Half a Century Experience for Development
Post-JCPOA Iran Viewed Positively
Iran Capital Market towards Globalization
Sanctions-Free Iran Oil Benefits All
Foreign-Flagged Tankers Docking at Kharg Port
RIPI, IFP Ink MoU for Holding Studies on Energy Fields
Iran, South Korea to Build Petro-Refinery
NIOC Tough on Foreign Partnership
North Azadegan Starts Production
Countdown for North Yaran Production
NISOC at Forefront of Output Hike
133 Delegations Received in 1 Year
JCPOA Brings Honor, Dignity to Iran
Rivalry with Regional Countries
Iran Targets 10% Gas Trade Share
Oil Price Slump in North America; Challenges & Consequences
Oil Slump Impact on North America
1-----Deal Reached on Gabon Offshore Rig
2-----Geotechnical Investigation in India
3----Australia Subsea Pipeline to Be Upgraded
4---Sea Trucks to Install Pipelines in Argentina
5-----NPD Approves BP’s Tambar Facility Extension
1--- Russia Fixes Cooperation with OPEC
2-----GECF: Fight Global Warming
3----Nigeria Launches $100mn Oil Fund
4----Saudi Aramco Signs $13bn Gas Contract
5----BP Eyes Oil Terminals Stake Sell-Off
6----Angola LNG Export Plant Shuts Down
7----- Turkmenistan Limits Access to Foreign Currency
8----Mexico Approves Auction Terms for 15 Offshore Oil Areas
9----CNPC Evacuates Oil Personnel from South Sudan
10----US Shale Output to Drop in August
Iran Oil Industry Needs $50b Annually
Norwegian Professor: IPC, a Good Start
Sanat Naft Abadan in Iran Premier League
Objective: Remaining in Premier League
Land of Water, Reflection and Sun
Fuel Distribution in Chaharmahal and Bakhtiari
Half a Century Experience for Development
More than half a century has passed since National Iranian Gas Company (NIGC) was established. Iran’s gas industry has been to ups and downs over these years.
NIGC took shape in 1965 following the signature of a protocol signed between Iran and then Soviet Union with the objective of gas exports, building Bidboland refinery and lying out Iran Gas Trunkline 1 (IGAT1) stretching from southern Iran to Astara in the north. Esfahan Steel Mill Company and Shiraz Petrochemical Co. were connected to IGAT1. Parts of the cities of Shiraz and Tehran were also connected to the gas network designed by French companies.
In the aftermath of the 1979 Islamic Revolution, a variety of events including very low price of exported gas, eight years of imposed war, international sanctions and Iran’s growing population prompted NIGC to reconsider its policies. In a bid to make maximum benefit from the country’s gas deposits, NIGC accelerated its activities for gas supply to cities, industries, power plants and villages.
Within the framework of such a mission, all necessary gas supply services including commodities and equipment were indigenized. At present, more than 95% of the services required by this sector are provided domestically.
There are different viewpoints about the nature of the NIGC activities over these years; however, one point must be taken into account: A country may be an importer of energy and receive its required energy in any desired manner based on its own policy. But Iran shares a huge gas reservoir with a neighboring state. We have to recover gas from this reservoir. During the early years of the Islamic Revolution, we did not have the necessary infrastructure for exports and we had to build gas transmission network in the country in order to pump gas to power plants, industries, cities and villages.
A number of issues like the imposed war, embargoes and lack of confidence in Iran’s economic system due to negative propaganda had disrupted investment in export infrastructure like pipeline construction and production of liquefied natural gas (LNG). Therefore, one may conclude that the adopted policies were to some extent proper and they have had many advantages.
At present, Iran’s domestic gas supply grid has been completed to a great extent, but development of gas supply still continues due to the growing number of emerging households. Aside from that, NIGC is supplying more gas to industries and power plants every year. In the light of the implementation of the Joint Comprehensive Plan of Action (Iran’s nuclear agreement with six world powers), we will be witnessing economic development in different industrial sectors including petrochemicals, power generation and gas-fuelled industries in the future. NIGC is expected to face considerable demand for gas in the future and Iran’s gas will be the driver of development in the country.
The significant point that must be taken into consideration by Petroleum Ministry is sticking to Maximum Efficient Rate (MER) gas recovery to manage gas reserves so that the future generations could benefit from this endowment. In this regard, another plan pursued by NIGC is to make optimal and correct use of gas while gas exports continue. These two issues complement each other and they are being pursued through investment and application of new technologies. Furthermore, we have extensive plans for the application of new technologies in our service-providing activities, construction of new refineries, gas pipelines and gas pressure booster stations. Such objectives could be realized through partnership between Iranian and foreign investors.
Despite sitting atop the largest gas reserves in the world, Iran has a meager 1% share in global gas trade. Iran’s 2025 Vision Plan requires the country to raise its share to 10%. This objective could be achieved through gas export via pipeline, in the form of LNG, gas swap with neighboring countries like Turkmenistan and Russia, as well as CNG and LPG exports to neighboring countries.
NIGC is currently making up more than 70% of the country’s energy mix, i.e. 6 million barrels of oil equivalent. It supplies more than 90% of the energy needs of power plants across the country, making great contribution to the environment protection the and clean air.
Last but not the least, whereas Iran’s gas industry is in need of $40 billion over ten years, it provides a valuable opportunity for foreign investors to invest in Iran.
*Mr. Araqi is Iran’s deputy minister of petroleum and also managing director of National Iranian Gas Company (NIGC).
Post-JCPOA Iran Viewed Positively
Iran’s historic nuclear agreement with six world powers, dubbed as the Joint Comprehensive Plan of Action (JCPOA), was signed on July 14, 2015. Now one year has passed since the landmark deal was struck. The world’s geopolitics and economy have since changed drastically and accordingly the post-JCPOA developments changed views vis-à-vis Iran.
80% Oil Market Share Regained
Over the past one year, 18 heads of state and 40 foreign ministers have visited Iran. The presence of 58 senior officials from different countries in Iran indicates that the JCPOA changed Iran’s image across the globe. In addition to political and economic officials, foreign tourists flocked to Iran. The end of a decades-old dispute between Iran and global powers was a big achievement per se.
Never in the history of United Nations Security Council, had any resolution been terminated before being implemented. But the Iranian government’s diplomatic dexterity managed to have six sanctions resolutions annulled. Normally, Security Council resolutions were either respected by the targeted country or military action had been taken against that country. Never had a resolution been made ineffective only through dialogue.
Foreign delegates were bidding for travelling to Iran. They were in search of more agreements with Iran.
The signature of the JCPOA changed economic conditions in favor of Iran. Thanks to this agreement, Iran has been viewed again positively due to the agreement and its potential for win-win deals.
Iran’s economy grew by 0.7% since the deal was signed and is forecast to grow 3.7% in the next year. At present inflation rate is at 8%, which has declined 80% compared to that of 2013, and the Iranian currency stabilized, said Mark Dubowitz, executive director of the Foundation for Defense of Democracies, a think tank in Washington, D.C.
The benefits to Iran’s economy mean Iranians were spared an economic collapse, Dubowitz said as reported by USA Today.
Inflation has slowed down; foreign investment in Iran has gradually grown while capital growth has been curbed. Iran has moved towards renovation of its aging aviation fleet and taken measures for replacing low-quality cars with vehicles compliant with European, South Korean and Japanese standards. Russia finally started delivering S300 anti-missile system to Iran; while many airports across the globe again authorized Iranian aircraft refuel. Industrial renovation has started and many commodities whose purchase had been blocked due to sanctions could be now brought in. Industrial components and medications could be bought from foreign companies. Foreign tourists have been regularly demanding visa to travel to Iran.
They above-mentioned points are all some achievements of JCPOA which have benefited both Iran and its trading and industrial partners.
One of the most important achievements was a rapid increase in Iran’s oil production and its success in clawing back its lost share in markets. On the anniversary of the signature of JCPOA, Iran’s Ministry of Petroleum said in a statement that the country has managed to regain 80% of its share which had lost in oil market due to the sanctions. That is while many Iranian and foreign experts ruled out the possibility of such a rapid increase in Iran’s oil sales. The important issue was that Iran regained its share at a time the black gold was experiencing a sharp slump and other producers were close to eliminating Iran from the market for good.
Another achievement was the reversal of ban on shipping navigations. Iranian vessels and oil tankers were allowed to call at international ports as insurance cover for Iranian tankers were reestablished.
SWIFT
The most important achievement of JCPOA could have been the facilitation of international banking transactions between Iran and foreign bodies. As the sanctions were lifted, Iran was reconnected to SWIFT (Society for Worldwide Interbank Financial Telecommunication) which supplies secure messaging services and interface software to wholesale financial entities.
Thanks to JCPOA, conventional banking activities like opening letters of credit and issuing banking guarantees became possible. Business and banking delegations from a variety of countries started travelling to Tehran even before the nuclear deal was implemented in January. Improvement of Iran’s banking relations with other countries topped the agenda in these negotiations.
Over the past one year, Central Bank of Iran (CBI) has held 123 rounds of talks at the level of governor or vice-governor with foreign parties in an attempt to bring back the level of transactions to the pre-sanctions levels.
Valiollah Seif, governor of CBI, said Asian and European parties have shown willingness for further cooperation.
The Europeans have been more cautious about resuming cooperation with Iran because of complicated banking system and ambiguities regarding banking activity in Iran.
Meantime, One of Iran’s London-based banks joined the euro payment system, in what could be another breakthrough for the country to remove technical hurdles created as a result of multiple years of sanctions.
Persia International Bank joined euro payment system known as Target-II after undergoing complicated banking procedures. This was carried out through the German central bank - Deutsche Bundesbank. Persia International Bank which is based in the UK belongs to Bank Mellat and Bank Tejarat and as the first Iranian bank stationed in London with Iranian owners; it managed to join euro payment system known as Target-II after undergoing complicated legal procedures.
In the international payment cycle (euro zone), the central banks of the euro zone countries are members of Target-II network.
Iran started receiving its frozen money in tranches before the nuclear deal was finalized, but Seif says CBI’s accounts are unblocked in all countries with no restrictions.
This issue is important not only for Iran, but also for potential investors and economic partners. That can guarantee world energy supply security through clearing the way for foreign investment in Iran’s oil and gas sector.
Iran Capital Market towards Globalization
In the capital market, many expected fundamental changes at Tehran Stock Exchange (TSE). That happened in March 2016. Over recent months, TSE has registered records with some shareholders pocketing 200 to 300 percent margins. However, during New Year holidays which began on March 20, TSE all-share index experienced drops.
Thanks to JCPOA, TSE joined The International Organization of Securities Commissions (IOSCO) which is an association of organizations that regulate the world’s securities and futures markets. That cleared the way for Iran capital market to get access to the World Federation of Exchanges (WFE) and become more known across the globe. WFE based in London is the trade association of 63 publicly regulated stock, futures, and options exchanges. Its market operators are responsible for operating the key components of the financial world.
Sanctions-Free Iran Oil Benefits All
Energy has a significant share in providing the necessary finance for other industries and sectors of Iran’s economy. That is why Iran’s petroleum industry has been focused upon more than any other sector of the economy following the implementation of Iran’s nuclear agreement with world powers, dubbed the Joint Comprehensive Plan of Action (JCPOA).
Meantime, the oil sector has been presented with new opportunities after the agreement took effect last January. Some of these opportunities will materialize in the short-term and some others in the long- term.
Thanks to JCPOA, other countries and big oil companies have had a golden chance for investment in Iran’s oil sector and buying oil from Iran.
This article aims at reviewing the ramifications of implementation of JCPOA on Iran’s petroleum industry on one hand, and on oil companies and oil consumers on the other.
JCPOA; Multiple Chances
Not only is JCPOA considered as a big achievement in the international political domain, but also it presented major economic opportunities for Iran and other countries in the economic sector, mainly energy sector.
Among the JCPOA’s effects on Iran’s petroleum industry, oil companies and oil consumers, the following could be singled out:
With the implementation of the JCPOA, some oil equipment whose delivery had been blocked due to the sanctions was supplied to Iran. For example, refrigeration, gas condensate stabilization compressors, electro-compressors and thermal transducers, which Iran had purchased from Germany’s Siemens for South Pars gas field, were delivered to the country and development of this jointly operated offshore reservoir took a new lease on life.
The fact is that Iran’s petroleum industry seeks to benefit from superior technology and the implementation of the nuclear agreement facilitated transfer of modern oil technology to Iran. Purchase of equipment from main vendors without resorting to intermediaries also reduced costs of technology transfer. Before implementation of the JCPOA, Iran had to pay higher sums for the purchase of equipment. Therefore, one of the most significant impacts of JCPOA implementation on oil projects was Iran's quicker access to foreign contractors, reduction of costs of implementation of projects while benefiting from modern technologies due to enhanced rivalry between contractors. For their part, major oil companies are benefiting from the JCPOA implementation due to direct investment and purchase of technical equipment.
Iran Oil Outlook
The JCPOA enhanced the export of Iran’s crude oil and petroleum products in the short term. It also contributed to reducing costs of crude oil and petroleum products export. Furthermore, development and operation of hydrocarbon fields would cost lower after the JCPOA implementation. The removal of sanctions on Iran facilitated Iran’s access to international financial markets in order to purchase equipment for the petroleum industry. Banking transactions and insurance cover at international level became possible. Therefore, Iran has clawed back its status in world markets in the short term after the JCPOA implementation.
The JCPOA could also have mid-term and long-term achievements for Iran’s energy industry, chief among the achievements are as follows:
Post-JCPOA Iran Oil Exports
One year has passed since Iran and six world powers struck a landmark nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). The historic agreement, which took effect in January, was the most important international development pertaining to Iran’s petroleum industry because Iran’s oil sector was at the receiving end of international restrictions. Now that the sanctions have been lifted Iran has brought its oil exports rate back to the pre-sanctions levels and is still determined to raise its output in coming years.
After the moderate administration of President Hassan Rouhani took office in 2013, a fresh round of nuclear talks were launched with the objective of overcoming disputes between Iran and P5+1 – the United States, France, Britain, China, Russia and Germany.
Ever since the agreement was signed, multinational and international companies have been expressing their interest in investing in Iran’s oil and gas sector. According to Iranian officials, the country’s petroleum industry will need $130 billion to $140 billion by 2020. The offshore South Pars gas field will need $30 billion. The World Bank has estimated that Iran will need $3 billion to $3.5 billion in foreign investment in 2016 and 2017, which requires a 5.5% growth in foreign investment attraction next year.
Regaining Iran Share
Immediately after international sanctions were lifted on Iran, the country restarted negotiations to win back its traditional customers in Europe and managed to gird many of them for resuming purchase of Iran’s crude oil.
France’s giant Total signed a contract for buying 160,000 b/d of crude oil from Iran. Oil is being loaded on tankers to depart for the terminals of this company. Furthermore, negotiations were held with Russia’s Lukoil and Spain’s Cepsa, ending in the signature of agreements. Greece’s Hellenic Petroleum also started receiving Iran’s crude oil.
For their part, Chinese, Indian, South Korean and Japanese companies have requested an increase in their oil purchase from Iran. Japan has already increased its Iran’s oil imports.
Iran’s Minister of Petroleum Bijan Zangeneh recently announced that the country’s oil production had exceeded 3.8 mb/d in the first quarter of the current calendar year (which started on March 20). Iran’s oil exports in the first quarter went beyond 2 mb/d.
According to Zangeneh, Iran’s petrochemical production stood at 40 million tons and petrochemical exports reached 12.8 million tons in March 2013. But, he noted, these figures reached 46 million tons and 18.7 million tons respectively in the last calendar year.
Iran is estimated to reap $21billion from oil exports this year if the country’s export averages 1.7 mb/d.
Iran’s pre-JCPOA and post-JCPOA oil revenues are significantly different. For instance, Iran’s light crude oil earned the country $21 million a day, which soared past $36 million after the JCPOA was implemented. Iran’s crude oil income in April alone was more than $13 billion, up from $7.6 billion before the sanctions were lifted.
Iran shipped 2.3 million b/d in April 2016, the highest level since 2012. These figures are 15 percent higher than the International Energy Agency (IEA) forecast. So far, Iran has been successful in its strategy, but increasing its market share further might prove difficult.
Iran's oil exports were set to surge in May, climbing nearly 60 percent from a year ago, with European shipments recovering to about half of pre-sanction levels, according to a source with knowledge of the country's crude lifting plans.
This shows Tehran is regaining market share at a faster pace than analysts had projected as it battles with Saudi Arabia for customers by cutting its prices. May shipments are set to jump to 2.1 mb/d from 1.3 mb/d during the same month in 2015, when Iranian exports were constrained by Western sanctions imposed because of the country's nuclear program. The April loadings were the highest since January 2012.
The increase in loadings suggests that Iran has overcome a tanker shortage that threatened to derail attempts to regain market share after the sanctions were lifted in January.
Loadings to Asia were 1.7 mb/d in April, about a third higher than a year ago and the most since 2011, according to Reuters.
Loadings were to stay near that level for May, with 1.6 mb/d scheduled.
Loadings for China, Iran's biggest customer, were nearly 840,000 b/d in April and more than 620,000 b/d were planned for May.
Iran's sales to Europe, including Turkey, are also rising fast, according to the Reuters source. April loadings to Europe totaled 487,000 bpd and are set for 400,000 b/d in May. European countries were buying as much as 800,000 b/d before 2012.
Oil major Total SA was set to take 160,000 b/d of crude in May, down from the 240,000 b/d loaded in April. The company, along with Spain's Cepsa, signed import deals with National Iranian Oil Company (NIOC) after the sanctions were lifted in January.
Loadings to Spain were set for 32,000 b/d in May, while Greece would take 65,000 b/d.
NIOC Tough on Foreign Partnership
National Iranian Oil Company (NIOC) has become tougher in its potential cooperation with foreign companies, the company’s managing director said.
Ali Kardor, who is also Iran’s deputy minister of petroleum, said: “Given the improvement in competitive atmosphere and more reasonable financial proposals offered by bidders following the implementation of the JCPOA (Joint Comprehensive Plan of Action), NIOC has become more selective in its decision-making for cooperation with international companies.”
“More well-known and technical companies are prioritized for cooperation,” he said.
Asked about Iran Petroleum Contract (IPC), the new model of contracts to replace buybacks, Kardor said: “Launching tenders and signing agreements will take time, but West Karoun fields, particularly Azadegan [oil] field, are prioritized.”
Regarding Iran’s oil exports, he said: “Iran’s crude oil exports stand above 2 mb/d excluding gas condensates, while including gas condensates, Iran's exports it will be 2.5 mb/d.”
He also said that no field is planned to be awarded for development without being put out to tender.
“Of course, according to NIOC deals bylaw, awarding development of joint fields without issuing any tender is subject to the decision of the petroleum minister and an ad hoc committee comprising senior officials,” said Kardor.
Iran, South Korea to Build Petro-Refinery
Iran and South Korea are to cooperate in petro-refinery establishment.
Member of the Board of Directors of Masjed Soleiman Petrochemical Company Ali Seifian says his company is to sign a contract with a consortium, comprising Korean companies, for financing and construction of a petro-refinery. Seifian said intensive talks are underway with well-credited German, Chinese and Korean companies for development of Zilaie Energy Zone in Masjed Soleiman, which is the second petrochemical hub in Khouzestan Province.
He said talks with the well-credited Korean companies focus on financing and construction of a petro-refinery, as well as the downstream units and peripheral facilities.
He added that the petro-refinery will be set up beside the phase 1 of Masjed Soleiman petrochemical project, whose construction has shown favorable progress.
The official said at least 1.5 billion dollars in investment is needed for development of the units.
Foreign-Flagged Tankers Docking at Kharg Port
Director General of Bushehr Province's Ports and Maritime Administration Mohammad Mahdi Bonchari says foreign-flagged oil tankers and VLCCs are now docking at the Kharg Island's port.
Kharg Island oil terminal is one of Iran's key oil export ports. The country sends most of its exported oil cargoes from the port to international destinations.
He said exports from the port rose by 60% over the first 4 months of the current Iranian calendar year which began on March 20, reaching 35.8 million tons of various cargoes.
He said for the first time since implementation of the Joint Comprehensive Plan of Action (JCPOA) that foreign-flagged oil tankers are calling at the port.
Bonchari said tankers from France, Spain, Greece, Poland, the Netherlands, Italy and South Korea are now crowding the port.
In the past four months, 925 vessels with over 1000 tons of freight capacity have berthed at the port, he added.
Tehran, Colombo Hope to Resume Oil Trade
Iran’s Minister of Petroleum Bijan Zangeneh and Sri Lankan Minister of Petroleum Resources Development Chandima Weerakkody have met in Tehran and discussed resumption of Iran’s oil and liquefied petroleum gas (LPG) exports to Sri Lanka, as well as crude oil swap operations.
Referring to longtime friendship between Iran and Sri Lanka, Weerakkody said the removal of sanctions on Iran was good news for the Sri Lankans.
“Iran is an important name for Sri Lanka in terms of oil supply because the only refinery in this country has been built to process Iran’s light crude oil,” said the Sri Lankan minister.
Zangeneh said Iran used to export 40,000 b/d of oil to Sri Lanka before the sanctions were imposed in 2012. He expressed hope that Iran would resume its oil exports to Sri Lanka now that Tehran’s nuclear agreement with six world powers has been implemented.
Regarding Iran’s plan to resume crude oil swap with Sri Lanka, the minister said: “Iran has no problem for swap; therefore, the companies that are willing to be engaged in crude oil swap, can refer to Iran.” Iran has so far held talks with some companies for swap operations and Russian, Turkmen and Kazakh companies have shown strong willingness to that effect.
W.K.H. Wegapitiya, CEO of Laugfs Holdings Ltd., was also present in the meeting. He expressed satisfaction with the lifting of Iran sanctions, saying his country has had to buy LPG from Oman and Malaysia during years of Iran embargo. He said his country is now willing to resume and increase its LPG purchase from Iran.
According to Wegapitiya, Sri Lanka used to import 10,000 tons a month of LPG from Iran “but now they intend to bring this figure to 90,000 tons a month”.
Sri Lanka is currently purchasing crude oil and oil products from Oman, Saudi Arabia, Singapore and Vietnam at higher prices, but has so far failed to find an alternative to Iran’s oil.
RIPI, IFP Ink MoU for Holding Studies on Energy Fields
Iran's Research Center of Petroleum Industry (RIPI) and France's IFP Energies nouvelles (IFPEN) have signed a memorandum of understanding (MoU) for cooperation in 8 energy-related technological grounds.
Accordingly, the two sides have agreed to cooperate in upstream and downstream areas in petroleum industry in topics like study of reservoirs, enhanced oil recovery, gas sweetening and emission of pollutants.
From RIPI, Mohammad Reza Katouzian and from IFP, Didier Houssin signed the document at RIPI's headquarters in Tehran .
Addressing a ceremony to sign the deal, the IFP official said Iran and France will cooperate on study of enhanced oil recovery from Iranian fields.
"During the talks that we had, we concluded that the two sides have similar challenges in petroleum industry research and we hope such challenges will be solved by mutual interactions between the two sides," Didier Houssin said in the ceremony.
He said many of Iran's oil fields are complicated ones and IFP intends to close ranks with RIPI for locating EOR methods for boosting oil recovery from the fields.
"RIPI is seeking to enjoy the training programs offered by IFP," said Katouzian for his part at the ceremony.
Based on the deal, the two sides have agreed to cooperate in areas such as studies over fields and reservoirs, EOR, gas sweetening and environmental areas, he added.
Furthermore, IFP has agreed to cooperate with RIPI on studies over Yadavaran join oilfield.
He also said that the two sides are considering signature of several deals in the future.
Armenia to Treble Iran Gas Imports
Iran’s petroleum minister, Bijan Zangeneh, and Armenian Minister of Energy and Natural Resources Levon Yolyan have discussed Iran’s gas exports to Armenia, Iran’s gas transit via Armenia as well as electricity trade.
After the meeting in Tehran, Zangeneh said Iran has agreed to triple its gas exports to Armenia to reach 3 mcm/d in early 2018.
He also said that Tehran-Yerevan electricity trade has increased from 3 terawatts/hour to 3.2 terawatts/hour.
“Iran’s gas transit via Armenia was the most important issue discussed in this meeting,” said Zangeneh.
He said that following Iran’s request to transit gas to Georgia, Armenia has proposed the formation of a new organization.
“It was agreed that the gas purchasing side which has so far been Yerevan thermal power plant be replaced with this new organization,” he added.
Zangeneh said the future contracts for Iran’s direct gas sales to Armenia as well as gas transit via Armenia will be done through this organization.
“Expansion of relations with neighbors in the energy sector, particularly gas exports, is among Iran’s plans. Of course, Armenia is not a big consumer, but it can open a significant route for Iran’s gas exports. We were in agreement on this issue,” said the minister.
Armenia started importing gas from Iran in mid-2009. Tehran and Yerevan signed an agreement in August 2015 for the construction of the third electricity transmission line stretching from Armenia to Iran.
H
Platform Load-out
Since the start of the current calendar year in March, two platforms – 19A and 21A – have been installed, while Platform 18B has been loaded out and sent to South Pars gas field.
Platform 18B is one of the main four platforms in Phase 18 that will be able to recover 500 mcf/d of gas after installation and launch. After transmitting this gas to refinery and being sweetened, 14 mcm/d of gas will be injected into national gas trunkline.
Fully Iranian 19A and 21 platforms have each capacity of 500 mcf/d of gas.
19A, 1st Iranian Platform
Among loaded out platforms, Platform 19A is the first fully Iranian platform that was recently loaded out from Khorramshahr Yard of Iranian Offshore Engineering and Construction Company (IOEC) to be installed in South Pars. It was installed in late July after its flare and jackup were put in place.
After the installation process of Platform 19A ended, pre-startup, hookup and startup will be on the agenda.
After that, different parts of the platform will become operational step by step before gas enters the platform. This process will be under way until December.
According to plans, Phase 19 which is equivalent to two standard phases becomes operational this year. Furthermore, revenue from the startup of this phase will see an increase of $3.5 to $4 billion a year.
Once fully operational, Phase 19 will be producing 2 bcf/d of gas, 80,000 b/d of gas condensate, 2,550 tons a day of ethane for feeding petrochemical plants, 3,200 tons a day of liquefied petroleum gas (LPG) including butane and propane, as well as 400 tons a day of sulfur.
to plans, Phase 19 which is equivalent to two standard phases becomes operational this year. Furthermore, revenue from the startup of this phase will see an increase of $3.5 to $4 billion a year.
Once fully operational, Phase 19 will be producing 2 bcf/d of gas, 80,000 b/d of gas condensate, 2,550 tons a day of ethane for feeding petrochemical plants, 3,200 tons a day of liquefied petroleum gas (LPG) including butane and propane, as well as 400 tons a day of sulfur.
Platform 21 Installed
Platform 21 was also loaded out from the IOEC Khorramshahr Yard and installed in late July. This 1 bcf platform weighs 2,700 tons. Iranian engineers handled the entire installation operations. It was the 21st platform to have been installed in South Pars.
The platform of Phase 21 which has been built in Khorramshahr Yard carries the relevant hydrocarbon through 11 wells and a 100-kilometer pipeline, 32 inches in diameter, to an offshore refinery. The pipeline which carries the hydrocarbon has been installed by local companies.
With the startup of Phases 20 and 21 of South Pars, Iran’s gas production capacity increases by 2 bcf/d. In addition to the generation of $4 billion a year in revenues for the country and the replacement of 50 liters a day of petroleum products with natural gas, that will pave the way for a satisfactory trade balance in Iran through the generation of $1.2 billion a year of income from gas condensate sales.
New Platform at South Pars
Platform 18B of the giant South Pars gas field, with a capacity of 500 mcf/d of gas, was installed on August 2 by Iranian engineers.
The platform alone weighs 2,300 tons. If the jacket, bridge and its flare are also included, the structure would weigh 6,650 tons.
Platform 18B will start recovering hydrocarbon from the Iranian sector of the reservoir which is shared with Qatar.
Platform 18B is the seventh offshore topdrive becoming operational under an agreement between Pars Oil and Gas Company (POGC) and Iran Shipbuilding & Offshore Industries Complex Co (ISOICO).
The launch of this platform will help inject 12.5 mcm/d of gas into national gas trunkline.
Phases 17 and 18 of South Pars and will add a total of 2 bcf of gas to the South Pars output. Since the start of production in these two phases in January 2015, 8 bcm of gas has been sweetened in these phases. Furthermore, these phases have produced 4.6 million barrels of gas condensate, 95,000 tons of ethane and 148,000 tons of butane and propane, valued at $1.3 billion.
The development of phases 17 and 18 is aimed at the production of 50 mcm/d of gas, 80,000 b/d of gas condensate and 400 tons a day of sulfur.
5 Phases to Start Gas production
Iran’s petroleum minister, Bijan Zangeneh, has said that the installation of platforms in South Pars will prepare the ground for enhanced production from this gas reservoir.
Iran is currently recovering some 430 mcm/d of gas from South Pars. According to plans, five new phases of South Pars – Phase 19 (equivalent to two phases), Phase 20 & 21 and the remaining sections of Phases 17&18 – are expected to become operational this year.
West Karoun, Iran Oil Hub
The name of West Karoun area is being bandied about. The reason is clear. Several important oil fields – North Azadegan, South Azadegan, Yadavaran, North Yaran and South Yaran – are located in this area. Oil experts believe that Iran's new oil hub will take shape in West Karoun area whose oil fields Iran shares with neighbors.
West Karoun area has great potential for oil exploration and it can revolutionize Iran's oil production capacity.
Operations have already begun for the development of West Karoun oil fields in western Iran. The client is Petroleum Engineering and Development Company (PEDEC) and Iranian and Chinese contractors are developing these reservoirs.
At present, 225,000 b/d of oil is being extracted from West Karoun fields. This figure is forecast to soar to 315,000 b/d by next March.
Iran Petroleum, whose correspondent recently visited West Karoun oil fields, provides a review of the oil reservoirs.
The latest achievement of PEDEC in West Karoun is the startup of the first phase of North Azadegan oil field with a capacity of 75,000 b/d. North Azadegan oil field shared by Iran and Iraq is located 120 kilometers west of the oil-rich city of Ahvaz.
In addition to common problems, development of this field was facing the big challenge of Hoor al-Azim Lagoon and environmental issues. A large segment of North Azadegan lies in the lagoon and PEDEC has modified drilling methods in order to protect the environmentally significant lagoon.
North Azadegan Starts Production
Keramat Behbahani, director of North Azadegan development project, said oil and gas production from this field averages at 73,000 b/d and 39 mcf/d, respectively.
"Oil production from this field started four months ago and so far more than five million barrels of oil has been recovered," he said.
Behbahani said some delays in the implementation of the project pertain to getting environmental and local permits, adding: "Drilling operations in this field were specific because a significant part of this field in Hoor al-Azim Lagoon. we were 4 to 5 meters deep in water in some spots and in practice we were facing an offshore environment."
"Moreover, due to environmental considerations, cluster drilling was done in order to spare the lagoon any harm. A total of 58 wells were spudded in 21 drilling beds," he said.
Behbahani referred to the existence of an independent power plant in North Azadegan field, describing it as a valuable contributor to sustainable production of this field.
"Despite the existence of this power plant, production will never stop at North Azadegan except during overhaul which is done every four years," he added.
Behbahani said the second phase of this project envisages production of 75,000 b/d of crude oil and 39 mcf/d of gas.
He said negotiations are under way with China's CNPCI for the development of the second phase of North Azadegan field.
"After examining the MDP proposed by the Chinese company to PEDEC and its approval, development of the second phase will start under a buy-back deal. In case of no agreement with CNPCI, the second phase development will be done under Iran Petroleum Contract (IPC)," he added.
Behbahani said all issues related to health, safety and environment (HSE) are observed in the development of North Azadegan, citing 49 million persons/hours of work without any accident there.
According to preliminary studies, North Azadegan is estimated to hold 6.5 billion barrels of oil in place, 330 million barrels of which is recoverable. New studies suggest an increase in the in-situ reserves of this field. In the first phase, North Azadegan will be able to produce 82,500 b/d.
110,000 b/d Soon
North Azadegan shot to prominence two years ago after Iran’s Minister of Petroleum Bijan Zangeneh decided to cancel the contract with CNPCI because the Chinese company did not observe its obligations
regarding the development of the oil field. After that the development project was assigned to a consortium of Iranian contractors. Now, early production from North Azadegan that will continue in two phases stands at 50,000 b/d. By September, the early output will increase 30,000 b/d and months later it will see another 30,000 b/d increase. In the end, with the full implementation of early production plan, the output of North Azadegan will exceed 110,000 b/d.
Mahmoud Marashi, director of South Azadegan oil field development project, said South Azadegan is expected to produce 320,000 b/d of oil in the first phase. He expressed hope that this objective will be materialized by March 2019.
Marashi said development of South Azadegan oil field envisages drilling 185 wells, adding that 38 wells have so far been drilled and 132 wells are planned to be spudded. He said that drilling of 32 wells is being put out to tender.
According to Marashi, 19 drilling rigs are currently operating in South Azadegan oil field. He said that after the Chinese company was expropriated, more than 270,000 meters of drilling has been done there.
He said that drilling each well cost $12.5 million in 2014, while the figure has sharply dropped to $7.5 million for drilling each well. He attributed this decline in costs to the implementation of Iran’s historic nuclear deal with six world powers, dubbed as the Joint Comprehensive Plan of Action (JCPOA). The deal, which was struck in July 2015, came into effect in January.
Marashi said France’s energy giant Total has offered to develop South Azadegan oil field, but Iran’s Ministry of Petroleum plans to put out all development projects to tender.
He said that during preliminary talks, Total agreed to submit a technical proposal to National Iranian Oil Company (NIOC) and a confidentiality agreement was signed to that effect.
Marashi said Japan’s Inpex has also expressed interest in the development of the second phase of this project.
Yadavaran Deposits Increase
Yadavaran oil field is another joint field located in West Karoun area. Iran shares this field with Iraq. Yadavaran is situated 70 kilometers southwest of the oil-rich city of Ahvaz and north of the city of Khorramshahr in Khuzestan Province. A buy-back deal for its development was signed with China’s Sinopec and the first phase of this project came online in 2008.
The objective behind the first phase development of Yadavaran was 85,000 b/d and currently 100,000 b/d (83,000 b/d of light crude oil and 17,000 b/d of heavy crude oil) is being recovered from this field.
Hadi Nazarpour, director of Yadavaran oil field development project, said production from this joint field has neared 100,000 b/d, while Iraq started its own recovery operation four months ago.
“Since the start of early production plan, some 54 million barrels have been recovered from this field,” he said.
In the second phase, he added, Yadavaran oil field is expected to produce 180,000 b/d of oil. This objective is forecast to be realized in four years. The master development plan (MDP) for this field has been finalized for the second phase development which is to be assigned to Sinopec.
Nazarpour said Yadavaran was initially supposed to be developed in three phases.
He also referred to the oil reserves in-place of this field and newly conducted technical studies to that effect, saying: “According to initial estimates, the in-place reserves of this field were announced at 12 billion barrels. But based on new estimates, they are estimated at 31 billion barrels. In that case, we may be witnessing the third, fourth and fifth phase development of Yadavaran in the future.”
Fahlian oil layer at Yadavaran field is light with API at 40, while Sarvak layer with API of 24 is heavy. The share of domestic manufacturing in Yadavaran field is more than 50%.
In the second phase development of Yadavaran field, 105 wells must be drilled. In this phase, new pipelines will be also laid out in order to bring production from this field to 180,000 b/d.
In the third phase, production from Yadavaran is planned to plateau at 300,000 b/d.
Countdown for North Yaran Production
North Yaran is the only oil field in west karoon whose development under a buyback deal has been awarded to an Iranian contractor (Persia Oil and Gas Industry Development Company). According to PEDEC officials, this Iranian contractor has fared well in this field.
Arash Baqerzadeh, director of North Yaran development project, said the project is now 89% complete. He added that this field is to start producing 30,000 b/d of oil from this field by September.
“Drilling operations for 20 production wells (in no man’s land) are over and production from this field will start in September after installation of wellhead equipment,” he said.
Baqerzadeh referred to 70% progress in the gas section of this project, adding that 12 mcf of gas is expected to be produced.
Baqerzadeh highlighted a 71% share of Iranian companies and manufacturers in this project, adding: “We have tried our best to use domestic commodities and equipment as much as possible and the items whose construction and supply were not possible in the country have been procured by European countries. Meantime, drilling operations for the development of North Yaran field have been completely done by Iranian contractors.”
He said that development of North Yaran is forecast in one phase, adding: “But based on new studies, a plan has been envisaged for increasing crude oil production from the southern section of North Yaran oil field by 10,000 b/d. It is currently in the preliminary stage of studies which we hope that a contract will be signed by the end of [the current calendar] year.”
Baqerzadeh said early production from this field started in February 2013 with a capacity of 5,000 b/d. So far, more than 1.4 million barrels of oil has been produced from this field.
North Yaran oil field holds 998 million barrels of oil in place, of which 52.48 million barrels are recoverable.
Infrastructure Ready for Oil Delivery
As far as the development of West Karoun field is concerned, not only production and its increase, but also providing infrastructure for transferring oil from these fields to export points are of high significance.
According to PEDEC officials, the infrastructure for transferring crude oil produced in the West Karoun fields is now ready.
Sirous Aghajari, director of West Karoun and Omidieh pumping facilities, said the first step in the delivery of crude oil from West Karoun fields to export terminals has been providing connection pipelines. He said that in the first stage, 220,000 b/d of oil has been transferred from West Karoun to export spots.
“In the next step, in order to realize the delivery of 300,000 b/d of crude oil to export terminals, there is plan for using West Karoun and Omidieh pumping facilities and a 32-inch pipeline,” he said.
He added that West Karoun and Omidieh pumping facility is expected to become operational in the coming months.
“We need to boost the capacity of pumping facilities in order to be able to transfer 700,000 b/d of oil produced [at West Karoun] to export terminals by the end of the [calendar] year 1397 (20 March 2019),” he said.
Aghajari added that the delivery of heavy crude oil requires 42-inch pipeline and the delivery of light crude oil would need 30-inch pipeline.
He said that the construction of a 1,000-kilometer pipeline, 42 meters in diameter, for the transfer of crude oil to Jask area is in the stage of preliminary studies.
Iraq’s production from its sector of Azadegan and Yaran oil fields stands at 200,000 b/d. Iran and Iraq will be producing in equal measure over the coming months.
Return to Good Days
The recent significant increase in Iran's crude oil production is definitely an important outcome of the country's landmark nuclear deal with six world powers. Iran's current output stands at 3.8 mb/d, while the country has brought its oil exports to 2 mb/d.
Iran's oil industry was at the receiving end of Western sanctions imposed on the Islamic Republic of Iran due to its nuclear program. Due to the sanctions tightened in 2012, Iran's oil exports drastically declined and the country could not receive its petrodollars due to banking restrictions. Due to these unjust measures imposed by Western governments, Iran's oil production went on cautiously and the production sector witnessed a significant decline.
Iran's crude oil exports fell to 970 tb/d during the first five months of the calendar year 1392, which started in March 2013. Therefore, Iran's share in global oil markets declined and some other countries took Iran's share.
After President Hassan Rouhani took office, Iran's nuclear talks with six world powers entered a new phase and the sanctions were gradually lifted.
NISOC at Forefront of Output Hike
After Iran's nuclear deal with world powers took effect last January, Minister of Petroleum Bijan Zangeneh announced that Iran is willing to raise its crude oil output by 500 tb/d. He was banking in on National Iranian South Oil Company (NISOC), which is the oil production hub of the country.
NISOC, which is Iran's largest oil production company, had adopted significant strategies when the country was under sanctions. Its offshoots made maximum use of the advantage of intermittent shutdown of wells and some facilities for overhaul.
A series of technical operations were required in 1,738 wells, 148 production units and 4,316 km of pipelines. During the calendar years 1393 and 1394, some 19,000 items of down-hole engineering tools, 651 processing reforms, more than 1,000 overhauls of processing equipment, 307 cases of overhaul of rotary machinery and tens of cases of pipeline thickness measurement were carried out by five oil and gas production companies affiliated with NISOC. All this was aimed at sustainable readiness for the resumption of production.
South Turbine Engineering Services Company, which was tasked with this major overhaul plan, has overhauled 37 gas turbines and 29 solar compressors in the past year alone and delivered to NISOC offshoots. Smart pig running in export pipelines was another important measure aimed at boosting the safety of pipelines and ensuring continued production in all pipelines, as well as successful planning and scheduling.
920,000 Output Hike
Bijan Alipour, CEO of NISOC, told Iran Petroleum that this company is producing 2.92 mb/d of oil.
"In our production hike plan, 920 tb/d was added to this company's production and we are planning to produce up to 3 mb/d," he said.
Regarding the manner of reaching this objective, he said: "Work-over of wells, drilling of new wells and overhaul affairs across NISOC-run fields could be referred to as the most important plan ahead with a view to 3 mb/d production."
Abdorreza Dabiri, production manager at NISOC, said overhaul has been a contributor to production hike by this company. He added that the overhaul done over the past three years, equals similar operations carried out over ten years.
He said NISOC's production dropped to between 1.95 mb/d and 2.1 mb/d during years of sanctions, adding that efforts by manpower and a sense of solidarity within NISOC helped increase output to the current level.
3.8 mb/d Target
This planning, along with the aforesaid measures, encouraged NISOC subsidiaries to bring Iran's crude oil production to 3.8 mb/s as targeted.
Zangeneh recently said that Iran's increased oil production has improved the country's status in world markets and within the Organization of the Petroleum Exporting Countries (OPEC).
"We had promised the President a production hike and this achievement was made thanks to production companies like Iranian Offshore Oil Company (IOOC), Arvandan [Oil and Gas Production Company], Iran Central Oil Fields Company (ICOFC) and particularly NISOC," added the minister.
Referring to the recent OPEC Conference, Zangeneh said: "This production increase improved Iran's position in the meeting because Iran had realized its objective and the world believed this."
Iran sits atop 158 billion barrels of proven crude oil, which makes up 9.3 percent of the world's proven reserves. Iran stands third in the world in terms of proven oil reserves, just behind Venezuela and Saudi Arabia.
According to a 2025 Vision Plan, Iran should become the second OPEC largest producer. For this purpose, Iran will have to be supplying 7% of the world's total oil and 8% of its gas by that time. To reach this objective, Iran needs to develop joint fields which are a main pillar of the Resilient Economy.
In addition to that, reconstruction of existing facilities, domestic and foreign investment, expansion of research and technology and supervision on their work along with modern management methods could prove effective on this issue.
Now in the light of political and economic overtures and international companies' interest in investment in Iran within the framework of new oil contracts, one must wait and see how conditions will proceed in the future.
133 Delegations Received in 1 Year
Iran Chamber of Commerce is the fourth generation of business body in the country. The first generation comprised foreign companies under title of Assembly of Businessmen during the reign of Nasser ad-Din Shah Qajar.
With more than 133 years of history, Iran Chamber of Commerce which is older than Iran's petroleum industry regroups Iranian private entities. Iran Chamber of Commerce has 34 provincial branches and 200 specialized affiliates.
According to Iran's Constitution, Iran Chamber of Commerce now advises the three bodies of power in the Islamic Republic. It is also tasked with screening business environment and implementing Article 44 of the Constitution.
Iran Chamber of Commerce is also the representative of the private sector for negotiations with foreign companies and businesspeople.
Pedram Soltani, vice-president of Iran Chamber of Commerce, told Iran Petroleum that the chamber has hosted more than 133 business delegations from a variety of countries over the past one year alone.
The following is the full text of the interview:
Q: Given the extent of activities of Iran Chamber of Commerce, would you please explain about its cooperation with Iran's petroleum industry?
A: As one of economic ministries in the country, Iran's Ministry of Petroleum has many stakeholders at the Chamber of Commerce. There is a good and persistent interaction between this ministry and the Chamber. Over recent years, many meetings have been held with the minister of petroleum. Iran's petroleum industry top officials are present at the Energy Committee of Iran Chamber of Commerce. Furthermore, there are other organs and committees active in this Chamber with close ties with the petroleum industry.
Due to close ties between these bodies, the Federation of Petroleum Industry has been recently established at Iran Chamber of Commerce.
The presence of Iranian oil industry officials in the federation is an important point in this Chamber. That has so far contributed to interaction between the Chamber and the petroleum industry. Another instance of communications between this Chamber and the petroleum industry is the presence of the representative of the Chamber in the Economic Council for making decisions about petroleum industry projects.
Q: Iran-West nuclear agreement is now entering its second year. How has the implementation of this agreement affected your international communications?
A: As a highly positioned element in Iran’s private sector, Iran Chamber of Commerce has largely communicated with its counterparts in European and Asian countries both directly and indirectly over this time.
Since petroleum industry is the most known economic sector in Iran, all foreign companies willing to invest in Iran’s petroleum industry were naturally present in our negotiations. Therefore, we are making efforts to steer Iranian companies involved in the energy sector into cooperating with foreign parties. I would like to remind that oil and gas companies represent a significant share in business delegations visiting Iran. Meantime, we see many representatives of foreign companies travelling to Iran in order to meet with representatives of oil and gas companies.
In the new round of interaction between Iranian Ministry of Petroleum and international companies, our efforts have been focused upon serious presence in joint programs and conferences in order to let the private sector win a toehold and also create conditions for the private sector to get more involved in this industry and further win the trust of the Ministry of Petroleum.
Before the implementation of the Joint Comprehensive Plan of Action (JCPOA), we held talks with our
Q: Over the past years, Iranian companies and manufacturers have crossed boundaries of science and technology to produce and export most basic petroleum industry commodities. Has Iran Chamber of Commerce had any activity in this regard?
A: As I mentioned before Iran Chamber of Commerce, which represents the private sector, is tasked with accelerating domestic companies’ move towards reaching their objectives. For instance, Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM) is a member of Iran Chamber of Commerce. Such associations have in the past years made efforts to push Iranian companies into international arena.
Q: A vital and important project for Iran’s petroleum industry now is to manufacture 10 groups of equipment. Have you been involved in this?
A: Yes, many companies affiliated with Iran Chamber of Commerce are trying to manufacture the required equipment. In recent years, our knowledge-based companies have been seriously seeking to indigenize oil industry equipment and modern technologies. During their visits to the booths of these companies at the 21st Oil Show, oil industry managers were surprised at this high level of progress. Since Iran’s private sector has a stronger self-confidence than the public sector, it is not necessary for the public sector to be custodian of this sector. The dutiful structure of Iran Chamber of Commerce has fulfilled its obligations in recent years under the 11th administration.
Q: One of the concerns of Iran’s petroleum industry is to accelerate the development of shared oil and gas fields. A major solution to allying this concern will be to attract domestic and foreign investment into this industry and that is why a new model of oil contractual framework has been developed over the past two years. How has Iran Chamber of Commerce contributed to this issue?
A: Throughout formulation of these new contracts, Iran Chamber of Commerce experts were regularly attending the meetings of working groups. Given the role of this model of oil contracts in attracting foreign investment our experts have always supported these contracts.
Iran’s Ministry of Petroleum requires foreign companies to partner Iranian companies for involvement in the petroleum industry projects. This is in line with the policy of supporting Iranian companies and manufacturers. However, this chance should not merely benefit state-run and quasi state-run companies.
Q: As a businessman in Iran’s private sector, which infrastructure do you think is needed for the private sector’s more prominent role in domestic and foreign investment?
A: Some general grounds like ordinary international banking transactions; financing, reliable insurance guarantees like Italy’s SACE that opened a $3.5 billion credit line must be prepared. Following negotiations and an agreement with Germany’s Hermes insurance, we will soon witness the opening of a credit line by this insurance agency. In the transport sector, active companies must start cooperation with European companies. Iranian companies have barely any audited account or internationally recognized certificate. In other words, they are not known to international organizations and companies. Iranian companies must keep up with international regulations which are customary in the world. That has not been practiced in Iran for a decade and it has to be updated. Fortunately over the past year international consulting and service firms have moved to open representative offices in Iran. In our negotiations with foreign companies, we have always told them we will provide more support to them should they choose an Iranian partner for operating projects because Iranian companies are important for us. Iran Chamber of Commerce’s rating office rates private Iranian companies for cooperation with foreign companies. This office is planned to become a national rating center this year in order to continue its job with a better and more serious framework.
Q: How could the level of interaction between petroleum industry related associations and Iran Chamber of Commerce be enhanced?
A: Currently, of 17 industrial associations in the world, 12 are affiliated with the Chamber. We welcome other associations’ application to join the Chamber.
Some issues are domestic; for example, the government or the petroleum ministry’s further trust in the private sector. In the past years, the nationality of Iranian companies has cost them dearly because these companies have been driven out of international markets due to sanctions. Therefore, now that the JCPOA has been implemented these companies must be privileged.
Q: The quality of commodities and equipment is of high significance for Iran’s Ministry of Petroleum. This ministry maintains that domestic and foreign companies must bid for tenders under equal conditions. What do you think?
A: We believe that low-quality equipment could turn out to be dangerous for projects. The Ministry of Petroleum can use foreign equipment, but if there is no high risk it must use Iranian commodities and products.
Q: After the JCPOA implementation, a post-sanctions committee was set up at Iran Chamber of Commerce. Would you please brief us about its activities?
A: This committee was established in June last year. There have been efforts under way for Iranian private companies to play a more prominent role in commerce, financial and insurance affairs. Another activity of this committee has been to process the achievements of JCPOA and monitoring them.
Marvdasht Petchem Plant on Path to Evolution
Almost fifty years ago Iran's petrochemical industry was born near the southern city of Shiraz. Iran joined the club of petrochemical producers after urea fertilizer was produced at Marvdasht Petchem Plant. Over the past five decades, Iran's petrochemical industry has seen ups and downs until it brought its output to more than 60 million tons in the 1990s and 2000s. This upward trend has been continuing in this industry and new units are being added to this industry every day.
Part of the development plan of Marvdasht Petrochemical Plant was launched in the presence of senior Iranian officials. It was the second jump in Iran's petrochemical industry.
With the startup of the third ammoniac/urea unit at Marvdasht Petrochemical Plant with a capacity of 680,000 tons of ammoniac and 1.075 million tons of granule urea, Iran's ammoniac production capacity has reached 4.5 million tons a year and its urea production capacity stands at 5.5 million tons a year.
Marvdasht Chemical Fertilizer Plant, with an annual production capacity of 100,000 tons, was launched in October 1963 as the first chemical fertilizer plant in Iran. That is to say that Shiraz Petrochemical Plant is the standard-bearer of petrochemical industry in Iran. For more than 50 years, it has spearheaded petrochemical production and provided the ground for petrochemical development.
Now after more than half a century of growth, Iran's installed petrochemical production capacity has reached 61 million tons. Shiraz Petrochemical Plant still enjoys a special position.
Given the useful life of existing units and safety and economic parameters pertaining to production and in the light of potential advantages at Shiraz Petrochemical Plant and also in line with the objective of persistent production and the continued life of this company, National Petrochemical Company moved to establish new ammonia and urea units in 2006.
Shiraz Petrochemical Plant is among facilities that were regularly bombed by Iraqi warplanes during eight years of Iraq-Iran War (1980-1988). But specialists working at this facility fared well in containing accidents.
According to planning, a fourth project is planned to become operational at Shiraz Petrochemical Plant, similar to the third unit (3,250 tons of ammoniac and 2,050 tons of urea). But due to a global jump in prices and the increase in the price of gas, this project has yet to become operational.
The urea price, which was around $530 over the past two years, has now reached $200. Oil prices have sharply fallen from $130 to $40 a barrel. Therefore, the price of products varies in line with changes in oil prices. Therefore, if proper conditions prevail over prices the fourth project will hit the agenda of Shiraz Petrochemical Plant.
Urea serves an important role in the metabolism of nitrogen-containing compounds by animals, and is the main nitrogen-containing substance in the urine of mammals. It is a colorless, odorless solid, highly soluble in water, and practically non-toxic. Dissolved in water, it is neither acidic nor alkaline. The body uses it in many processes, most notably nitrogen excretion. The liver forms it by combining two ammonia molecules (NH3) with a carbon dioxide (CO2) molecule in the urea cycle. Urea is widely used in fertilizers as a source of nitrogen and is an important raw material for the chemical industry.
The urea/ammonia project at Shiraz Petrochemical Plant has been carried out with a total investment of € 550 million plus IRR 4,000 billion. It was designed and installed by Petrochemical Industries Design and Engineering Company (PIDEC) using technology developed by a Swiss and Japanese company.
Iranian engineers handled detailed design, purchase engineering, implementation, pre-commissioning and commissioning of this project.
Marvdasht urea/ammonia project has doubled the production capacity of Shiraz Petrochemical Plant to 7.3 million tons.
Kianoush Kazemi, CEO of Shiraz Petrochemical Joint Stock Company, the Marvdasht plant has created 500 direct and 4,000 to 5,000 indirect job opportunities.
The products from new units at Shiraz Petrochemical Plant will be exported to Europe, South America and Africa. Due to their special properties, these products could be used in areas of higher humidity. That is why countries in the aforesaid continents are sought as potential customers.
Shiraz Petrochemical Plant has already been exporting products to India and some European countries.
NIGC Turns 50
JCPOA Brings Honor, Dignity to Iran
More than half a century has passed since gas industry took shape in Iran. National Iranian Gas Company (NIGC) has now turned 50. A review of the past events shows that the state-run firm's activities have been concentrated on gas supply to cities and villages in the aftermath of the 1979 Islamic Revolution.
Iranian gas officials view this development as logical and valuable, despite such events as the Revolution and the imposed war from 1980 to 1988.
Most cities and villages have now been connected to the gas network and NIGC's mission is nearing its end. Therefore, the gas industry is considering changes to shift focus onto gas exports and winning a toehold in the global gas trade.
To mark its 50th anniversary, NIGC held a seminar on August 1. President Hassan Rouhani, Minister of Petroleum Bijan Zangeneh and other senior officials were present.
Addressing the ceremony, President Rouhani said the achievements of Iran's oil and gas industry, particularly in exports, were an outcome of Iran's nuclear agreement with six world powers, dubbed as the Joint Comprehensive Plan of Action (JCPOA).
"It would run counter to dignity to see others decide for Iran's oil exports. The JCPOA brought dignity for Iran because our dignity is putting our resolve into practice," he said.
Noting that Iran's dignity hinges on the country's resolve which in turn is tied to proper and wise policy instead of slogans, the president said: "If a nation is indulged in shouting slogans it can never be honorable, but if it moves on the path of wisdom the country will be put on the path of dignity, honor and independence."
Rouhani heaped praise on Iran's oil and gas industry staff and referring to his administration's plan for exporting 200 mcm/d of gas to other countries, particularly neighboring states, he added: "In today's world, the countries' power partly depends on energy self-sufficiency because development is intertwined with energy and oil and gas are instrumental in this sector."
The president said self-sufficiency in the production of oil and petroleum products including gasoline was of high significance. He referred to disputes emerging between countries in winter, saying: "A country's independence in different sectors and self-sufficiency in supplying basic needs of people constitute an important issue which the administration pays attention to."
Rouhani stressed that national independence and self-sufficiency requires paying attention to energy, oil and gas, saying: "If today people are living an easy life in hot summer and in cold winter it is because of having proper access to energy. Technical staff of oil and gas sector shoulder this important responsibility."
The president said gas production and consumption in the country stood at 2.5 bcm in 1978, while it will reach 284 bcm next year.
He added that the population covered by gas supply services was less than 6% in 1978, which has exceeded 90% now and will soon reach 95%. Rouhani said that means Iran's entire population has access to gas supply network.
He said that gas supply to some remote regions including Sistan and Baluchestan Province in southwestern Iran is under way, adding: "It means that the gas industry has taken a great stride for the welfare, comfort and serenity of the nation."
Rouhani said choking air pollution in many cities of Iran was a major cause of concern for his administration, adding: "One way to get out of this situation is to use gas as the source of fuel in power plants and economic enterprises."
The president said liquid fuel consumption at power plants in the country stood at 42% in 2013, down to 18% in 2015. He noted that liquid fuel consumption at power plants will continue its downward trend to reach 9%, which will make great contribution to air pollution mitigation.
Rouhani stressed the need for the development of oil and gas fields Iran shares with neighboring countries, adding: "In South Pars [gas field], valuable progress has been made and that must continue. With the startup of phases 14, 15, 16 and 17 of South Pars [which Iran shares with Qatar], last [calendar year], 160 mcm/d of gas was added to
the country's production and this year, too. The country's gas production will increase with the completion of phases 18, 19, 20 and 21 of South Pars."
The Iranian president said along with the development of joint hydrocarbon fields, new technologies must be used for enhancing the rate of recovery from oil fields.
Full Gas Supply this Year
Iran's petroleum minister said in the ceremony that NIGC owns one of the most extended service providing networks in the country, adding: "At present, roughly 90% of the country's population (99% of urban and more than 60% of rural population) is under coverage of gas supply network."
Zangeneh said gas supply to villages is among the priorities of the 11th administration and more than IRR 80,000 billion is earmarked for this purpose, this year.
Referring to gas consumption in the country since the 1979 Islamic Revolution, he said: "While gas consumption in the country was around 2.5 bcm in 1978, this figure reached 4.5 bcm in 1989, 46 bcm in 1997, 100 bcm in 2005 and 145 bcm in 2013."
Zangeneh said gas consumption in the country is forecast to reach 284 bcm in 2017, implying that gas consumption would have doubled between 2013 and 2017.
The minister went on to speak about the country's enhanced refining capacity, saying: "While the country's gas refining capacity was 31 mcm in 1978, this figure reached 548 mcm in 2013 and is forecast to reach 1 bcm in 2017."
The minister said the population under coverage of gas supply network was below 1% in 1978, adding that the figure reached 9%, 27% and 61.8% in 1989, 1997 and 2005, respectively. He said the figure reached 87% in 2013 and 90% last March.
Zangeneh expressed hope for the supply of gas to more than 95% of the country's population in 2017, adding that 95% would mean full gas supply in Iran.
Regarding South Pars gas production, the minister said: "Production from this joint gas field was 41 bcm in 2005, which increased to 95 bcm in 2013 and 130 bcm in 2015." Production from South Pars will reach 236 bcm in 2017."
Zangeneh said gas makes up some 70% of the country's energy mix, adding that liquid petroleum products are to be used only for transportation sector over the coming two years. "We will not have liquefied petroleum gas, kerosene and fuel oil consumption," he added.
According to Zangeneh, plans have been worked out for raising gas exports to 200 mcm/d. He said that gas supply to neighboring countries through pipeline and Iran LNG project are prioritized.
He referred to a new generation of petrochemical plants that have been erected in the past years by reliance on the gas industry, saying the output from petrochemical plants totaled 3.193 million tons during the first quarter of the current calendar year which started on March 20. Last year's first quarter petrochemical output was 2.868 million tons.
Gas supply to power plants was another issue raised by Zangeneh. He said that power plants across the country consumed 61 bcm of fuel in 2012, 36% of which was liquefied petroleum gas.
The minister said the LPG share of power plants has dropped in recent years. He said the share was 27% in 2014 and 18% in 2015. He added the share will fall to below 10% this year.
Zangeneh gave assurances that the South Pars project no longer faces any financial shortages, adding that phases 12, 15, 16 and 17 of the giant reservoir have added a total of 160 mcm of gas to the country's gas refining capacity and 140 mcm to the country's onshore gas production capacity.
The minister said phases 19, 18, 20 and 21 are to become operational in the current calendar year.
Zangeneh said the South Pars gas production amounted to 241, 262 and 356 mcm/d in 2012, 2013 and 2015, respectively.
Rivalry with Regional Countries
Mohammad-Reza Nematzadeh, Iran's Minister of Industry, Mine and Trade, also addressed the ceremony. He said that most gas industry equipment is manufactured domestically.
He highlighted the Iranian Ministry of Petroleum's success in exploration, drilling, platform construction as well as onshore and offshore pipe laying, saying Iran is now able to compete with regional countries in these sectors.
He said that a major achievement of the implementation of JCPOA was an increase in foreign investment in Iran, adding that a number of agreements have been signed for investment in Iran's industrial sector in the first quarter of the current calendar year.
Nematzadeh said 38% of the world gas is consumed by industries, adding that this figure is 26% in Iran, which must increase in the future.
New Players in Gas Trade
Mohammad-Hossein Adeli, Gas Exporting Countries Forum (GECF) secretary general spoke about energy market, gas supply and demand, Iran's international standing in gas exports and the relationship between gas and the environment.
Noting that demand for energy will treble in Iran over the coming 25 years, Adeli underscored the necessity of maximum use of renewable energies, saying: "At present, 98% of the country's energy is ensured by oil and gas. Energy consumption in the country is limited mainly to oil and gas and this trend will continue for 25 years."
He said that households and power plants account for the bulk of gas consumption in Iran, adding: "This trend will change in the future and the power plants' share will be more than the households'."
Adeli referred to energy efficiency plans in the country, saying: "If efficiency increases gas consumption will be cut by 20% and we will be able to earmark this gas for exports."
He referred to global gas market, saying: "The US was an importer of gas since 2005, but it has become a gas exporter this year, and Australia is set to overtake Qatar in the coming years. Furthermore, Angola, Tanzania and Mozambique will soon join new players of gas industry."
Adeli also pointed to global gas importers, saying: "Having overtaken Japan, China and India are becoming new players in gas imports."
"Demand for gas will increase in coming years. In this regard, China, the US, India and Iran will account for half of new demand levels," he said.
Gas Supply Hits Record
Deputy Minister of Petroleum Hamid-Reza Araqi, who is also managing director of NIGC, said gas supply to 5,000 villages was put on agenda last year, adding that 2,000 villages have already received gas. "Gas supply to 5,000 more villages is also under way and NIGC plans to supply gas to the city of Zahedan before the 11th administration bows out."
He referred to NIGC plans for protecting the environment, saying 250 mcm/d of gas is delivered to 72 power plants in the country, which makes up 90% of the power plants' fuel consumption.
Araqi said Iran's power plants received 57 bcm of gas last calendar year, which will reach 67 bcm in the current calendar year.
"This amount of gas is equivalent to 60 billion liters of liquid fuel. By this replacement, less carbon dioxide will be generated," he added.
Highlighting record of gas supply in different sectors last calendar year, the official said 700 mcm/d of gas was delivered to consumption spots in the last calendar year. He said this figure will increase to 1.2 bcm by 2025.
Araqi also said that 44 NIGC subsidiaries are currently distributing gas to 23 million households across the country through 35,000 kilometers of pipeline and 300,000 kilometers of network.
Iran Targets 10% Gas Trade Share
Iran’s gas industry is five decades old now. When the industry started work the main objective was to export gas. To that end, Iran’s first gas refinery pumped gas to the then Soviet Union before it would be delivered to Europe.
Half a century later today, Iran is making fresh attempts to increase gas production from the new phases of the supergiant South Pars gas field in a bid to export more gas and win a higher share in this profitable and strategic business.
In order to get further familiar with Iran’s gas policy, Iran Petroleum has conducted an interview with Mohammad-Reza Qodsizadeh, director of planning at National Iranian Gas Company (NIGC).
Q: Why did Iran change policy in the past decades and favored domestic development of gas to the export of this energy commodity?
A: In the aftermath of the [1979] Islamic Revolution in Iran, the country was facing numerous problems including embargoes and repercussions of the [Iraqi imposed] war. Therefore, Iran’s gas industry shifted its outward-looking view to an inward-looking one. In other words, plans were made for natural gas to make up the main energy commodity in the country. Huge natural gas deposits, profitability of replacement of liquid fuel with gas and public satisfaction were among other reasons of switching attention from outside to inside to the gas industry.
Q: Does it mean that Iran’s gas industry would have remained export-oriented had the Islamic Revolution and the Iraqi war not occurred?
A: No! In my opinion it was reasonable to develop gas industry inside the country and the Revolution and the war accelerated this process. Over the past decades, supplanting liquid fuel with gas has earned Iran significant economic benefits.
Q: What is the current status of gas supply in Iran?
A: Gas makes up a 70% share in Iran’s energy mix now. More than 1,000 cities and 20,000 villages are benefiting from this energy. We hope that during the 6th Five-year [Development] Plan, all Iranian cities and villages will be benefiting from gas. Of course, gas supply in hot areas will be developed at a slower place.
Q: Some Iranian villages are located in remote mountainous areas and gas supply to these villages via pipeline would not be economical. What is NIGC’s plan for energy distribution in these villages?
A: In this regard, the policy of governments and the ruling establishment in Iran is important because administrations are tasked with supplying energy to people and it is people who would choose their energy of choice based on their economic status. In Iran, gas has so far been supplied at subsidized and unreal prices. The reason for inclination for gas is easy access and its low price. Meantime, most villages and cities in Iran receive gas via pipeline.
Of course, we have currently plans for some hot and remote areas where gas consumption is low. We plan to use liquefied petroleum gas (LPG) in these areas. Such projects are under way in some provinces like Khuzestan, Isfahan and Sistan and Baluchestan.
Q: Given the low oil prices, are gas supply projects still profitable in Iran?
A: Sure! What has changed due to the slump in oil prices is the length of the time of return on investment because we believe that using natural gas will have economic justification under any circumstances. Therefore, low oil prices could not much affect gas distribution network development in Iran. Oil prices are low now and we have more than 20 cents per cubic meter of gas that would replace liquid fuels like gasoil. A weak point of this industry is the low price of gas. This issue leaves no motivation for the application of state-of-the-art technology for efficient fuel and using other fuels.
Q: Given the increase in gas production in the country following the startup of new phases of South Pars, what is the status of fuel supply to industries and power plants and what are your future plans in this regard?
A: Every year, as gas production from South Pars increases and gas supply projects come on-stream, liquid fuel consumption in the country, particularly at power plants and major industries, drops. Gas supply to Iranian power plants has reached 90% and according to plans liquid fuel consumption at power plants is expected to reach
reach zero in five years. In the [calendar] year 1394 (which ended in March), more than 57 bcm of gas was consumed at Iran power plants. If they were to consume liquid fuel we had to spend at least $20 billion. Natural gas consumption has grown on average 10% a year. Given gas distribution in Sistan and Baluchestan Province, we predict power plants’ consumption to reach $60 billion by yearend.
Q: What are NIGC’s new plans for enhancing gas exports?
A: In case of optimal use of gas in different sectors, it will be possible to increase exporting this energy carrier or electricity. Gas is a national wealth belonging to all generations and its consumption must be efficient.
Over the coming two years, gas supply to households in Iran will be slowed down sharply because we have reached a stage of saturation in this sector. After that, by increasing the number of cultural and education projects we plan to make gas consumption efficient in Iran, in a bid to have a bigger share of global gas trade.
According to [2020] Vision Plan, Iran must have a share of above 10% in the global gas trade. Currently, our main customer is Turkey besides Armenia and Azerbaijan. Our gas export is expected to increase soon from the current 35 mcm/d to more than 200 mcm/d. Our target markets are Turkey, Iraq, Oman, Kuwait and Pakistan. In case international conditions improve, Iran will be able to partly supply the gas needs of Europe. The reason is that Europe plans to diversify its sources of energy, and gas is considered a clean fuel in Europe.
Our priority for gas exports is to use pipelines. Due to the existence of gas distribution network in Turkey, pipeline is the best way for gas exports to Europe. Of course, gas could be exported in the form of liquefied natural gas (LNG), too. For instance, India which has political disputes with Pakistan favors this method.
Q: Which stage are gas exports to Pakistan in now?
A: Iran has a contract with Pakistan for gas exports. This country was supposed to start recovering gas in 2015 because we had prepared the necessary infrastructure for that purpose, but due to financial reasons it has failed to build pipeline in its own territory. Now we are waiting for decision making by the two countries' officials.
Q: Would you please tell us about NIGC’s plans for expanding gas distribution network and building gas pressure booster stations in the country?
A: As gas production increases mainly from the jointly operated South Pars gas field, Iran is planning to expand its domestic network. Iran’s gas production is forecast to exceed 1 bcm/d by 2025. Based on planning for the transfer of this amount of gas, three new trunklines are envisaged, one of which (Iran Gas Trunkline 6) is mostly ready. IGAT-9 and IGAT-11 will be constructed to supply the country’s needs in central and eastern areas. Once these trunklines become operational gas supply in the country will be sustainable. Based on the 6th Five-Year Plan, 28 gas pressure booster stations are envisaged. Every year five stations will be built as the pipeline construction makes progress.
Q: Given the extent of the gas industry and its need for new projects and application of technologies in this regard, how does NIGC plan to attract domestic and foreign investors?
A: One of the great advantages of Iran is the existence of potential for development. Many countries like Turkey and Malaysia do not enjoy such potential. Realizing the development objectives in this big industry largely depends on the settlement of issues between Iran and big world powers. Fortunately, due to its gas deposits and unique geographical position, our country can easily introduce itself as the energy hub in the world.
There are currently many investors wishing presence in Iran’s gas industry. But they will step into Iran when they are assured of return on their investment. Therefore, the necessary infrastructure must be provided for this purpose.
In the gas sector, if we manage to get foreign finance for our export projects like IGAT-9 and finalize gas export deal with Europe we would have done a great job. This issue is nearing finalization with regard to Iraq.
Q: In your opinion, which one is important under the present circumstances: oil or gas?
A: It is difficult to answer this question, but gas can become national development engine and create more jobs than oil might do. Given the country’s huge gas reserves, in the long term gas will push Iran’s economy ahead.
Q: Given the decline in oil prices in the world, what do you think of the prospect of gas market?
A: It seems that oil prices will be back to a reasonable level in the near future. But as far as gas projects are concerned I would like to note that they are still economical even with $40 oil. By efficient use of gas we have to move towards its exports because besides the economic aspects of the issue it will boost Iran’s national security.
Q: Do you think any sector of gas industry still remains to be developed after 50 years?
A: Yes, of course. There is great potential with regard to building high-pressure pipelines. If we can bring gas production to one billion barrels, many capacities need to be created for development.
Q: How much investment does NIGC need annually for developing its infrastructure?
A: It will need at least $20 billion in investment over the coming five years.
Q: This industry is now half a century old. How do you assess the capability of Iranian contractors and manufacturers involved in this industry?
A: At present we have almost no problems with regard to the supply of necessary commodities by domestic companies. Significant efforts have been made during years of sanctions so that domestic manufacturers would build rotary equipment like turbocompressors. It is noteworthy that our main challenge now is investment.
Oil Price Slump in North America; Challenges & Consequences
North America, which covers Canada, the United States and Mexico, is one of the important oil-rich regions in the world. These three countries are all produces of crude oil.
In this article, we review oil production conditions in these three countries and then review the consequences of oil price fall for them.
US
Crude oil production in the US went on upward trend in 2012 and continued into 2015. But oil production in the US slowed down and even halted in 2015 as oil prices fell sharply. According to the US Energy Information Administration (EIA), shale oil production in this country continued to fall for the seventh consecutive month in June 2016. On account of exorbitant debts and sharp fall in oil prices, the US shale oil and gas industry has flagged behind its once historic growth.
US Crude Oil Output (million barrels), 2010-2016
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US Crude Oil Output (million barrels), 2015-2016
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Canada
According to BP official data, Canada sits atop the world’s largest oil reserves, behind Saudi Arabia and Venezuela. It is now the fifth largest producer of oil in the world.
Canada’s National Energy Board (NEB) put the country’s crude oil production at 3.87 mb/d in 2015, which is estimated to soar to 6 or 7 mb/d by 2040.The bulk of Canada’s oil reserves is found in Alberta.
Canada Crude Oil Output (million barrels), 2010-2016
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Canada Crude Oil Output (million barrels), 2015-2016
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Canada exports 1.6 mb/d of oil to other markets, including neighboring US. Canada has long replaced Venezuela and Mexico as oil supplier to the US. However, enhanced shale oil production in the US has reduced its appetite for taking in crude oil from Canada.
As oil prices rebound Canada hopes it will increase its production and find new markets.
The primary market for Canada’s heavy crude oil production growth is located in US Midwest and along the Gulf of Mexico coastlines.
There are opportunities for this type of oil to make its way into new markets in Asia. By extracting more oil from tar sands, Canada will be able to meet growing demand in Asia mainly from China and India.
Furthermore, Canada crude oil production can replace the oil imported to power refineries in Quebec and western coasts of the US.
Mexico
Mexico is among the top 10 oil producers in the world. Along with Canada and Saudi Arabia, Mexico is one of major suppliers of oil to the US. Over the past one decade, Mexico has seen oil production fall due to pressure decline in its mature oil fields. Oil production in this country has declined from 3.4 mb/d in 2004 to 2.5 mb/d in 2016.
Mexico’s giant state oil company PEMEX has lost nearly 30% of its production since 2004. The main reason is insufficient investment in oil exploration and production sectors.
Mexico Crude Oil Output (million barrels), 2010-2016
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Mexico Crude Oil Output (million barrels), 2015-2016
[mexico-crude-oil-production (1)]
Mexico amended its energy law in 2014. These reforms end PEMEX’s 75-year monopoly on oil production, and facilitate joint venture investments in the country. The objective sought by the reforms was to enhance production and export through new investments by private and foreign companies in Mexico’s oil reservoirs.
But as oil prices have fallen in recent years and many oil companies have subsequently pulled out of oil field development projects Mexico cannot be much hopeful of attracting fresh investments with a view to raising its production level.
Oil Slump Impact on North America
The US, Mexico and Canada have all suffered losses due to sharp decline in crude oil price in international markets. This loss production is seen in the financial
losses of oil companies, the growing number of unemployed people, low investment in the oil and gas industries, slow economic growth and banks’ losses from granting loans to oil companies.
Lower Investment
Under circumstances of oil price decline and concomitant fall in the profits of oil companies, most big companies are trying to reduce their investment in a bid to maintain their level of liquidity. According to estimates, investment in the oil sector through 2016 to 2018 would be almost cut by half from the 2013-2014 period. North America is no exception to this rule and it has faced the issue of reduced investment in its oil sector. This issue is mainly seen in the shale oil sectors in the US, Canada and Mexico.
Further crude oil extraction from oil sands in Canada requires transport facilities including construction of oil pipelines and railroads. For instance, crude oil supply in western Canada is not in favorable conditions due to the shortage of transport facilities. More transit facilities are needed for the supply of these oil cargoes to oil markets.
Anyway, the global oil price slump and the decline in exports from Canada have reduced investment in this country.
Since shale oil extraction and production costs stand high, investment in these projects is not economical for major oil companies. Therefore, a large number of companies and groups involved in the oil sector have suspended most of their shale oil projects.
For instance, Suncor Energy has forecast to cut its investment in shale oil production by $1 billion. These restrictions come in the wake of global oil price fall.
Suncor Energy is a Canadian integrated energy company based in Calgary, Alberta. It specializes in production of synthetic crude from oil sands.
Shale Oil in America
[EIA_World_Shale_Gas_Map]
Moreover, US oil giant Chevron is cutting its investments by $5 billion. This company has announced that it will stop financing projects which are no longer profitable due to crude oil price decline.
Mexico’s PEMEX has also been unsuccessful in attracting new investments. This company’s revenues are vital for Medico’s public treasury; however, it has announced delaying its planned $3.6 billion investment indefinitely due to losses it has produced following crude oil price decline in world markets, which means continued oil production decline in Mexico.
Oil Companies’ Financial Loss
PEMEX’s oil production fell 6.7% to 2.2 mb/d in 2015 year-on-year. Therefore, the decline in production and oil prices doubled PEMEX’s financial losses in 2015 from the year before to stand at $30.3 billion. That is the case, while this company’s production is on a downward trend and it is forecast to experience financial loss as oil prices stand at a very low level. In the US, bankruptcy has struck more than 60 oil and gas companies. Small-sized companies that have lost their capitals are facing more serious problems.
More Unemployment
The decline in oil prices has axed many jobs in most oil companies in North America. Alberta, which is known as Canada’s oil industry heart, cut nearly 20,000 jobs in 2015 because many companies involved in energy projects have had to axe jobs.
Suncor Energy cut 1,000 jobs in a bid to cut its production costs by $600 million to $800 million and make up for the fallout from oil price fall.
Alberta-based Husky Energy Inc. logged $4.1 billion in losses in the third quarter of 2015 due to low oil prices. It moved to cut jobs and sell out assets.
US’s Chevron has also accounted that it plans 10% job cuts in order to reduce costs.
Low Economic Growth
The fall in oil prices has negatively impacted growth in North American countries like Canada and Mexico. For example, the fall in oil prices has harmed Mexico's economy to the extent that the Mexican government has had to curb its budget under pressure from low oil prices.
Canada has in recent years banked in on oil extraction in order to shore up its economic growth, but the 50% decline in global oil prices has made energy production costly in Canada. It has also left negative impacts on investors in other sectors like financial services, immovable market and industries. As a result, economic growth has slowed down.
Since energy industry accounts for 10% of Canada's gross domestic product (GDP), the fall in oil revenues constitutes a big coup for Canada whose economic growth has been affected. Furthermore, the oil price fall and subsequent oil exports have resulted in a 1.7% decline in domestic demand and also given rise to lower investment.
Banks Lose Interests
Some big banks in North America have not been safe from low oil prices either. The failure of oil companies to reimburse their debts has inflicted harm on the banks in these countries.
Five big banks in Canada, including Royal Bank, Toronto-Dominion Bank, Nova Scotia Bank, have had to cut their investments in a bid to be able to cover loss-producing loans paid to oil and gas companies.
Canadian banks seem to have no option but to limit their loan reimbursement to the oil sector in this country. This issue is likely to drive oil companies towards bankruptcy. Of course, threats to Canadian banks are not necessarily related to granting loans to oil companies. Rather on a larger scale, as employment falls in the petroleum industry, many families will suffer shock from negative income and wealth. That would finally leave impacts on banking balance sheets in Canada.
Regional Rivalry
The sharp fall in oil prices has forced North American countries to sell more oil. That has brought about some sort of competition between oil exporters in this region as they seek to preserve and develop their markets. For instance, an oil price war has erupted between Canada and Latin American countries on which country should deliver heavy crude to refineries in US Gulf costs. At present, Canada is the most important supplier of crude oil to the US by providing 45% of its crude oil needs. It also plans to enhance its share by building new pipelines.
-----Deal Reached on Gabon Offshore Rig
VAALCO Energy has reached an accord with Transocean on the remaining contract term for the Constellation II rig, employed for a recent drilling program offshore Gabon.
The agreement provides for payment of $5.1 million net to VAALCO’s interest for unused rig days under the contract. This amount, plus demobilization charges, will be paid in seven monthly installments.
Last month, the electrical submersible pumps (ESPs) in the South Tchibala 2-H well failed - the well, which had been producing 1,700 b/d of oil, has since been shut-in.
VAALCO aims to deploy a hydraulic workover unit (at lower cost than a jackup) to move onto the Avouma platform and replace the ESPs in the well, which should be back on production by early 4Q.
CEO Steve Guidry said: “Thus far in 2016, we have experienced very high production uptime along with more shallow declines from new wells placed on production in the last 12 months.
“The shut-in of the South Tchibala 2-H well is expected to be only a short-term temporary disruption, therefore we don’t see a need to change our current annual production guidance of 3,700-4,500 boe/d at this time.”
2-----Geotechnical Investigation in India
Fugro will begin a major program of geotechnical investigations under a contract awarded by ONGC.
Valued at about $26 million, the contract involves site investigation work to gather geotechnical and geohazard data at the field, which is located in the KG-DWN-98/2 block off the east coast of India. The information will support the design and subsequent installation of wellheads, manifolds, platforms, FPSO anchors, umbilicals, pipelines, and flowlines.
Fugro will deploy its deepwater geotechnical vessel Fugro Voyager, which will perform the work in water depths ranging from 50 to 1,500 m (164 to 4,921 ft). The fieldwork will be followed by extensive laboratory testing, data analysis, interpretation, and integration with other data acquired by Fugro.
For ONGC’s site characterization reports, Fugro said it will integrate the geotechnical and geohazard data from this project with metocean data and AUV geophysical survey data it had acquired previously at this field.
The work is due to begin before the end of 3Q.
3----Australia Subsea Pipeline to Be Upgraded
Hydratight has completed an upgrade project on the John Brookes subsea pipeline on the North West Shelf of Western Australia.
Contracted by Quadrant Energy Pty Ltd. on behalf of the John Brookes joint venture, Hydratight engineered, manufactured, delivered, and supported the installation of an 18-in. MORGRIP connector on the John Brookes subsea pipeline is located 54 km (34 mi) northeast of Quadrant’s Varanus Island facilities.
Hydratight engineers Mark Fisher and Bob Till were embedded in the offshore installation team.
“This was an exciting project to be part of strict safety and environmental expectations in place,” explained Fisher. “These included working closely with a DNV inspector who flew in from Singapore to witness all aspects of the upgrade. It also meant an independent critique of our manufacturing procedures.
“The component parts were of extremely high specifications and we had strict rules on forging and manufacturing. These included the use of a compliant biodegradable mineral hydraulic fluid used for activating the tensioners and flushing and cleansing all tooling. We ensured no other unassessed hydraulic fluid was used.”
A representative from Quadrant Energy oversaw the factory acceptance test of the completed connector in the UK, before witnessing a second test and diver training on arrival in Australia.
Bespoke features were included on the engineered product including corrosion resistant alloy cladding, composite graphite seals, the company’s ball and taper technology and its subsea tensioning equipment.
4---Sea Trucks to Install Pipelines in Argentina
Enap Sipetrol Argentina has contracted Sea Trucks for pipelay construction for the PIAM project on the Magallanes field offshore Argentina.
The work scope covers engineering, project management, and installation of three pipelines in diameters from 6 to 14 inch.
It also includes one shore approach, installation of tie-in spools and risers, abandonment of two existing lines and recovery of flexibles. Water depths in the field are up to 70 m (229 ft).
Sea Trucks’ DP-3 vessel Jascon 34 will perform the pipelay and provide accommodation under a separate contract. Offshore activities are due to start in 4Q.
5-----NPD Approves BP’s Tambar Facility Extension
The Norwegian Petroleum Directorate has given BP the green light to extend the Tambar field facility until Jan. 1, 2022, which coincides with the expiry of production license 065.
The lifetime was set at 15 years in the field’s plan for development and operation, which ends on July 15.
The Tambar oil field is located in the southern part of the Norwegian North Sea, about 16 km (10 mi) southeast of the Ula field. The field was developed with a remote-controlled wellhead facility without process equipment.
The field is produced with depressurization. Natural gas expansion combined with pressure support from water drive is the most important drive mechanisms.
The oil is transported to Ula via pipeline. Following processing, the oil is exported by pipeline to Teesside in the UK via Ekofisk, while the gas is injected in the Ula reservoir to increase oil recovery.
BP Norge AS is the operator of production license 065, with an ownership interest of 55%. DONG E&P Norge AS holds the remaining 45%.
1--- Russia Fixes Cooperation with OPEC
Russian Energy Minister Alexander Novak said in an interview he has ruled out possible coordination with OPEC group on oil output after a failed attempt to jointly maintain production levels earlier this year.
"We do not discuss the issues of coordination of actions between Russia and OPEC... We can't agree on production cuts as we don't have such tools and mechanisms," Novak told Reuters in an interview cleared for publication.
The Organization of the Petroleum Exporting Countries and other big oil producers, including Russia, were not able to reach a deal in Doha in April on freezing oil production in order to support falling oil prices.
Global crude oil prices reached a 13-year low of $27 per barrel in January due to oversupply, but have recovered since then to around $50.
The weak price for oil, Moscow's chief export commodity, hit the Russian economy which shrank by 3.7 percent last year.
In the interview with Reuters, Novak said Russia sees its cooperation with OPEC focusing on the exchange of information and analysis on the global oil market, rather than on coordinating production level.
Russian companies have been increasing oil production this year. Novak said he expects domestic oil output at 542-544 million tons this year after it hit 534 million tons (10.73 million barrels per day), a 30-year high, in 2015.
Novak said he will likely meet new Saudi energy minister Khalid al-Falih at 15th IEF Ministerial Meeting in Algeria in late September. It will be their first meeting since Falih was appointed in May, taking over from veteran minister Ali al-Naimi.
"Obviously, we will discuss the situation on the (global) oil market," he said, adding that they will also look into the possibility of joint energy projects in Russia, Saudi Arabia and third countries.
Novak said Russia is sticking to its forecast that the oil price will average between $40 and $50 this year. He said though there are risks that it could be lower due to seasonal decline in demand.
Trading houses across the globe are betting on oil markets remaining oversupplied for at least two more years even as crude prices stage a recovery driven by early signs of falling production.
The Russian minister said he expected global oil markets would balance out by mid- or end-2017, with a lot depending on Saudi Arabia's policy. He said he saw demand rising by at least 0.8-1 percent per year, or by 0.7-1.0 million barrels per day.
Novak added that global oil stockpiles have reached 3 billion barrels, of which 500 million barrels he called "excessive" and warned that it will take a long time before they leave the market.
"In general, this is almost 1.5 million bpd, meaning that if nothing in addition will be produced (globally) and output is maintained at current levels, this overhang will still cover for the annual increase in demand," Novak said.
2-----GECF: Fight Global Warming
Combining renewable energy and natural gas is the way to fight global warming and prevent surface temperatures from rising more than 2° C, Gas Exporting Countries Forum, or GECF, secretary general Seyed Mohammad Hossein Adeli said in an interview with EFE.
“It’s very important that global warming not exceed 2° centigrade and, to achieve this, the response lies not just in renewable energy. The study we’ve done concluded that we have to combine renewables with natural gas,” Adeli said.
The GECF official, who attended an oil conference in Bolivia, stressed that this strategy should be accompanied by a reduction in oil and coal consumption.
The Iranian diplomat and economist said countries should aim to expand the renewable energy market and consumption of natural gas, a fuel that is considered cleaner than burning coal or crude.
The GECF predicts that dependence on fossil fuels in the world will be reduced from 80 percent to 75 percent within 25 years.
The world has large natural gas reserves and Iran, Qatar and Russia and possess huge reserves, Adeli said.
Scientists are working on new technologies to remove the CO2 produced by coal in an effort to make it a cleaner energy source, the GECF official said.
Fossil fuels, however, will still be around over the next 50 years because the growth in renewables will be insufficient to meet total energy demand, Adeli said.
For many countries in Asia, Africa and Latin America, natural gas is accessible, inexpensive and does not require complex technologies, compared to solar power plants.
The GECF members are Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, Venezuela and the United Arab Emirates.
The Netherlands, Iraq, Oman, Peru and Norway have observer status in the organization.
GECF members control 42 percent of the global natural gas supply, hold 70 percent of proven reserves, and account for 40 percent of the gas transported via pipelines and 65 percent of the global liquefied natural gas (LNG) market.
3----Nigeria Launches $100mn Oil Fund
Nigeria’s government has launched a special fund worth US$100 million to take care of securing the credit that the oil industry of the country needs. Called a Nigerian Content Intervention Fund, the fund will be managed by the Nigerian Content Development and Monitoring Board and the Bank of Industry.
Until now, Nigerian oil service companies could benefit from a 50 percent interest rebate on loans from commercial banks plus partial security. These were provided by the Nigeria Content Development Fund, which was launched in 2012.
The Acting Executive Secretary of the NCDMB said the new fund was set up in response to difficulties cited by local oil industry players in obtaining borrowed funds for their operations. Patrick Obah added that the board and the Bank of Industry were dedicated to providing assistance to oil services companies that wanted to create more jobs locally, retain their revenues in-country and add value to the economy.
Nigeria’s oil sector has been deeply troubled by falling oil prices and more recently, by a long string of attacks on oil production and transport infrastructure. Some of these attacks, though not targeting people, have ended with human casualties. The groups taking responsibility for the attacks have stated that their aim is to redirect a bigger portion of state oil revenues from Lagos to the impoverished region of the Niger Delta, where the country’s oil industry is concentrated.
Just the other day, senior government officials from the two southern provinces of Nigeria urged the central government to revise the oil well ownership regulations in such a way as to give Niger Delta communities a bigger share of the profits. “The people of the Niger Delta region should possess at least 65 percent of the oil wells contrary to the present ownership structure where less than 10 percent of the oil blocks belong to our people,” the legislators said
----Angola LNG Export Plant Shuts Down
Angola's liquefied natural gas (LNG) export facility has been shut down until mid- to late-August for a planned phase of testing and maintenance before ramping back up to full capacity, trade sources said.
Angola's recently refurbished plant reopened in early June after it was shut down in April 2014 to fix design flaws.
Since then it has exported four cargoes, while traders had expected it to pump out six to nine shipments before shutting down for a final phase of tests.
The Chevron-led project should ramp-up toward full export capacity once it is back in operation by September, traders said.
Angola LNG did not immediately respond to request for comment.
----Mexico Approves Auction Terms for 15 Offshore Oil Areas
Mexico's oil regulator approved contracts and auction terms for 15 shallow water areas in the southern Gulf of Mexico, to be bid out early next year as part of a series of tenders following a sweeping energy overhaul.
The first phase of the so-called Round Two tender will feature 30-year production sharing contracts, the regulator known as CNH said. Winners will be announced on March 22, 2017.
The auction hopes to draw investment of about $750 million per block, or about $11.25 billion in total over the life of the contracts, said CNH president Juan Carlos Zepeda.
Ranging from 375 square miles (972 sq km) to 180 square miles (466 sq km) in size and containing mostly light oil, the blocks lie along the coast of Veracruz, Tabasco and Campeche states, and location of most local production. They include nearly 650 million barrels of crude oil equivalent in proven reserves.
Hoping to reverse slumping oil output, Mexico ended the decades-long monopoly of national oil company Pemex in 2013, paving the way for private producers to operate on their own. But a sharp fall in crude prices has made that harder.
To pre-qualify for the auction, firms or consortia must be able to document technical capability from at least three exploration and production projects between 2011 and 2015, or total investments of at least $1 billion on such developments.
Eligible bidders must also have experience either as an operator or financial partner in either shallow or deep waters.
To bid alone or in consortium, the companies participating must meet minimum capital requirements of $1 billion. Or, the bidders can document assets worth at least $10 billion.
Contracts will be awarded based on which bidders offer the largest government take, using a formula that includes the share of pre-tax profits companies offer the state plus an additional investment commitment.
Local content procurement requirements range from 15 percent to 35 percent of goods and services over the contract lifespan.
The 2017 auction will follow three auctions that began last year covering both shallow water and onshore blocks. The first highly-anticipated deep water auction is scheduled to take place in December.
The three Round One auctions have met with mixed success, with several shallow water fields receiving no bids, while all onshore blocks offered late last year attracted winning bids.
9----CNPC Evacuates Oil Personnel from South Sudan
The China National Petroleum Corporation (CNPC) evacuated 191 of its employees in South Sudan amid worries over an escalation in the armed conflict between the government and opposition troops.
A CNPC statement issued on 19 June mentioned that only 77 of their workers remain in the African country manning the company’s oilfields. The communiqué further detailed that CNPC will try maintain normal operations in South Sudan. Nevertheless, the firm warns that it may remove all its personnel should the situation worsen.
China spent US$20 billion in Sudan before it split into two separate countries in 2011, and initially the investment paid off as nearly 14 million barrels of oil were produced in the first ten months of 2013. Yet the advent of civil war starting in December 2013 between forces loyal to President Salva Kiir and former Vice President Riek Machar led to tens of thousands of people dead and output plummeting to 120,000 barrel per day.
Clashes erupted earlier this month in the Southern Sudanese capital of Juba that left 272 people dead, including two United Nations peacekeepers from China. Both sides in the conflict declared a ceasefire on 12 July, but fighting could resume over the mobilization of 3000 rebels threatening to attack Juba.
“We are communicating with them to stop this and disperse,” said Army spokesman Lul Ruai Koang to Bloomberg. “If they insist to fight, we will attack them with our air force. This is the warning we are giving them.”
In light of the re-escalation of the conflict, Germany, Britain, Italy, Japan, India, and Uganda have all attempted to pull their citizens out of South Sudan.
The conflict has limited oil production to the northern Upper Nile state even though South Sudan maintained 75 percent of Sudan’s oil supply following independence. Sudan holds a vital importance over its landlocked neighbor, which maintains pipelines and other facilities used in order to export South Sudanese oil via the Bashayer port along the Red Sea.
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----BP Eyes Oil Terminals Stake Sell-Off
According to The Daily Telegraph, BP is selling off a string of fuel storage terminals as well as its stake in an enormous pipeline as part of a shake-up of its operations in the UK that affects around 350 jobs.
The FTSE 100 oil major is planning to offload its stake in the onshore United Kingdom Oil Pipeline (UKOP), which it co-owns as part of a consortium with Royal Dutch Shell, US firm Valero and France’s Total. The 650km UKOP system supplies fuel to Heathrow and Gatwick airports and stretches from the Stanlow oil refinery in the north west of England to the Coryton refinery on the Thames in Essex.
As part of the overhaul, BP is also selling its storage terminals at Belfast, Hamble and Northampton, as well as its stake in the Kingsbury terminal, which is a 50-50 joint venture with Shell and is one of the biggest inland sites in the country. The four terminals store petrol, diesel and jet fuel and the sales will leave BP with just two such sites.
Furthermore, the oil major has struck a deal with Hoyer, the logistics company, to handle its fuel transport operations. This agreement will result in about 280 BP staff, including drivers and other logistics roles, transferring over to Hoyer. Some 30 BP employees could be made redundant following the Hoyer deal.
BP employs 45 staff at the terminals it is selling, and it hopes they will all be given jobs by the sites’ new owners once deals are agreed. The shake-up does not affect the company’s retail business in the UK, which includes its network of more than 1,200 petrol stations across the country.
It is understood that BP announced the overhaul to its employees, although the oil giant began looking for buyers for the terminals a few months ago. It follows a strategic review undertaken by the company.
Companies across the oil industry are cutting costs and selling assets to deal with the plunge in the oil price. Brent crude, which traded at around $115 a barrel about two years ago, slumped to less than $28 a barrel in January, forcing firms to reassess their businesses to deal with the downturn.
In February, BP posted its biggest-ever annual loss of $6.5bn and revealed it is cutting thousands of jobs in an attempt to cope with the oil price slump. The business has also been dealing with the fall-out from the 2010 Gulf of Mexico disaster. It said last week that its total bill for the worst oil spill in US history would come to $61.6bn.
A company spokesman said: “BP can confirm that we have entered into an agreement with Hoyer to outsource our secondary transport activities, and that we are seeking buyers for a portion of our stake in the UKOP pipeline, three of our terminals and our ownership interest in one other terminal.
“We regularly carry out strategic reviews of our operations and these decisions ensure that we remain focused on our core activities, while our customers benefit from improved efficiency.”
----- Turkmenistan Limits Access to Foreign Currency
Turkmenistan, Central Asia's biggest gas exporter, has restricted access to foreign currency for local companies and individuals in response to a sharp fall in export revenues, Turkmen businessmen say.
Foreign currency controls would normally be a crisis measure implemented when a country is worried its foreign currency reserves are being seriously depleted.
In the case of Turkmenistan, the government does not disclose the size of its reserves, so it is difficult to gauge how serious the problem is. The central bank and finance ministry did not respond to Reuters questions on the subject.
Any economic crisis could have far-reaching consequences in Turkmenistan, an ex-Soviet country that borders Iran and Afghanistan. It has been under one-party rule for 25 years.
Turkmenistan has long relied on gas supplies to Russia as its main source of hard currency revenue. Moscow halted purchases in January after sharply reducing them last year in a pricing dispute. Total Turkmen exports dropped 38.5 percent last year and were down a further 41.5 percent in the first quarter, the most recent period for which official data is available.
Late last year the central bank stopped selling foreign currency to local businesses, said one Turkmen entrepreneur who spoke on condition of anonymity because he feared official retribution for speaking openly about the issue.
Foreign exchange operations are now handled by commercial banks which have a varying degree of access to foreign currency, the businessman said.
He said companies working on priority projects, such as the construction of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, were still able to access foreign currency. Another project moving at full steam is the construction of facilities for the 2017 Asian Indoor and Martial Arts Games, a matter of prestige for the Ashgabat government.
For anyone else, finding dollars or euros has become a tough task. Another Turkmen businessman, also speaking on condition of anonymity, told Reuters that after requesting $10,000 from his bank, he would only get $500.
The restrictions on businesses accessing foreign currency have not been previously reported.
Turkmenistan's central bank forwarded all requests for comment to one official who could not be reached by telephone despite repeated calls over several days. The Finance Ministry said it had no information on the matter.
Turkmenistan's central bank has kept the exchange rate for the manat currency TMT= fixed since a 19-percent devaluation in early 2015.
On the black market, the manat is quoted at about 5.5-6.0 per dollar, against the official rate of 3.5 per dollar. The black market though does not have enough foreign currency in circulation to meet demand.
Consumers also face problems. Ordinary Turkmens can only buy their monthly pay's worth in foreign currency at local banks, upon presenting a pay slip. Money transfers from abroad made through the Western Union system are being paid out only in local currency since June, according to a Reuters correspondent in Ashghabat.
A Russia-based customer service representative at WU said the company had no special restrictions on transfers sent to and from Turkmenistan. A Dubai-based WU spokeswoman for the region could not be reached for comment.
"When I travel abroad I have to go to each one of my relatives and friends to get as much foreign currency as I can," said the first businessman. "My bank still hasn't completely filled an order I placed last December."
Because of the shortage of foreign currency, prices for imported goods have soared. One of the businessmen said his family's grocery bill has gone up by a quarter over the last 12 months and some items, such as electronics, have become 50 percent more expensive.
US Shale Output to Drop in August
U.S. shale oil production is expected to fall some 99,000 barrels per day in August, according to a U.S. government forecast that highlighted the hit to the industry from weak global crude prices.
Total output is expected to fall to 4.55 million bpd, according to the U.S. Energy Information Administration's (EIA) drilling productivity report.
U.S. shale companies have scaled back production since the price of U.S. crude slipped from above $100 a barrel in 2014. It traded at about $45 on.
Bakken production from North Dakota is expected to fall 32,000 bpd, the third monthly decline, while production from the Eagle Ford formation in Texas is expected to drop 48,000 bpd, the smallest monthly decline since March.
Production from the Permian Basin in West Texas is expected to fall 6,000 bpd, according to the data, the smallest monthly decline since April.
New well oil output per rig is forecast to rise by 17 bpd to 858 bpd for the Bakken, up by 12 bpd to 515 bpd in the Permian and up by 24 bpd to 1,076 bpd in the Eagle Ford, data showed.
Total natural gas production, meanwhile, is forecast to decline for a sixth consecutive month in August to 45.7 bcfd, the lowest level since July 2015, the EIA said.
That would be down a little over 0.4 bcfd from July, making it the smallest monthly decline in three months, it noted.
The biggest regional decline was expected to be in Eagle Ford, down 0.2 bcfd from July to 5.8 bcfd in August, the lowest level of output in the basin since February 2014, the EIA said.
August output in the Marcellus formation, the biggest U.S. shale gas field, was expected to ease by less than 0.1 bcfd from July to 18.0 bcfd. That would be the sixth monthly decline in a row, falling to the lowest level since December.
In the Marcellus formation, located in Pennsylvania and West Virginia, initial production during the first full month for a new well was expected to edge up to a record high 11.3 mmcfd in August. That compares with 9.5 mmcfd in August 2015.
If correct, that would be the 16th straight monthly increase in initial production for a new well in the Marcellus. That growth rate, however, was on track to decline for a sixth consecutive month in August.
----Saudi Aramco Signs $13bn Gas Contract
State oil giant Saudi Aramco signed four engineering contracts to build its Fadhili gas processing project, the company said.
The project is worth more than $13.3 billion (50 billion riyals) and, when completed in 2019, will be the first program in the kingdom to treat gas from both onshore and offshore fields.
The company signed a contract with Saudi Electricity Co and France's Engie to construct the Fadhili plant, which will generate power and steam. A contract for work on offshore facilities went to India's Larsen & Toubro.
Two other contracts, awarded to local companies, are for downstream facilities and a residential camp. Other contracts for the project were signed late last year.
"Fadhili underscores Saudi Aramco's resolute focus on long-term strategies, despite the weak market conditions," said Aramco's Chief Executive Amin Nasser.
The Fadhili project aims to boost Saudi gas production capacity to more than 17 billion standard cubic feet per day by 2020, a top energy priority in Saudi Arabia outlined in the kingdom's National Transformation Plan.
Many industrial firms have complained about a gas shortage crimping expansion plans. Saudi Arabia is also trying to use more gas for power generation and water desalination instead of direct burning of crude oil, which it wants to export.
"Using low Btu (British thermal unit) gas, where technically viable, as a substitute for conventional gas (methane) will extend the availability of gas supplies within the kingdom during periods of peak gas demand," Sadad al-Husseini, a former senior executive at Aramco, said of the project.
The plan for Fadhili includes a 1,500-megawatt power plant, which will use 400 MW of electricity to power the gas project and send the remaining 1,100 MW to the domestic grid.
Engie has signed an agreement which will ensure the power produced by the plant will be bought for 20 years.
Iran Oil Industry Needs $50b Annually
After the removal of international sanctions on Iran and openings for cooperation with foreign companies in the oil sector, one of the most important issues has been to develop a new version of oil contractual framework – Iran Petroleum Contract- known as "IPC".
The new version of IPC had been unveiled earlier this year and it is expected to be finalized in the coming months.
The IPC is the outcome of two years of relentless work by an oil contract restructuring committee headed by Mehdi Hosseini, who advises Minister of Petroleum Bijan Zangeneh.
Allameh Tabatabaei University recently hosted an international seminar on “Optimization of Upstream Oil and Gas Contracts”. The speakers in this conference included then vice-president for legal affairs Elham Aminzadeh, Deputy Minister of Petroleum for International Affairs and Trading Amir-Hossein Zamani-Nia, head of Oil Contracts Restructuring Committee Mehdi Hosseini, Professor Anna Aabø, lecturer Stavanger Offshore Technical College, and a professor from King’s College London.
During the two-day seminar, the framework of balancing upstream oil and gas contracts, management of transfer of technological savvy and management of enhanced recovery in the upstream oil industry were discussed.
Aminzadeh said the IPC is subject to new amendments for more transparency, adding: “The new version of oil contracts will be amended in accordance with national interests.”
She said that IPC will include precision about the sovereign right of host government, standing of regulatory bodies, conditions and terms of arbitration, transfer of technology and enhancing the capabilities of domestic companies.
Aminzadeh said the principle of equilibrium, transfer of technology and boosting domestic capabilities were reviewed during the conference.
She said that contracts for oil exploration, extraction, development and recovery have been drawn up so as to preserve balance.
“Sustainability is a principle which must be taken into consideration in all contracts because this principle helps create mutual commitment,” added Aminzadeh.
She said that foreign parties to contracts are required to make maximum use of Iran’s domestic capabilities. Article 4 of IPC emphasizes 51% share for domestic parties.
Aminzadeh said IPC outlines interaction with international companies and has transparent clauses about the rate of return on investment.
1st IPC Deal Soon
Zamani-Nia, a former senior nuclear negotiator and a veteran diplomat, said IPC is to be finalized in the coming month, adding that the first IPC-style deal is expected to be signed in three to four months.
He said that hydrocarbon reservoirs which Iran shares with neighboring countries will be prioritized, adding that a main objective will be to enhance recovery from oil fields.
“For the next five years, approximately $185 billion worth of projects in upstream, mid-stream and downstream sectors have been envisaged and we have to attract at least $40 to $50 billion in investment every year,” said Zamani-Nia.
He said that IPC only sets forth broad lines for contracts and relies on mutually agreed principles. He noted that each project will have a totally different contract wording.
Zamani-Nia noted that more than 150 foreign delegates from major oil and gas companies have travelled to Iran, after Iran and six world powers signed a historic nuclear deal in July 2015.
He said foreign companies have expressed surprise at Iran’s unpreparedness for development.
“Under the present circumstances and more than two years since these contracts were drafted it will be late for universities to give their views,” said Zamani-Nia.
He said that data on joint fields has been provided to foreign companies for further review and facilitating the future signature of contracts.
“Iran must take advantage of the current opportunities because with oil price at $40, producer countries are engaged in tight competition for attracting foreign investment,” he noted.
Zamani-Nia said current low oil prices provide Iran with an opportunity to attract investment, adding: “
country’s stable political system, its security and availability of veteran engineers and manpower are among other advantages of Iran for attracting foreign investment.”
He also said that implementation of the nuclear deal has facilitated the presence of foreign experts in Iran; and unfreezing Iran’s assets blocked in foreign banks and eased money transactions. He said that these developments clear the way for major contracts for investment in coming months.
Zamani-Nia also said that Iran’s gas condensate exports have reached 450,000 b/d from 230,000 b/d which Iran exported before the nuclear agreement.
PC Drafting
Hosseini said IPC has been drafted in compliance with upstream regulations, adding that the legal capacities of Iran’s Ministry of Petroleum have not been used completely.
He said that the criteria taken into consideration for the drafting of IPC included the US’s oil production hike from 1.5 mb/d to 5.5 mb/d over the past year and its heavy investment in the gas industry, investment in West Africa’s deep waters, Siberia, Alaska and Gulf of Mexico, Iraq’s planning to develop its independent and joint fields and bring its oil output to 7 mb/d, Saudi Arabia’s $50 billion contract for the development of its fields, United Arab Emirates’ accelerated development of its oil fields and Oman’s awarding of 14 blocks for exploration.
Hosseini said buy-back deals were examined and an encyclopedia of contracts from 33 countries was compiled. PhD theses from different universities were studied and the IPC was put to public opinion in February 2014. After that, Hosseini said, the drafting of IPC started.
“In order to make up for losses in the [development of] joint oil and gas fields and preventing further denial of Iran’s national rights in these sectors, it is urgent o seek investment for the development of fields for oil and gas recovery,” he said, adding that every month of delay in implementing IPC will cost Iran $ 8 to $10 billion in losses.
He said that Iran holds 500 to 600 billion barrels of oil in place with a recovery rate of 25%, while the recovery rate is 50% in Saudi Arabia and more than 50% in North Sea.
Hosseini said Iran’s oil reserves in place could earn the country $500 to $600 billion.
“Good domestic capacities with low costs, large population of university graduates, political stability and security and exploration potential (existence of sedimentary layers on 1 million square kilometers) are among issues that make Iran geologically, politically and economically attractive for foreign investors,” he said.
Hosseini said the objectives sought by Ministry of Petroleum in IPC include maximizing exploration areas, enhancing recovery rate, reducing exploration risks, acquiring technology and empowering domestic companies.
Universities Involved
Hossein Salimi, chancellor of Allameh Tabatabei University, said universities have sought, over the past two years, to get involved in key issues like oil contracts.
He said that oil contracts are not bound to legal aspects, noting that they are intertwined with domestic and foreign political and economic issues.
“As jurists, we cannot decide about the legality of the contracts just by citing words used in international conventions,” said Salimi.
“, When oil contracts are examined In Iran’s academic society, the issue of political economy is often ignored; while the oil market, the future of oil consumption, oil trading, new technologies and oil standing in the power balance must be taken into account,” he added.
Norwegian Professor: IPC, a Good Start
There were some foreign speakers at the international Conference on Optimization of Upstream Oil and Gas Contracts was held in Tehran July 10-11. Professor Anna Aabø, lecturer Stavanger Offshore Technical College, was one of them. She said Iran, which is rich in oil and gas, has the chance to get the required capital through new contracts. She, however, noted that Iran has to keep up with international developments regarding this industry.
The following is the full text of exclusive interview of Iran Petroleum with Professor Aabø:
Q: Ms. Aabø! Have you reviewed IPC (Iran Petroleum Contract) draft?
A: I’ve not been into details of these contracts, but I know what they are about.
Q: What do you think of them?
A: I think that it would be very important to revise the framework of these contracts. In my view, it is very important to take into consideration conducting research, applying technology and defining responsibility of implementation of project in these contracts. This issue will be of high significance in the long run because Iran enjoys all necessary resources. Iran’s educated population is significant. It seems that Iran’s political conditions have improved and it is very important for signing contracts with mutually satisfactory conditions. I think that the conditions of each contract must be looked into independently. A contract has always two parties. We have to identify our strong points in order to attend talks with strong background.
Q: What do you think of the framework of IPC contracts? Which points must be taken into consideration in these contracts?
A: I think there are many points which must be taken into consideration. Transparency and predictability of conditions of contracts are very important for foreign companies. It is very important for foreign companies to be assured that their activities will continue in the future. In other words, the Iranian party must formulate a contract regime which will be transparent and devoid of any corruption so that foreign companies can envisage a future for their activities in Iran.
Q: Which points do you propose to be included in the IPC to become attractive for the foreign side?
A: All points I mentioned here must be taken into account. Furthermore, it must be noted that a contract requires accuracy and precision in text. All details must be studied carefully because you will be affected by its provisions in the future. Oil and gas are long-term business contracts and huge investments are made in these sectors for the recovery of oil and gas for many years. Therefore, industrial and political stability as well as the predictability of conditions are very important. Of course I cannot speak very clearly about this issue because I have to review this framework with more precision. But as far as I know this framework is a good starting point for Iran’s oil contracts.
Q: To what extent do you think this new framework will help Iran succeed in implementing new projects?
A: That’s a very difficult question. There is tight competition in the market while oil prices have declined. As we see in the North Sea and in Norwegian coastal zones, only the best projects can attract investors. However, I believe that Iran enjoys the necessary potential for stabilizing IPC contracts and get the required investment for its projects.
Q: Have you been involved in the drafting of oil contracts in Norway?
A: No, I wasn’t involved in the drafting of the contracts, but I’ve been active within the framework of oil contracts. I have worked for the Norwegian governments and its national oil company. For years I have been engaged in technology and innovation. I have fully studied whatever which is related to rules and regulations in the contracts.
Q: Do you have any experience of contribution to oil contracts in your country? I mean documented experiences.
A: Norway has a long history of contribution to the drafting of contracts and regulations in other countries. We have our own experiences, but we cannot apply them to those your country. Norway ties to find the best method for safeguarding its own assets. For instance, our industry is based on innovation and technology, which create domestic market for us and facilitate export to world markets. I think that all these points must be incorporated into IPC. Generally speaking, I believe the IPC framework provides good conditions for investment.
Sanat Naft Abadan in Iran Premier League
By Amir Sadeqi Panah
Football activities at Iran's Ministry of Petroleum have been under way the same as previous years. Numerous football teams which are all affiliated with the ministry are active in different fields and achieve good results.
After achievements of "Naft Masjed Soleyman", "Naft Tehran", "Naft o Gaz Gachsaran" in recent years, Naft Abadan has once more managed to find its way into Iran's Premier League championship matches under aegis of petroleum industry officials.
Despite being new, this team showed good performance in last year’s first League matches and it is now doing its best to remain in the Premier League.
Since extra costs have always been cut at the sports club affiliated with Ministry of Petroleum, Naft Abadan trained a team at conventional costs and when the Portuguese coach of this time failed to achieve desired results in the middle of the way, Nader Dastneshan, who has a good record, took over the team. Benefitting from both young and veteran footballers, he managed to drive the team ahead gradually and finally made the dream of Abadan people come true.
Abadan, Brazil!
"Sanat Naft Abadan" is undoubtedly the most popular football team in Khuzestan Province with the highest number of fans.
Residents of Abadan love their football team desperately and they are the strangest football fans. They are used to drawing a parallel between Abadan and Brazil, saying "Sanat Naft Abadan" plays like Brazil, and Naft Abadan is Iran's Brazil! They often shout “Abadan Is Brazil!”
Although their team has been travelling between the first League and Premier League in recent years, the people in Abadan seriously care about the fate of their team.
Having understood the feelings of lively fans of football in Abadan, Iranian petroleum ministry officials have always supported Naft Abadan.
In the last season of the first League, "Sanat Naft Abadan" found its way to the Premier League matches thanks to petroleum ministry’s support.
Fourth Ascension
The significant point with Nader Dastneshan, the head coach of Naft Abadan, is that he has managed to lead a petroleum ministry football team to the Premier League stage. He earlier led Naft Tehran to Premier League. Dastneshan has a history of success with Mess Kerman and Esteel Azin Tehran in Premier League matches. He is among leading head coaches in terms of bringing his teams to the Premier League phase.
Dastneshan who will continue to be the head coach of "Sanat Naft Abadan" in Premier League is hopeful of surviving in the Premier League.
This Year’s Team
Despite certain restrictions, "Sanat Naft Abadan" football club has fared well. They want their team to survive in the Premier League and that is why they have signed veteran players like Reza Norouzi and Aqil Etemadi with the approval of the head coach. Several foreign players have also joined Naft Abadan.
The club officials hope that this team will register success and make Abadan people happy. A South Korean footballer is among players of "Sanat Naft Abadan". He is the first South Korean footballer to have come to Iran to continue his practice of football.
Objective: Remaining in Premier League
Naft Abadan was lucky in the draw. It has started Premier League matches reasonably and it is making efforts to register good results in its record by staying in the matches.
The club managers have paid players and technical staff on time and at present one has to wait and see if this deep-rooted team would be able to achieve success in the 16th Iran Football League matches.
I Want to Make Abadan Happy
Nader Dastneshan is among veteran head coaches of Iranian football. He has been with several teams and he is largely motivated to register success for "Sanat Naft Abadan" football club. He is talented in working with young footballers. Instead of recruiting famous players, he preferred to take local youths in.
Iran Petroleum has conducted an interview with Nader Dastneshan. The full text of interview with Sanat Naft Abadan head coach is as follows:
Q: Would you please tell us about "Sanat Naft Abadan" conditions? Did you ever imagine of Premier League?
A: The fact is that when I left "Mashin Sazi Tabriz" football club last year and came to Abadan I was pursuing no other objective than the success of this team. The first thing I did was to boost the morale of the players. We raised the self-confidence of the players and tried to make them understand that they can do great jobs. Fortunately, our efforts came to fruition and we managed to bring this team to the Premier League after several years and make its fans happy.
Q: You are leading the team in the Premier League, too. Do you think that success is likely?
A: The fact is that the conditions will be more difficult for teams that have just moved from the First League to Premier League. Such teams must first try to survive the first year and then they can fight for better places. We have formed a good team although we did not spend too much due to budget restrictions. We have recruited qualified players and we are very hopeful of the future.
Q: Other teams have recruited star players. Won’t you face any problems with your young lineup?
A: Football needs to recruit youths. I have always recruited young footballers and I did the same in Abadan. Since we could not spend too much we set our objective on recruiting youths and hopefully proper conditions have been created for us. Last year, "Esteqlal of Khuzestan" won Iran Premier League championship with a group of youths and this experience showed that the youths should not be underestimated. Of course, we do by no means seek championship and remaining in the Premier League will suffice.
Q: But many say your team is unlikely to remain in the Premier League for the next season.
A: We will definitely show this year that everything is possible. I assure you that my young players will show their best performance and change all equations. These footballers are highly motivated and this high motivation will serve us very much. We will prove that money cannot be a determining factor in football. I have proved it during my career in other teams. Steel Azin used to spend a lot for years, but that was us who managed to lead the young team to Premier League. These are experiences which we have to benefit from.
Q: Anything else you would like to add?
A: I would like to offer my special gratitude to the managers of "Sanat Naft Abadan" football club and also the Iranian Ministry of Petroleum. Last year, they did a lot for us and they are still fully supporting us this year. I hope that they keep supporting us and we will be able to make people of Abadan happy.
Chaharmahal and Bakhtiari
Land of Water, Reflection and Sun
Chaharmahal and Bakhtiari Province is among mountainous regions in Iran’s central plateau. It neighbors Isfahan Province in the north and east, Khuzestan Province in the west, Kohguiluyeh Boyer Ahmad Province in the south and Lorestan Province in the northwest. Persian, Bakhtiari dialect, Turkic and Armenian are spoken in this province. The average altitude in Chaharmahal and Bakhtiari Province is 2,000 meters and that is why it is considered the rooftop of Iran.
Chaharmahal and Bakhtiari Province enjoys an ancient history. Pottery works and stone instruments unearthed in ancient hills in Hafashjan city indicate that the province dates back to 7th millennium BC.
Douplan
Douplan which is 35 kilometers far from Ardal city is a village located in Naghan District of Kiar County. Vertical rocks overlooking the river and deep ravines alongside the river lined with oak trees are very attractive sceneries. This region welcomes Iranian and foreign visitors throughout the year.
Chaleshtar Castle
Known as a glorious stone architecture in Iran, Chaleshtar Castle is located 5 kilometers from Shahr-e Kord. This castle incorporates a combination of Qajar-era architecture and European architecture as some stone columns show.
The castle which was built at the order of Khora Rahm Khan in 1323 AH based on Ivan capital inscription expands on approximately 12,000 square meters of land.
Sar Seyed Aqa Village
Sar Seyed Aqa is a step village located at the center of Kouhrang County and is 10 kilometers away from Shahr-e Kord, the provincial capital of Chaharmahal and Bakhtiari. The houses in this village are made from adobe and their doors open to the nature. This village is several hundred years old, but there is no documented evidence about its history.
Fuel Distribution in Chaharmahal and Bakhtiari
Whereas Chaharmahal and Bakhtiari Province is largely visited by tourists, distribution and consumption of petroleum products in are important in this province. The issue takes up added importance in cold seasons when rain and snowfall make fuel delivery extremely difficult. National Iranian Oil Products Distribution Company (NIOPDC) zone in this province has fared well in this regard.
Mojtaba Sardari, manager of Chaharmahal and Bakhtiari zone of NIOPDC, told Iran Petroleum that 63.544 million liters of regular gasoline and 16.48 million liters of premium gasoline were consumed in the province during the first quarter of the current calendar year which started on March 20.
He said that gasoline consumption in first quarter grew one percent compared with the same period a year ago.
Sardari put at 46 the number of fuel stations distributing liquid fuel and compressed natural gas (CNG).
He said that 17 stations are distributing gasoline, gasoil and CNG, while there are a total of 20 CNG stations in the province.
"Three more fuel stations are also to resume work in the province", said Sardari. He noted that these stations used to operate but had been put out of service.
“With the removal of obstacles, these stations, one of which is CNG, will become operational soon,” he said.
Sardari said gasoil consumption in Chaharmahal and Bakhtiari Province stood at 57.171 million liters during the first quarter of the current calendar year, up 6% year-on-year.
He said transport and agriculture sectors account for the bulk of gasoil consumption in this province, adding that 5,211 tons of liquefied petroleum gas (LPG) was also consumed in the province during the first quarter.
Sardari said several factories in the province are among major consumers of fossil fuel, adding: “It is noteworthy that most of these factories, as emphasized by the Iranian government and the Ministry of Petroleum, must use gas in addition to fuel oil as feedstock. Therefore, due to hot weather in the first months of the year and decline in household gas consumption this factory is tasked with using natural gas. Thus, we will not deliver any fuel to these factories during the first months of the year.”
He said that due to cold weather and snowfall, gas consumption rate rises in winter and gas distribution pressure falls off. Therefore, he added, the factories have to use an alternative fuel, i.e. fuel oil.
“During the last three months of the last [calendar] year, we delivered some 16.8 million liters of fuel oil to factories,” said Sardari.
“In the light of measures undertaken by Chaharmahal and Bakhtiari zone of NIOPDC for fuel efficient use and preventing environment pollution, we were selected as the exemplary unit by the Department of the Environment last year. Meantime, we are making efforts to become again the exemplary organization or green organization this year,” he said.
Storage Tanks and Pipelines
Sardari went on to announce plans for the construction of more storage tanks and pipelines stretching from Isfahan oil refinery to this province.
He said that the broad lines of this project have won the approval of Iran’s minister of petroleum, adding that the projects are under review at the Planning Section of NIODPC.
He said that Isfahan refinery supplies the required fuel of Chaharmahal and Bakhtiari Province, adding: “At present, we have to use some 140 oil tankers for transferring fuel to different corners of the province. The hidden point with regard to this method is the fuel consumption of oil tankers themselves in addition to transport costs, death dangers and decrepit roads.”
He said that each oil tanker consumes some 500 liters of gasoil for traveling between Isfahan and Shahr-e Kord.
Sardari said there are currently two main oil storage sites in Iran, citing Isfahan and Shazand storage sites.
“Given the potentialities of Chaharmahal and Bakhtiari Province and its proximity to border provinces, an oil storage facility in this province could become an export hub for the country,” he added.
Sardari said the investment needed for the construction of two 20-million-liter storage tanks and construction of a pipeline stretching from Isfahan refinery was around IRR 1,500 billion.
He added that this investment will return in five years, noting that foreign investment could be also used for this project.
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