inch butterfly valves and we have managed to produce more than 50% of chemicals domestically. We have mastered up to 75% of the technical knowhow needed for some of these materials.
The manufacturing of all spare parts of pumps, industrial filters, components of automatic valves and control system cards has been done through reverse engineering.
Above all, NIGC Directorate of Research and Technology, in collaboration with the Research Institute of Petroleum Industry (RIPI), worked on amine formulation. We managed to find the formula for producing this highly consumed chemical substance at refineries.
Amine field test at Masjed Soleyman refinery was positive. But since the test was not difficult at Masjed Soleyman refinery we have decided to conduct a new field test at Ilam refinery in order to examine this formulation under difficult conditions, too.
Today, one of the most important equipment we often use at NIGC is turbine and gas compressor.
In order to domestically manufacture this equipment, NIGC has signed long-term deals with Oil Turbocompressor Company (OTC) and it has taken steps towards domestic manufacturing of turbines.
NIGC have provided this chance to domestic manufacturers and within the framework of establishment of OTC, we distributed responsibilities and finally managed to become self-sufficient in the manufacturing of turbines which we had to purchase from abroad.
We are becoming self-sufficient in the procurement of all equipment by domestic companies and today there is nothing for us to worry about in this part of gas transmission systems. These turbines are even used at refineries.
Q: What has been done for the second phase of Ilam refinery?
A: In this project, it seems that there are acceptable conditions in the upstream sector and NIGC is getting ready for the second phase of Ilam refinery.
Q: What about a 200% increase in feedstock supply to Fajr Jam refinery by South Pars gas reservoir?
A: In order to implement the country’s economic policies and benefit from all capacities and with regards to the Ministry of Petroleum’s prioritization of joint fields, NIGC decided to supply more feedstock to Fajr Jam refinery from South Pars. This project has currently a capacity of 25 mcm.
Q: Would you please tell us about the activities of your office with regard to storage?
A: During the first quarter, 543 mcm of gas was injected into Shourijeh underground storage facility and 477 mcm into Sarajeh underground storage facility. But that is not our maximum capacity and we prefer to use our experience at treatment facilities in Sarajeh so that we would enhance the capacity of the operating units instead of adding a new terrain.
Our recovery and injection capacity is more than what is happening now and that is because what should have been done in parallel in the upstream sector, specifically in the drilling of wells, has not been done. In other words, if the number of upstream wells increases we would be able to bring the storage capacity to over 20 mcm/d, which was around 15 mcm/d last calendar year.
Regarding other projects, Nasrabad project in Kashan and Yourtesha project in Varamin are under study. There are low-risk hydrocarbon fields with better conditions.
Another important project we have under way is Qezel Tappeh. We have first to drill the first well so that we would see the conditions for underground storage. Qezel Tappeh project was defined earlier, but it was started recently.
Due to depth and high pressure, this project has specific conditions. That is why we were also willing to cooperate with Khazar Exploration and Production Company which has already gathered the data of this reservoir in order to revise drilling activities.
Ministry of Petroleum also plans to specify five fields for underground storage. NIGC would help storage operations. These fields are mainly located in the west of the country.
Q: Now, please tell us about exports. Is there necessary infrastructure for enhancing gas exports to Turkey?
A: Tabriz station, which had the capacity of 35 mcm/d of gas, has doubled its output by launching new electroengines. That would facilitate increased gas exports to Turkey at a sustainable level.
Q: Which plans do you have for the sustainability of gas network in the north of the country this year?
A: In order to guarantee sustained gas supply to the north of the country, which mainly stretches from Birjand (a city in northeast Iran) to Gorgan, we plan to launch Dasht station which would be of help to sustained gas supply in the north of the country.
OPEC; Consequences of Oil Price Fall
By Shuaib Bahman
The Organization of the Petroleum Exporting Countries (OPEC) was established on September 12, 1960. It is an influential organization in oil markets. Its current members are Iran, Algeria, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, Ecuador, Angola and Venezuela. One of the major objectives pursued by this organization is to coordinate and integrate oil policies of member states and find the best way for serving their interests and work out new mechanisms for guaranteeing oil price stability in international oil market in a bid to check challenging fluctuations.
Following such an objective, OPEC has been looking for a solution to stabilize the oil market since 1980s. In recent years, the oil producer group has sometimes followed price shoring up strategies and has tried to manage production. But in some other cases, it has preferred to support the market and it has followed the policy of price band. A review of the activity of OPEC indicates that neither of these two aforesaid strategies has proven successful on the long-term. The reason is that the strategy of price support and production control has resulted in the loss of share in oil markets while pro-market strategy has caused a price decline. In other words, both strategies have caused a significant decline in OPEC revenues.
Oil prices started falling in summer 2014 and this trend has since been continuing. This price slump has once more pushed OPEC, as the main oil producer group, to bold relief. Like in the past, OPEC is facing serious challenges and problems for stabilizing prices and curbing price fall.
In this analysis, we first review OPEC oil production and then we will examine challenges OPEC is facing with regard to oil price decline. In the end, we will analyze the consequences of oil price decline for OPEC.
Further Sale for Higher Revenues
OPEC member states’ oil revenues totaled nearly $1,000 billion in 2014, the lowest since 2010 when the 12-member body earned only $745 billion from selling oil. OPEC oil revenues reached $1,112 billion in 2013, but it fell to $993.3 billion in 2014 due to market crash. Therefore, OPEC oil revenues in 2014 were 11% lower than in 2013, which means that OPEC’s financial share of world oil market dropped from 43.5% in 2013 to 42.6% in 2014.
OPEC oil basket price was varying around $115 in summer 2014 before sharply falling to below $60.
An annual report by OPEC shows that the group’s oil production was a bit more than 30 mb/d in 2014, which reached 31 mb/d a year later. Despite an oversupplied oil market, OPEC member states decided in their last ministerial meeting to roll over the output at 30 mb/d for another six months. This decision was made by OPEC at a time official data released by the International Energy Agency (IEA) shows that the world has been grappling with the longest ever market oversupply at least in the past three decades.
Surveys show that supply glut, increased production of shale oil in the US and Canada, sluggish demand in consumer countries and low economic growth rate in China and India- major oil consumers- are the major causes of price slump.
However, some analysts lay the blame on Saudi Arabia’s policy of oil price discount in a bid to inflict losses on Iran and Russia for the current oil market instability.
Market Regulation
OPEC member states hold 814 billion barrels of oil reserves, or around 78% of the world’s total reserves. But these countries supply only 6.5% of the world’s crude oil needs. In case of lack of cooperation and understanding on the part of OPEC member states, energy supply security will face problem in the future. OPEC’s contribution to crude oil supply security for future consumption is key to supply security for industrialized countries.
At a time OPEC member states play an instrumental role in pricing and while the key condition for these countries to see their oil revenues rise is higher oil price, and OPEC member states need more hard currency for economic growth and development, in most cases they stir up the continuation of oil price fall. A number of factors are important in this trend:
First, OPEC member states often move to increase supply on the grounds that they should prevent a decline in the group’s share of world oil market. Such an increase in oil supply further drives oil prices down. In their view, increased prices give a strong impetus for the growth of investment in unconventional oil production; therefore, OPEC’s share of global oil market would decline. Moreover, since OPEC top producers are willing to maintain the level of their revenues from crude oil exports, every time prices are weakened, they increase supply. In other words, the impetus in these countries for maintaining or increasing crude oil revenues is so strong that they often go beyond their quota and increase their output to reach their desired level.
The second reason could be explained as follows: Given the fact that OPEC claims to be the main regulator of oil market in the world is seeking a fair price for crude oil. A fair price is one that would pursue the interests of both producers and consumers of crude oil at the same time. But, in a capitalist economy, no fair price could be defined because top crude oil producers are among developing countries and advanced industrialized countries are the major consumers of oil. That means that these two groups of countries have different economic structures; therefore, no price could be set for crude oil to serve the interests of both groups at the same time.
Citing OPEC Charter, member states assert that they are tasked with regulating oil market in the world. In other words, the task assigned to OPEC at this sensitive juncture is to manage the price crisis in the world markets. But the outcome of this management would be mainly to avoid any loss to leading consumers of crude oil in industrialized countries and their affiliated oil firms.
Third, there is incongruousness and lack of coordination between OPEC member states.
OPEC member states are classified under three categories in terms of oil reserves and the possibility of future oil supply.
Small and medium countries hold a 7.6% share in the world oil reserves. Libya, Nigeria, Qatar, Algeria and Indonesia together possess less oil than Iran.
The six big member states of OPEC hold oil reserves more than nine times higher the medium and small countries. Therefore, OPEC’s power is concentrated in Saudi Arabia, Iraq, UAE, Kuwait, Iran and Venezuela, respectively. These countries make up a 31.8% share in world oil production while other OPEC member states account for only 9.7% of the world’s total oil production. Therefore, in analyzing the OPEC status in world oil market and the structure of decision-making regime and OPEC’s policymaking, this incongruousness in the reserves held by OPEC member states should be taken into consideration.
In fact, any decision adopted by OPEC should take into consideration the interests of all member states. If not, it will face many challenges and some countries would refuse to abide by their production quota.
Some OPEC member states do not agree with the current production quota system and want changes. For these countries, the current production quota system is based on old statistical data about the production capacity of member states. Therefore, they say, it is unacceptable and it does not take into account changes to the production capacity of member states in recent years. Therefore, some OPEC member states demand changes to their quotas; therefore, they do not comply with their allocated quotas. Refusal to abide by quotas results in oil oversupply and subsequent oil price fall.
A drop in oil prices does not cut supply in the short and mid-term, but on the contrary, it would give impetus for more supply. Oversupply and the replenishment of consumer countries’ stocks would also facilitate serious oil price shock.
Another issue is that some OPEC member states work in coordination with consumer countries rather than with their fellow member states. For instance, while most OPEC members believe that supply should be cut due to oil price fall, Saudi Arabia refuses to be cooperative and it is raising its output in favor of consumers.
Apparently, OPEC is the only body capable of effectively managing crises stemming from oil supply and price in the world markets, but the structure of world oil market and relations between OPEC and non-OPEC member states are such that OPEC’s measures for crisis management often end in serving the interests of major oil consumers in industrialized countries and non-OPEC producers.
Consequences
Apart from the fact that what factors are behind the decline in oil prices, it should be noted that the continuation of this trend would bring about undesired consequences for oil producing countries.
In the first step, oil price decline would weaken the OPEC position because the immediate result of fall in the revenues of OPEC member states would be lower investment in the energy sector. Under such circumstances, producer countries would not be able to make investment. Nor will big companies be willing to contribute to these projects due to low prices and cost ineffectiveness.
Technically speaking, crude oil production requires very huge costs for exploration and recovery. In competitive markets, investment in this sector will be envisaged only if oil prices would be at a level to produce acceptable profits.
Therefore, oil price decline could result in insufficient investment in the energy sector of producing countries in the long-term and that would clear the way for weakening the position of OPEC member states. Undoubtedly, such a trend would pose a serious threat to the largest organization involved in oil supply in the world.
Meantime, continued oil price fall would add fuel to OPEC differences and this organization would risk dissolution or the withdrawal of some member states. Given the fact that there are serious differences between some OPEC member states regarding such issues as electing a secretary-general and pricing policy, oil price fall would further stir up differences. Such an issue will give rise to undesired consequences for OPEC and its member states. Lack of a common policy on the part of producing countries will finally end in the disadvantage of both and it could perpetuate the present conditions of oil price falls for years.
From another standpoint, oil price fall means a weaker role for OPEC member states in international policies. This means the falling influence of OPEC and it can turn the US into the major player in the world oil market.
Given its shale oil exploration and extraction, the US can grow into a key player in the oil market and orientate the trend of global petroleum industry. Such a change will by no means benefit the OPEC member states and could even destabilize this organization. Under the present circumstances, major industrialized countries will not be able to realize their main objective, which is diversifying sources for energy supply, without OPEC’s cooperation. If this organization is weakened and the US becomes the leader of world energy, OPEC will become an organization that would not be influential enough on the prices.
Given the consequences of oil price for OPEC member states, four possibilities are held out with regard to the future of this organization:
First, OPEC would maintain its current position in terms of members and policymaking and it would make no new structural changes.
Second, OPEC would move towards a weaker position and would see its cohesion being weakened. This possibility is ruled out for a variety of reasons.
Third, OPEC would be disbanded or would continue to work passively. Major oil cartels and companies in industrialized countries are the major opponents of this organization, but the presence of countries like Iran, Saudi Arabia and Venezuela – all member states of OPEC, weakens this possibility.
Fourth, OPEC would be downsized but would become stronger and more cohesive and countries like Norway and Russia – both top oil producers – would join it.
In conclusion, OPEC has no option but to change its membership structure and policies if it really intends to remain influential in supply-demand system and energy pricing in world markets.
A review of OPEC’s present conditions indicates that its member states have to reconsider their objectives and priorities in order to be able to adopt a comprehensive and unified policy in the future.
Therefore, making efforts for the realization of the fourth aforesaid possibility, i.e. more influence and cohesion, would turn OPEC into an influential organization in the future.
OPEC; Consequences of Oil Price Fall
By Shuaib Bahman
The Organization of the Petroleum Exporting Countries (OPEC) was established on September 12, 1960. It is an influential organization in oil markets. Its current members are Iran, Algeria, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, Ecuador, Angola and Venezuela. One of the major objectives pursued by this organization is to coordinate and integrate oil policies of member states and find the best way for serving their interests and work out new mechanisms for guaranteeing oil price stability in international oil market in a bid to check challenging fluctuations.
Following such an objective, OPEC has been looking for a solution to stabilize the oil market since 1980s. In recent years, the oil producer group has sometimes followed price shoring up strategies and has tried to manage production. But in some other cases, it has preferred to support the market and it has followed the policy of price band. A review of the activity of OPEC indicates that neither of these two aforesaid strategies has proven successful on the long-term. The reason is that the strategy of price support and production control has resulted in the loss of share in oil markets while pro-market strategy has caused a price decline. In other words, both strategies have caused a significant decline in OPEC revenues.
Oil prices started falling in summer 2014 and this trend has since been continuing. This price slump has once more pushed OPEC, as the main oil producer group, to bold relief. Like in the past, OPEC is facing serious challenges and problems for stabilizing prices and curbing price fall.
In this analysis, we first review OPEC oil production and then we will examine challenges OPEC is facing with regard to oil price decline. In the end, we will analyze the consequences of oil price decline for OPEC.
Further Sale for Higher Revenues
OPEC member states’ oil revenues totaled nearly $1,000 billion in 2014, the lowest since 2010 when the 12-member body earned only $745 billion from selling oil. OPEC oil revenues reached $1,112 billion in 2013, but it fell to $993.3 billion in 2014 due to market crash. Therefore, OPEC oil revenues in 2014 were 11% lower than in 2013, which means that OPEC’s financial share of world oil market dropped from 43.5% in 2013 to 42.6% in 2014.
OPEC oil basket price was varying around $115 in summer 2014 before sharply falling to below $60.
An annual report by OPEC shows that the group’s oil production was a bit more than 30 mb/d in 2014, which reached 31 mb/d a year later. Despite an oversupplied oil market, OPEC member states decided in their last ministerial meeting to roll over the output at 30 mb/d for another six months. This decision was made by OPEC at a time official data released by the International Energy Agency (IEA) shows that the world has been grappling with the longest ever market oversupply at least in the past three decades.
Surveys show that supply glut, increased production of shale oil in the US and Canada, sluggish demand in consumer countries and low economic growth rate in China and India- major oil consumers- are the major causes of price slump.
However, some analysts lay the blame on Saudi Arabia’s policy of oil price discount in a bid to inflict losses on Iran and Russia for the current oil market instability.
Market Regulation
OPEC member states hold 814 billion barrels of oil reserves, or around 78% of the world’s total reserves. But these countries supply only 6.5% of the world’s crude oil needs. In case of lack of cooperation and understanding on the part of OPEC member states, energy supply security will face problem in the future. OPEC’s contribution to crude oil supply security for future consumption is key to supply security for industrialized countries.
At a time OPEC member states play an instrumental role in pricing and while the key condition for these countries to see their oil revenues rise is higher oil price, and OPEC member states need more hard currency for economic growth and development, in most cases they stir up the continuation of oil price fall. A number of factors are important in this trend:
First, OPEC member states often move to increase supply on the grounds that they should prevent a decline in the group’s share of world oil market. Such an increase in oil supply further drives oil prices down. In their view, increased prices give a strong impetus for the growth of investment in unconventional oil production; therefore, OPEC’s share of global oil market would decline. Moreover, since OPEC top producers are willing to maintain the level of their revenues from crude oil exports, every time prices are weakened, they increase supply. In other words, the impetus in these countries for maintaining or increasing crude oil revenues is so strong that they often go beyond their quota and increase their output to reach their desired level.
The second reason could be explained as follows: Given the fact that OPEC claims to be the main regulator of oil market in the world is seeking a fair price for crude oil. A fair price is one that would pursue the interests of both producers and consumers of crude oil at the same time. But, in a capitalist economy, no fair price could be defined because top crude oil producers are among developing countries and advanced industrialized countries are the major consumers of oil. That means that these two groups of countries have different economic structures; therefore, no price could be set for crude oil to serve the interests of both groups at the same time.
Citing OPEC Charter, member states assert that they are tasked with regulating oil market in the world. In other words, the task assigned to OPEC at this sensitive juncture is to manage the price crisis in the world markets. But the outcome of this management would be mainly to avoid any loss to leading consumers of crude oil in industrialized countries and their affiliated oil firms.
Third, there is incongruousness and lack of coordination between OPEC member states.
OPEC member states are classified under three categories in terms of oil reserves and the possibility of future oil supply.
Small and medium countries hold a 7.6% share in the world oil reserves. Libya, Nigeria, Qatar, Algeria and Indonesia together possess less oil than Iran.
The six big member states of OPEC hold oil reserves more than nine times higher the medium and small countries. Therefore, OPEC’s power is concentrated in Saudi Arabia, Iraq, UAE, Kuwait, Iran and Venezuela, respectively. These countries make up a 31.8% share in world oil production while other OPEC member states account for only 9.7% of the world’s total oil production. Therefore, in analyzing the OPEC status in world oil market and the structure of decision-making regime and OPEC’s policymaking, this incongruousness in the reserves held by OPEC member states should be taken into consideration.
In fact, any decision adopted by OPEC should take into consideration the interests of all member states. If not, it will face many challenges and some countries would refuse to abide by their production quota.
Some OPEC member states do not agree with the current production quota system and want changes. For these countries, the current production quota system is based on old statistical data about the production capacity of member states. Therefore, they say, it is unacceptable and it does not take into account changes to the production capacity of member states in recent years. Therefore, some OPEC member states demand changes to their quotas; therefore, they do not comply with their allocated quotas. Refusal to abide by quotas results in oil oversupply and subsequent oil price fall.
A drop in oil prices does not cut supply in the short and mid-term, but on the contrary, it would give impetus for more supply. Oversupply and the replenishment of consumer countries’ stocks would also facilitate serious oil price shock.
Another issue is that some OPEC member states work in coordination with consumer countries rather than with their fellow member states. For instance, while most OPEC members believe that supply should be cut due to oil price fall, Saudi Arabia refuses to be cooperative and it is raising its output in favor of consumers.
Apparently, OPEC is the only body capable of effectively managing crises stemming from oil supply and price in the world markets, but the structure of world oil market and relations between OPEC and non-OPEC member states are such that OPEC’s measures for crisis management often end in serving the interests of major oil consumers in industrialized countries and non-OPEC producers.
Consequences
Apart from the fact that what factors are behind the decline in oil prices, it should be noted that the continuation of this trend would bring about undesired consequences for oil producing countries.
In the first step, oil price decline would weaken the OPEC position because the immediate result of fall in the revenues of OPEC member states would be lower investment in the energy sector. Under such circumstances, producer countries would not be able to make investment. Nor will big companies be willing to contribute to these projects due to low prices and cost ineffectiveness.
Technically speaking, crude oil production requires very huge costs for exploration and recovery. In competitive markets, investment in this sector will be envisaged only if oil prices would be at a level to produce acceptable profits.
Therefore, oil price decline could result in insufficient investment in the energy sector of producing countries in the long-term and that would clear the way for weakening the position of OPEC member states. Undoubtedly, such a trend would pose a serious threat to the largest organization involved in oil supply in the world.
Meantime, continued oil price fall would add fuel to OPEC differences and this organization would risk dissolution or the withdrawal of some member states. Given the fact that there are serious differences between some OPEC member states regarding such issues as electing a secretary-general and pricing policy, oil price fall would further stir up differences. Such an issue will give rise to undesired consequences for OPEC and its member states. Lack of a common policy on the part of producing countries will finally end in the disadvantage of both and it could perpetuate the present conditions of oil price falls for years.
From another standpoint, oil price fall means a weaker role for OPEC member states in international policies. This means the falling influence of OPEC and it can turn the US into the major player in the world oil market.
Given its shale oil exploration and extraction, the US can grow into a key player in the oil market and orientate the trend of global petroleum industry. Such a change will by no means benefit the OPEC member states and could even destabilize this organization. Under the present circumstances, major industrialized countries will not be able to realize their main objective, which is diversifying sources for energy supply, without OPEC’s cooperation. If this organization is weakened and the US becomes the leader of world energy, OPEC will become an organization that would not be influential enough on the prices.
Given the consequences of oil price for OPEC member states, four possibilities are held out with regard to the future of this organization:
First, OPEC would maintain its current position in terms of members and policymaking and it would make no new structural changes.
Second, OPEC would move towards a weaker position and would see its cohesion being weakened. This possibility is ruled out for a variety of reasons.
Third, OPEC would be disbanded or would continue to work passively. Major oil cartels and companies in industrialized countries are the major opponents of this organization, but the presence of countries like Iran, Saudi Arabia and Venezuela – all member states of OPEC, weakens this possibility.
Fourth, OPEC would be downsized but would become stronger and more cohesive and countries like Norway and Russia – both top oil producers – would join it.
In conclusion, OPEC has no option but to change its membership structure and policies if it really intends to remain influential in supply-demand system and energy pricing in world markets.
A review of OPEC’s present conditions indicates that its member states have to reconsider their objectives and priorities in order to be able to adopt a comprehensive and unified policy in the future.
Therefore, making efforts for the realization of the fourth aforesaid possibility, i.e. more influence and cohesion, would turn OPEC into an influential organization in the future.
3D Seismic Testing in Gambia
Polarcus has begun acquiring 3D seismic over two blocks operated by Camac Energy Gambia.
The 12-streamer 3D/4D vessel Polarcus Alima should take around 50 days to cover 1,500 sq km (579 sq mi) over the A2 and A5 blocks, 28 mi (45 km) offshore Gambia. Both are said to be on-trend with Cairn Energy’s deepwater FAN-1 and SNE-1 discoveries offshore Senegal.
Kase Lawal, chairman and CEO of Camac parent company Erin Energy, said: “The acquisition of 3D seismic data in this emerging West Africa margin basin will provide valuable pre-drill information that is key to evaluating the exploration potential of these blocks, which are in close proximity to recent offshore Senegal oil discoveries.”
India Offshore Platform Goes Onstream
BG India has produced first oil from the Mukta-B (MB) unmanned wellhead platform in the offshore Bombay basin.
BG has a 30% interest in the Panna-Mukta oil and gas fields, in partnership with ONGC and Reliance Industries.
As part of the project the MB and MA pipelines have also been completed, allowing a re-start of production from the MA platform which had been shut-in for more than two years due to pipeline integrity issues.
Facilities on the new platform include hybrid solar panels and wind turbines to ensure self-sufficiency in power, remote monitoring for process optimization, and a VOIP protocol for improved communication.
Well Completed Offshore New Zealand
Cue Energy says the Maari MR7A development well is onstream offshore New Zealand, at an initial production rate of 1,500-2,000 b/d of oil.
The optimal rate will be determined after several weeks of production history, based on reservoir management considerations.
Total output from the OMV-operated Maari field is now around 15,000 b/d.
MR7A is producing from the Moki formation reservoir unit. It was drilled horizontally from the Maari wellhead platform to a TD of 4,220 m (13,845 ft), of which 920 m (3,018 ft) was completed in good-quality reservoir section, according to log data.
Latest Lula Floater on Station Offshore Brazil
Petrobras’ newly-converted FPSO Cidade de Itaguaí is anchored in 2,240 m (7,349 ft) of water in the Iracema Norte area of the Lula field in the presalt Santos basin.
The Schahin/Modec consortium, which was responsible for converting the hull, constructing, and integrating the topsides modules at the BrasFELS shipyard in Angra dos Reis, will also operate the vessel.
It will eventually be connected to eight producer and nine injector wells, with capacity to produce 150,000 b/d of oil, to store 1.6 MMbbl, to compress 8 MMcm/d (282 MMcf/d) of natural gas, and to inject 264,000 b/d of water.
Statoil Proves Further Condensate
Statoil and partner Total have discovered gas and condensate in the Julius structure close to the King Lear field in the southern Norwegian North Sea.
The jackup Maersk Gallant drilled well 2/4-23S in 68 m (223 ft) of water in the production license PL 146, encountering hydrocarbons in the Ula formation with moderate reservoir quality, according to the Norwegian Petroleum Directorate. Statoil estimates recoverable volumes in the range 15-75 MMboe.
The well was also designed to appraise King Lear, discovered by the PL146/PL333 partnership in 2012. It provided important information on reservoir distribution and reservoir communication in King Lear.
Following further analysis, Statoil expects volumes in King Lear to stay within its previous estimate of 70-200 MMboe. The partners will now work on a development solution.
China LPG Prices Retreat
Prices of imported and domestic LPG fell in both South and East China amid a bearish outlook due to ample supply and weak demand, trade sources said.
"Asian LPG prices continued to move lower this week in line with weaker crude futures, which dampened market sentiment," one source said.
Refrigerated LPG was assessed at a six-month low of $445/mt CFR South China for propane and $475/mt for butane, down 5% from $468/mt and $498/mt respectively a week earlier, Platts data showed.
The import cost to China for August-delivery refrigerated cargoes was estimated at Yuan 3,150/mt ($514.94/mt) for propane and Yuan 3,350/mt for butane after adding taxes and fees, below spot prices in the wholesale market, Platts calculations showed.
In southern Guangdong province, imported LPG cargoes of mixed propane and butane traded at around Yuan 3,400-3,500/mt in the wholesale market this week, down Yuan 50/mt from the week before, local traders said.
Nine refrigerated LPG cargoes, totaling around 200,000 mt, have arrived in Guangdong over the past two weeks, according to shipping data from Beijing-based energy information provider JYD Commodities Hub.
Many LPG import terminals were said to be incurring losses as import costs were higher than spot prices in the wholesale market, but they were still motivated to sell as they expected prices had further to fall, said a trader with a major domestic LPG import terminal.
Gazprom Files Case Against Turkmengaz
Russian gas company Gazprom said it had lodged a case against Turkmenistan's Turkmengaz at the international arbitration court in Stockholm over the price in a supply contract.
The move came weeks after Turkmenistan accused Gazprom of not paying for gas supplied from the Central Asian country this year.
Gazprom, the world's top natural gas producer, buys gas from Turkmenistan for its own use or resale. But the amount has fallen this year as relations between Moscow and the reclusive former Soviet Union republic are increasingly strained by a competition to supply the large Chinese gas market.
A spokesman for the Russian company said: "A lawsuit has been filed in Stockholm. The demand - a revision of prices."
Forbes magazine reported that the purchasing price stood at $240 per 1,000 cubic meters - lower than the price Gazprom charges its customers in Europe.
Turkmenistan so far has the upper hand in the fight for the Chinese market, supplying around 30 billion cubic meters (bcm) of gas annually with plans to double that volume by 2020.
Gazprom plans to start gas sales to China in 2018, gradually increasing flows to 38 bcm per year from east Siberia. Talks over gas flows to China from west Siberian fields have so far failed to gain traction.
Nexen pipeline leak in Alberta
One of the largest leaks in Alberta history has spilled about five million liters of emulsion from a Nexen Energy pipeline at the company's Long Lake oil sands facility south of Fort McMurray.
Nexen said in a statement its emergency response plan has been activated and personnel were onsite. The leak has been stabilized, the company said.
The spill covered an area of about 16,000 square meters, mostly within the pipeline corridor, the company said. Emulsion is a mixture of bitumen, water and sand.
The pipeline that leaked is called a "feeder" and runs from a wellhead to the processing plant.
"All necessary steps and precautions have been taken, and Nexen will continue to utilize all its resources to protect the health and safety of our employees, contractors, the public and the environment, and to contain and clean up the spill," the company said in the statement.
Peter Murchland, public affairs manager for the Alberta Energy Regulator, said officials were notified and had staff onsite to work with Nexen.
Saudi Oil Exports Fall to 5-Month Low
Saudi Arabia’s crude oil exports fell to their lowest in five months in May despite near-record production, as the Organization of the Petroleum Exporting Countries (OPEC) kingpin turns itself into a major refined-fuels power and as domestic consumption rises.
Saudi Arabia, the world’s top crude oil exporter, shipped 6.935 million barrels per day (bpd) on average in May, down from 7.737m bpd in April and the lowest since December, official data showed.
As crude exports slide, the OPEC producer is offering customers millions of barrels of diesel from new refineries as it turns itself into a major supplier of refined oil products, potentially triggering a price war with Asian competitors as its exports feed into a glut.
Saudi Arabia’s massive refineries are now processing more of its crude at home, moving the country into a tie with Royal Dutch Shell as the world’s fourth-largest refiner and enabling it to export more fuel products than ever before.
Petrobras Oil Platform Output Cut
An output cut at an offshore oil and gas platform owned and operated by Brazil's state-led oil company Petroleo Brasileiro SA was not caused by a 24-hour strike, a union involved in the action said.
The output cut on the P-15 platform happened on July 20, four days before the strike, after Petrobras, as the company is known, began adjustments to its gas compression system's turbo and motor compressors, Marcos Breda, communications director for SindepetroNF, a union representing platform workers, said.
It was not immediately clear why the union said that the strike was responsible for the platform shutdown.
Petrobras confirmed that the platform had been shut for repairs four days before the strike began.
According to FUP, a union federation to which SindipetroNF belongs, union workers struck at 19 offshore platforms in the Campos and Santos Basins.
Pemex to Ship 6mb of Crude to Japan Refinery
Mexico's Pemex said it had agreed to ship six million barrels of its light crude to Japan's largest refinery over the next six months, as the state-run oil company seeks to further develop its ties with Asia.
The shipments of Isthmus crude will go via six cargoes between this August and January 2016 to JX Nippon Oil & Energy Corp. Pemex already shipped about 4 million barrels to JX Nippon in the first half of the year.
Pemex had been negotiating with buyers in Japan and South Korea earlier this year about the chloride content of its crude, and said it would offer discounts if the level of the chemical that can cause corrosion was higher than usual.
The crude will be shipped from Pemex's Salina Cruz terminal on the southern Pacific coast of Mexico. The company did not include pricing information in its announcement.
Global oil and Asian product market, July
By Zakiye Bahrami
Crude prices slip to three-month lows on oversupply market and high stocks
Crude prices were on downward trend from the beginning of July. According to The International Energy Agency recent report, the oil price could fall even further and "massively oversupplied" global oil market would continue into 2016. "The bottom of the market may still be ahead," the IEA said, adding: "The rebalancing that began when oil markets set off on an initial 60% price drop a year ago has yet to run its course."
" The oil market was massively oversupplied in the second quarter of 2015, and remains so today. It is equally clear that the market’s ability to absorb that oversupply is unlikely to last. Onshore storage space is limited, so is the tanker fleet. "
The IEA said OECD industry inventories hit a record 2.876 billion barrels in May, up by a steep 38 million barrels. OECD production is expected to be lower, while OPEC was expected to continue to produce at record highs. Iranian oil exports could increase after sanctions against Tehran is lifted. A 500,000 b/d jump in Persian Gulf production in June was led by Saudi Arabia, Iraq and the UAE, which produced 1.8 m b/d more crude than a year ago.
Return of Iranian barrels is likely to affect oil supply. According to Financial Times article, the new phase in Iranian oil market is going to happen in both upstream and downstream with interested major oil groups to return to Iranian projects and contracts. “The return of Iran to international oil markets comes at a time when global supplies are already far exceeding demand. And while few expect the process of unwinding international sanctions to be completed before 2016, Iran has made clear it plans to ramp up exports as quickly as possible,” The FT said.
Asian Product Markets
Following drop in crude prices, Singapore products prices fell. Singapore products also fell fundamentally, confirming weak situation in the market (graphs 2 & 3).
Products market fundamentals in brief
July2015 |
Light Distillates |
Middle Distillates |
Heavy Products |
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Gasoline |
Naphtha |
Gasoil |
Jet Fuel |
Fuel Oil 180 & 380 cst |
|
↓ |
↓ |
↓ |
↓ |
↓ |
(Upward arrow: strength, downward arrow: weakness)
Light Distillates (gasoline, naphtha)
Lower gasoline exports to the US and rising supplies in the Rotterdam pushed gasoline market downside. More weakness were seen in gasoline market with the lower demand from Indonesia and other main Asian importers at the end of Ramadan.
Asian naphtha crack – differential between naphtha price and Dubai crude prices - reached its lowest level since the start of 2015. Naphtha market is fundamentally weak on pressure from high Middle Eastern supply from new refineries and Western arbitrage arrivals. More supply-side pressure stemmed from higher Indian volumes. It is expected that oversupplied situation in the region will be continued in the coming period. Based on the reports, around 1.8-1.9 million tons of naphtha are making their way west-to-east during July, with similar volumes likely to arrive in Asia in August.
Middle Distillates (gasoil, jet fuel)
Ample supply and seasonally softer demand shaped the weak Asian gasoil market. During July, Chinese exports increased and additional cargoes were offered by firms in Malaysia and Taiwan. Moreover, increased production from Aramco limited the market more.
Jet fuel crack continued its downward trend which started since November 2014 and reached its lowest level that is Unprecedented at least from 2013. There were plenty of cargoes in the region. High freight rates made exports out of the region hard to work, and even though reports suggest that suppliers were finding homes for barrels in Europe and the US (Platts), arbitrage has done little recently to support the market. Looking ahead, any sustained recovery in Asian jet cracks in the next few weeks looks unlikely, especially with regional crude intake expected to continue rising as refineries return online.
Fuel Oil
Fuel oil market in both grades weakened. Asian fuel oil demand was weak as more crude import allocations were awarded to Chinese teapot refiners. This situation will be continued in the coming months. On the other hand, supplies were ample amid high refinery utilization rates and high stock levels in Singapore. However there were some supportive factors in the market which caused the market to be still strong compared to the year 2014. Startup of secondary conversion units at the new Yanbu and Ruwais cut Middle East fuel oil exports. Moreover, summer increased fuel oil demand for electricity and air conditioning. Therefore, lower arrivals from the Middle East and West of Suez, helped Singapore fuel oil market to work fundamentally active.
Iran Vessel Gathers Persian Gulf Oil Pollutants
Over recent years, seas and lakes across the world have become a place for dumping pollutants, particularly oil pollutants. That is why the UN special agency, International Maritime Organization (IMO), has been focusing specifically on the issue of environment pollution at seas. Persian Gulf is currently a major transit route for oil shipment to the world. Many oil and gas projects are under way in the Persian Gulf. Almost 60% of the world’s oil reserves are accumulated in the Persian Gulf region and due to the incessant oil transit through the Persian Gulf, huge volumes of pollutants is flowing in.
According to the latest official data released in global reports, the Persian Gulf and Sea of Oman are known to be among the most polluted maritime regions due to the release of pollutants from oil and commercial vessels, and 10 million tons of pollutants resulting from war and urban wastewaters. These oil pollutants are also caused by accidents at seas, dumping, oil transit, reparation of vessels, fuel smuggling and cooling of engine rooms. However, the bulk of pollution in the Persian Gulf and the Strait of Hormuz comes from oil wells and oil platforms. Add to this other factors like smuggling of gasoil and gasoline, depot of urban and hospital waste in the Persian Gulf littoral states and long-term industrial projects. These factors are jeopardizing the Persian Gulf ecosystem health and safety day by day.
One can easily find out that the transportation of 17 mb/d of oil through the Strait of Hormuz, transit of 40,000 to 50,000 very large crude carriers in the Persian Gulf and the leak of 15,000 metric tons of oil products due to the heavy traffic of oil tankers have made Persian Gulf the most polluted gulf in the world to. According to official data, 57% of Persian Gulf oil pollution comes from the displacement of oil tankers. This index varies between 4% and 15% in other seas in the world at worst. The major cause of pollution in the Persian Gulf dates back to Iraq-Iran war from 1980 to 1988. By that time, 5.8 million barrels of oil was released into the sea. At present, Persian Gulf and Sea of Oman are reported to be 47 times more polluted than standard level.
Given the fast growth of Persian Gulf pollution due to the leak of oil and oil products from vessels and the flow of industrial wastes and urban wastewaters into this sea, it is necessary to apply new methods in order to resolve this problem. The significance of this issue has given impetus to the Persian Gulf littoral states to envisage action to get rid of this environmental scourge.
As a Persian Gulf littoral state, Iran has taken numerous measures with a view to protecting the Persian Gulf environment in light of the significance of safeguarding the environment and meeting international obligations. In its latest measure, Iran sent a maritime pollution gathering vessel into the Persian Gulf recently. This vessel, Darya Pak 1 (clean sea), is planned to boost Iran’s status in protecting maritime environment in the Persian Gulf region. The vessel was launched in collaboration with a Norwegian company at Bandar Abbas Shipbuilding Complex. The vessel started its mission in the final days of spring in a bid to safeguard the environment of Persian Gulf and Sea of Oman.
The vessel was ordered by Iran Ports and Maritime Organization. It cost more than IRR 690 billion and it took four years to be constructed by Iranian engineers at Iran Offshore Industries and Shipbuilding Complex. The vessel was initially supposed to have been built in one year, but due to the imposition of sanctions on Iran, it took four years. However, it cost 25% lower than similar foreign vessels. Measuring 5.5 meters long and 13 meters wide, it can accommodate 22 crewmembers. The vessel has a capacity of gathering 550 cubic meters of pollutants and wastes. The vessel’s draft is around four meters and it runs at 30 kilometers per hour. It is among the most advanced vessels built in the country with a capacity to clean domestic and international polluted waters in the shortest possible time. The vessel has been designed such that it could gather pollutants up to 25 meters deep in the sea. It is a unique vessel in the Middle East. This vessel has also two 100-meter-long wings for gathering pollutants and it can clean the Sea of Oman completely.
The design of this vessel took 1,200 man/hour at PMO and the construction of this vessel will save the country foreign currency in the future.
Darya Pak-I vessel enjoys the state-of-the-art technology for fighting oil pollution and five types of the most advanced equipment has been installed on this ship in order to clean any kind of oil spill in different depths. After gathering these spills, the vessel transfers them to the shore to be used for other purposes.
The vessel has been constructed by Bahr Gostaresh Company and its equipment was purchased from abroad and mounted inside the country. The four-engine vessel has three generators and its launch in the Persian Gulf waters was a breakthrough in Iran’s green industry and domestic manufacturing.
These specifications underscore the significance of construction of such a vessel and the launch of the first Iranian vessel to gather oil pollution. The removal of Persian Gulf and Sea of Oman pollution was a major request from coastal residents. With the help of this vessel, their wishes will come true.
Three such vessels are needed in order to clean the Persian Gulf and the Sea of Oman from oil pollutants. Iran Offshore Industries and Shipbuilding Complex will soon start building Darya Pak-II vessel.
Sulfur-to-Fertilizer
As recovery from hydrocarbon reservoirs in the world increases, sulfur production exceeds its consumption. Every year, a large amount of sulfur is left unused.
Recent studies show that the annual sulfur production is set to rise significantly across the world because the oil extracted from reservoirs is becoming sourer and sourer due to the higher content of sulfur.
Therefore, given restrictions and regulations set by international bodies with regard to the protection of the environment, it is necessary that the percentage of sulfur in the extracted oil be reduced to a large extent.
It is forecasted that 72 million tons of sulfur would be produced in the world in 2017. That is much higher than global demand for this product.
Moreover, sulfur recovery from fossil fuels in order to prevent air pollution and corrosion of equipment and machinery would cause significant sulfur production, which is counted as sulfur surplus. Therefore, finding new methods for the consumption of surplus sulfur produced in oil and gas refineries and its conversion into products of higher value has become a cause of concern for many countries in the world and these countries are currently considering value-added generation from this substance and minimizing its damage to the environment.
Over recent years, Iran has been exporting raw sulfur, but that was not profitable business. Since sulfur is a byproduct of gas refineries, it is possible to use new technologies to produce products of higher value-added from sulfur. For instance, sulfur could be used in agriculture to improve the quantity and quality of produce. Sulfur can help reform the soil PH and contribute to the growth of protein-containing plants like pistachio and alfalfa.
Since a major challenge to Iran’s petroleum industry is the production of sulfur as a byproduct and the transfer and sale of a large amount of sulfur is not economical and there may not be enough space for storage, the sulfur stocked in stores had better be converted into products of higher value.
Given the significance of this issue, researchers at the Research Institute of Petroleum Industry (RIPI) recently managed to produce a type of agricultural fertilizer from the surplus sulfur produced in Iran’s petroleum industry. This fertilizer has contributed to a 30% higher productivity in farmlands.
Forouzan Vakili, manager of this project, said sulfur is considered as an extra substance in the oil and gas industries.
“In the sour gas sweetening process and demercaptanization, a large amount of this substance is accumulated and oil and gas industry activists are looking for approaches to transform sulfur into products of higher value-added,” he said.
Referring to research conducted in this field, he said that using this substance for agricultural purposes is a propriety. He added that studies are planned to be conducted for using sulfur in the agricultural sector.
Vakili said: “To that end, we managed to produce agricultural fertilizer from sulfur by using additives and micro-nutritive elements.”
He said the final product is granulated sulfur to be used in the agriculture sector, adding that the research is being conducted by the Ministry of Agriculture and Soil and Water Research Institute.
“Under this cooperation framework, we are determined to develop the use of the produced fertilizer for quantitative and qualitative improvement of the products,” said Vakili.
He said these studies have been carried out in two phases, adding that the first phase showed that this agricultural fertilizer would boost the productivity by 20 to 30% in farmlands.
Regarding the second phase of these studies, Vakili said: “In this phase, we are making efforts to have this product included in the country’s agricultural fertilizer mix and draw up a national document for its consumption.”
The produced sulfur, he said, could be used for nutritive and reforming purposes. He added that since the soil in Iranian farmlands is basic, this fertilizer could be used for changing soil from basic to acidic medium.
He noted that this type of fertilizer would help absorb nutritive materials more effectively.
Vakili said oil seeds would be benefiting more than any other materials from this type of sulfur.
“We have used this product for growing strategic products like wheat, soya, colza and cotton. The results have indicated a 20-30% increase in the performance and output,” he said.
Petchem Co. Basketball Dreams of Asia Championship
Without a bit exaggeration, when someone speaks about basketball in Iran, the first thing striking minds is the name of Bandar Imam Petrochemical Company’s Club (BIPC). This team has fared very well in recent years and has managed to take Iran’s basketball out of a bipolar status.
BIPC club has made progress following planning in recent years and it has now reached a level of development to be counted upon as one of leading basketball teams. Besides recording success at national level, the team is now representing Iran and hopes to realize major objectives in Asian clubs championship.
History
Exactly when Tehran’s Mahram Club was known as the master of basketball in Iran, the emergence of BIPC basketball team raised eyebrows across the country. For the first time in the country, this club launched an academy of basketball and brought about progress in this sector at national level. The club located in Sar Bandar city changed the equations of basketball league with a veteran coach like Mehran Hatami. The team won trophies in two consecutive seasons without registering any defeat. The team set an unforgettable record. BIPC club has also registered four runners-up title in its history.
Bad Luck
Upon a recommendation by Gholam-Reza Dolou, the former head of Iran Basketball Federation, two leagues, one national and one professional were held in the last season. The difference between these two leagues lied in the composition of players. National league did not allow foreign basketball players in.
BIPC basketball team showed up strongly in both leagues, but it lost the championship cup due to bad luck.
This club made its way through to the national league finale. Despite the fact that some of its key players had sustained injuries, it did fare well against Mahram. However, it was defeated in three games and won only one to finish runners-up. Similar conditions prevailed in the professional league of basketball. BIPC failed to go to the finale, but it won Gorgan Municipality team and finished the third.
Youth Orientation
Over these years, BIPC basketball team has had famous players like Samad Nik-Khah Bahrami, Mehdi Kamrani, Hamed Afaq, Behnam Yakhchali and Arsalan Kazemi, but it has never hesitated to recruit young players. Thanks to an influential basketball academy it has, this club introduces a large number of qualified youths every year to join Iran’s basketball team. This issue reached its zenith in the last season and some BIPC players managed to prove their qualifications. More of them are expected in the future.
Big Objectives
Despite its failure to win the league championship title, BIPC is representing Iran at the Asian basketball championship league. Every year, West Asian countries play for winning quota. This year, Iran had to choose between Mahram and BIPC. But Mahram stepped back and now BIPC has been chosen to represent Iran.
Now, the club and particularly its managing director Shapour Yari are determined to train a powerful team for Asian games. BIPC has been authorized to have two foreign players in its composition.
The Asian basketball championship games are scheduled to be held in October.
BIPC to Fare Well
The several-year presence of Mehran Hatami as the head coach of BIPC club has won the club significant success. Valuable services rendered by this coach to this team will never be forgotten. However, after the end of BIPC matches in the last season, the Board of Directors of the club named Mehran Shahin Tab’e as the new head coach for the club. Shahin Tab’e has been of great help to Iran’s basketball. He was set to become the basketball federation’s choice as the head coach, but he lost this chance after a directive instructed a non-Iranian head coach. The following is a short interview with Shahin Tab’e:
Q: How come you accepted to serve as the head coach of BIPC?
A: The club’s managers had talked to me some time ago and asked me to provide them with plans. I offered my plans which were accepted and I took over as BIPC head coach.
Q: You’ve already been present at BIPC. How much has it been helpful to your new job?
A: It was definitely very influential. One of the main reasons which persuaded me to accept the BIPC proposal was this issue. But due to the short history of BIPC team, everyone knows this club as an important basketball team and this team is in a specific position. BIPC is a qualified team and conditions are ripe for working with it. I have the impression that big jobs could be done for this team.
Q: You were a major choice to serve as the head coach of Iran’s national team. But a foreigner was finally chosen. Why?
A: Every coach likes to serve his country’s national team and I am no exception. I would have accepted any offer and I would have been proud of working for my country’s team, but the federation officials decided to hire a foreign coach. Anyway, I wish this German coach, who has a very good record, success.
Q: You must know that BIPC has been chosen to represent Iran at Asian basketball championship league. What are your plans?
A: I think a very good opportunity has been provided for our team to be able to display our qualifications. I have already negotiated about presence in Asian games with the managing director of the club and the BIPC is looking for a strong presence in the Asian games. This team should be strengthened and we should be able to run by hiring veteran and young players.
Q: How hopeful are you to win the Asian championship?
A: Hope gives us impetus to live. We have to benefit from this opportunity and we exhaust our efforts to achieve good results.
Q: BIPC is participating in these games for the first time. What do you think?
A: Experience is definitely an important issue in such games, but we will try to fill this void by hiring experienced players. The petrochemical complexes have big dreams and we will doubtlessly represent Iran in a qualified manner.
Q: Anything for conclusion?
A: We want the Iranian people to support us so that we would respond to their kindness by registering good results in the Asian clubs championship.
History of Bakhtiari Oil Company
Due to the existence of oil in Bakhtiari-owned lands, this ethnic group was in direct contact with foreign investors and governments. This communication brought them both benefits and losses.
Among the important events that oil imposed on the Bakhtiaris was the 1905 contract and the establishment of Bakhtiari Oil Company (BOC) in 1909.
William Knox D’Arcy won concessions for the purchase of oil, natural wax and minerals in 1901.
The D'Arcy Concession was a petroleum oil concession that was signed in 1901 between William Knox D'Arcy and Mozzafar al-Din Shah of Persia. The oil concession gave D’Arcy the exclusive rights to prospect for oil in Persia. This 18 point concession would give D’Arcy the exclusive rights to prospect, explore, exploit, transport and sell natural gas, petroleum, asphalt and mineral waxes in Persia.
Several years after the signature of this concession, the exploration activities of D’Arcy were extended to Mount Zagros in southwest Iran, the British explorer dispatched his representatives to the black tents of Bakhtiari nomads in order to win them over.
In fact, the feudalist structure of Iran during the Qajar dynasty and the weakness of the central government in dealing with the powerful nomadic cores in Iran’s traditional social structure of the time had forced the concessioner to negotiate a deal with Bakhtiaris living in the exploration zone.
In 1905, four years after the D’Arcy concession was awarded, an agreement was signed between the representatives of the concessioner and the Bakhtiari tribal chiefs. Of course, D’Arcy took no specific action in this regard and he delegated the task to British Foreign Office.
British consul in Iran’s central city of Isfahan, General John Preece, was tasked by British Foreign Office to negotiate with the Bakhtiari tribal chiefs on behalf of D’Arcy. Negotiation with the Bakhtiaris was not so easy. The Bakhtiaris had heard rumors about other oil concessions and they were eager to know more about the concessioner’s real intentions.
At that time, Najaf-Qoli Khan Samsam as-Saltaneh and Gholam-Hossein Khan Shahab as-Saltaneh were two Bakhtiari tribal chiefs. However, Ali-Qoli Khan Sardar As’ad was much more above them because of his influence. Long years of stay in Tehran and his friendship with Qajar chancellor Amin as-Sultan as well as travels to Europe distinguished him from other tribal chiefs. That is why General Preece was more prudent in his negotiations with As’ad than with others.
In the negotiations held in spring, the tribal chiefs had demanded 10% of revenues, but Sardar As’ad demanded 20%. However, in the end, the 10% share was agreed upon.
The representative of D’Arcy and the Bakhtiari tribal chiefs finally sealed an agreement on November 15, 1905. By virtue of this six-point deal, the D’Arcy concession was insured because he was convinced that the seal of approval by Bakhtiari tribal chiefs was more valid than the seal of approval of Mozzafar al-Din Shah of Qajar.
Based on this deal, D’Arcy received all parcels of land he needed for exploration and production and of course he had already won permission from the central government from the Bakhtiaris and he only paid sums for the farmlands.
In return for 2,000 pounds a year, the Bakhtiari tribal chiefs committed to protect all roads and facilities and people involved in oil exploration operations.
Najaf-Qoli Khan Samsam as-Saltaneh, Gholam-Hossein Khan Shahab as-Saltaneh, Ali-Qoli Khan Sardar As’ad and Nasir Khan Sarem al-Molk signed the deal with General Preece and Reynolds in the presence of Mohammad-Taqi Khan Amin al-Sharia, the first secretary of Preece, about oil drilling operations. This deal gave further assurances to the concessioner for investment in Iran.
Preece and Reynolds also took advantage of the unawareness of the opposite party in order to face fewer problems in the future. The deal required the Bakhtiaris to appoint chiefs for their protection forces. These chiefs were tasked with controlling bodyguards and Iranian laborers.
The general terms of this agreement reached on 15 November 1905 were as follows:
1. The Agreement was to remain in force for 5 years. All required land was to be handed over by the Khans "at the fair price of the day". Non-arable land was to be free.
2. The Company was to pay the Khans 2,000 Pounds per annum (subsequently increased to 2,500 Pounds) in quarterly installments, in return for the guards furnished by the latter. …. Before the finding of oil, the Khans were to furnish two bodies of guards to protect the two places where drilling was to be done. After the finding of oil, the Khans were to furnish as many bodies of guards as would be required to protect the various spots where drilling would be carried out.
3. In the event of sufficient oil being found in Bakhtiari territory, the terms of the Agreement were to remain binding as long as the D'Arcy Concession continued in force.
4. On the pipeline being constructed, the Company was to increase the guarding subsidy to 3,000 Pounds per annum.
5. After the formation of one or more companies to work in the Bakhtiari lands, and after oil had been passed through the pipeline, the Company was to grant the Khans 3 per cent of all the ordinary shares issued by such company or companies, the said shares to be fully paid.
6. Should the employees of the Khans fail in their duties, the Company would have the right to ask for compensation for any loss.
7. On the expiration of the D'Arcy Concession, all buildings that belonged to the Company were to become the property of the Khans.
Article 1 of the Agreement later became the subject of serious dispute between the Company and the Khans. Dr. Young representing the Company, negotiated during 17-28 April 1911 with Sardar Mohtashem and Sardar Bahador at Masjid-I-Suleiman and offered the Khans 23 Tumans a jarib (a third of an acre) for cultivated land and 5 Tumans for hill tracts. The Khans agreed taking 2,000 Pounds as negotiators and two installments of 10,000 Pounds and 5,000 Pounds, which with a 5,000 Pounds advance they had received the previous year, made up the agreed sum thus concluding the dispute after 6 years of negotiations.
During the three-year distance between the 1905 signature of agreement and the 1908 discovery of oil in Naftoun oil field, certain events forced D’Arcy to give half of its shares to the British government in a bid to win its financial support. After that, the British government was officially a party to the deal with the Bakhtiaris. Over this time, the tribal chiefs who had signed the 1905 deal were enjoying some financial benefits.
Of course, nobody can deny the benefits of the Bakhtiaris’ familiarity with civilization and industrial progress, but the main question here is to know why the Bakhtiaris failed to change their lifestyle in other regions than Zagros.
In 1908, Reynold's perseverance paid off. On the 16th of May 1908, drillers working at Masjid-I-Suleiman detected a "strong smell of gas" in the well. At 4 o'clock in the morning of May 26th, oil was struck and it was in commercial quantities. This, without question was the tip of a vast reservoir that lay beneath that barren land deep in the winter grazing grounds of the Bakhtiaris. On the 14th of April 1909 the Anglo-Persian Oil Company was formed with an initial capital of 2 million pounds. The British had realized that close relationship with the Bakhtiari tribal chiefs was the key to their success in the oil territories and to reach this aim, three steps had to be taken. The first one was to reach an agreement for the purchase of territories as needed. The second one, an agreement for the protection of installation and the pipelines and the third, was to give some share of the Company to the Bakhtiaris. The first two had been achieved. On the 13th of April 1909, Bakhtiari Oil Company was formed with a capital of 400,000 Pounds, and it was agreed that the Bakhtiari "Khans" were to receive 3% of the profits of companies formed in addition to holding 37,200 shares of the First Exploitation Company and 11,670 shares of the Bakhtiari Oil Company. With the formation of Anglo-Persian Oil Company Ltd., all the rights were transferred to the new parent company.
The Bakhtiaris were never paid the sums they deserved under the 1905 deal, and their shares were finally given to the central government.
Persepolis, Glory of Ancient Persia
Persepolis was the ceremonial capital of the Achaemenid dynasty in ancient Persia from 550 to 330 BC. Located 70 km northeast of the southern city of Shiraz in Fars Province, Persepolis was destroyed by Alexander the Great of Macedonia. Millions of visitors travel to Persepolis every year to visit ruins.
Persepolis is a UNESCO World Heritage site.
To the ancient Persians, the city was known as Pārsa. The English word Persepolis is derived from the Greek Persépolis (Περσέπολις), compound of Pérsēs (Πέρσης) and pólis (πόλις), meaning "Persian city".
As new archaeological evidence suggests the earliest remains of Persepolis date back to 515 BC. Famous French archeologist André Godard, who excavated Persepolis in the early 1930s, concluded that Cyrus the Great had chosen the site for Persepolis, but Darius I erected the terrace and the great palaces.
Apadana Palace and the Council Hall, the main imperial Treasury and its surroundings were all constructed under the order or Darius. These edifices were completed when his son King Xerxes the Great came to power. Construction work continued on the terrace until the downfall of the Achaemenid dynasty.
Persepolis Structure
The Persepolis palaces sprawl on 125,000 square meters of land. The ancient site is located near the small river Pulvar, which flows into the river Kur whose name is derived from Persian word for Cyrus. The site includes artificially constructed parts and cut out of a mountain.
The other three sides are formed by retaining walls, which vary in height with the slope of the ground from 5 to 13 meters on the west side of a double stair.
Entrance
There are double stairs giving access into Persepolis. Built face to face, the stairs are located in the northwestern section of the site.
Construction of a broad stairway started in 519 BC to be the main entrance to the terrace 20 meters above the ground. The dual stairway, known as the Persepolitan stairway, was built in symmetrically on the western side of the Great Wall. The 111 steps were 6.9 meters wide with treads of 31 centimeters and rises of 10 centimeters.
The steps were originally believed to have been built to allow for nobles and royalty to ascend by horseback. But new findings suggest that the shallow risers allowed visiting dignitaries to maintain a regal appearance while ascending. The top of the stairways led to a small yard in the north-eastern side of the terrace, opposite the Gate of Nations.
A pair of bulls with the heads of bearded men stands by the western threshold. Another pair, with wings and a Persian head, stands by the eastern entrance, to reflect the power of the Empire.
Apadana Palace
Apadana is among the most ancient palaces in Persepolis. Built following the order of Darius the Great, the palace was used for staging New Year celebrations and receiving envoys from other countries.
The palace had a grand hall in the shape of a square, each side 60 meters long with 72 columns, thirteen of which still stand on the enormous platform. Each column is 19 meters high with a square Taurus and plinth. The columns carried the weight of the vast and heavy ceiling.
Tachara
The Tachara, Tachar Château, Mirror Hall or exclusive palace of Darius I is one of the interior palaces in Persepolis. This outdated Persian world means winter residence. Made of gray stone, the palace was built by Darius I. However, only a small portion of the palace was finished under his rule, and it was his successor and son Xerxes I who completed after his death in 486. Xerxes called the house a Taçara, winter palace. Artaxerxes I continued to use the palace. Its ruins are immediately south of the Apadana.
Hadish Palace
Hadish Palace was reserved to King Xerxes. It is built at the highest part of Persepolis. The palace is connected to the Queen’s Palace through two stairways. Xerxes named the palace after his second wife Hadish.
Hadish Palace is in the southernmost part of the palace and its floor is mainly the mountain.
Queen’s Palace
Queen’s Palace was also built by King Xerxes. Compared with other palaces, it is located at the lowest altitude.
German archeologist and Iranologist Ernst Emil Herzfeld started excavation in Queen’s Palace in 1931. It was then renovated and is today used as a museum and the central office of Persepolis installations.
Throne Hall
Next to the Apadana, second largest building of the Terrace and the final edifice is the Throne Hall or the Imperial Army's hall of honor (also called the "Hundred-Columns Palace). This 70x70 square meter hall was started by Xerxes and completed by his son Artaxerxes I by the end of the fifth century BC.
Tripylon
The Tripylon ("triple gate") of Persepolis can be found between the Apadana and the Hall of Hundred Columns.
This suggests that it was built after the completion of these two buildings, but this is no more than a speculation. Other scholars argue for an earlier date. However, the building consists of a central room with approaches to the north (to the Apadana), east (Hall of hundred columns) and south (palace of Xerxes and "palace D").
The three gates were decorated. In the eastern gate, we can see the king sitting on his throne, attended by the crown prince. The southern and northern gates showed the king with an attendant, leaving the building. Both representations are well-known; parallels can be seen in the Palace of Xerxes and the Hall of Hundred Columns.
Naqsh-e Rustam
Naqsh-e Rustam is an ancient necropolis located about 12 km northwest of Persepolis near the city of Marvdasht in Fars province.
One of the most ancient historical sites, Naqsh-e Rustam is home to signs from the Elamite, Achaemenid and Sassanid dynasties.
Four tombs belonging to Achaemenid kings are carved out of the rock face at a considerable height above the ground.
One of the tombs is explicitly identified by an accompanying inscription as the tomb of Darius I the Great (c. 522-486 BC). The other three tombs are believed to be those of Xerxes I (c. 486-465 BC), Artaxerxes I (c. 465-424 BC), and Darius II (c. 423-404 BC) respectively. A fifth unfinished one might be that of Artaxerxes III, who reigned at the longest two years, but is more likely that of Darius III (c. 336-330 BC), last of the Achaemenid dynasts.
Pasargadae
Pasargadae was the capital of the Achaemenid Empire under Cyrus the Great.
Located in Fars Province, Pasargadae is also a UNESCO World Heritage site.
Its palaces, gardens and the mausoleum of Cyrus are outstanding examples of the first phase of royal Achaemenid art and architecture and exceptional testimonies of Persian civilization. Particularly noteworthy vestiges in the 160-ha site include: the Mausoleum of Cyrus II; Tall-e Takht, a fortified terrace; and a royal ensemble of gatehouse, audience hall, residential palace and gardens. Pasargadae was the capital of the first great multicultural empire in Western Asia. Spanning the Eastern Mediterranean and Egypt to the Hindus River, it is considered to be the first empire that respected the cultural diversity of its different peoples. This was reflected in Achaemenid architecture, a synthetic representation of different cultures.
Persepolis, Glory of Ancient Persia
Persepolis was the ceremonial capital of the Achaemenid dynasty in ancient Persia from 550 to 330 BC. Located 70 km northeast of the southern city of Shiraz in Fars Province, Persepolis was destroyed by Alexander the Great of Macedonia. Millions of visitors travel to Persepolis every year to visit ruins.
Persepolis is a UNESCO World Heritage site.
To the ancient Persians, the city was known as Pārsa. The English word Persepolis is derived from the Greek Persépolis (Περσέπολις), compound of Pérsēs (Πέρσης) and pólis (πόλις), meaning "Persian city".
As new archaeological evidence suggests the earliest remains of Persepolis date back to 515 BC. Famous French archeologist André Godard, who excavated Persepolis in the early 1930s, concluded that Cyrus the Great had chosen the site for Persepolis, but Darius I erected the terrace and the great palaces.
Apadana Palace and the Council Hall, the main imperial Treasury and its surroundings were all constructed under the order or Darius. These edifices were completed when his son King Xerxes the Great came to power. Construction work continued on the terrace until the downfall of the Achaemenid dynasty.
Persepolis Structure
The Persepolis palaces sprawl on 125,000 square meters of land. The ancient site is located near the small river Pulvar, which flows into the river Kur whose name is derived from Persian word for Cyrus. The site includes artificially constructed parts and cut out of a mountain.
The other three sides are formed by retaining walls, which vary in height with the slope of the ground from 5 to 13 meters on the west side of a double stair.
Entrance
There are double stairs giving access into Persepolis. Built face to face, the stairs are located in the northwestern section of the site.
Construction of a broad stairway started in 519 BC to be the main entrance to the terrace 20 meters above the ground. The dual stairway, known as the Persepolitan stairway, was built in symmetrically on the western side of the Great Wall. The 111 steps were 6.9 meters wide with treads of 31 centimeters and rises of 10 centimeters.
The steps were originally believed to have been built to allow for nobles and royalty to ascend by horseback. But new findings suggest that the shallow risers allowed visiting dignitaries to maintain a regal appearance while ascending. The top of the stairways led to a small yard in the north-eastern side of the terrace, opposite the Gate of Nations.
A pair of bulls with the heads of bearded men stands by the western threshold. Another pair, with wings and a Persian head, stands by the eastern entrance, to reflect the power of the Empire.
Apadana Palace
Apadana is among the most ancient palaces in Persepolis. Built following the order of Darius the Great, the palace was used for staging New Year celebrations and receiving envoys from other countries.
The palace had a grand hall in the shape of a square, each side 60 meters long with 72 columns, thirteen of which still stand on the enormous platform. Each column is 19 meters high with a square Taurus and plinth. The columns carried the weight of the vast and heavy ceiling.
Tachara
The Tachara, Tachar Château, Mirror Hall or exclusive palace of Darius I is one of the interior palaces in Persepolis. This outdated Persian world means winter residence. Made of gray stone, the palace was built by Darius I. However, only a small portion of the palace was finished under his rule, and it was his successor and son Xerxes I who completed after his death in 486. Xerxes called the house a Taçara, winter palace. Artaxerxes I continued to use the palace. Its ruins are immediately south of the Apadana.
Hadish Palace
Hadish Palace was reserved to King Xerxes. It is built at the highest part of Persepolis. The palace is connected to the Queen’s Palace through two stairways. Xerxes named the palace after his second wife Hadish.
Hadish Palace is in the southernmost part of the palace and its floor is mainly the mountain.
Queen’s Palace
Queen’s Palace was also built by King Xerxes. Compared with other palaces, it is located at the lowest altitude.
German archeologist and Iranologist Ernst Emil Herzfeld started excavation in Queen’s Palace in 1931. It was then renovated and is today used as a museum and the central office of Persepolis installations.
Throne Hall
Next to the Apadana, second largest building of the Terrace and the final edifice is the Throne Hall or the Imperial Army's hall of honor (also called the "Hundred-Columns Palace). This 70x70 square meter hall was started by Xerxes and completed by his son Artaxerxes I by the end of the fifth century BC.
Tripylon
The Tripylon ("triple gate") of Persepolis can be found between the Apadana and the Hall of Hundred Columns.
This suggests that it was built after the completion of these two buildings, but this is no more than a speculation. Other scholars argue for an earlier date. However, the building consists of a central room with approaches to the north (to the Apadana), east (Hall of hundred columns) and south (palace of Xerxes and "palace D").
The three gates were decorated. In the eastern gate, we can see the king sitting on his throne, attended by the crown prince. The southern and northern gates showed the king with an attendant, leaving the building. Both representations are well-known; parallels can be seen in the Palace of Xerxes and the Hall of Hundred Columns.
Naqsh-e Rustam
Naqsh-e Rustam is an ancient necropolis located about 12 km northwest of Persepolis near the city of Marvdasht in Fars province.
One of the most ancient historical sites, Naqsh-e Rustam is home to signs from the Elamite, Achaemenid and Sassanid dynasties.
Four tombs belonging to Achaemenid kings are carved out of the rock face at a considerable height above the ground.
One of the tombs is explicitly identified by an accompanying inscription as the tomb of Darius I the Great (c. 522-486 BC). The other three tombs are believed to be those of Xerxes I (c. 486-465 BC), Artaxerxes I (c. 465-424 BC), and Darius II (c. 423-404 BC) respectively. A fifth unfinished one might be that of Artaxerxes III, who reigned at the longest two years, but is more likely that of Darius III (c. 336-330 BC), last of the Achaemenid dynasts.
Pasargadae
Pasargadae was the capital of the Achaemenid Empire under Cyrus the Great.
Located in Fars Province, Pasargadae is also a UNESCO World Heritage site.
Its palaces, gardens and the mausoleum of Cyrus are outstanding examples of the first phase of royal Achaemenid art and architecture and exceptional testimonies of Persian civilization. Particularly noteworthy vestiges in the 160-ha site include: the Mausoleum of Cyrus II; Tall-e Takht, a fortified terrace; and a royal ensemble of gatehouse, audience hall, residential palace and gardens. Pasargadae was the capital of the first great multicultural empire in Western Asia. Spanning the Eastern Mediterranean and Egypt to the Hindus River, it is considered to be the first empire that respected the cultural diversity of its different peoples. This was reflected in Achaemenid architecture, a synthetic representation of different cultures.
Persepolis, Glory of Ancient Persia
Persepolis was the ceremonial capital of the Achaemenid dynasty in ancient Persia from 550 to 330 BC. Located 70 km northeast of the southern city of Shiraz in Fars Province, Persepolis was destroyed by Alexander the Great of Macedonia. Millions of visitors travel to Persepolis every year to visit ruins.
Persepolis is a UNESCO World Heritage site.
To the ancient Persians, the city was known as Pārsa. The English word Persepolis is derived from the Greek Persépolis (Περσέπολις), compound of Pérsēs (Πέρσης) and pólis (πόλις), meaning "Persian city".
As new archaeological evidence suggests the earliest remains of Persepolis date back to 515 BC. Famous French archeologist André Godard, who excavated Persepolis in the early 1930s, concluded that Cyrus the Great had chosen the site for Persepolis, but Darius I erected the terrace and the great palaces.
Apadana Palace and the Council Hall, the main imperial Treasury and its surroundings were all constructed under the order or Darius. These edifices were completed when his son King Xerxes the Great came to power. Construction work continued on the terrace until the downfall of the Achaemenid dynasty.
Persepolis Structure
The Persepolis palaces sprawl on 125,000 square meters of land. The ancient site is located near the small river Pulvar, which flows into the river Kur whose name is derived from Persian word for Cyrus. The site includes artificially constructed parts and cut out of a mountain.
The other three sides are formed by retaining walls, which vary in height with the slope of the ground from 5 to 13 meters on the west side of a double stair.
Entrance
There are double stairs giving access into Persepolis. Built face to face, the stairs are located in the northwestern section of the site.
Construction of a broad stairway started in 519 BC to be the main entrance to the terrace 20 meters above the ground. The dual stairway, known as the Persepolitan stairway, was built in symmetrically on the western side of the Great Wall. The 111 steps were 6.9 meters wide with treads of 31 centimeters and rises of 10 centimeters.
The steps were originally believed to have been built to allow for nobles and royalty to ascend by horseback. But new findings suggest that the shallow risers allowed visiting dignitaries to maintain a regal appearance while ascending. The top of the stairways led to a small yard in the north-eastern side of the terrace, opposite the Gate of Nations.
A pair of bulls with the heads of bearded men stands by the western threshold. Another pair, with wings and a Persian head, stands by the eastern entrance, to reflect the power of the Empire.
Apadana Palace
Apadana is among the most ancient palaces in Persepolis. Built following the order of Darius the Great, the palace was used for staging New Year celebrations and receiving envoys from other countries.
The palace had a grand hall in the shape of a square, each side 60 meters long with 72 columns, thirteen of which still stand on the enormous platform. Each column is 19 meters high with a square Taurus and plinth. The columns carried the weight of the vast and heavy ceiling.
Tachara
The Tachara, Tachar Château, Mirror Hall or exclusive palace of Darius I is one of the interior palaces in Persepolis. This outdated Persian world means winter residence. Made of gray stone, the palace was built by Darius I. However, only a small portion of the palace was finished under his rule, and it was his successor and son Xerxes I who completed after his death in 486. Xerxes called the house a Taçara, winter palace. Artaxerxes I continued to use the palace. Its ruins are immediately south of the Apadana.
Hadish Palace
Hadish Palace was reserved to King Xerxes. It is built at the highest part of Persepolis. The palace is connected to the Queen’s Palace through two stairways. Xerxes named the palace after his second wife Hadish.
Hadish Palace is in the southernmost part of the palace and its floor is mainly the mountain.
Queen’s Palace
Queen’s Palace was also built by King Xerxes. Compared with other palaces, it is located at the lowest altitude.
German archeologist and Iranologist Ernst Emil Herzfeld started excavation in Queen’s Palace in 1931. It was then renovated and is today used as a museum and the central office of Persepolis installations.
Throne Hall
Next to the Apadana, second largest building of the Terrace and the final edifice is the Throne Hall or the Imperial Army's hall of honor (also called the "Hundred-Columns Palace). This 70x70 square meter hall was started by Xerxes and completed by his son Artaxerxes I by the end of the fifth century BC.
Tripylon
The Tripylon ("triple gate") of Persepolis can be found between the Apadana and the Hall of Hundred Columns.
This suggests that it was built after the completion of these two buildings, but this is no more than a speculation. Other scholars argue for an earlier date. However, the building consists of a central room with approaches to the north (to the Apadana), east (Hall of hundred columns) and south (palace of Xerxes and "palace D").
The three gates were decorated. In the eastern gate, we can see the king sitting on his throne, attended by the crown prince. The southern and northern gates showed the king with an attendant, leaving the building. Both representations are well-known; parallels can be seen in the Palace of Xerxes and the Hall of Hundred Columns.
Naqsh-e Rustam
Naqsh-e Rustam is an ancient necropolis located about 12 km northwest of Persepolis near the city of Marvdasht in Fars province.
One of the most ancient historical sites, Naqsh-e Rustam is home to signs from the Elamite, Achaemenid and Sassanid dynasties.
Four tombs belonging to Achaemenid kings are carved out of the rock face at a considerable height above the ground.
One of the tombs is explicitly identified by an accompanying inscription as the tomb of Darius I the Great (c. 522-486 BC). The other three tombs are believed to be those of Xerxes I (c. 486-465 BC), Artaxerxes I (c. 465-424 BC), and Darius II (c. 423-404 BC) respectively. A fifth unfinished one might be that of Artaxerxes III, who reigned at the longest two years, but is more likely that of Darius III (c. 336-330 BC), last of the Achaemenid dynasts.
Pasargadae
Pasargadae was the capital of the Achaemenid Empire under Cyrus the Great.
Located in Fars Province, Pasargadae is also a UNESCO World Heritage site.
Its palaces, gardens and the mausoleum of Cyrus are outstanding examples of the first phase of royal Achaemenid art and architecture and exceptional testimonies of Persian civilization. Particularly noteworthy vestiges in the 160-ha site include: the Mausoleum of Cyrus II; Tall-e Takht, a fortified terrace; and a royal ensemble of gatehouse, audience hall, residential palace and gardens. Pasargadae was the capital of the first great multicultural empire in Western Asia. Spanning the Eastern Mediterranean and Egypt to the Hindus River, it is considered to be the first empire that respected the cultural diversity of its different peoples. This was reflected in Achaemenid architecture, a synthetic representation of different cultures.
Oil Products Distribution in Marvdasht
Marvdasht, in the southern province of Fars, is home to ancient monuments like Persepolis, Naqsh-e Rustam and Pasargadae. Millions of tourists travel to Fars province, particularly at the beginning of Persian New Year in March to spend their holidays and visit these ancient wonders. Due to these characteristics, Marvdasht faces a heavy task in supplying petroleum products in different seasons of the year.
Moreover, due to mild weather conditions in Marvdasht and the productivity of its lands, this region has become the agriculture hub of Fars province. Around 70% of factories and agricultural plants are located there. The provincial branch of National Iranian Oil Products Distribution Company (NIOPDC) shoulders a heavy responsibility.
Ali Khademian, the director of the Marvdasht Division of NIOPDC, told Iran Petroleum that this office is tasked with supplying fuel to Marvdasht and the cities of Arsanjan and Pasargad, constituting a total population of 500,000.
“The Shiraz-Isfahan transit route cutting through Marvdasht and the existence of historical monuments like Persepolis, Naqsh-e Rustam and Pasargadae makes the responsibility of fuel distribution heavier,” he said.
Khademian said on average 530 million liters of oil products, including gasoline, gasoil, kerosene, fuel oil, liquefied petroleum gas (LPG) and compressed natural gas (CNG), is distributed annually in the three cities.
He noted that in some seasons like the start of New Year and in the summer, fuel consumption picks up sharply as more visitors travel to Fars province.
Khademian said two million tourists visit the historic monuments of Marvdasht every year.
He said the required fuel is supplied by Shiraz oil refinery, as well as refineries in the neighboring Isfahan and Yazd provinces.
Khademian said on average 300,000 liters a day of gasoline is distributed in Marvdasht, Arsanjan and Pasargad cities, adding that the figure would increase to 800,000 l/d when the province is flooded by visitors.
He said 1 ml/d of gasoil is also consumed in the three cities, adding that 550,000 b/d is consumed by the transport sector. The rest goes to agriculture and industries.
According to Khademian, 120 ml of gasoline, 310 ml of gasoil, 44 ml of fuel oil and 33 ml of kerosene is consumed every year in Marvdasht and the two other cities.
He said that fuel supply is handled by 35 stations, adding that five gasoline and gasoil distribution stations are envisaged to be constructed.
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