Iran Oil Output to Hit 4.7mb/d
Commodity Exports to Turkmenistan
Strategic Equipment Built for Petroleum Industry
NDFI to Provide 3/4 Portion of Domestic Investment
Progress in Iran Offshore Expertise
“Holding” Potentials in Iran Petroleum Industry
Drilling, Key to Tapping Reservoirs
Russia-China Alliance Flexes Muscles
Iran Eyes Bigger Gas Market Share
(P)GCC Petchem Development Projects
RIPI Can Now Assess Claus Process Catalysts
Petroleum Museums in Iran and Across the World
Oil Exploration in Khuzestan; Social and Cultural Upshot
Rasht, Where Rainfall Never Stops
Output Hike, a Feasible Target
Iran ranks first in terms of recoverable oil and gas reserves. Although this sentence has been heard hundreds of times it is an undeniable fact.
According to official data, Iran holds 157 billion barrels of crude oil and 33.8 tcm of natural gas. In total, Iran holds 369 BOE.
The world’s largest independent gas reservoir – South Pars gas field – is shared by Iran and Qatar in the Persian Gulf waters. The world’s seventh largest oil field is Azadegan, which contains around 10 percent of Iran’s recoverable reserves. There are 62 onshore and 12 offshore hydrocarbon fields in Iran. Iran’s access to high seas and its special geographical position have created appropriate conditions for oil and gas exports. Iran can also serve as a route for oil and gas delivery to other countries.
That was only the tip of the iceberg in Iran’s oil and gas potentials. But, the necessary infrastructure has to be provided for more effective use of these potentials.
Over the past eight years, tough international sanctions against Iran have blocked implementation of plans for the petroleum industry. Due to the sanctions, Iran has serious problems in terms of oil and gas production.
But since President Hassan Rouhani took office in August 2013, Iran’s Petroleum Ministry focused on enhanced oil and gas production. Therefore, Petroleum Ministry aims at realizing these objectives through making various attempts.
To reach this objective, a number of issues need to be taken into consideration. Iran enjoys sufficient potentials to realize that objective, but an important point would be the use of state-of-the-art technology. Iran has already acquired technology in some sectors. Another issue is technology transfer. In this regard, the government has shown interest in cooperation with international companies.
Another significant point with regards to enhanced oil and gas production by Iran is investment. The presence of Iranian and foreign companies in development projects can prove effective.
A thaw in Iran’s political tensions with the Western countries, particularly following the signature of a nuclear accord between Tehran and six world powers has persuaded oil giants to envisage return to Iran’s energy sector.
Iran’s Petroleum Minister Bijan Namdar Zangeneh has stepped up calls for the swift development of the supergiant South Pars gas field.
Iran has also introduced new contractual frameworks for hydrocarbon projects in order to make them more attractive.
Juxtaposing the aforementioned factors drives us to the conclusion that Iran’s planned oil recovery enhancement is feasible.
Iran Oil Output to Hit 4.7mb/d
Iran’s Petroleum Minister Bijan Namdar Zangeneh has said that the country’s oil production is forecasted to reach 4.7 mb/d in the coming three years.
“Iran’s oil production will reach 4.7 mb/d in three years, 700,000 b/d of which will come from joint fields,” Zanganeh said on state television.
“Iran’s enhanced crude oil production capacity is in harmony with the country’s economic macro policies,” he said.
Zangeneh said Iran is also to see growth in its gas condensate production in three years, adding: “Gas condensate production will reach 1mb/d with the operation of Phase 17 of South Pars [gas field] as well as Kangan, Tabnak and Parsian gas condensate facilities.”
The minister said Iran’s oil and gas condensate production capacity will reach 5.7 mb/d in three years. He insisted that this objective could be realized.
He added that such a production capacity will boost Iran’s status in OPEC.
South Pars
Regarding the giant offshore South Pars gas field development, Zangeneh said: “Phase 12 of South Pars is producing at full capacity. Meanwhile, two terrains of Phase 15 are producing sour gas. Phase 16 is to start up soon and its platform will become operational in the next few months.”
He said the offshore section of Phase 18 of South Pars is being completed and noted that numerous offshore platforms are to be installed this year.
“This year and next year, 200 mcm of gas will be added to the country’s production capacity,” he said.
Zangeneh said the current calendar year to March 2015 and the following year will each see 100 mcm/d gas production hikes.
The minister said all phases of South Pars are hoped to come on-stream in three years, adding that phases 13, 20&21, 19 and 22&24 are next priority projects of Petroleum Ministry.
These phases, he said, are to produce gas for domestic consumption, feeding industries, exports and electricity exports.
Persian Gulf Refinery 75% Complete
Zangeneh said distribution of Euro-4 gasoline, which started in Tehran last year, continues to be distributed in more big cities.
He said that development of Persian Gulf Star Refinery, which had been halted due to some problems, has restarted.
The minister said the facility should have become operational several years ago, adding: “Persian Gulf Star Refinery is significant from two aspects. First, with this refinery, Iran will reach self-sufficiency in gasoline production for long years. Second, Euro-5 gasoline will be produced in the country.”
Zangeneh said this refinery’s gasoline production capacity is 36 ml/d.
“Gasoline consumption in Iran is currently 70 ml/d, 63 ml/d of which is produced domestically with the rest being procured through imports,” he said.
“With the completion of Persian Gulf Star Refinery, the country’s gasoline production capacity will increase by 60 percent of the current production. Moreover, the quality will be high,” he said.
Zangeneh said this refinery, which has three 120,000-barrel terrains, is 75 percent complete.
“Our short-term goal for launching the first unit of this refinery, I don’t mean full operation [to produce gasoil, kerosene, liquefied gas and oil] is for the first half of the next [calendar] year. The following terrains will start up afterwards,” he said.
Zangeneh said Persian Gulf Star Refinery is the most important strategic project in the country, after South Pars gas field development.
The minister said more than 12 million liters of gasoline will be produced from this refinery next year, adding that terrain-2 of the refinery is hoped to start up next year.
He said the refinery will fully come on-stream in the calendar year starting March 2016 to allow export of gasoline, gasoil, kerosene and fuel oil.
Petchem Feedstock
Zangeneh stressed the need for feedstock supply to petrochemical plants in the country, saying operation of new phases of South Pars and the ensuing production of ethane and methane are hoped to provide sufficient feedstock to petrochemical plants.
He said Iran’s Petroleum Ministry feels obligated to cope with the problems of petrochemical plants which are all privately owned.
Zangeneh said finance is the main challenge for some petrochemical projects, adding: “Efforts will be made for resolving the problem for some of these companies with Chinese finance. The rest will be resolved with the help of National Development Fund.”
New Refining Projects
Zangeneh said Iran’s gas condensates will be processed at Siraf Refining Park (which involves eight 60,000-barrel refineries) in four years, adding that as a result no condensate will be exported then.
The minister said eight investors are to be picked from among 20 candidates for building these refineries in three years.
He said Iran mulls projects for heavy crude refining in order to stop crude oil selling, adding that a project is being envisaged in Jask or Bandar Abbas in southern Iran for that purpose.
Zangeneh said development of petrochemical plants will be the most important measure for ending crude oil sales.
“To that effect, six to eight major petrochemical plants are to be constructed across the country to transform natural gas to plastics by using new technology,” he said.
Zangeneh said downstream petrochemical parks will be also established to create jobs and value-added.
The minister said Iran faced restrictions in gas production in the last calendar year, adding that liquid oil products substituted natural gas in power plants. He said 27 billion liters of liquid oil products, valued at 18 billion dollars, were burnt in power plants.
Zangeneh said operation of new phases of South Pars will make up for gas shortage in the country, adding that liquid fuel consumption rate in the power plants has fallen 54 percent this year due to increased gas supply to them.
Zangeneh said Iran’s Petroleum Ministry is currently operating more than 60 billion dollars of projects.
Stock Market
Zangeneh said the most logical way of selling oil to the private sector would be through stock markets.
“In the past one year, crude oil and gas condensate were both sold on Energy Exchange,” he said.
“If assurances are given that potential buyers will supply the oil they purchase to crude oil refineries in the country, Petroleum Ministry is ready to sell oil to them at 95 percent of Persian Gulf FOB prices,” said Zanganeh.
He said the law requires oil prices to equal the Persian Gulf FOB rates unless the oil is to be used in domestic refineries.
Interaction with Universities
Zangeneh called on universities to contribute to enhanced recovery from oil fields.
He said University of Tehran, Sharif University of Technology, University of Shiraz, Research Institute of Petroleum Industry, Petroleum University of Technology and Islamic Azad University are expected to study oil fields on which enhanced recovery projects are to be carried out.
“We have 10-year contracts with these universities. During this time, they have to fully study the fields and find ways of EOR,” he said.
Iran Oil Output to Hit 4.7mb/d
Iran’s Petroleum Minister Bijan Namdar Zangeneh has said that the country’s oil production is forecasted to reach 4.7 mb/d in the coming three years.
“Iran’s oil production will reach 4.7 mb/d in three years, 700,000 b/d of which will come from joint fields,” Zanganeh said on state television.
“Iran’s enhanced crude oil production capacity is in harmony with the country’s economic macro policies,” he said.
Zangeneh said Iran is also to see growth in its gas condensate production in three years, adding: “Gas condensate production will reach 1mb/d with the operation of Phase 17 of South Pars [gas field] as well as Kangan, Tabnak and Parsian gas condensate facilities.”
The minister said Iran’s oil and gas condensate production capacity will reach 5.7 mb/d in three years. He insisted that this objective could be realized.
He added that such a production capacity will boost Iran’s status in OPEC.
South Pars
Regarding the giant offshore South Pars gas field development, Zangeneh said: “Phase 12 of South Pars is producing at full capacity. Meanwhile, two terrains of Phase 15 are producing sour gas. Phase 16 is to start up soon and its platform will become operational in the next few months.”
He said the offshore section of Phase 18 of South Pars is being completed and noted that numerous offshore platforms are to be installed this year.
“This year and next year, 200 mcm of gas will be added to the country’s production capacity,” he said.
Zangeneh said the current calendar year to March 2015 and the following year will each see 100 mcm/d gas production hikes.
The minister said all phases of South Pars are hoped to come on-stream in three years, adding that phases 13, 20&21, 19 and 22&24 are next priority projects of Petroleum Ministry.
These phases, he said, are to produce gas for domestic consumption, feeding industries, exports and electricity exports.
Persian Gulf Refinery 75% Complete
Zangeneh said distribution of Euro-4 gasoline, which started in Tehran last year, continues to be distributed in more big cities.
He said that development of Persian Gulf Star Refinery, which had been halted due to some problems, has restarted.
The minister said the facility should have become operational several years ago, adding: “Persian Gulf Star Refinery is significant from two aspects. First, with this refinery, Iran will reach self-sufficiency in gasoline production for long years. Second, Euro-5 gasoline will be produced in the country.”
Zangeneh said this refinery’s gasoline production capacity is 36 ml/d.
“Gasoline consumption in Iran is currently 70 ml/d, 63 ml/d of which is produced domestically with the rest being procured through imports,” he said.
“With the completion of Persian Gulf Star Refinery, the country’s gasoline production capacity will increase by 60 percent of the current production. Moreover, the quality will be high,” he said.
Zangeneh said this refinery, which has three 120,000-barrel terrains, is 75 percent complete.
“Our short-term goal for launching the first unit of this refinery, I don’t mean full operation [to produce gasoil, kerosene, liquefied gas and oil] is for the first half of the next [calendar] year. The following terrains will start up afterwards,” he said.
Zangeneh said Persian Gulf Star Refinery is the most important strategic project in the country, after South Pars gas field development.
The minister said more than 12 million liters of gasoline will be produced from this refinery next year, adding that terrain-2 of the refinery is hoped to start up next year.
He said the refinery will fully come on-stream in the calendar year starting March 2016 to allow export of gasoline, gasoil, kerosene and fuel oil.
Petchem Feedstock
Zangeneh stressed the need for feedstock supply to petrochemical plants in the country, saying operation of new phases of South Pars and the ensuing production of ethane and methane are hoped to provide sufficient feedstock to petrochemical plants.
He said Iran’s Petroleum Ministry feels obligated to cope with the problems of petrochemical plants which are all privately owned.
Zangeneh said finance is the main challenge for some petrochemical projects, adding: “Efforts will be made for resolving the problem for some of these companies with Chinese finance. The rest will be resolved with the help of National Development Fund.”
New Refining Projects
Zangeneh said Iran’s gas condensates will be processed at Siraf Refining Park (which involves eight 60,000-barrel refineries) in four years, adding that as a result no condensate will be exported then.
The minister said eight investors are to be picked from among 20 candidates for building these refineries in three years.
He said Iran mulls projects for heavy crude refining in order to stop crude oil selling, adding that a project is being envisaged in Jask or Bandar Abbas in southern Iran for that purpose.
Zangeneh said development of petrochemical plants will be the most important measure for ending crude oil sales.
“To that effect, six to eight major petrochemical plants are to be constructed across the country to transform natural gas to plastics by using new technology,” he said.
Zangeneh said downstream petrochemical parks will be also established to create jobs and value-added.
The minister said Iran faced restrictions in gas production in the last calendar year, adding that liquid oil products substituted natural gas in power plants. He said 27 billion liters of liquid oil products, valued at 18 billion dollars, were burnt in power plants.
Zangeneh said operation of new phases of South Pars will make up for gas shortage in the country, adding that liquid fuel consumption rate in the power plants has fallen 54 percent this year due to increased gas supply to them.
Zangeneh said Iran’s Petroleum Ministry is currently operating more than 60 billion dollars of projects.
Stock Market
Zangeneh said the most logical way of selling oil to the private sector would be through stock markets.
“In the past one year, crude oil and gas condensate were both sold on Energy Exchange,” he said.
“If assurances are given that potential buyers will supply the oil they purchase to crude oil refineries in the country, Petroleum Ministry is ready to sell oil to them at 95 percent of Persian Gulf FOB prices,” said Zanganeh.
He said the law requires oil prices to equal the Persian Gulf FOB rates unless the oil is to be used in domestic refineries.
Interaction with Universities
Zangeneh called on universities to contribute to enhanced recovery from oil fields.
He said University of Tehran, Sharif University of Technology, University of Shiraz, Research Institute of Petroleum Industry, Petroleum University of Technology and Islamic Azad University are expected to study oil fields on which enhanced recovery projects are to be carried out.
“We have 10-year contracts with these universities. During this time, they have to fully study the fields and find ways of EOR,” he said.
Commodity Exports to Turkmenistan
In 2008, Turkmenistan passed a new hydrocarbon Act which opened a billion-dollar market to foreign oil companies like Dragon Oil of the United Arab Emirates, China’s CNPC and Malaysia’s Petronas.
Iranian market analysts may wonder to what extent Iranian companies are aware of this Act and relevant developments. Do they know that this new Act in Turkmenistan authorizes signature of contracts for exploration, production, production sharing, service contracts and concessions within the framework of cooperation? Have Iranian companies ever analyzed the instructions and bylaws passed by the Turkmen government? Has Iran made any plans with regards to this law?
In order to find answers to these questions, a one-day seminar was held in Tehran under the title of “oil, gas and petrochemical forum for exporting commodities and engineering services to Turkmenistan” so that private companies could discuss their potentials for presence in Turkmenistan’s oil market so that Iranian officials would remove hurdles to such cooperation.
Mohammad-Taqi Amanpour, special representative of Iran’s petroleum minister in development of engineering services and commodities exports, said Iran’s Petroleum Ministry plans to enter foreign markets.
“Being adjacent to Iran, Turkmenistan can help Iran realize its objective,” he said. Amanpour said Petroleum Minister Bijan Namdar Zangeneh has ordered attraction of foreign markets.
“To that effect, Turkmen experts have so far visited 30 Iranian companies and got familiar with the potentials of Iranian companies,” he said. “Furthermore, three short, mid and long-term plans have been adopted at Iran’s Petroleum Ministry for presence in Turkmenistan’s market.”
“In the short-term plan, projects which are in the stage of contract signature or the commodities which have already been ordered to Turkmenistan are being followed up on. In the mid-term plan, projects which have been presented by the Turkmen government and could be operated by Iranian companies will be studied. In the long-term plan, efforts will be made for identifying opportunities for investment in Turkmenistan so that the necessary preparations will be made for investment in this country,” he said.
Addressing the forum, Zangeneh said: “We hope that the private sector’s efforts will help Iran boost its strategic relations with Turkmenistan.”
“Turkmenistan is an important neighbor for Iran and it holds strategic relations with Iran,” the minister said.
“Turkmenistan is a developing country. Now, Turkmen and Iranian presidents both insist on the development and strengthening of relations between the two countries,” said Zangeneh.
The minister, however, said transactions between Iran and Turkmenistan have been low. “In the past, Iran was importing 8 to 10 bcm of gas from Turkmenistan and Iran’s purchase from Turkmenistan amounted to three billion dollars, but what Turkmenistan has imported from Iran has been much lower than this sum.”
Zangeneh said the Islamic Republic will stop importing gas from Turkmenistan by March 2016.
He said Iran would no longer need to import gas from Turkmenistan as its gas production will increase by 200 mcm/d by that time.
Zangeneh, however, said Iran will continue to broaden its political and economic ties with the breakaway republic of Former Soviet Union.
The minister said that Iran has been importing gas from Turkmenistan to create opportunities for economic activists particularly the private sector.
Zangeneh said Iranian companies are still unable to operate megaprojects worth around five billion dollars, adding: “Iranian companies are currently able to operate projects worth 700 million dollars to one billion dollars.”
The minister also said that due to banking restrictions, Iran has been settling its debts with Turkmenistan through exporting commodities and engineering services.
Last May, Zangeneh said the Islamic Republic is set to prepare the ground for a gas-for-goods deal with neighboring Turkmenistan.
Iran is Turkmenistan’s second largest trade partner after Russia.
The Islamic Republic exports machinery, construction materials, sedans, buses, food stuff, agricultural and petrochemical products, electrical products and home appliances to Turkmenistan, and imports natural gas, electricity, textiles and agricultural products from its northern neighbor.
Iran and Turkmenistan have had official diplomatic relations since Turkmenistan's independence from the Soviet Union in 1991. Iran was the first nation to recognize Turkmenistan as an independent country.
The two countries have maintained good relations ever since and have cooperated in the economic, infrastructure and energy sectors.
During the meeting, managing director of National Iranian Gas Company Hamid-Reza Araqi said the state-run company backs the presence of the private sector in Turkmenistan. He also called on private companies to get familiar with legal developments in Iran’s neighbor.
Araqi and other officials in the forum called on private companies to set up a working committee to study obstacles to commodity and engineering services exports to Turkmenistan.
The representatives of the private sector also addressed the meeting about their potentials for presence in Turkmenistan’s market.
New Customers for Iran Gas
Iran is currently negotiating to export natural gas to Dubai and Abu Dhabi, a top official said.
Ali Majedi, Iran’s deputy petroleum minister for international affairs and commerce, said: “Of course the volume of gas requested by them is not as much as the volume of gas which is currently exported to Iraq and Turkey.”
He said Tehran-Muscat negotiations for export of Iran’s gas to Oman are in progress and the roadmap for finalizing the agreement has been already prepared.
Kuwait, Abu Dhabi and Dubai need Iran’s gas for desalination facilities and of course, the volume of their gas demand is much less compared to other importers of Iran’s gas including Iraq and Turkey, Majedi added.
Iran and Oman have signed a contract under which the Islamic Republic will supply the Persian Gulf state with 10 bcm of natural gas per year. The project is expected to come on stream within three years. The pipeline and related infrastructure, estimated at around $1bn, will be entirely funded by Oman.
Gas Swap with Azerbaijan Republic
Majedi said Azerbaijan Republic has offered to increase the volume of gas swap operations with Iran.
“We agree with the broad lines of this proposal and we hope that we will reach positive results,” he said.
Azerbaijan Republic has a small swap deal in which Iran supplies fuel to its exclave of Nakhchivan - isolated from the rest of Azerbaijan Republic by neighboring Armenia - and pays Iran back by pumping similar volumes to northern Iran.
The ex-Soviet country exported 151 bcm to Iran in the first four months of this year versus 149 bcm in the same period, a year earlier. SOCAR plans to export 0.4 bcm of gas to Iran in 2014, the same as last year.
Iran Can Double Turkey Gas Delivery
Iran can nearly double its gas shipment to Turkey from the current 36 mcm/d with the start-up of new facilities, a top Iranian gas official said.
“At present, there is suitable ground and necessary capacity for Iran to double its gas exports to Turkey,” Hamid Reza Araqi, managing director of National Iranian Gas Company (NIGC), said.
He added that Iran can enhance its gas production due to new developments in the upstream oil sector.
Araqi, however, said Iran and Turkey would be required to sign a new contract for any increase in the volume of gas delivery.
Iran’s natural gas is of crucial importance to Turkey as the energy-hungry country uses a significant portion of imported Iranian gas to generate electricity.
Turkey has offered to raise its gas purchase from Iran to 20 bcm a year, provided that Iran cuts the price.
According to the latest international estimates, Iran sits atop the world's largest gas reserves.
Iran-Iraq Pipeline Tested
Iran has begun pre-commissioning tests on a pipeline built to transport natural gas to Iraq to feed the country’s power plants, a top Iranian official said.
“After the end of cleaning and calibration pigging, 97 kilometers (Iran’s section) of the pipeline will become operational,” Alireza Gharibi, managing director of Iranian Gas Engineering and Development Company, said.
He added that the 97-kilometer pipeline, 48 inches in diameter, will be linked to Iran’s gas trunklines (IGATs) to deliver natural gas from Iran to Iraq.
Majedi said earlier Iran is expected to start pumping gas to Iraq early next Iranian calendar year, which starts on March 21, 2015.
Iran has agreed to export 25 mcm/d of gas to Iraq, but the gas delivery will start at seven mcm per day.
The 270-kilometer pipeline stretches from the village of Charmaleh, located in Iran’s western province of Kermanshah, into the town of Naft Shahr on the border with Iraq.
The pipeline, which is estimated to earn Iran 3.7 billion dollars a year in revenues, will be fed by the massive offshore South Pars gas field in southern Iran.
South Pars gas field, which Iran shares with Qatar in the Persian Gulf, is estimated to contain 14 trillion cubic meters of gas and 18 billion barrels of condensate.
Iran’s Q1 Oil Output Up
Iran’s oil production soared 86,000 b/d in the first quarter of 2014 year-on-year, according to data from OPEC monthly review.
The US Energy Information Administration (EIA) also announced that Iran produced 3.247 million barrels of oil during the first four months of the year, up 131,000 b/d year-on-year.
The monthly update of the International Energy Agency (IEA) also said that Iran’s crude oil exports grew 0.1 percent during the first quarter of the year.
OPEC also said that Iran’s July oil production reached 2.762 mb/d, down 9,800 b/d from the preceding month.
Foreign Firms Keen to Invest in Iran Gas
Thirteen foreign companies have announced their readiness to invest 15 billion dollars in Iran’s gas industry, a top official at the National Iranian Gas Company said.
Asghar Soheilipour said thirteen European and Asian companies, as well as four Iranian companies are ready for investment.
“Four British and French companies, three Japanese companies, two South Korean companies, four Chinese companies and four Iranian companies have voiced their readiness for presence in Iran’s gas industry projects,” he said.
He added 21 meetings have so far been held with Iranian and foreign companies for investment in Iran’s gas industry.
Soheilipour said these companies are mainly active in pipe making, development of refineries and construction of pressure booster stations.
Among the projects up for the investment are Iran Gas Trunkline (IGAT)-IX, IGAT-XI, completion of IGAT-6 and development of Ilam refinery.
Iran Masters Deep Water Drilling Technology
Iran is the only OPEC member state to have mastered technology for deepwater drilling, managing director of Khazar Exploration and Production Company said.
Ali Osouli said deepwater drilling is a branch of knowledge owned by only a few big companies in the world.
"At present, Iran is at the top of Caspian Sea littoral states to that effect," he said.
Osouli said studies by major oil companies in the world show that drilling in Caspian Sea deep waters requires huge investment.
He said the offshore Sardar-e-Jangal oil field in north of Iran promises economic development and industrial growth.
He said more studies are needed to explore more hydrocarbon reserves in the Caspian Sea.
Iran’s Petroleum Ministry has in recent years attached special significance to the development of oil fields in the Caspian Sea.
The Caspian Sea is rich in hydrocarbon resources and the littoral states of the sea have made great investment in developing oil fields in the region over the past years.
Russian and Swedish companies have expressed readiness to join drilling projects in the Caspian Sea.
In July 2012, Iran discovered a new oil layer with in-place reserves of two billion barrels in Sardar-e -Jangal oil and gas field off the shore of the northern Iranian province of Guilan in the Caspian Sea, which contains quality crude that is toxic hydrogen sulfide-free.
The preliminary evaluations indicated that Sardar-e- Jangal field would produce some 8,000 b/d of oil and its gas reserves were estimated at 50 bcf - a quantity equivalent to Iran's total gas consumption over a 10-year period.
Iran Oil Reserves Viable for 60 Years
A senior Iranian oil official has said that Iran would enjoy viable oil deposits for six decades.
“Iran will have oil for 60 years and gas for 200 years,” Bahman Soleymani, exploration deputy chief of National Iranian Oil Company’s Exploration Directorate, said.
“Iran is at the top in terms of oil exploration in the world. Throughout 2000-2006 and 2006-2012 periods, Iran claimed the world’s top spot in oil and gas exploration,” he said.
Soleymani said the chance of exploration drilling in Iran is more than the world’s average rate, adding: “The chance of successful exploration drilling in Iran is currently above 70 percent.”
He said Iran managed to boost the rate to 90 percent in the calendar year to March 2013.
Iran’s exploration plans progressed 95 percent during the first three years of Iran’s fifth five-year economic development plan ending in March 2015.
According to NIOC Exploration Directorate, 178 oil and 70 gas fields have so far been explored in Iran’s sedimentary basins. They include 176 oil fields in Zagros and Persian Gulf regions and two in central Iran. Regarding gas fields, 65 are in Zagros and Persian Gulf, two in central Iran and three in Kopet Dagh.
Chennai Petroleum Plans for Iran Oil Imports
Chennai Petroleum Corp. (MRL), a unit of India’s largest refiner, plans to resume crude imports from Iran after a two-year gap as insurers return to the market.
“This year, we plan to restart Iran oil purchases,” Managing Director S. Venkataramana told Bloomberg in a phone interview. “We are already talking to the re-insurers for this, and we are getting positive responses.”
Chennai Petroleum, controlled by Indian Oil Corp. (IOCL), plans to import about 300,000 metric tons of oil from Iran for the year ending in March 2015, he said. Western sanctions designed to prevent Iran from developing nuclear weapons had hampered the company’s ability to benefit from 90-day credit offered by the Persian Gulf producer, triple what others make available.
“As a result, the working capital requirement of the company has increased, resulting in higher interest expenses,” the refiner stipulated in the annual report on its website.
Iran pledged to continue talks with 5+1 after failing to clinch a long-term deal on its nuclear program in Vienna last month. Iran agreed to scale back that program last year and in return was allowed to maintain crude exports at about 1.1 million barrels a day.
Iran Expects Progress in South Azadegan
Iran expects tangible progress in the development of South Azadegan oil field in the coming months, a top official said.
“Our estimates show that we will witness an acceptable level of progress” in December or January, Rokneddin Javadi, managing director of National Iranian Oil Company, said.
He said that four drilling rigs have been provided to work in Azadegan oil field after the removal of China’s CNPCI. He added that 10 rigs will be operating in the field, shared with Iraq, soon.
CNPC’s several years of foot-dragging on the development of South Azadegan, shared with neighboring Iraq, ended in the termination of cooperation with this contractor.
In the first phase of the development of South Azadegan field, 320,000 b/d of crude will be recovered. For that purpose, 385 wells need to be drilled in this field. So far, 12 wells have been drilled. The initial budget approved for the development of South Azadegan is 500 million dollars plus IRR 500 trillion.
Petchem Bans Lifted
International sanctions against Iran’s petrochemical sector have been lifted following last year’s nuclear deal with six world powers, Iran’s Foreign Ministry spokeswoman has said.
“Based on the Geneva accord, economic sanctions against Iran have been partially lifted. The removal of petrochemical industry sanctions is a case in point,” Marzieh Afkham said.
She said that Iran’s nuclear talks with the world powers – the United States, France, Britain, Russia, China and Germany – are expected to reach conclusion on schedule.
“Full lifting of economic sanctions against Iran is on the agenda. That will happen in the future,” said Afkham.
1st National Petchem Plant to Be Launched
Iran's first indigenous petrochemical plant will be launched in the next two months, top official said.
"Takht-e Jamshid Petrochemical Plant has the capacity of producing 30,000 tons of styrene-butadiene rubber (SBR) and 18,000 tons of poly-butadiene rubber (PBR) per year," added Ali Mohammad Basaqzadeh, production manager at the National Iranian Petrochemical Company (NPC).
Basaqzadeh noted that the polymer production unit of Lorestan Petrochemical Company will come on stream by March 2015, which has the capacity of producing 300,000 tons of polymers each year.
Iran produced 40 million tons of petrochemicals last year and $9 billion worth of its products were exported.
The country plans to increase petrochemical exports to $12 billion this year.
Iran's petrochemical exports increased 6 percent between March and June.
Iran’s petrochemical production increased more than five percent during the first four months of the current calendar year (which started on March 21) from a year ago, Basaqzadeh said.
He said the growth results from phases 12 and 15&16 of the massive South Pars gas field.
He said that petrochemical production increases as long as more feedstock is supplied to petrochemical plants.
Basaqzadeh predicted the country’s petrochemical output to reach 48 million tons this year in the presence of enough feedstock.
Strategic Equipment Built for Petroleum Industry
Iran’s petroleum industry has constantly focused on self-sufficiency and domestic manufacturing in order to maintain its dynamism. But the fact is that there was no precise planning in this regard before international sanctions were toughened against Iran’s oil industry. The sanctions prompted Iran’s petroleum industry to focus on self-reliance through boosting domestic potentials.
To that effect, Iran’s petroleum industry has moved to support domestic manufacturers. These efforts have so far resulted in the manufacturing of strategic equipment like gas turbines and compressors, offshore and onshore drilling rigs, downhole completion strings, equipment for petrochemical plants and refineries.
Rokneddin Javadi, deputy Petroleum Minister and managing director of National Iranian Oil Company (NIOC), said recently that domestic manufacturers are expected to fully indigenize equipment manufacturing for the petroleum industry.
“Ten groups of petroleum industry’s strategic commodities will be manufactured inside the country in three years,” he said.
Javadi said Petroleum Ministry is concentrating on improving domestic manufacturing of petroleum industry equipment, adding: “Plans have already been made for the mass production of ten groups of strategic commodities of this industry in the country over the coming three years. Given Iran’s economic policies, focus on domestic manufacturing is of great significance in the Petroleum Ministry.”
Javadi said domestic manufacturing of strategic equipment should be planned based on existing potentials and demand. “In this regard, companies qualified for manufacturing will be identified.”
He said the government is paying due attention to research projects on domestic manufacturing. Javadi said interaction between the government and domestic manufacturers can minimize Iran’s dependence on foreign companies for ten groups of commodities widely used in the petroleum industry.
“We hope that challenges to this industry, particularly in domestic manufacturing, will be lifted one after another under the aegis of parliament and government support and professional look at the petroleum industry issues,” he said.
Investment in Domestic Manufacturing
Iran deposits more than 20 percent of its oil revenues into the National Development Fund (NDF). The fund grants low-interest loans to domestic manufacturers and knowledge-based private companies.
The government has promised to provide private companies active in research and manufacturing with IRR 30 trillion by March 2015 by dipping into the NDF.
Sourena Sattari, vice-president for science and technology affairs, said IRR 10 trillion is already allocated to be paid to knowledge-based private companies and domestic manufacturers.
He said the government has no problem in financing research projects by private entities, adding that the "Knowledge-Based Companies Support Law" envisages lucrative facilities for these companies.
“Based on this law, knowledge-based companies can benefit from such facilities as tax and customs duties exemptions,” he said.
Sattari said 10 groups of commodities have been recommended by Petroleum Minister Bijan Namdar Zangeneh to be manufactured domestically.
“Support for knowledge-based companies for commercialization of products should go to the extent that we would be no longer witnessing the importation of commodities already manufactured domestically,” he said.
Sattari said the Office of Vice-President for Science and Technology is ready to offer the required facilities to domestic manufacturers of petroleum industry equipment.
“In the event of guaranteed commodity purchase by the petroleum industry, we can witness the realization of policies of the Economy of Resistance in this industry,” he said. “For indigenization and domestic manufacturing in the petroleum industry, manufacturers should be helped financially. The Office of Vice-President for Science and Technology is ready to grant banking facilities with the interest rate of 4 to 16 percent to research centers and manufacturers.”
Sattari said at least IRR 3 billion could be already paid to domestic manufacturers and knowledge-based centers.
He said compliance with international standards and competitive prices are the two criteria required by oil companies to be respected by domestic manufacturers.
“All senior officials in the country have concluded that petroleum industry is the largest industrial market in Iran,” said Sattari.
The vice-president said the administration of President Hassan Rouhani attaches great importance to oil and gas industries, citing the establishment of Committee for Development of Oil, Gas and Coal Technology and Renovation and the Committee for Energy Efficiency and the Environment.
Sattari said these two committees have been set up to support knowledge-based companies and manufacturers willing to invest in relevant projects.
Self-Reliance in Widely Used Equipment
Ezzatollah Akbari, managing director of Kala Naft Company, said a three-year plan has been made for the indigenization of equipment largely used in the petroleum industry.
“Domestic manufacturers should present their technical and financial proposals for designing and manufacturing petroleum industry commodities,” he said.
Akbari said domestic manufacturers are required to present their plans in one month for designing and manufacturing ten groups of commodities, adding that an agreement will then be signed between NIOC, the Office of Vice-President for Science and Technology and manufacturers.
He said that Petroleum Ministry will provide the necessary finance for the manufacturing of these commodities.
Supporting Domestic Manufacturers
Abbas Ali-Abadi, managing director of Iran Power Plant Projects Management Company (MAPNA), said domestic manufacturers have already proven their capabilities in supplying the necessary commodities for the petroleum industry.
“Therefore, we have to prepare conditions so that we would no longer see the purchase of commodities and equipment from unknown foreign companies,” he said.
He stressed the need for stricter supervision on financing petroleum industry equipment, saying: “Domestic manufacturers are still active despite international restrictions stemming from sanctions and the lack of proper market for their commodities. Therefore, the necessary grounds should be prepared for further persuading these companies to manufacture equipment for the petroleum industry.”
“While investment in the research sector is a must, we should not forget that investment will be economically justified when there would be a good market,” Ali-Abadi said.
Vendor List Arrangement
Hamid-Reza Tayyebi, head of Academic Jihad, said the oil industry’s vendor list has to be arranged.
He said that qualified domestic manufacturers should be also persuaded to transfer in new technology.
Challenges
Sirous Talari, manager of the Society of Iranian Petroleum Industries Equipment Manufacturers (SIPIEM), said the problems faced by SIPIEM members with regards to manufacturing have been listed and submitted to Petroleum Ministry.
He said the problems are mainly related to finance, technology and exports, adding that letters of credit (LC) for knowledge-based companies is pretty essential.
NDFI to Provide 3/4 Portion of Domestic Investment
National Development Fund of Iran (NDFI) was set up in 2011 to preserve a portion of oil and gas revenues and make saving for the future generations. Its share from revenues of oil, gas, and condensate exports was set at 20% in order to finance economic projects and make investment in international financial markets. The NDFI’s share of oil and gas revenues was supposed to increase by three percent every year. It will be 32% in 2015. NDFI allocates sums in rials and dollars to private entities and cooperatives within the framework of contracts with operating agent banks. NDFI is currently a member of the International Forum of Sovereign Wealth Funds (IFSWF); therefore, it can even support foreign investors in Iran.
Iran Petroleum has conducted an interview with Mohammad Mazraati, director for international cooperation of NDFI, regarding the fund’s contribution to the development of oil and gas industries, as well as attraction of foreign investment in Iran’s oil projects.
Q: More than three years have passed since the NDFI was set up in Iran. Would you please tell us about the status of this fund, particularly its international status and its balance?
A: As you know, the NDFI was established to attract portions of revenues from oil, gas, condensate and oil products exports and preserve the accumulated wealth for future generations through funding investment projects in the country by granting facilities to the private sector. The fund is also allowed to invest in international financial markets in a bid to generate wealth for the future generations. The NDFI’s share of petrodollars is expected to increase three percent a year. In the first year of its establishment, the fund had a 20-percent share of oil revenues, but now it stands at 29 percent. The asset under management (AUM) of the Fund stands currently at more than 65 billion dollars. Its ranking varies between 21 and 22 in terms of balance in the world. These fluctuations stem from variation in Iran’s oil and gas revenues in different periods. But the important point which I should note is the transparency of this fund on the international scene. International regulations governing sovereign wealth funds require transparent declaration of wealth funds because potential investors and enterprises need to know about the activities of these funds transparently. In this regard, Iran’s NDFI has managed to claim the 28th spot among national sovereign funds in the world. We predict that it would be among the top 10 SWFs soon if sanctions are eased or lifted and the country could boost oil and gas exports.
Q: After President Hassan Rouhani took office [August 2013], the NDFI was subject to new rules and regulations. Would you please tell us about these new regulations?
A: On July 8 this year, the NDFI Board of Trustees presided over by Iran’s president voted a number of ratifications, the most important of which was categorizing projects based on priority for receiving facilities. A financial regulation was also approved the manner of granting facilities.
The Trustees also adopted ratification on foreign exchange rate fluctuations. The NDFI’s balance is in dollars and potential investors and fluctuations in the conversion rate must be taken into account by themselves and finds the best way to hedge probable risks. An important point is that the facilities are granted in dollars and the receivers are not authorized to convert them into rials in the market. Repayment will be also in dollars.
Conditions were also set for companies qualified to benefit from the NDFI. These companies are required to have 80 percent of their stakes held by private entities.
The Internal Rate of Return (IRR) on investment should be also at least 15 percent. The fund is set up for development goals, but we have inserted an exception, that is water and agriculture projects which are required to have a minimum 10-percent internal rate of return.
Defining approaches for attracting foreign investment and regulations about the fund’s investment in international monetary and financial markets was among other ratifications.
The NDF can invest two billion Euros in foreign markets by the end of the current calendar year in March 2016.
Q: You referred to ratifications about foreign companies and investors. Do the ratifications apply to foreign companies, too?
A: In response to this question, we have first to take a look at the law on encouraging and supporting foreign investment in Iran. According to this law, foreign investors are supported and are authorized to benefit from the resources of Iranian banks, credit funds and financial institutes. In case a foreign investor establishes a company in Iran, he would be treated like all other private companies and he can benefit from the NDFI and other resources for domestic investment. If the foreign investor does not establish any company in Iran, the case would be different.
To that effect, the Iranian parliament has approved a law which requires foreign investors or companies to get permission from the parliament before receiving facilities. This makes the job a bit difficult. But according to NDFI’s ratifications, foreign companies and investors registering a company in Iran – even with 100% foreign ownership – can directly receive facilities from NDFI without any need for parliament approval. Therefore, NDFI’s regulations and ratifications apply to both domestic and foreign companies and investors.
Q: The most important and the most attractive issue for domestic and foreign investors would be to know what projects are categorized by NDFI as prioritized ones in getting facilities. What mechanisms have you worked out for prioritization?
A: As far as the prioritization of projects is concerned, the main condition is profitability and wealth-generating aspect of the project. The projects with higher profitability and lower risk will be definitely prioritized.
In the oil and gas sectors, the NDFI’s priority in granting facilities will be upstream projects with focus on joint fields because these projects are attractive, quite profitable, low-risk for investors and job-creating. These projects will also raise the NDFI’s share of oil and gas resources.
Manufacturing projects as well as procurement of drilling rig and platform projects are among other NDFI priorities because these sectors are closely linked with the upstream sector and the development of oil and gas fields is impossible without them.
Another priority is development of petrochemical and refining plants. Although these mid-stream and downstream projects are less profitable than upstream projects, Iran’s mainly heavy crude oil reserves require sophisticated refineries to process crude oil. Such refineries will be profitable for the country. That is why refinery projects are among NDFI’s priorities for getting facilities. In the petrochemical sector, given Iran’s high potentials in feedstock supply to petrochemical plants and their long-term profitability and insistence on the creation of petrochemical hubs, construction of petrochemical plants are among priorities for getting facilities from the fund.
Furthermore, projects related to energy supply security including oil, gas and oil products storage facilities are also priority projects.
Q: How much is the amount of facilities granted to potential investors? What about the terms of repayment?
A: Let’s first talk about equities – both domestic and foreign. The equities could be in cash or include commodities and equipment. To us, it makes no difference. To that effect, Iranian enterprises or foreign investors and companies willing to receive facilities from the NDFI should contribute at least 25 percent of the total investment needed for the project. The NDFI will account for the remaining 75 percent. However, there are some exceptions. Given the country’s development plan as an objective of the existence of the fund, cooperatives, water and agriculture projects and technical and engineering service exports projects would be required to contribute 20 percent and the NDFI would provide the remaining 80 percent. With regards to development projects in under-developed regions, up to 90 percent of the required investment would be provided by the NDFI and only 10-percent contribution by the investor would be enough. I would like to remind you that public enterprises are required to provide 30 percent. The interest rate on the facilities varies depending on the projects. For the oil and gas industries, whose projects are quite profitable and low-risk, the annual interest rate is 8 percent. For other projects, the rate is 6 percent. We have also considered an exception for water and agriculture development projects in under-developed regions where the annual interest rate is set at four percent. The re-pay period is eight years – three years for construction operation of the project, six-month grace period and the rest for repayment.
Q: How will the facilities be paid by the NDFI?
A: To receive facilities, the investors will not directly refer to the Fund. They have to refer to NDFI agent banks that have contracts and have been introduced on NDFI website (www.ndf.ir). Then, the banks take care of all due diligences including the profitability of the project, the capacity of the investor, the scientific and technological capabilities of the investors as well as the necessary guarantees. In case all conditions are met, the banks will submit the cases to the NDFI. The fund will also study the cases before referring the investors to the Central Bank of Iran (CBI) for getting facilities.
The important point is that the facilities are not granted to the investors in cash and they are mainly spent on the purchase of equipment and commodities needed in the investment projects. The sums will be directly deposited into the account of companies supplying equipment or services. This process is done quickly. Within 40 days, a final decision is made about the project and its qualification for receiving the facilities.
Q: Given the NDFI’s focus on oil and gas projects in granting facilities, how much has so far been allocated to this sector and how much is to be paid?
A: Since the establishment of the fund, more than 15 billion dollars has been approved and paid for oil, gas and petrochemical projects. Recently, 7 billion dollars was approved for upstream projects and 2 billion dollars for petrochemical and refining projects.
Q: As you know, international sovereign wealth funds seek interaction with the government. How has the NDFI fared in this regard?
A: I have to note that the Santiago Principles, to which we are a party, require close relations with the government. To that effect, the NDFI’s management is such that governmental officials including petroleum minister, minister of economy and the governor of CBI are among the fund’s Board of Trustees and they always present their views. It does not mean that the government is meddling with the fund’s affairs. The NDFI is a sovereign wealth fund and all its activities are transparent and in its operation acts dependently.
Q: Have Iran’s new foreign policy and progress in Iran’s nuclear talks with six world powers led to any improvement in the NDFI’s work conditions?
A: Yes, sure! The success of Iran’s nuclear talks with the P5+1 group has not only been a factor improving the NDFI’s work conditions, but also an effective factor bolstering Iran’s economy. Easing or lifting of the sanctions will undoubtedly underscore the NDFI’s role in Iran’s economy. Since nuclear talks have resumed, looks have become positive to the NDFI and many positions have been modified. We have even held talks with some wealth funds for joint cooperation and even establishment of joint investment funds. We have planned meetings with all national sovereign funds to pave the ground for future collaboration
Q: The NDFI hosted an international seminar in Kish Island last year. What happened then?
A: The NDFI’s first international seminar was held in Kish Island with the participation of senior officials and foreign guests in November 2013. All articles and speeches are available in English on www.ndf.ir.
Foreign investors, banking experts, financial management companies, OPEC Fund for International Development (OFID), International Monetary Fund and foreign universities were represented in the seminar. We plan to hold this seminar every two years in order to attract more investors for collaboration, keep ourselves abreast of financial evolution, get experiences from other practitioners and build confidence to secure mutual interests.
NDFI to Provide 3/4 Portion of Domestic Investment
National Development Fund of Iran (NDFI) was set up in 2011 to preserve a portion of oil and gas revenues and make saving for the future generations. Its share from revenues of oil, gas, and condensate exports was set at 20% in order to finance economic projects and make investment in international financial markets. The NDFI’s share of oil and gas revenues was supposed to increase by three percent every year. It will be 32% in 2015. NDFI allocates sums in rials and dollars to private entities and cooperatives within the framework of contracts with operating agent banks. NDFI is currently a member of the International Forum of Sovereign Wealth Funds (IFSWF); therefore, it can even support foreign investors in Iran.
Iran Petroleum has conducted an interview with Mohammad Mazraati, director for international cooperation of NDFI, regarding the fund’s contribution to the development of oil and gas industries, as well as attraction of foreign investment in Iran’s oil projects.
Q: More than three years have passed since the NDFI was set up in Iran. Would you please tell us about the status of this fund, particularly its international status and its balance?
A: As you know, the NDFI was established to attract portions of revenues from oil, gas, condensate and oil products exports and preserve the accumulated wealth for future generations through funding investment projects in the country by granting facilities to the private sector. The fund is also allowed to invest in international financial markets in a bid to generate wealth for the future generations. The NDFI’s share of petrodollars is expected to increase three percent a year. In the first year of its establishment, the fund had a 20-percent share of oil revenues, but now it stands at 29 percent. The asset under management (AUM) of the Fund stands currently at more than 65 billion dollars. Its ranking varies between 21 and 22 in terms of balance in the world. These fluctuations stem from variation in Iran’s oil and gas revenues in different periods. But the important point which I should note is the transparency of this fund on the international scene. International regulations governing sovereign wealth funds require transparent declaration of wealth funds because potential investors and enterprises need to know about the activities of these funds transparently. In this regard, Iran’s NDFI has managed to claim the 28th spot among national sovereign funds in the world. We predict that it would be among the top 10 SWFs soon if sanctions are eased or lifted and the country could boost oil and gas exports.
Q: After President Hassan Rouhani took office [August 2013], the NDFI was subject to new rules and regulations. Would you please tell us about these new regulations?
A: On July 8 this year, the NDFI Board of Trustees presided over by Iran’s president voted a number of ratifications, the most important of which was categorizing projects based on priority for receiving facilities. A financial regulation was also approved the manner of granting facilities.
The Trustees also adopted ratification on foreign exchange rate fluctuations. The NDFI’s balance is in dollars and potential investors and fluctuations in the conversion rate must be taken into account by themselves and finds the best way to hedge probable risks. An important point is that the facilities are granted in dollars and the receivers are not authorized to convert them into rials in the market. Repayment will be also in dollars.
Conditions were also set for companies qualified to benefit from the NDFI. These companies are required to have 80 percent of their stakes held by private entities.
The Internal Rate of Return (IRR) on investment should be also at least 15 percent. The fund is set up for development goals, but we have inserted an exception, that is water and agriculture projects which are required to have a minimum 10-percent internal rate of return.
Defining approaches for attracting foreign investment and regulations about the fund’s investment in international monetary and financial markets was among other ratifications.
The NDF can invest two billion Euros in foreign markets by the end of the current calendar year in March 2016.
Q: You referred to ratifications about foreign companies and investors. Do the ratifications apply to foreign companies, too?
A: In response to this question, we have first to take a look at the law on encouraging and supporting foreign investment in Iran. According to this law, foreign investors are supported and are authorized to benefit from the resources of Iranian banks, credit funds and financial institutes. In case a foreign investor establishes a company in Iran, he would be treated like all other private companies and he can benefit from the NDFI and other resources for domestic investment. If the foreign investor does not establish any company in Iran, the case would be different.
To that effect, the Iranian parliament has approved a law which requires foreign investors or companies to get permission from the parliament before receiving facilities. This makes the job a bit difficult. But according to NDFI’s ratifications, foreign companies and investors registering a company in Iran – even with 100% foreign ownership – can directly receive facilities from NDFI without any need for parliament approval. Therefore, NDFI’s regulations and ratifications apply to both domestic and foreign companies and investors.
Q: The most important and the most attractive issue for domestic and foreign investors would be to know what projects are categorized by NDFI as prioritized ones in getting facilities. What mechanisms have you worked out for prioritization?
A: As far as the prioritization of projects is concerned, the main condition is profitability and wealth-generating aspect of the project. The projects with higher profitability and lower risk will be definitely prioritized.
In the oil and gas sectors, the NDFI’s priority in granting facilities will be upstream projects with focus on joint fields because these projects are attractive, quite profitable, low-risk for investors and job-creating. These projects will also raise the NDFI’s share of oil and gas resources.
Manufacturing projects as well as procurement of drilling rig and platform projects are among other NDFI priorities because these sectors are closely linked with the upstream sector and the development of oil and gas fields is impossible without them.
Another priority is development of petrochemical and refining plants. Although these mid-stream and downstream projects are less profitable than upstream projects, Iran’s mainly heavy crude oil reserves require sophisticated refineries to process crude oil. Such refineries will be profitable for the country. That is why refinery projects are among NDFI’s priorities for getting facilities. In the petrochemical sector, given Iran’s high potentials in feedstock supply to petrochemical plants and their long-term profitability and insistence on the creation of petrochemical hubs, construction of petrochemical plants are among priorities for getting facilities from the fund.
Furthermore, projects related to energy supply security including oil, gas and oil products storage facilities are also priority projects.
Q: How much is the amount of facilities granted to potential investors? What about the terms of repayment?
A: Let’s first talk about equities – both domestic and foreign. The equities could be in cash or include commodities and equipment. To us, it makes no difference. To that effect, Iranian enterprises or foreign investors and companies willing to receive facilities from the NDFI should contribute at least 25 percent of the total investment needed for the project. The NDFI will account for the remaining 75 percent. However, there are some exceptions. Given the country’s development plan as an objective of the existence of the fund, cooperatives, water and agriculture projects and technical and engineering service exports projects would be required to contribute 20 percent and the NDFI would provide the remaining 80 percent. With regards to development projects in under-developed regions, up to 90 percent of the required investment would be provided by the NDFI and only 10-percent contribution by the investor would be enough. I would like to remind you that public enterprises are required to provide 30 percent. The interest rate on the facilities varies depending on the projects. For the oil and gas industries, whose projects are quite profitable and low-risk, the annual interest rate is 8 percent. For other projects, the rate is 6 percent. We have also considered an exception for water and agriculture development projects in under-developed regions where the annual interest rate is set at four percent. The re-pay period is eight years – three years for construction operation of the project, six-month grace period and the rest for repayment.
Q: How will the facilities be paid by the NDFI?
A: To receive facilities, the investors will not directly refer to the Fund. They have to refer to NDFI agent banks that have contracts and have been introduced on NDFI website (www.ndf.ir). Then, the banks take care of all due diligences including the profitability of the project, the capacity of the investor, the scientific and technological capabilities of the investors as well as the necessary guarantees. In case all conditions are met, the banks will submit the cases to the NDFI. The fund will also study the cases before referring the investors to the Central Bank of Iran (CBI) for getting facilities.
The important point is that the facilities are not granted to the investors in cash and they are mainly spent on the purchase of equipment and commodities needed in the investment projects. The sums will be directly deposited into the account of companies supplying equipment or services. This process is done quickly. Within 40 days, a final decision is made about the project and its qualification for receiving the facilities.
Q: Given the NDFI’s focus on oil and gas projects in granting facilities, how much has so far been allocated to this sector and how much is to be paid?
A: Since the establishment of the fund, more than 15 billion dollars has been approved and paid for oil, gas and petrochemical projects. Recently, 7 billion dollars was approved for upstream projects and 2 billion dollars for petrochemical and refining projects.
Q: As you know, international sovereign wealth funds seek interaction with the government. How has the NDFI fared in this regard?
A: I have to note that the Santiago Principles, to which we are a party, require close relations with the government. To that effect, the NDFI’s management is such that governmental officials including petroleum minister, minister of economy and the governor of CBI are among the fund’s Board of Trustees and they always present their views. It does not mean that the government is meddling with the fund’s affairs. The NDFI is a sovereign wealth fund and all its activities are transparent and in its operation acts dependently.
Q: Have Iran’s new foreign policy and progress in Iran’s nuclear talks with six world powers led to any improvement in the NDFI’s work conditions?
A: Yes, sure! The success of Iran’s nuclear talks with the P5+1 group has not only been a factor improving the NDFI’s work conditions, but also an effective factor bolstering Iran’s economy. Easing or lifting of the sanctions will undoubtedly underscore the NDFI’s role in Iran’s economy. Since nuclear talks have resumed, looks have become positive to the NDFI and many positions have been modified. We have even held talks with some wealth funds for joint cooperation and even establishment of joint investment funds. We have planned meetings with all national sovereign funds to pave the ground for future collaboration
Q: The NDFI hosted an international seminar in Kish Island last year. What happened then?
A: The NDFI’s first international seminar was held in Kish Island with the participation of senior officials and foreign guests in November 2013. All articles and speeches are available in English on www.ndf.ir.
Foreign investors, banking experts, financial management companies, OPEC Fund for International Development (OFID), International Monetary Fund and foreign universities were represented in the seminar. We plan to hold this seminar every two years in order to attract more investors for collaboration, keep ourselves abreast of financial evolution, get experiences from other practitioners and build confidence to secure mutual interests.
Petchem Output Up 5%
Iran is to see its gas production rise by 100 mcm/d this year as new phases of the giant South Pars gas field are expected to come on-stream.
Petroleum industry experts say such a production hike will bring about major changes in the energy sector and particularly in feedstock supply to petrochemical plants, some of which have stopped running due to feedstock shortage.
Ali-Mohammad Basaqzadeh, director of production control at National Petrochemical Company, said production from Iran’s petrochemical plants has grown more than five percent year-on-year due to the operation of phases 12, 15&16 of South Pars.
“Furthermore, new units like Ilam Petchem Plant and Kermanshah Polymer Factory have recently become operational. In case of sustainable feedstock supply, the country’s petrochemical production will reach around 48 million tons this [calendar] year [to March 2015],” Basaqzadeh told Iran Petroleum in an interview.
He said the operation of phases 15-18 of South Pars will result in abundant supply of methane, ethane and gas condensate to feed petrochemical plants. “Based on plans, 100 mcm of natural gas or methane is to be added to the country’s production this year. That could be of great help to petrochemical plants fed on this gas,” he said.
Basaqzadeh said some petrochemical plants stop running during winter due to methane shortage, adding: “Last [calendar] year, the country’s petrochemical production fell by more than 1.5 million tons due to feedstock undersupply. Therefore, with an increase in South Pars production we seem to no longer face this problem.”
Last year, Iran faced a 160-mcm shortage in its petrochemical plants. Methanol, urea and ammoniac production plants are expected not to face feedstock shortage this year.
Efforts are under way for the installation of ethane separation systems in phases 15-18 of South Pars soon in order to make up for ethane undersupply.
Basaqzadeh said phases 15-18 of South Pars are expected to produce 180 tons per hour of ethane, adding: “Immediately after operation, these phases are unlikely to be able to produce this volume, but they are forecasted to produce at least 100 tons of ethane per hour.”
He said petrochemical plants in the country are ready to receive ethane supplied by phases 15 to 18 of South Pars because Kavian, Morvarid, Jam and Arya-Sasol petrochemical plants are running below their capacity due to ethane shortage.
Basaqzadeh said Takht-e Jamshid Petrochemical Plant is 98 percent complete, Lorestan Petrochemical Plant’s polymer unit is to start producing 300,000 tons a year soon, Mahabad Petrochemical Plant will come on-line by March next year while the second phase of Kavian Petrochemical Plant will start production.
The official said most petrochemical plants in the country are operating based on the amount of natural gas they are supplied with.
“In the future, due to difference in the price of gas and other feedstocks, in case of petrochemical oversupply in the market and concomitant price fall, non-gas units would be likely to shut down their production lines,” he said.
Basaqzadeh said Iran, which holds 33.8 tcm of gas, needs around 70 billion dollars for improving its upstream and downstream sectors. Some 30 percent of this required sum is needed by the downstream sector, particularly polymer production.
He said that the best competitive condition for investment and development of Iran’s petrochemical industry will be to have access to the proper feedstock – natural gas, ethane, and naphtha and gas condensate.
The country’s gas treatment and transmission capacity stands currently at 600 mcm/d, which is expected to soar to 1 bcm/d soon. Sufficient ethane supply will be instrumental in the preservation of Iran’s status as a petrochemicals producer.
With the completion of South Pars phases (development of phases 12 to 27), the field will offer 650,000 b/d of gas condensate, 6.7 million tons a year of liquefied petroleum gas (LPG) and four million tons a year of ethane which will go straight to petrochemical plants.
Change in Approach
Iran’s petrochemical industry has continued its growth in recent years despite obstacles and restrictions. This valuable industry is currently seeking operations to supply products of high value in order to help the government realize its economic plans.
Basaqzadeh said petrochemical plants are focusing on production chain, adding: “In the past, Iran’s production was mostly methanol, but now the policy is to produce propylene, poly propylene, ethylene, polystyrene, olefin and other grades of high value-added.”
Since the toughening of sanctions against the Islamic Republic, gas condensate has been fully supplied to Nouri, Bou Ali, and Bandar Imam and Tabriz petrochemical plants.
Basaqzadeh said Iran has become self-sufficient in fertilizer urea production thanks to Pardis Petrochemical Plant. Iran is currently exporting 50 percent of its fertilizer urea production.
Iran is producing on average 4.5 million tons of fertilizer urea a year with annual consumption hovering around two million tons.
The government is examining plans to raise the price of fertilizer urea purchase from petrochemical plants. Fertilizer urea is currently sold at IRR 6,120 a kilo.
Basaqzadeh said the price of feedstock for petrochemical plants has increased in the current year, adding that the price hike should be so that the stock market would be stuck with no shock.
Most experts believe that annual changes in the feedstock price will destabilize attraction of domestic and foreign investment in the petrochemical industry. They say any price formula should stand for 15 years. Over the past four years, feedstock prices have been reconsidered three times. The government is currently studying 13-cent price with a 30-percent rate of return.
Basaqzadeh said Iran can expect foreign investment as this price is near the price charged in neighboring countries.
Oil and gas prices were in a clear proportion until shale gas hit the world markets. Now, gas prices are falling while oil prices are rising. Therefore, any price formula for feedstock of petrochemical plants should take into consideration such factors and possible conditions.
Speculation Out
Iran has in recent years struck a balance to the supply and demand for petrochemical products by offering petrochemicals on the stock market.
Basaqzadeh said a main challenge to petrochemical industry in recent years was the big difference in the stock market and free market prices. The issue stemmed from the fact that the foreign exchange rate enforced in the stock market was based on the semi-official rate, while the free market rate was much higher. Speculators used to purchase petrochemicals on the stock market to sell on the free market at higher prices. But the exchange rate in both free market and stock market were equalized and the speculators were automatically driven out. The 15-percent difference in the price disappeared.
“Due to free market exchange rate in the stock market and petrochemicals’ price hike, some real consumers have seen their purchase power decline. To that effect, the government has taken steps to provide the necessary cash to customers. Moreover, some upstream plants are selling their products on a three-month credit,” Basaqzadeh said.
Progress in Iran Offshore Expertise
Half a century ago, Italy’s Agip explored Bahregan oil zone in shallow waters of Persian Gulf. In those days nobody imagined that Iranian engineers would one day be able to explore and produce oil in their territorial waters.
At that time, only foreign companies were steering offshore oil and gas projects in Iran. Offshore operations are among the most difficult tasks in exploration.
Until 15 years ago, petroleum industry experts and project managers ruled out the possibility of establishment of Iranian contracting companies to be able to steer offshore oil and gas projects. However, in the 1990s, cooperation between Iranian companies and some foreign contractors in Iran’s petroleum industry helped Iran acquire technology for offshore structure. Development of offshore Abuzar oil field was the first offshore project operated by Iranian offshore engineers. That was the beginning of a road which led Iran to self-sufficiency in the offshore industry. The development resulted in the establishment of such companies as Iran Marine Industrial Company (SADRA), Iran’s Offshore Engineering and Construction Company (IOEC) and Iran Shipbuilding & Offshore Industries Complex Company (ISOICO).
Over recent years, Iranian companies operating offshore projects have made great achievements throughout their collaboration with foreign companies working in Iran, but foreign companies were loath to fully transfer technology into Iran.
The toughening of international sanctions against Iran’s energy sector set the stage for Iranian companies to prove their competence. At present, Iranian companies can fully operate offshore projects.
In the offshore sector, pipe-laying and offshore structure construction are among the most important activities. Throughout their cooperation with foreign companies, Iranian companies managed to transfer in the necessary technology for offshore structure and pipe-laying.
Meantime, Iranian companies active in the offshore sector increased their efforts to make the country independent of foreign companies. Now, more than 85 percent of engineering operations in the construction of platforms is done inside the country. Iranian offshore companies are capable of fully handling engineering operations.
More than 70 percent of the items needed in engineering, procurement and construction (EPC) offshore projects are supplied by domestic manufacturers, but it should be taken into account that some commodities are still being imported due to non-standardization in Iran.
Since 1985, Iran has been transferring in technical knowhow for the construction of offshore platforms. Now, jackets are constructed completely in Iran.
Installation of heavy offshore structures also requires certain equipment. Ten years ago, Iranian offshore companies decided to provide crane-mounted vessels needed for moving heavy structures like jackets and decks. IOEC, SADRA and Saff Rosemond Engineering & Management Company purchased these vessels. But no foreign expert is needed for installing the offshore structures. Even platforms weighing over 2,000 tons are installed by Iranians.
Iranian contractors have fared well specifically over the past six years. Except for 20 to 30 percent of the items needed in offshore oil and gas projects, the rest is being procured by Iranian companies.
South Pars Gas Field
Laying more than 1,900 kilometers of pipeline, 32 inches in diameter, construction and installation of 26 jackets and 7 offshore platforms (19 others are still under construction) and conducting pre-start up test are examples of Iranian offshore oil industry companies’ success in the massive South Pars gas field in southern Iran. IOEC has handled 70 percent of these projects in South Pars. The company has 21 years of experience in designing, procurement, construction, logistics, transfer and installation of offshore platforms as well as onshore and offshore pipe-laying.
Today, IOEC is recognized as an EPCI in the world. It is capable of providing services to offshore oil and gas projects. It has established strategic relations with many companies in order to expand its activities. By establishing numerous satellite companies, IOEC is determined to become an international holding company.
The offshore activities of this company are its strengths. Simultaneous installation, pre-commissioning and commissioning of five topsides in phases 12 and 15-18 of South Pars is a brilliant point in the records of IOEC.
Operation of a single-point mooring (SPM) in Phase 12 of South Pars, export of gas condensate from this phase and lying pipeline from sea to land in phases 22&23 of this field, which is shared with Qatar, are among the most important offshore operations in recent months. All these operations have been carried out to accelerate development of South Pars gas field.
With the implementation of priority projects in South Pars (including phases 17&18, 12, 15&16), the country’s gas production is to increase by 100 mcm this year. Four platforms – A17, A18, B12 and C12 – are being installed. The pre-commissioning and commissioning operations and the start-up of these four topsides will create more than 1,000 jobs offshore.
Iranian petroleum industry experts are currently capable of handling upstream sector (exploration, extraction, production and processing of oil and gas) and downstream sector (refineries, petrochemicals and distribution of oil products).
International companies developing oil and gas fields never imagined that Iran would be able to make progress in the offshore oil sector. But South Pars is a proof of the capabilities of Iranian companies in operating offshore projects.
Offshore Sector, a Must
The significantly growing demand for fossil energies has attracted the attention of many countries to the energy-rich Middle East region, particularly Persian Gulf and Caspian Sea. International oil and gas companies have made huge investment in this region’s oil and gas sectors. Iran’s access to huge hydrocarbon reserves, particularly offshore reservoirs, encouraged the formation of more companies operating offshore projects. The success of these companies inside Iran (operating projects) and abroad (exporting technical and engineering services) depends on improvement of their knowledge for more effective operation of projects.
Over recent years, Iranian companies have been indigenizing the technology for offshore oil and gas recovery and development of structure needed for transfer of oil and gas.
Under the present circumstances, it is necessary to adopt effective methods for mastering offshore technology.
Offshore reservoirs account for over 21 percent of Iran’s oil production, or 800,000 b/d.
Iran, which sits atop 15 percent of the world gas reserves, is accounting for five percent of the world’s gas production. Given the fact that 33.6 percent of Iran’s gas reserves are onshore and 66.4 percent are offshore, the significance of development of offshore industry comes further to the limelight.
In the meantime, 92 percent of the Middle East’s gas reserves are held by Iran, Qatar, Saudi Arabia and the United Arab Emirates and they hold 37 percent of the world gas reserves, as well. South Pars gas field – shared by Iran and Qatar – contains 50 percent of the Middle East’s gas reserves.
Iran has currently 40 oil and gas operation zones – 27 onshore and 13 offshore.
Zagros zone is one of the hydrocarbon richest zones in the Middle East. A large number of fields are located in this zone. They are shared by Iran, Iraq, Saudi Arabia, Oman, UAE, Kuwait and Qatar.
Iran shares 28 hydrocarbon fields with seven neighbors, including 18 oil, four gas and six oil/gas fields. Iran is among few countries sharing so many hydrocarbon reservoirs with neighbors.
Thanks to progress achieved in the offshore industry in recent years, Iran has been awarded offshore oil and gas projects in India, Qatar, Venezuela and Nigeria.
Operating projects overseas can bring Iran millions of dollars in revenues. The government and senior oil managers are expected to support companies working in the offshore industry.
“Holding” Potentials in Iran Petroleum Industry
Iranian government officials have been seeking to streamline bureaucracy by sticking to Article 44 of the Constitution, which calls for the privatization of state-owned companies.
But hasty action in privatization of some companies without conducting expert studies has created problems for them. Iran’s petroleum industry has been no exception. The planned privatization of important companies like National Iranian Drilling Company (NIDC) and Kala Naft, regardless of their activities, have promoted Iranian oil officials to work out mechanisms for preserving the status of these companies while respecting Article 44 of the Constitution.
Changing the structure of these companies to holding company is an approach envisaged for NIDC under a four-year plan.
A holding company is a company or firm that owns other companies' outstanding stock. The term usually refers to a company that does not produce goods or services itself; rather, the philosophy behind its establishment is to own shares of other companies to form a corporate group. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.
Iran’s petrochemical industry has a successful experience. Persian Gulf Holding Company, which comprises 15 petrochemical plants, is holding a major share in petrochemical production and exports.
A holding company exists for the sole purpose of controlling another company, which might also be a corporation, limited partnership or limited liability company, rather than for the purpose of producing its own goods or services. Holding companies also exist aimed at owning property such as real estate, patents, trademarks, stocks and other assets. If a business is 100% owned by a holding company, it is called a wholly owned subsidiary.
The advantages of establishment of holding companies have so far been proven in other countries. In Iran, holding companies seem to be needed due to numerous structural problems and absence of strategic plans in many big organizations at a time technology is growing rapidly and rivalry is gathering steam across the globe.
Business and production have become so complicated that many big organizations are teaming up with other companies in order to boost their potentials and increase their profitability.
Iranian government officials have taken this issue seriously in recent years and have taken steps in this regard. Meantime, holding is a privatization approach in Iran.
Different definitions have been offered for holding company. Generally speaking, a holding company is a company that doesn’t have any operations, activities, or other active business. Instead, it owns assets. These assets can be shares of stock in other corporations, limited liability companies, limited partnerships, private equity funds, hedge funds, publicly traded stocks, bonds, real estate, song rights, brand names, patents, trademarks, copyrights, or virtually anything else that has value.
The procedure involves acquisition of shares in the absorbed company, and not its assets with or without liabilities. The separate legal entity of the absorbed company is, therefore, not disturbed. In other words, the subsidiary company continues its business as usual because acquisition of controlling interest by another company does not mean its liquidation.
Advantages
The advantages of holding companies include legal facility of establishment (much easier than merger), legality of cooperation with foreign companies, access to investment and less bureaucracy.
Growing inclination for holding companies stems from the existing complicated business conditions, right rivalry, instability of markets, blossoming of companies and their efforts for acquiring bigger shares of the market and gaining more profits.
Furthermore, realizing the macro objectives of organizations within the framework of policies, striking a balance between resources and consumption and avoiding parallel work necessitate the formation of holding companies.
Today, many countries are making efforts to shift from centralized economic systems to free market economy.
State-owned companies are facing the challenge of effectiveness, while all countries are not in a position to be able to move towards free market economy.
Some countries have developed their own methods through trial and error for the purpose of reforming the structure of state-owned companies. In many cases, they modify the company’s structure or ownership of stocks.
Some developed and developing countries have learned through experience that establishment of holding companies is an effective policy.
By doing so, the governments will separate ownership and their management tasks and by creating distance between companies and the government gives both sides freedom of action and let them show creativity.
Holding companies in any country can make great contribution to gross national product (GNP), effective job creation, exports, banking facilities as well as satisfaction of stakeholders.
Holding companies have led to economic success in some countries. For example, Iran and South Korea were in similar positions in the 1960s, but application of modern management methods and structural reforms helped South Korea undergo development and become a top economy in the world. There are a variety of reasons for the progress of South Korea, but holding companies in this Asian country are a major factor of success.
In Iran’s business literature, holding companies are big companies with many subsidiaries under their control. But holding does not imply this and the companies teaming up under a holding are independent and holding companies are not necessarily large-sized.
Holding in Iran
Establishment of holding companies has long been viewed as a way of reducing organizational bureaucracy and accelerating response to the market, but the issue has become specifically important in the past decade.
In Iran, small-sized companies do not have enough room for maneuvering. But if they join together and form a holding they will be able to make important economic decisions and win a major share of the market. In general, by analyzing the structure of organizations in Iran, it is observed that large-sized companies are facing structural and administrative problems.
In management theory, the thesis that Structure follows Strategy was proposed by the historian Alfred Chandler. This means that a corporate structure is created in order to implement a given corporate strategy.
Based on this theory, the establishment of holding companies could be viewed from two aspects.
The first aspect is determining a role and strategy for big companies. Holding is a strategy which managers should take into account. This strategy is a must in many new organizations.
Many of existing structures are not optimal and they impose high control, administrative and planning costs. As an advanced structure, holding can prove effective and efficient.
The second step is to define a proper model of holding for Iranian companies. After holding is accepted as a structure, it would be necessary to know which criteria the holding structure should be designed upon.
The structure of holding distributes risks, reinforcement of strategy, and diversity of activities and facility of compensating damage. Therefore, it is a must for Iranian companies to establish holding. But the main condition before the formation of a holding is to make a strategic analysis of the holding as an operational structure.
Establishment of holding companies in any country is necessary. In Iran, the law has potentially recognized establishment of holdings because of the legality of investment in companies and foreign investment law.
Holding Structures
Three structures have been defined for holding entities.
Simple Parenting
A parent company controls other companies by owning an influential amount of voting stock or control. Parent companies will typically be larger firms that exhibit control over one or more small subsidiaries in either the same industry or other industries. Parent companies can be either hands-on or hands-off with subsidiaries, depending on the amount of managerial control given to subsidiary managers.
Divided Parenting
In this model, specialized groups are formed to underscore a specific part of the job (like equipment manufacturing groups) or handle a specific job (like technical and financial groups).
Vertical Structure
This structure indicates the repetition of the organization’s tasks. A group of subsidiaries may be classified under a group, while they independently handle a job.
In order to find the appropriate model, eight factors have to be taken into consideration: value creation, power balance, connection, complexity, flexibility, strategic communications, rivalry and feasibility.
An effective structure is expected to be able to strike a balance between internal and external computability.
Types and Impact of Holding Companies
There are three basic types of holding companies:
Holding in State-Run Sector
One of the most important objectives of formation of holding companies in the government-owned sector is effective management of state-run companies, facilitating the sale of stocks, management of subsidiaries, achieving synergy through harmonized activity in a specific sector and management of government assets for more income.
Effective and optimal management of subsidiaries following the model of administration of enterprises is a main feature of holding companies.
Government-owned or state-run enterprises are often the result of corporatization, a process in which government agencies and departments are re-organized as semi-autonomous corporate entities, sometimes with partial shares listed on stock exchanges.
The term 'government-linked company' (GLC) is sometimes used to refer to corporate entities that may be private or public (listed on a stock exchange) where an existing government owns a stake using a holding company.
Choosing the most appropriate model of holding company in Iran will require comprehensive studies so that micro and macro management issues are completely examined.
Given the effective role of holding structures in enhancing the productivity of large organizations and previous successful experiences as well as numerous challenges faced by big organizations in Iran, it seems that holding structure can be an effective tool spurring economic development and reforms and privatization.
“Holding” Potentials in Iran Petroleum Industry
Iranian government officials have been seeking to streamline bureaucracy by sticking to Article 44 of the Constitution, which calls for the privatization of state-owned companies.
But hasty action in privatization of some companies without conducting expert studies has created problems for them. Iran’s petroleum industry has been no exception. The planned privatization of important companies like National Iranian Drilling Company (NIDC) and Kala Naft, regardless of their activities, have promoted Iranian oil officials to work out mechanisms for preserving the status of these companies while respecting Article 44 of the Constitution.
Changing the structure of these companies to holding company is an approach envisaged for NIDC under a four-year plan.
A holding company is a company or firm that owns other companies' outstanding stock. The term usually refers to a company that does not produce goods or services itself; rather, the philosophy behind its establishment is to own shares of other companies to form a corporate group. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.
Iran’s petrochemical industry has a successful experience. Persian Gulf Holding Company, which comprises 15 petrochemical plants, is holding a major share in petrochemical production and exports.
A holding company exists for the sole purpose of controlling another company, which might also be a corporation, limited partnership or limited liability company, rather than for the purpose of producing its own goods or services. Holding companies also exist aimed at owning property such as real estate, patents, trademarks, stocks and other assets. If a business is 100% owned by a holding company, it is called a wholly owned subsidiary.
The advantages of establishment of holding companies have so far been proven in other countries. In Iran, holding companies seem to be needed due to numerous structural problems and absence of strategic plans in many big organizations at a time technology is growing rapidly and rivalry is gathering steam across the globe.
Business and production have become so complicated that many big organizations are teaming up with other companies in order to boost their potentials and increase their profitability.
Iranian government officials have taken this issue seriously in recent years and have taken steps in this regard. Meantime, holding is a privatization approach in Iran.
Different definitions have been offered for holding company. Generally speaking, a holding company is a company that doesn’t have any operations, activities, or other active business. Instead, it owns assets. These assets can be shares of stock in other corporations, limited liability companies, limited partnerships, private equity funds, hedge funds, publicly traded stocks, bonds, real estate, song rights, brand names, patents, trademarks, copyrights, or virtually anything else that has value.
The procedure involves acquisition of shares in the absorbed company, and not its assets with or without liabilities. The separate legal entity of the absorbed company is, therefore, not disturbed. In other words, the subsidiary company continues its business as usual because acquisition of controlling interest by another company does not mean its liquidation.
Advantages
The advantages of holding companies include legal facility of establishment (much easier than merger), legality of cooperation with foreign companies, access to investment and less bureaucracy.
Growing inclination for holding companies stems from the existing complicated business conditions, right rivalry, instability of markets, blossoming of companies and their efforts for acquiring bigger shares of the market and gaining more profits.
Furthermore, realizing the macro objectives of organizations within the framework of policies, striking a balance between resources and consumption and avoiding parallel work necessitate the formation of holding companies.
Today, many countries are making efforts to shift from centralized economic systems to free market economy.
State-owned companies are facing the challenge of effectiveness, while all countries are not in a position to be able to move towards free market economy.
Some countries have developed their own methods through trial and error for the purpose of reforming the structure of state-owned companies. In many cases, they modify the company’s structure or ownership of stocks.
Some developed and developing countries have learned through experience that establishment of holding companies is an effective policy.
By doing so, the governments will separate ownership and their management tasks and by creating distance between companies and the government gives both sides freedom of action and let them show creativity.
Holding companies in any country can make great contribution to gross national product (GNP), effective job creation, exports, banking facilities as well as satisfaction of stakeholders.
Holding companies have led to economic success in some countries. For example, Iran and South Korea were in similar positions in the 1960s, but application of modern management methods and structural reforms helped South Korea undergo development and become a top economy in the world. There are a variety of reasons for the progress of South Korea, but holding companies in this Asian country are a major factor of success.
In Iran’s business literature, holding companies are big companies with many subsidiaries under their control. But holding does not imply this and the companies teaming up under a holding are independent and holding companies are not necessarily large-sized.
Holding in Iran
Establishment of holding companies has long been viewed as a way of reducing organizational bureaucracy and accelerating response to the market, but the issue has become specifically important in the past decade.
In Iran, small-sized companies do not have enough room for maneuvering. But if they join together and form a holding they will be able to make important economic decisions and win a major share of the market. In general, by analyzing the structure of organizations in Iran, it is observed that large-sized companies are facing structural and administrative problems.
In management theory, the thesis that Structure follows Strategy was proposed by the historian Alfred Chandler. This means that a corporate structure is created in order to implement a given corporate strategy.
Based on this theory, the establishment of holding companies could be viewed from two aspects.
The first aspect is determining a role and strategy for big companies. Holding is a strategy which managers should take into account. This strategy is a must in many new organizations.
Many of existing structures are not optimal and they impose high control, administrative and planning costs. As an advanced structure, holding can prove effective and efficient.
The second step is to define a proper model of holding for Iranian companies. After holding is accepted as a structure, it would be necessary to know which criteria the holding structure should be designed upon.
The structure of holding distributes risks, reinforcement of strategy, and diversity of activities and facility of compensating damage. Therefore, it is a must for Iranian companies to establish holding. But the main condition before the formation of a holding is to make a strategic analysis of the holding as an operational structure.
Establishment of holding companies in any country is necessary. In Iran, the law has potentially recognized establishment of holdings because of the legality of investment in companies and foreign investment law.
Holding Structures
Three structures have been defined for holding entities.
Simple Parenting
A parent company controls other companies by owning an influential amount of voting stock or control. Parent companies will typically be larger firms that exhibit control over one or more small subsidiaries in either the same industry or other industries. Parent companies can be either hands-on or hands-off with subsidiaries, depending on the amount of managerial control given to subsidiary managers.
Divided Parenting
In this model, specialized groups are formed to underscore a specific part of the job (like equipment manufacturing groups) or handle a specific job (like technical and financial groups).
Vertical Structure
This structure indicates the repetition of the organization’s tasks. A group of subsidiaries may be classified under a group, while they independently handle a job.
In order to find the appropriate model, eight factors have to be taken into consideration: value creation, power balance, connection, complexity, flexibility, strategic communications, rivalry and feasibility.
An effective structure is expected to be able to strike a balance between internal and external computability.
Types and Impact of Holding Companies
There are three basic types of holding companies:
Holding in State-Run Sector
One of the most important objectives of formation of holding companies in the government-owned sector is effective management of state-run companies, facilitating the sale of stocks, management of subsidiaries, achieving synergy through harmonized activity in a specific sector and management of government assets for more income.
Effective and optimal management of subsidiaries following the model of administration of enterprises is a main feature of holding companies.
Government-owned or state-run enterprises are often the result of corporatization, a process in which government agencies and departments are re-organized as semi-autonomous corporate entities, sometimes with partial shares listed on stock exchanges.
The term 'government-linked company' (GLC) is sometimes used to refer to corporate entities that may be private or public (listed on a stock exchange) where an existing government owns a stake using a holding company.
Choosing the most appropriate model of holding company in Iran will require comprehensive studies so that micro and macro management issues are completely examined.
Given the effective role of holding structures in enhancing the productivity of large organizations and previous successful experiences as well as numerous challenges faced by big organizations in Iran, it seems that holding structure can be an effective tool spurring economic development and reforms and privatization.
Drilling, Key to Tapping Reservoirs
Such factors as creating capacities in exploration zones, estimates and reservoir studies for the development of fields, preservation and enhancement of production capacity with a view to reaching enhanced recovery constitute the strategies of petroleum industry in the world. All these factors have one point in common; they depend on drilling industry in a way or other.
Meantime, oil is a strategic commodity in the world and it has long been a key contributor to development in many countries. This strategic commodity has necessitated the creation of new industries. Production of this valuable and strategic hydrocarbon substance from underground requires equipment, machinery as well as technical and engineering knowledge. To that effect, oil and gas well drilling is the most essential, the most specialized and the most complicated part of these activities. Although satellite images and other sophisticated equipment are used in hydrocarbon exploration, the rotation of drilling bit has the final say.
Battling unknown nature, drilling deep underground, high temperature, working in mountainous and treacherous regions and deserts, bad weather, exposure to flammable, poisonous and lethal fluids and many other factors make drilling industry the toughest and the most complicated job in the world.
Heydar Bahmani, managing director of National Iranian Drilling Company (NIDC), takes all aforementioned issues into account with regards to the development of oil and gas fields. But he also attaches great importance to human resources particularly young manpower.
Bahmani, who earlier held the same position for two terms, says development of the drilling industry for meeting oil and gas objectives is a wise approach.
His first term as NIDC managing director was from 1997 to 2002. He implemented modern drilling system to make the drilling market competitive.
“Since I believe that NIDC experts and specialists are men of difficult days, we will try together to realize the objectives of the great petroleum industry for enhanced recovery,” he told Iran Petroleum in an interview.
Q: Let’s begin with this question: Where would have we been had the NIDC not been established?
A: Drilling is key to tapping reservoirs and is actively present from the beginning to the end of petroleum industry. After the preliminary studies are conducted on the reservoir, exploration wells are drilled showing whether or not there is any recoverable oil there. The next step will be drilling appraisal wells that would provide more complete data about the reservoir, its fluid and the crude oil’s API gravity. This data is sent to the reservoir engineering section to design development drilling operations after the profitability of tapping the reservoir has been proven. In this stage, the management of the reservoir is assigned to developers for recovery. These companies will again need drilling services for maintaining or boosting the production ceiling.
Most reservoirs in Iran are currently in the second half of their life cycle and they will experience production fall-off if the necessary planning is not made. Drilling new production as well as injection wells will effectively guarantee continuation of production. If proper drilling is done in a reservoir its recovery rate will enhance. This issue shows the key role of drilling in enhanced oil and gas recovery. For this reason, I personally believe that reinvigorating the drilling industry to serve oil and gas development projects is a wise stratagem.
Q: What are the main points in NIDC’s 20-year development plan? Where do you think this company will stand in 2025?
A: Fortunately, the NIDC has in different periods had sympathetic managers interested in creating infrastructures. This issue shows the significance of the responsibility we shoulder vis-à-vis the future generation. The measures undertaken in NIDC include the formulation of a 20-year development plan in 1985. This long-term plan was implemented favorably with less than 15 percent variance from the main plan. This issue indicates the significance of long-term strategic planning in NIDC.
But drilling operations did not stop even for a single day during years of the Sacred Defense (an allusion to imposed war 1980-1988). Our colleagues managed to keep oil production running during the toughest war conditions by drilling 309 wells. The drilling industry dedicated more than 40 martyrs to the Islamic homeland.
Q: What are the main strategic plans you envisage for the NIDC?
A: In addition to the tasks officially assigned to us, expansion of the [drilling] fleet, structural, financial and legal reforms are also envisaged.
Q: What are the advantages of the presence of NIDC in domestic projects for the petroleum industry?
A: Bidding in drilling tenders, NIDC creates a competitive atmosphere; nevertheless, the bidder with lowest financial proposal and best technical proposal wins the tender. In addition, the number of drilling rigs owned by NIDC operating in exploration and development projects, as well as new and complementary drilling operations is an indication of Iran’s firm will for enhancing its production capacity and promoting its position in the OPEC (Organization of the Petroleum Exporting Countries). The capability of the drilling industry has helped Iran’s petroleum industry not to suffer seriously from restrictions at any time, even under the West’s unfair sanctions against our country. Drilling operation in the country has never halted under foreigners’ forceful methods or bullying.
Q: The realization of the country’s development requires expansion of the drilling fleet. What does NIDC plan to do in this regard?
A: The drilling industry plans development of operational and technical sectors in order to respond to the petroleum industry’s needs and make its contribution to the implementation of the 2025 Vision Plan and the drilling industry’s 20-year development plan. Under the aegis of Petroleum Ministry, we do hope for considerable investment in this sector.
Q: You have mentioned many times that you are not against privatization, but many believe that you are. Could you elaborate on that?
A: The fact is that drilling is a private profession. A quick decision is needed to be made about the NIDC so that its credit will be provided from outside the organization. For that purpose, NIDC needs to be privatized. We are of the opinion that this issue must be reviewed by experts. Therefore, it does not mean that we oppose any such cession [to the private sector]. NIDC is a strategic organization for the [Islamic] establishment. It is the pivot of production. At present, the Islamic Republic’s oil production is done by NIDC. Therefore, this company is expected to be treated prudently. We are ready to make plans based on instructions to follow up on mechanisms for a drilling holding. I think it would be better off to help private drilling companies to control the market. Then, in case of their ability, we can prepare the conditions for them to work along with the NIDC. A state-run drilling organization cannot compete with them.
Q: NIDC is an offshoot of National Iranian Oil Company (NIOC). How is it supposed to become a holding company?
A: Over recent years, as the issue of implementation of Article 44 of the Constitution [on privatization] becomes more serious, a large number of companies have been listed for cession. The decision for the [privatization of] the NIDC was made in March 2013. Under this abruptly decided cession, 35 percent of the company’s profits were supposed to be paid to Ta’avon Foundation in return for the government’s debts. At that time, many said the decision was inexpert, but the previous administration insisted on the project.
Q: How about now?
A: Yes, nearly 40 percent of the NIDC’s activities have been privatized and this process has always been pursued; however, the government must still enjoy sovereignty over it. Changing the state-owned structure of the NIDC according to the plans of the government and the Privatization Organization is a must and that is why after the 11th administration took office senior Petroleum Ministry officials decided to follow up on holding or privatization for the NIDC. The point which should not be ignored is that this company requires structural changes and that is clear for management experts. Many experts believe that the NIDC could accelerate its operations only if the company undergoes structural changes. In any case, we hope that the activities would be sped up under the aegis of an expert decision so that we would finally manage to boost productivity in this organization.
Q: What is the economic advantage of this project?
A: As far as I know, this project envisages potentials for generating revenues in some units including labs, technical inspection and IT. In line with these changes we have to seek higher effectiveness and productivity in all sections of the organization.
Q: You’ve time and again described specialized manpower as the assets of the company. Have the human resources been taken into consideration in the prospective structure of the company?
A: Everywhere in the world, holdings are created for realization of macro-objectives so that they would be able to strike a balance between revenues and costs while fulfilling their obligations. In other words, this structure will prevent duplication and uncoordinated work. Therefore, the project will have the chance of more success in increasing its market share for more profitability, and undoubtedly, manpower will benefit.
Q: It seems that operating projects abroad will be more profitable for the NIDC. What do you think of that?
A: Before answering your question, let me refer to a background. NIDC staff’s expertise along with their sophisticated equipment has created a good image of the company on the international scene. All new drilling equipment including directional and horizontal drilling equipment, drilling services equipment like coiled tubing, new drilling fluid equipment, well logging equipment and fluid have been imported in recent years and NIDC technicians are using them.
Advanced training courses are offered at Drilling Technology Training Center. The IWCF which is the most difficult drilling course is offered in this training center and has been endorsed by international companies. NIDC’s operations in foreign countries started years ago, specifically in Turkmenistan’s fields. Our colleagues have shown that they can work in reservoirs abroad without any problem. NIDC drilling engineers have already worked along with European and American companies in Libya.
But in response to your question, I have to say that entry into foreign markets may create more revenues for the company, but we had better operate projects at home, as long as national drilling services are needed – unless there is competition. We are an economic enterprise and naturally we look at the markets in the region in our marketing strategy. But providing technical and industrial services abroad is not tied only to the NIDC managers’ decision. First, Petroleum Ministry should make up its mind and allow us work abroad. Other bodies like Foreign Ministry, as well as legal and customs organs should also help us do this job.
Q: As you know, an important point with organizational agility would be the possibility of planning for the future. Do you think that the planned holding status for NIDC enjoys such a potential?
A: Yes, sure! If the project is implemented precisely and based on international standards it will have special planning potentials for the future of the company and confrontation with different changes in the drilling industry, particularly in the field of competition. NIDC was once the sole drilling services provider, but today we are witnessing the accelerated growth of companies in this industry. For preserving this position, as well as NIDC’s rivalry privilege, we have to seek ways to boost productivity and efficiency through structural changes.
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NIDC currently owns 69 drilling rigs, 20 percent of which are operating in drilling projects. The rest is operating in the oil and gas fields run by National Iranian South Oil Company (NISOC), Iran’s Central Oil Fields Company (ICOFC) and Iran’s Offshore Oil Company (IOOC).
NIDC is active in South Pars gas field. It accomplished drilling operations in phases 9 and 10, two years ago. NIDC spudded 22 wells in phases 17 and 18 in March 2014. Moreover, NIDC has been assigned the task of drilling 22 wells in Phase 14 and so far 40 percent of drilling operations in this phase have been completed. Along with four wells in Phase 1, NIDC is in charge of a total of 70 wells in South Pars. NIDC is also likely to be assigned the drilling of 22 wells in two other phases of South Pars.
Last calendar year, NIDC signed an agreement with Petroleum Engineering and Development Company (PEDEC) for the drilling of 22 wells in Yaran field. This contract caused many restrictions for the company, but currently the required commodities for Yaran field project have been procured and the number of drilling rigs in this field will increase soon.
After CNPCI left South Azadegan field, we announced our readiness to enter this field and handle drilling activities. Of course, we had earlier worked with PEDEC and this Chinese company in this field, but this time we entered direct talks. Petroleum Minister [Bijan Namdar Zangeneh] recently ordered that 50 wells in this field be commissioned to NIDC. We plan to move 8 drilling rigs to this field and we predict that the drilling operations will last 2 to 3 years.
Drilling in North Azadegan field is to finish soon and the rigs in this field will be moved to South Azadegan. Drilling is also under way in Azar field, where we have been assigned seven wells. Two wells are currently being drilled by Pirouz Rig and Rig 35.
Delays have been reported and the main reason for delayed drilling pertains to the procurement of commodities, but the complexity of the reservoir and lack of sufficient data also slowed down the work. However, commodities have been purchased for Azar and Yaran fields and they are in the state of customs procedure. From now on, we can easily continue our activity in this field.
Drilling, Key to Tapping Reservoirs
Such factors as creating capacities in exploration zones, estimates and reservoir studies for the development of fields, preservation and enhancement of production capacity with a view to reaching enhanced recovery constitute the strategies of petroleum industry in the world. All these factors have one point in common; they depend on drilling industry in a way or other.
Meantime, oil is a strategic commodity in the world and it has long been a key contributor to development in many countries. This strategic commodity has necessitated the creation of new industries. Production of this valuable and strategic hydrocarbon substance from underground requires equipment, machinery as well as technical and engineering knowledge. To that effect, oil and gas well drilling is the most essential, the most specialized and the most complicated part of these activities. Although satellite images and other sophisticated equipment are used in hydrocarbon exploration, the rotation of drilling bit has the final say.
Battling unknown nature, drilling deep underground, high temperature, working in mountainous and treacherous regions and deserts, bad weather, exposure to flammable, poisonous and lethal fluids and many other factors make drilling industry the toughest and the most complicated job in the world.
Heydar Bahmani, managing director of National Iranian Drilling Company (NIDC), takes all aforementioned issues into account with regards to the development of oil and gas fields. But he also attaches great importance to human resources particularly young manpower.
Bahmani, who earlier held the same position for two terms, says development of the drilling industry for meeting oil and gas objectives is a wise approach.
His first term as NIDC managing director was from 1997 to 2002. He implemented modern drilling system to make the drilling market competitive.
“Since I believe that NIDC experts and specialists are men of difficult days, we will try together to realize the objectives of the great petroleum industry for enhanced recovery,” he told Iran Petroleum in an interview.
Q: Let’s begin with this question: Where would have we been had the NIDC not been established?
A: Drilling is key to tapping reservoirs and is actively present from the beginning to the end of petroleum industry. After the preliminary studies are conducted on the reservoir, exploration wells are drilled showing whether or not there is any recoverable oil there. The next step will be drilling appraisal wells that would provide more complete data about the reservoir, its fluid and the crude oil’s API gravity. This data is sent to the reservoir engineering section to design development drilling operations after the profitability of tapping the reservoir has been proven. In this stage, the management of the reservoir is assigned to developers for recovery. These companies will again need drilling services for maintaining or boosting the production ceiling.
Most reservoirs in Iran are currently in the second half of their life cycle and they will experience production fall-off if the necessary planning is not made. Drilling new production as well as injection wells will effectively guarantee continuation of production. If proper drilling is done in a reservoir its recovery rate will enhance. This issue shows the key role of drilling in enhanced oil and gas recovery. For this reason, I personally believe that reinvigorating the drilling industry to serve oil and gas development projects is a wise stratagem.
Q: What are the main points in NIDC’s 20-year development plan? Where do you think this company will stand in 2025?
A: Fortunately, the NIDC has in different periods had sympathetic managers interested in creating infrastructures. This issue shows the significance of the responsibility we shoulder vis-à-vis the future generation. The measures undertaken in NIDC include the formulation of a 20-year development plan in 1985. This long-term plan was implemented favorably with less than 15 percent variance from the main plan. This issue indicates the significance of long-term strategic planning in NIDC.
But drilling operations did not stop even for a single day during years of the Sacred Defense (an allusion to imposed war 1980-1988). Our colleagues managed to keep oil production running during the toughest war conditions by drilling 309 wells. The drilling industry dedicated more than 40 martyrs to the Islamic homeland.
Q: What are the main strategic plans you envisage for the NIDC?
A: In addition to the tasks officially assigned to us, expansion of the [drilling] fleet, structural, financial and legal reforms are also envisaged.
Q: What are the advantages of the presence of NIDC in domestic projects for the petroleum industry?
A: Bidding in drilling tenders, NIDC creates a competitive atmosphere; nevertheless, the bidder with lowest financial proposal and best technical proposal wins the tender. In addition, the number of drilling rigs owned by NIDC operating in exploration and development projects, as well as new and complementary drilling operations is an indication of Iran’s firm will for enhancing its production capacity and promoting its position in the OPEC (Organization of the Petroleum Exporting Countries). The capability of the drilling industry has helped Iran’s petroleum industry not to suffer seriously from restrictions at any time, even under the West’s unfair sanctions against our country. Drilling operation in the country has never halted under foreigners’ forceful methods or bullying.
Q: The realization of the country’s development requires expansion of the drilling fleet. What does NIDC plan to do in this regard?
A: The drilling industry plans development of operational and technical sectors in order to respond to the petroleum industry’s needs and make its contribution to the implementation of the 2025 Vision Plan and the drilling industry’s 20-year development plan. Under the aegis of Petroleum Ministry, we do hope for considerable investment in this sector.
Q: You have mentioned many times that you are not against privatization, but many believe that you are. Could you elaborate on that?
A: The fact is that drilling is a private profession. A quick decision is needed to be made about the NIDC so that its credit will be provided from outside the organization. For that purpose, NIDC needs to be privatized. We are of the opinion that this issue must be reviewed by experts. Therefore, it does not mean that we oppose any such cession [to the private sector]. NIDC is a strategic organization for the [Islamic] establishment. It is the pivot of production. At present, the Islamic Republic’s oil production is done by NIDC. Therefore, this company is expected to be treated prudently. We are ready to make plans based on instructions to follow up on mechanisms for a drilling holding. I think it would be better off to help private drilling companies to control the market. Then, in case of their ability, we can prepare the conditions for them to work along with the NIDC. A state-run drilling organization cannot compete with them.
Q: NIDC is an offshoot of National Iranian Oil Company (NIOC). How is it supposed to become a holding company?
A: Over recent years, as the issue of implementation of Article 44 of the Constitution [on privatization] becomes more serious, a large number of companies have been listed for cession. The decision for the [privatization of] the NIDC was made in March 2013. Under this abruptly decided cession, 35 percent of the company’s profits were supposed to be paid to Ta’avon Foundation in return for the government’s debts. At that time, many said the decision was inexpert, but the previous administration insisted on the project.
Q: How about now?
A: Yes, nearly 40 percent of the NIDC’s activities have been privatized and this process has always been pursued; however, the government must still enjoy sovereignty over it. Changing the state-owned structure of the NIDC according to the plans of the government and the Privatization Organization is a must and that is why after the 11th administration took office senior Petroleum Ministry officials decided to follow up on holding or privatization for the NIDC. The point which should not be ignored is that this company requires structural changes and that is clear for management experts. Many experts believe that the NIDC could accelerate its operations only if the company undergoes structural changes. In any case, we hope that the activities would be sped up under the aegis of an expert decision so that we would finally manage to boost productivity in this organization.
Q: What is the economic advantage of this project?
A: As far as I know, this project envisages potentials for generating revenues in some units including labs, technical inspection and IT. In line with these changes we have to seek higher effectiveness and productivity in all sections of the organization.
Q: You’ve time and again described specialized manpower as the assets of the company. Have the human resources been taken into consideration in the prospective structure of the company?
A: Everywhere in the world, holdings are created for realization of macro-objectives so that they would be able to strike a balance between revenues and costs while fulfilling their obligations. In other words, this structure will prevent duplication and uncoordinated work. Therefore, the project will have the chance of more success in increasing its market share for more profitability, and undoubtedly, manpower will benefit.
Q: It seems that operating projects abroad will be more profitable for the NIDC. What do you think of that?
A: Before answering your question, let me refer to a background. NIDC staff’s expertise along with their sophisticated equipment has created a good image of the company on the international scene. All new drilling equipment including directional and horizontal drilling equipment, drilling services equipment like coiled tubing, new drilling fluid equipment, well logging equipment and fluid have been imported in recent years and NIDC technicians are using them.
Advanced training courses are offered at Drilling Technology Training Center. The IWCF which is the most difficult drilling course is offered in this training center and has been endorsed by international companies. NIDC’s operations in foreign countries started years ago, specifically in Turkmenistan’s fields. Our colleagues have shown that they can work in reservoirs abroad without any problem. NIDC drilling engineers have already worked along with European and American companies in Libya.
But in response to your question, I have to say that entry into foreign markets may create more revenues for the company, but we had better operate projects at home, as long as national drilling services are needed – unless there is competition. We are an economic enterprise and naturally we look at the markets in the region in our marketing strategy. But providing technical and industrial services abroad is not tied only to the NIDC managers’ decision. First, Petroleum Ministry should make up its mind and allow us work abroad. Other bodies like Foreign Ministry, as well as legal and customs organs should also help us do this job.
Q: As you know, an important point with organizational agility would be the possibility of planning for the future. Do you think that the planned holding status for NIDC enjoys such a potential?
A: Yes, sure! If the project is implemented precisely and based on international standards it will have special planning potentials for the future of the company and confrontation with different changes in the drilling industry, particularly in the field of competition. NIDC was once the sole drilling services provider, but today we are witnessing the accelerated growth of companies in this industry. For preserving this position, as well as NIDC’s rivalry privilege, we have to seek ways to boost productivity and efficiency through structural changes.
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NIDC currently owns 69 drilling rigs, 20 percent of which are operating in drilling projects. The rest is operating in the oil and gas fields run by National Iranian South Oil Company (NISOC), Iran’s Central Oil Fields Company (ICOFC) and Iran’s Offshore Oil Company (IOOC).
NIDC is active in South Pars gas field. It accomplished drilling operations in phases 9 and 10, two years ago. NIDC spudded 22 wells in phases 17 and 18 in March 2014. Moreover, NIDC has been assigned the task of drilling 22 wells in Phase 14 and so far 40 percent of drilling operations in this phase have been completed. Along with four wells in Phase 1, NIDC is in charge of a total of 70 wells in South Pars. NIDC is also likely to be assigned the drilling of 22 wells in two other phases of South Pars.
Last calendar year, NIDC signed an agreement with Petroleum Engineering and Development Company (PEDEC) for the drilling of 22 wells in Yaran field. This contract caused many restrictions for the company, but currently the required commodities for Yaran field project have been procured and the number of drilling rigs in this field will increase soon.
After CNPCI left South Azadegan field, we announced our readiness to enter this field and handle drilling activities. Of course, we had earlier worked with PEDEC and this Chinese company in this field, but this time we entered direct talks. Petroleum Minister [Bijan Namdar Zangeneh] recently ordered that 50 wells in this field be commissioned to NIDC. We plan to move 8 drilling rigs to this field and we predict that the drilling operations will last 2 to 3 years.
Drilling in North Azadegan field is to finish soon and the rigs in this field will be moved to South Azadegan. Drilling is also under way in Azar field, where we have been assigned seven wells. Two wells are currently being drilled by Pirouz Rig and Rig 35.
Delays have been reported and the main reason for delayed drilling pertains to the procurement of commodities, but the complexity of the reservoir and lack of sufficient data also slowed down the work. However, commodities have been purchased for Azar and Yaran fields and they are in the state of customs procedure. From now on, we can easily continue our activity in this field.
Bulgaria Halts South Stream Project
All operations on Russia’s Gazprom-led project South Stream have been suspended, as they do not meet the requirements of the European Commission, Bulgaria’s Ministry of Economy and Energy said on its website.
“Minister of Economy and Energy Vasil Shtonov has ordered Bulgaria’s Energy Holding to halt any actions in regards of the project,” the ministry said. This specifically means entering into new contracts.
There has been mounting pressure from the EU to put the project on hold, and now the European Commission will be consulted each step of the way to make sure it complies with EU law.
European 'anti-monopoly' laws prohibit the same company to both own and operate the pipeline. However, Gazprom and Bulgaria had previously struck a bilateral agreement regarding that aspect of the project.
Algeria's Q1 Oil, Gas Exports Down 9%
Algeria
Algeria's oil and natural gas exports fell 9 percent in the first quarter from a year earlier, reducing its energy earnings by 12 percent, the central bank said on Tuesday.
OPEC member Algeria, a major gas supplier to Europe, relies heavily on energy exports to finance state development and social programs.
The country's oil and gas production has stagnated since 2010 due to a fall in exploration activity and a lack of investment from foreign companies.
Foreign firms have been wary of Algeria's contract terms and security since militants attacked a gas plant last year.
Crude oil exports fell to 42 million barrels in the first quarter from 61 million a year earlier, the central bank said.
Natural gas exports fell to 7.8 bcm from 11 bcm, it said on its website.
Condensate exports slipped to 10.6 million barrels from 11.7 million.
Apache Finds Potential New Oil
Apache Corp said it had made an oil discovery off the coast of Western Australia, pointing to possibly as much as 300 million barrels of oil in place in what could be a commercially viable new oil province.
It said drilling at the Phoenix South-1 well in the Canning Basin had found at least four separate oil columns, with light oil samples taken.
"Although evaluation is at an early stage, Phoenix South-1 is an exciting result," Apache's international chief operating officer, Thomas Voytovich, said in a statement.
"If these results are borne out by further appraisal drilling, Phoenix South may represent a new oil province for Australia," he said.
Turkmens Reminded to Install Gas Meters
Turkmenistan's Ministry of Oil and Gas Industry and Mineral Resources spread a message Aug.8 to remind the country's population of the need to install gas meters for rational use of the natural fuel.
"There is a need to install gas meters countrywide, as the most reliable means of controlling the consumption of natural gas by the population. We shouldn't allow the use of self-made gas appliances, installations and burners," the ministry said.
The ministry added that in the process of designing and construction of residential buildings, as well as overhauling of residential and public buildings, it is necessary to use energy-saving technologies and install gas appliances and equipment with low energy consumption.
Crude Oil Market Review
Since the start of 2014, crude futures prices on the two sides of the Atlantic Basin have performed differently. While the price of Nymex WTI surged by around $5.2/b during the first seven months of the year, compared to the same period a year earlier, ICE Brent gained only 91¢ during the same period, narrowing the spread between the two benchmarks. The Brent-WTI spread reduced significantly during the first half of the year due to bullish US market fundamentals supporting WTI. This was in addition to ongoing massive volumes of crude being redirected to the US Gulf Coast (USGC) from the midcontinent via newly- constructed/reversed pipelines.
Simultaneously, the Brent market remained under pressure amid ample crude supplies and lackluster European buying due to weak global demand for middle distillates.
The overheated US market was triggered by strong gasoline demand, allowing gasoline prices to increase more than $5/b during the second quarter of the year. As a result, refinery margins for WTI crude on the USGC showed a sharp increase, thus encouraging refineries to ramp up run rates.
US refinery throughputs struck their highest level since 1990 at 16.6 mb/d. Running refineries flat out led to several significant draws of even up to 7.5 mb in crude stocks in some weeks and helped bring Cushing levels down to a fresh 5½-year low. The high seasonal run rates amid robust USGC refining margins and diminishing stocks have underpinned the strength of WTI, thereby narrowing the Brent-WTI spread. Firm seasonal refinery demand has also resulted in a stronger sweet crude market on the USGC, pushing prices near their highest levels of the year. LLS, the benchmark for USGC sweet crudes, has recently risen to a premium of close to $2.50/b to Dated Brent, compared to the minus $4/b averaged over the first half of the year. Therefore, Dated Brent price-related sweet crudes looked more attractive to US refiners on a prompt basis, particularly West African grades.
The Brent market and all Brent price-related sweet crude values have been undermined by low European and Asian demand caused by poor refining margins, narrow product crack spreads and ongoing steady supplies, despite serious geopolitical tension in several regions, which has spread rapidly to all West African and other sweet crudes available at the Mediterranean. The West African crude premiums/differentials have deteriorated, with some near multi-year lows.
North Sea light sweet crude values saw the same trend on the partial return and prospect of higher supplies of Libyan crudes to the market after being disrupted for almost a year.
Meanwhile, Brent's premium to Dubai fell to its lowest in eight months as the Brent price softened. By mid-July, Brent-Dubai was valued at $3.10/b, the narrowest since 8 November. The drop has helped narrowing the gap to Dubai after it hit a nine-month high of $4.96/b on 13 June. A narrower spread makes Brent-linked grades more attractive than those priced to Dubai and encourages the flow of Brent-linked crude, particularly West African grades, from the eastern Atlantic Basin to Asia.
Looking forward, reaching the end of the driving season together with upcoming refinery maintenance, demand for crude is expected to ease, which should impact refinery margins in the US. In the meantime, increased availability of crude in Europe and Asia could support regional refinery margins in the second half of the year.
Oil Price Movements
The OPEC Reference Basket (ORB) fell in July by $2.28 to $105.61/b after reaching its highest value for the year a month earlier, as the market put aside its worries over supply disruptions. The Basket’s year-to-date value stood at $105.35/b. Crude oil futures were down sharply for the month as slow demand and weak refining margins offset renewed supply concerns. The Nymex WTI front-month contract lost $2.75 to average $102.39/b in July. Y-t-d, the WTI futures contract’s value rose $5.24 to $101.07/b. The ICE Brent front-month contract decreased by $3.78 to $108.19/b. Year-to-date, ICE Brent was higher by 91¢ at $108.72/b. As prices tumbled, speculators' net long positions retreated sharply in July by a hefty 121,506 contracts to 120,695 lots. Speculators also cut net long positions in WTI to 276,741 contracts. The Brent/WTI spread narrowed further by almost $1.00 to $5.80/b - the closest alignment since September 2013.
The narrowing is justified given the weak east Atlantic Basin market and high US refinery run rates.
OPEC Reference Basket
The OPEC Reference Basket lost all the gains earned over the previous month as the crude oil market has become complacent about the risk of supply disruptions, while a supply overhang and lackluster refinery demand in Asia and Europe drove prices lower. The Basket lost about $2.30 over the month on average. Ample supply amid low refinery demand due to poor refining margins — particularly in Europe and Asia — contributed greatly to weakness in outright crude oil prices, which in turn was reflected in the Basket value.
On a monthly basis, the OPEC Reference Basket slipped to an average of $105.61/b in July, down by $2.28, or 2.11% below the previous month. Y-t-d, the Basket was 36¢ higher compared with the same period one year earlier, standing at $105.35/b compared with an average of $104.99/b a year ago.
Brent-related Basket components from West and North Africa lost a significant share of their value in July, as each dropped over $4 from the previous month. This retreat was mainly attributed to poor refining economics for light products, which translated into modest light sweet crude oil demand from refiners in Europe as well as in Asia. An overhang of supply also affected the market. A month-long overhang in West African barrels amid rising Libyan crude supply additionally depressed prices for similar grades in Europe and Africa.
Brent-related Basket components Saharan Blend, Es Sider, Girassol and Bonny Light dropped $5.11 or 4.5%, on average. Latin American Basket components Merey and Oriente slipped in line with the drop in outright prices on the WTI market and weak heavy oil cracks relative to light crude, losing almost 3.7% over the month on average.
Oriente and Merey decreased by $3.54 and $3.65 in July, respectively. Middle Eastern spot prices also suffered from weak Asian refining margins and lower refinery runs, though not as much as in Europe. Middle Eastern spot components and multi-destination grades fell by around $1.90 and $1.45, respectively.
On 7 August, the OPEC Reference Basket stood at $102.23/b, $3.38 under the July average.
Oil Futures Market
Crude oil futures were down sharply over the month as slow demand and weak refining margins offset renewed supply concerns. Crude prices also tumbled as apprehension over the security of Iraqi supply eased and Libyan exports appeared ready to resume.
ICE Brent fell by $3.78 to $108.19/b in July while Nymex WTI dropped by $2.75 to $102.39/b. Subdued demand weighed on crude prices in the Atlantic Basin, outweighing fears that sanctions on Russia following events in the Ukraine could curtail supplies. Slim demand and abundant alternative West African supply offset tight crude supply in Northwestern Europe, where pipeline and field maintenance cut the export of North Sea crudes to 755 tb/d from 870 tb/d. Over 30 mb of West African oil were available, helping to depress many light sweet crude premiums to their lowest rate in five years. Libyan production rose past 500 tb/d for the first time since January, adding to regional supplies and causing prices to slide further. US WTI fared better than markets elsewhere, as higher refinery utilization on the US Gulf Coast (USGC) bolstered crude demand.
Nymex WTI front-month dropped by $2.75 over the month to average $102.39/b in July. Compared with the same period in 2013, WTI’s value was higher by $5.24 or 5.5% at $101.07/b. In the ICE exchange, Brent front-month slumped $3.38 to average $108.19/b. Year-to-date; ICE Brent was higher in value than the same period one year ago. Its value strengthened by 91¢ or 0.8% to $108.72/b from $107.81/b.
On 7 August, ICE Brent stood at $105.44/b and Nymex WTI at $97.34/b.
Prices tumbled after speculators' net bets on rising Brent crude oil prices hit a record high in June before retreating sharply in July, an indication that the geopolitical risk premium has ebbed a little. Money managers decreased their net long futures and options positions in ICE Brent by a hefty 121,506 contracts to 120,695 lots at the end of July from the highest-ever amount recorded by the exchange at the end of June, as figures from the ICE show.
Data from the US Commodity Futures Trading Commission (CFTC) showed that hedge funds and money managers also decreased their bullish bets in US crude oil futures by cutting their net long US crude futures and options positions during July as prices decreased. The speculator group cut its combined futures and options positions in US crude oil contracts to 276,741 contracts from 345,283 lots. Moreover, total futures and options open interest volume in the two markets decreased sharply in July by 497,202 contracts to 3.87 million contracts.
The daily average traded volume during July for Nymex WTI contracts increased by 56,239 lots to average 598,720 contracts. ICE Brent daily traded volume also rose, by 78,853 lots to 747,917 contracts. The daily aggregate traded volume in both crude oil futures markets increased by 135,092 contracts in July to around 1.35 million futures contracts, equivalent to around 1.35 billion b/d. The total traded volume in Nymex WTI and ICE Brent contracts was 13.2 and 17.2 million, respectively, over the month.
Futures Market Structure
Backwardation in the Brent market structure flipped into contango for the first time in over three years amid a crude supply surplus. In Europe, where refiners have been outcompeted by the US and other regions, sharp run cuts have left an overhang of crude in the east Atlantic Basin, particularly in West Africa. This surplus kept the front end of the Brent curve in contango, with prompt prices depressed below the level of forward deliveries. The first-month premium over the second month flipped from around 60¢/b in June to a discount of almost 30¢/b in July, weakening by more than 90¢ over the month. On the other hand, the Nymex WTI front-month stretched its premium over the second month by almost 30¢ to 95¢/b as stocks levels in Cushing further depleted.
Firm demand from US refiners drew crude out of storage to feed record throughputs, pushing prompt crude markets far above forward prices after nearly five years of prompt discount. Access to cheaper crude, as well as cheaper gas for power and hydrogen production has given US coastal refiners a huge cost advantage over competitors elsewhere in the world. US throughputs jumped to 16.6 mb/d in the first half of the month, the highest recorded by the US Energy Information Administration (EIA). This high run rate and the ability to move crude to USGC refineries are rapidly exhausting crude stocks in the midcontinent. Inventories at Cushing have fallen to less than 19 mb at the end of July; leaving crude tanks just 28% full, the emptiest since 2005. In the US physical crude oil market, prompt WTI traded at nearly $4/b above the second month, the highest since the immediate aftermath of the financial crisis six years ago.
The spread between the two benchmarks narrowed further by almost $1.00 to $5.80/b, the tightest gap since September 2013. The narrowing is fundamentally justified given the weak east Atlantic Basin market and high US refinery throughput rates. High run rates and depleting stocks have supported the strength of WTI Cushing, thereby narrowing the Brent/WTI spread. Brent was under pressure given ample Atlantic Basin crude supplies and lackluster European buying. The prompt Brent/WTI spread ended the month narrower at an average of around $5.79/b, after settling at $6.82/b the previous month.
(OPEC Monthly Review)
Ukraine Mulls EU Gas Reverse
Ukraine hopes to receive more than half of imported natural gas it needs through reverse supplies from the European Union, Ukrainian parliament-appointed Energy and Coal Industry Minister Yuriy Prodan.
“With account for Slovakia, Poland and Hungary, we can cover over 50% of our imported gas needs,” the Ukrainian Energy Ministry quoted Prodan as saying.
He said Ukraine may annually obtain 8-10 billion cubic meters (bcm) of gas via Slovakia. In all, such supplies may amount up to 16 bcm each year via the territory of the three countries.
European Commission ready to contribute to expanding reverse-flow gas for Ukraine.
Ukraine hopes to start partial reverse of natural gas via Slovakia (the Vojany-Uzhgorod pipeline) from September 2014. Test deliveries of fuel through that pipe currently continue, with daily volumes reaching up to 2 million cubic meters.
Russian energy giant Gazprom on June 16 switched Ukrainian national oil and gas company Naftogaz to prepayment for gas supplies because Kiev failed to pay part of its gas debt by the deadline of 10:00 Moscow Time on June 16. Gas supplies to Ukraine were halted, but transit volumes were reportedly passing via Ukraine to Europe in line with the schedule.
US to Report on Crude Oil Export
The US Energy Information Administration plans to release two reports in September examining some of the issues surrounding a potential end to the nation's decades-old ban on most crude oil exports, the EIA's chief said.
Some lawmakers have pressed the EIA, the statistical arm of the Department of Energy, to provide analysis on the implications of relaxing or abolishing the ban, as debate over the future of the moratorium has intensified.
The US crude oil export ban was imposed by Congress in the 1970s after the Arab oil embargo. The US shale oil boom of recent years is expected to soon make the country the world's top crude producer, surpassing both Saudi Arabia and Russia.
It has also led to a glut of light oil in Texas and Louisiana because refiners have invested billions of dollars to process heavier oils imported from Mexico and Venezuela.
The EIA's upcoming reports will focus on the impact to US gasoline prices at the pump from changing domestic and global oil markets, and on the costs of building different types of crude oil refining units in the United States.
Shale Rattles Producers
The wave of resource nationalism among oil-producing nations that helped propel prices to a record in 2008 is dissipating as competition from US shale stirs governments to offer better terms, the IEA said.
Sliding crude prices in the face of supply threats in Iraq and Libya reflect that industry concerns of scarcity have been replaced with a perception of sufficiency, said Antoine Halff, head of the Paris-based International Energy Agency’s industry and markets division.
Producing countries such as Russia and Argentina who sought greater control of resources from international oil companies in the last decade are now changing tack to entice foreign partners, he said.
“Back in 2008, we were at the peak of a cycle of resource nationalism among producing countries,” Halff said in an interview.
“Now we’re in a completely different situation, where some of the very same countries that had indulged in resource nationalism are back-pedaling, and making their investment terms more attractive to foreign companies.”
Oil’s climb during the last decade, driven by concerns that supplies were dwindling, spurred a competition for reserves that encouraged producing nations to increase their proportion of revenues through higher taxes, Halff said. Surging shale oil output in the US has boosted the nation’s production to its highest in three decades.
The shale boom has completely changed the perception of supply scarcity, Halff said by phone on Aug. 12.
“Many countries feel threatened by the unconventional revolution in the US. There’s competition for investment, competition for technology.
Japan Eyes Big Refining Push into Asia
JX Nippon Oil & Energy Corp is looking at building refineries and petrol stations in Indonesia and Vietnam as fuel consumption slumps at home, in what would be its first major downstream oil investment in Asia outside Japan.
Japan's biggest oil refiner sees the two markets as the most promising locations for investment due to their robust economic growth outlook and openness to foreign investment, the company's president Tsutomu Sugimori said in an interview.
Japan's oil demand has dropped a fifth over the past decade, and is projected to fall another 8 percent in the next five years, a government energy committee forecast in March.
Indonesia and Vietnam, where oil demand is growing 1-2 percent a year, are looking to beef up their refining capacities to reduce expensive product imports.
Azerbaijan Oil/Condensate Output Falls
Crude oil and condensate production in Azerbaijan fell to 23.535 million tons in January-July from 24.098 million tons in the same period last year, a source at the State Statistics Committee said, driven by declines at fields operated by BP.
Falling output at the main Azeri, Chirag and Guneshli (ACG) oilfields had previously raised concerns in Baku.
British oil major BP and its partner, Azeri state energy firm SOCAR, have tried to calm those fears by saying last year that production had stabilized. Total oil output grew last year for the first time since 2011.
BP said earlier this year that oil production at ACG in 2014 might be slightly lower than in 2013 as the company planned maintenance work at the Central Azeri and West Azeri platforms, halting operations for a couple of weeks.
Falling Oil Hurts Producers’ Budget Needs
Oil prices are now too low for most OPEC countries to cover their spending needs, a survey shows.
Although the cost of getting oil out of the ground is low in most countries in the cartel, growing social spending and ambitious infrastructure plans mean many oil producers now earn less from their oil sales than they need to fund their budgets.
The weighted average of oil prices collected by members of the Organization of the Petroleum Exporting Countries was $106 a barrel last year - just enough to cover the average budget requirements of the group, according to figures compiled by one team of analysts, who declined to be identified.
But oil prices are falling, and the OPEC crude oil basket price was just $100.88 a barrel, the OPEC Secretariat calculates.
Seven of the 12 OPEC members, including Iraq, Iran and Nigeria, now need far higher oil prices to cover their budgets, data from economists and industry analysts show.
Iran’s oil price needs rose 11 per cent last year due to US and EU sanctions, while the average break-even price for Iraq rose 16 per cent, the figures show.
Nigeria’s oil price needs have also risen sharply thanks to the increasing cost of deepwater offshore projects, which the International Energy Agency says have attracted oil companies wishing to avoid the country’s domestic turbulence.
By contrast, average selling prices for oil covered the budgets of five key OPEC members, most of which are located in the Persian Gulf: Saudi Arabia, UAE, Qatar, Kuwait and Angola.
Siberia Pipeline
Russia-China Alliance Flexes Muscles
By Shuaib Bahman
Introduction
Russia-China relations have different political, economic and security aspects. The two countries have mainly sought to broaden their cooperation in the energy sector and boost their trade transactions.
The Russians are exporting a major part of their oil and gas to markets in Europe and their western neighbors, but they have never ignored fast-growing economic developments at their eastern borders and have undertaken huge efforts for diversifying their export markets. Meantime, the China looks at Russia as a secure source of oil and gas to meet its growing energy needs and strengthen its economy.
Energy, Key to Sino-Russian Ties
China-Russia relations have been growing in different sectors in recent years. Moscow-Beijing trade has increased ten-fold since 2000. Energy transactions have been the main contributor to the development of economic ties between the two countries.
Russia and China agreed in 2008 to build an oil pipeline which would carry 1.6 mb/d of crude oil from Russia’s Siberia to China. Moreover, during an official visit to China in September 2010, Russian President Vladimir Putin signed a document explaining terms and conditions of gas exports to China. In 2009, Russia and China reached basic agreement for gas exports from reservoirs in west Siberia, Far East and Sakhalin’s offshore fields. Russia’s eastern and western routes were agreed to be used as options for the delivery of gas to China.
Commercial negotiations on the terms and conditions of natural gas supplies to China have been under way since late 2005. The state-owned petroleum company CNPC participates in the negotiations on behalf of the Chinese party.
In October 2009, Gazprom and CNPC inked the Framework Agreement on major terms and conditions for natural gas supply from Russia to China. In December 2009 the Basic Major Terms of Gas Supply from Russia to China were signed.
The parties fundamentally agreed on gas supplies along two routes: the western route – 30 billion cubic meters (Altai project), and the eastern route – 38 billion cubic meters. Within the Altai project implementation, Gazprom Group has effectuated considerable preparatory work for the creation of new gas transmission capacities. The investment rationale for the project was developed and the survey along the pipeline route was performed. The Altai gas pipeline construction will start only when a gas purchase and sales agreement is concluded with China.
Gazprom, which is Russia’s main energy company, has been broadening its technological cooperation with China’s CNPC.
Gazprom and CNPC share interests in the following sectors:
A review of the background of Russia-China cooperation in the energy sector indicates that both countries are willing to expand cooperation and benefit from their energy equations.
In their foreign diplomacy, Russia and China are seeking to transform energy into a solid pillar in their bilateral ties. To that effect, both countries are pursuing relatively similar and complementary approaches. China is seeking to develop its own resources, while Russia is after diversification of its markets. Therefore, Russia can be a supplier of energy to China while Beijing can become a lucrative energy market for Moscow.
“Power of Siberia” Pipeline
On 21 May 2014, China and Russia signed a $400 billion gas supply deal, securing the world's top energy consumer a major source of fuel and opening up a new market for Moscow as it risks losing European customers over the Ukraine crisis.
The 4,000 kilometer "Power of Siberia" pipeline, spanning marshlands, mountains and seismic zones, will mainly take gas from the 1.2 trillion cubic meter East Siberian Chayanda gas field and pump it to China's main consumption centers near its eastern coast.
Russia will begin delivering gas from 2018, building up gradually to 38 billion cubic meters (bcm) a year.
It is also planned to have an offshoot to supply Gazprom's liquefied natural gas (LNG) export projects at Sakhalin and Vladivostok to serve major buyers such as Japan and South Korea.
Russia and China have agreed in principle on a $25 billion prepayment under the deal.
The overall cost for the Chayanda and Kovykta upstream development, which geologists say is more complex than Russian west Siberian gas fields, and the pipeline and processing costs will likely exceed $50 billion.
No price has been officially announced, but sources say it is around $350-380 per thousand cubic meters.
This would benefit China as it is cheaper than Asian spot LNG prices. Russia also benefits as industry sources say it is in line with recent European discounts and still slightly above its break-even costs. Russia plans to invest $55 billion in exploration and pipeline construction to China's border, and China's CNPC said it would build the Chinese section of the pipeline.
China and Russia have signed the most important energy accord in their history, giving both sides equal benefits. China intends to import natural gas from Russia to meet its growing domestic demand while Russian officials plan to raise gas exports to new markets including China in order to reduce dependence on Europe’s gas market.
Therefore, Russia-China gas deal has also political and security benefits for both sides.
Repercussions
Relations between China and Russia have always been of high geopolitical significance. Closer ties between Russia and China have ended in the formation of a powerful security bloc against the US hegemony in the eastern hemisphere. After the collapse of the Union of Soviet Socialist Republics (USSR), differences on ideology and border disputes between Russia and China were overshadowed. This rapprochement between the two countries heralded bright prospect for cooperation between them.
Signature of energy deals with the Power of Siberia Pipeline being the latest has enhanced political and commercial bonds between China and Russia. These strong bonds can result in the following developments:
Conclusion
Russia-China strategic partnership has political, economic and military aspects. From a political point of view, the relations between the two countries have reached its highest level. China is viewed by many analysts as a potential ally of Russia for bringing about a major change in the global equations. The signature of a landmark gas deal between Russia and China can sketch out the future of ties between the two countries in the world. The gas deal will not result in the establishment of an independent Sino-Russian bloc on the international scene; however, the two countries’ agreements can be viewed as a kind of Russia-China alliance.
Siberia Pipeline
Russia-China Alliance Flexes Muscles
By Shuaib Bahman
Introduction
Russia-China relations have different political, economic and security aspects. The two countries have mainly sought to broaden their cooperation in the energy sector and boost their trade transactions.
The Russians are exporting a major part of their oil and gas to markets in Europe and their western neighbors, but they have never ignored fast-growing economic developments at their eastern borders and have undertaken huge efforts for diversifying their export markets. Meantime, the China looks at Russia as a secure source of oil and gas to meet its growing energy needs and strengthen its economy.
Energy, Key to Sino-Russian Ties
China-Russia relations have been growing in different sectors in recent years. Moscow-Beijing trade has increased ten-fold since 2000. Energy transactions have been the main contributor to the development of economic ties between the two countries.
Russia and China agreed in 2008 to build an oil pipeline which would carry 1.6 mb/d of crude oil from Russia’s Siberia to China. Moreover, during an official visit to China in September 2010, Russian President Vladimir Putin signed a document explaining terms and conditions of gas exports to China. In 2009, Russia and China reached basic agreement for gas exports from reservoirs in west Siberia, Far East and Sakhalin’s offshore fields. Russia’s eastern and western routes were agreed to be used as options for the delivery of gas to China.
Commercial negotiations on the terms and conditions of natural gas supplies to China have been under way since late 2005. The state-owned petroleum company CNPC participates in the negotiations on behalf of the Chinese party.
In October 2009, Gazprom and CNPC inked the Framework Agreement on major terms and conditions for natural gas supply from Russia to China. In December 2009 the Basic Major Terms of Gas Supply from Russia to China were signed.
The parties fundamentally agreed on gas supplies along two routes: the western route – 30 billion cubic meters (Altai project), and the eastern route – 38 billion cubic meters. Within the Altai project implementation, Gazprom Group has effectuated considerable preparatory work for the creation of new gas transmission capacities. The investment rationale for the project was developed and the survey along the pipeline route was performed. The Altai gas pipeline construction will start only when a gas purchase and sales agreement is concluded with China.
Gazprom, which is Russia’s main energy company, has been broadening its technological cooperation with China’s CNPC.
Gazprom and CNPC share interests in the following sectors:
A review of the background of Russia-China cooperation in the energy sector indicates that both countries are willing to expand cooperation and benefit from their energy equations.
In their foreign diplomacy, Russia and China are seeking to transform energy into a solid pillar in their bilateral ties. To that effect, both countries are pursuing relatively similar and complementary approaches. China is seeking to develop its own resources, while Russia is after diversification of its markets. Therefore, Russia can be a supplier of energy to China while Beijing can become a lucrative energy market for Moscow.
“Power of Siberia” Pipeline
On 21 May 2014, China and Russia signed a $400 billion gas supply deal, securing the world's top energy consumer a major source of fuel and opening up a new market for Moscow as it risks losing European customers over the Ukraine crisis.
The 4,000 kilometer "Power of Siberia" pipeline, spanning marshlands, mountains and seismic zones, will mainly take gas from the 1.2 trillion cubic meter East Siberian Chayanda gas field and pump it to China's main consumption centers near its eastern coast.
Russia will begin delivering gas from 2018, building up gradually to 38 billion cubic meters (bcm) a year.
It is also planned to have an offshoot to supply Gazprom's liquefied natural gas (LNG) export projects at Sakhalin and Vladivostok to serve major buyers such as Japan and South Korea.
Russia and China have agreed in principle on a $25 billion prepayment under the deal.
The overall cost for the Chayanda and Kovykta upstream development, which geologists say is more complex than Russian west Siberian gas fields, and the pipeline and processing costs will likely exceed $50 billion.
No price has been officially announced, but sources say it is around $350-380 per thousand cubic meters.
This would benefit China as it is cheaper than Asian spot LNG prices. Russia also benefits as industry sources say it is in line with recent European discounts and still slightly above its break-even costs. Russia plans to invest $55 billion in exploration and pipeline construction to China's border, and China's CNPC said it would build the Chinese section of the pipeline.
China and Russia have signed the most important energy accord in their history, giving both sides equal benefits. China intends to import natural gas from Russia to meet its growing domestic demand while Russian officials plan to raise gas exports to new markets including China in order to reduce dependence on Europe’s gas market.
Therefore, Russia-China gas deal has also political and security benefits for both sides.
Repercussions
Relations between China and Russia have always been of high geopolitical significance. Closer ties between Russia and China have ended in the formation of a powerful security bloc against the US hegemony in the eastern hemisphere. After the collapse of the Union of Soviet Socialist Republics (USSR), differences on ideology and border disputes between Russia and China were overshadowed. This rapprochement between the two countries heralded bright prospect for cooperation between them.
Signature of energy deals with the Power of Siberia Pipeline being the latest has enhanced political and commercial bonds between China and Russia. These strong bonds can result in the following developments:
Conclusion
Russia-China strategic partnership has political, economic and military aspects. From a political point of view, the relations between the two countries have reached its highest level. China is viewed by many analysts as a potential ally of Russia for bringing about a major change in the global equations. The signature of a landmark gas deal between Russia and China can sketch out the future of ties between the two countries in the world. The gas deal will not result in the establishment of an independent Sino-Russian bloc on the international scene; however, the two countries’ agreements can be viewed as a kind of Russia-China alliance.
Iran Eyes Bigger Gas Market Share
Iran currently sits atop 75% of the world energy reserves. This geopolitical and geoeconomic position can make promote Iran’s status to an undisputed center of power in the world.
Benefiting from this unique position and playing an effective role in energy ties require formulation of plans based on knowledge, political finesse and knowledge of energy-based geopolitical dynamism.
In order to play its effective role in the region and the world, Iran will need to use all its territorial capacities with energy sector being among the most significant ones. To that effect, the country is making efforts to benefit from its potentials in the energy sector to boost its economic and political power and promote its international position.
Putting these potentials into practice would mean development of Iran’s petroleum industry and improving relations between Iran and the regional countries. Development of such energy ties will help raise the capabilities of this industry as well as helping oil-related sectors grow. In the end, Iran will see its role in regional and international energy equations get a boost.
15% Share of Gas Trade
Iran intends to get a 15-percent share of global gas trade in the coming years by relying on its huge gas reserves including the giant offshore South Pars gas field.
Hassan Torbati, director of planning at the National Iranian Gas Company, says the latest estimates put Iran in the position of top holder of gas reserves with 33.7 tcm of gas in place.
He said in an interview that Iran is currently the third largest supplier of gas with large distance from Russia and the US.
“Russia and the US are currently producing 500 to 600 bcm of natural gas a year while Iran, the third largest producer of gas, is offering only 180 bcm a year of gas,” he said
Torbati added that such a difference is unacceptable for Iran, noting that Iran should win a bigger share of gas trade in the world.
He turned to Iran’s 40-year-old gas industry, saying: “Since the start of this industry to present, gas production has reached 180 bcm a year. Therefore, we have naturally to move more quickly for enhancing production.”
Investment in Gas, a Must
Torbati said Iran’s gas production is forecasted to triple in 12 years to reach 400 bcm a year.
“It means that Iran has to boost its activities in the upstream and downstream sectors 2.5 times what it has done over the past 40 years and this needs big financial resources,” he said.
“The investment required for the gas industry could be attracted from domestic and foreign sources. Therefore, foreign companies and investors can be present in these projects from beginning to end through their financial and technical contribution to this industry or they can invest in this industry and get their profits from the sale of end products,” he added.
Torbati said Iran’s gas industry will need at least 200 billion dollars in investment to realize its objectives by 2015.
“Our country is forecasted to need nearly 15 billion dollars in investment in pipeline and pressure booster station sectors in three years. Therefore, providing this amount of investment is a major objective of this industry,” he said.
ROI Guaranteed
Torbati said the Iranian government and parliament have worked out proper mechanisms for providing the necessary finance to the gas industry.
He said the budget bill adopted for the current calendar year to March facilitates return on investment (ROI) through oil and gas sales.
“In other words, the ROI is guaranteed by the Iranian government and that could sharply reduce risk of investment in our country’s gas industry,” said Torbati.
He said that Iran’s gas industry is so attractive for domestic and foreign investors that no tax exemption and privilege would be needed.
“But it seems that we need to reconsider legal mechanisms and processes for attracting foreign investment,” said Torbati.
He said that restrictions to foreign investment in Iran are behind the gas industry’s reliance on domestic sources, adding that efforts are needed for facilitating attraction of foreign investment and benefiting from banking resources.
Pipelines and Pressure Booster Stations
Torbati said the first priority for Iran’s gas industry in attracting foreign investment will be construction of pipelines and pressure booster stations, noting that Iran has acquired the necessary technology in these sectors.
He said NIGC also welcomes investment in refinery construction projects.
“In two years, Iran’s annual gas production is planned to reach 250 bcm. For realizing this goal, some 3,000 kilometers of high-pressure pipelines and 30 new pressure booster stations should be built with an investment of 15 billion dollars,” said Torbati.
He said an objective of Iran’s gas industry development is to export this product to neighbors and European countries, adding that infrastructures are under construction with that view.
Torbati underscored the strategic position of the Islamic Republic in the region and said: “If gas resources in Turkmenistan can meet the world markets’ needs on the long term, Iran will be able to transit this gas.”
“Based on the new policies of Iran’s petroleum industry, in a bid to save hard currency spent on petroleum products for power plants, gas facilities and refineries reparation was done under a crash program so that more gas would be sent to power plants in the hot season of the year and liquid fuel burning would be prevented.”
“Since the beginning of the current year [on March 21], with measures undertaken in South Pars gas field and increased gas supply to power plants, six billion liters of liquid fuel was prevented from being burnt in the power plants,” said Torbati. “At present, 600 mcm/d of gas could be transferred and this capacity will increase as gas production is to rise soon.”
$25b Saved
Until recently, Iran’s gasoil production could not meet domestic demand. The country had to spend more than 25 billion dollars every year for importing this strategic product.
But over the past months, Iran has not only stopped importing this product, but also has started exporting gasoil to its neighbors.
Billions of dollars spent on liquid fuel imports to meet growing domestic demand prompted Iran to find another option for fuel supply to power plants. To that effect, Petroleum Ministry reduced liquid fuel supply to the power plants and instead increased natural gas delivery to them.
More than 75 power plants are generating electricity in Iran. They are fed with billions of liters of liquid fuel and billions of cubic meters of gas annually.
A review of oil and gas consumption in Iran in recent years shows that power plants impose billions of dollars in costs on Iran’s economy every year.
In the last Iranian calendar year to March, power plants consumed more than 27 billion liters of liquid fuel, which was up 23.4 percent from the year before.
Data provided by National Iranian Oil Products Distribution Company (NIOPDC) indicates that Iranian power plants consumed 12.1 billion liters of gas oil and 15.2 billion liters of fuel oil in the last calendar year.
The data also shows that gasoil consumption by power plants grew more than 60 percent year-on-year. The reason is linked to lower gas supply to this sector and the power plants’ dependence on liquid fuel since they are not of combined cycle category.
In the current year, Iran is focusing on gas supply to power plants. Iran plans to deliver 42 bcm of gas, 6 bcm more compared to last year, to the power plants to keep them running.
Lower Liquid Fuel Supply
During the first 135 days of the current Iranian calendar year which started on March 21, power plants in Iran burned 5.2 billion liters of liquid fuel, down 3.175 million liters year-on-year. The decline in liquid fuel consumption stems from increased gas supply.
Gasoil consumption in power plants during the same period stands at 2.275 billion liters, while fuel consumption reached 2.926 billion liters.
Gasoil consumption was down 828 million liters year-on-year and fuel oil consumption fell 2.346 billion liters year-on-year.
Oil & Gas Products
Oil and gas producing countries are engaged in tight competition to win a bigger share of the market. In this regard, Iran’s Petroleum Ministry plans to boost oil and gas products exports. Enhanced gas supply and effective management of liquid fuel supply to power plants has made more gasoil available for exports. Iran exported its first cargo of gasoil to Afghanistan.
This effective policy took shape after Western governments imposed sanctions on Iran’s oil sector. The construction of Persian Gulf Star Gas Condensate Refinery and several other major refinery projects started following the imposition of restrictions on the Islamic Republic.
The first phase of Persian Gulf Star Refinery is expected to come on-stream next calendar year. The facility’s operation will let Iran export more gasoil.
Similar refining projects have so far become operational at Tehran and Shazand refineries. Bandar Abbas refinery is also expected to produce 6 ml of gasoline and 8 ml of euro-4 and euro-5 gasoil.
According to Iran’s Petroleum Ministry, with a 510,000 b/d increase in the country’s crude oil refining capacity, Iran’s total oil refining capacity will reach 2.63 mb/d, which equals 60 percent of Iran’s total oil production. Exporting oil products is much easier than exporting crude oil.
Modifying macro policies for reducing economic costs and subsequently environmental pollutants can define a new strategy for using Iran’s energy sources more effectively.
(P)GCC Petchem Development Projects
Petrochemical development megaprojects in the member states of the six-nation [Persian] Gulf Cooperation Council (GCC) have raised petrochemical production capacity from 73 million tons in 2007 to more than 120 million tons in 2013. Due to the tender bids offered by these countries, the growth in petrochemical production is expected to continue.
Among the GCC member states, Saudi Arabia is a leading country in petrochemical development. At present, the value of Engineering, Procurement and Construction (EPC) projects under construction in this country stands at 28.5 billion dollars. Among the most important projects in Saudi Arabia are a 20-billion-dollar project by Sadara Chemical Company, a five-billion-dollar project for the development of Rabigh Refining and Petrochemical Company (Petro Rabigh) and a 3.4-billion-dollar elastomer project.
In total, Saudi Arabia has invested 70 billion dollars in its petrochemical and refining development projects with focus on economic diversity to reduce dependence on raw hydrocarbons and create job opportunities for its young manpower.
Economic Conditions
Petrochemical industries have had a growing contribution to the gross domestic product (GDP) of Persian Gulf Arab states in recent years. The petrochemical share of GDP in these countries increased from around 14% in 2007 to above 17% in 2011, but other industrial products accounted for only 8.9 of GCC’s GDP.
Qatar, Top Non-Oil Exporter
Here is the petrochemical industries’ share of GDP in GCC member states:
Qatar: 25%, United Arab Emirates: 18.2%, Saudi Arabia: 11%, Kuwait: 11%, Oman: 7.3% and Bahrain: 4.6%.
In 2011, GCC’s non-oil exports fetched around 105 billion dollars with petrochemical industries accounting for 44%. In that year, over 55.8 million tons of chemical-petrochemical products were delivered by GCC states to foreign markets.
In 2011, the average share of petrochemical industries in the GDP of each GCC member state was around two percent with Qatar holding the highest (2.6%) and Kuwait the lowest (0.5%).
Saudi Arabia was the main GCC petrochemical exporter by delivering 35.2 million tons of petrochemical products to foreign markets.
The highest share of non-oil exports among GCC member states belongs to Qatar. Its share stood at 68% in 2011 exporting 11.5 million tons, up 14% year-on-year, valued at 5.4 billion dollars.
Petrochemical exports accounted for around 61% (3.9 billion dollars) in 2011 in Oman. This percentage was 9% (2.7 billion dollars) in the UAE.
The average annual growth rate in petrochemical exports was around 13% in the GCC states in 2011.
Petrochemical Production
The main petrochemical products supplied by GCC member states are ethylene, methane and their derivatives. These products made up three-fourths of the GCC total petrochemical production in 2011.
In 2007, a total of 27 million tons of basic petrochemical products were produced by GCC. The production soared to 45.2 million tons in 2011 (or 37.5% of the GCC total petrochemical production). The highest production growth rate was registered for propylene and xylene. The GCC is currently producing 7.7 million tons of propylene.
Chemical fertilizer production also registered a high growth rate, making up a 22% share (27.4 million tons).
The rapidest growth rate in production belonged to polymers through 2007-2011. Throughout this period, polymer production rose from 11 million tons to 20.4 million tons a year.
The lowest share in petrochemical production belonged to special products (1%). Given the new policies of job creation and development of downstream chemical industries in Saudi Arabia, the rate of special chemicals production has been growing.
Saudi Arabia’s SABIC (Saudi Basic Industries Corporation) plans to build eight industrial parks to create job opportunities and develop downstream chemical-petrochemical industries in the Arab kingdom. These parks would be able to create links between upstream mega-industries and downstream factories, particularly in the production of engineering plastics, paints, coaters and industrial additives.
Throughout 2007-2011 period, aromatics registered 26% production growth in the GCC member states. Aromatics make up 8% of GCC petrochemical production.
Foster Wheeler of US has conducted a pre-feasibility study for an aromatics plant to be constructed by Kuwait's Petrochemical Industries Company (PIC).
Propylene Production
Propylene production grew at around 27% in the GCC states through 2007 to 2011. China registered 14% growth, while the world’s average growth rate was 6.4%.
In 2000, Saudi Arabia produced only one million tons of propylene, while it raised its production to six million tons in 2011. The main driver of this production growth was the use of liquid feedstock instead of ethane in petrochemical and refining facilities.
Methanol production rate grew 4% in the GCC countries through 2007-2011 period when China and Asia experienced 32% and 22% rates, respectively.
Saudi Arabia’s Position
According to the Middle East Economic Digest (MEED), Saudi Arabia has been the top GCC country in terms of petrochemical development. It is currently operating 28.5 billion dollars of EPC projects.
Aramco is the second largest Saudi producer of petrochemicals, behind SABIC. Aramco is eying ambitious projects including a 20-billion-dollar project by Sadara Chemical Company and a five-billion-dollar project for the development of Rabigh Refining and Petrochemical Company (Petro Rabigh).
SABIC is operating a 3.4-billion-dollar elastomer project in cooperation with ExxonMobil.
Saudi Arabia has offered tender bids for petrochemical projects worth 3.1 billion dollars. The country is also close to finalizing a Front End Engineering Design (FEED) contract worth five billion dollars between Aramco and France’s Total.
In 2013, Aramco announced plans to build chemical plants in three regions at a cost of 70 billion dollars.
Implementation of these projects will open new routes in Saudi Arabia’s chemical industries to replace gas with liquids as feedstock.
GCC Petrochemicals
Qatar is the second largest producer of petrochemicals among the GCC member states. It is set to launch two major projects before the end of the current decade.
Thanks to access to huge gas reserves, Qatar faces no problem with feedstock. The country is awash with such feedstock as ethane, propane and butane.
The Al-Karaana Petrochemicals Complex has awarded the US’ Fluor the major front-end engineering and design (FEED) contract for its proposed 6.4 billion dollars petrochemicals project at Ras Laffan in Qatar.
Al-Karaana is the new name for the petrochemicals joint venture between Qatar Petroleum (QP) and the UK/Dutch Shell Group at Ras Laffan.
Another project is 7.4-billion-dollar Al Sejeel Petrochemical Complex operated by QP and Qatar Petrochemical Company (QAPCO). The plant is expected to produce 1.4 million tons of ethylene. Its products will also include LLDPE, HDPE, polypropylene and butadiene.
Qatar plans to build new petrochemical plants to bring its production to 23 million tons from a current 10 million tons by 2020.
Oman is also making huge investments in its oil fields in order to build refining and petrochemical facilities for 13 billion dollars. Oman is set to launch a 3.6-billion-dollar plastic production plant by 2018.
The UAE has not attached great importance to petrochemical projects and is unlikely to change course. The petrochemical projects under way in this country are worth 1.9 billion dollars.
Abu Dhabi National Chemicals Company (ChemaWEyaat) plans to build a chemical plant in Ruwais.
Bahrain and Kuwait have not done too much for developing their petrochemical industries; however, both countries are determined to develop their refining industries in order to feed their chemical plants.
RIPI Can Now Assess Claus Process Catalysts
For the first time in Iran, researchers in the catalyst and nanotechnology department of Iran’s Research Institute of Petroleum Industry (RIPI) have managed to design and develop a pilot system for assessing Claus Process alumina and titania catalysts.
The Claus process is a catalytic chemical process that is used for converting gaseous hydrogen sulfide (H2S) into elemental sulfur (S). The process is commonly referred to as a sulfur recovery unit (SRU) and is very widely used to produce sulfur from the hydrogen sulfide found in raw natural gas and from the by-product sour gases containing hydrogen sulfide derived from refining petroleum crude oil and other industrial facilities.
Sepehr Seddiqi, head of the catalyst and nanotechnology department of RIPI, said recovered gas contains significant amounts of H2S which needs to be separated to prevent the corrosion of pipelines and destruction of downstream process catalysts.
“The H2S separated from [gas] is poisonous and acidic. It causes contamination, and heavily damages the environment while it is impossible to discard it outright. That is why another process used in the elimination of H2S and other sulfur compounds for producing sulfur is Claus process,” he said.
He stressed the need for the development of oil and gas industries and indigenization of relevant technologies for self-sufficiency, saying: “A joint project has been approved between RIPI and the R&D Directorate of National Iranian Gas Company with the objective of indigenizing Claus technology.”
Seddiqi said catalyst is the main material used in the reactors. He added that the development of Claus process alumina and titania catalysts have been assigned to RIPI.
“The main and highly consumed catalysts in Claus process are active alumina and titania. They are very active for converting H2S and SO2 into sulfur and hydrolysis of carbon-sulfur composites like COS and CO2,” he said.
He added that catalysts are tested for density, diameter of pores, physical properties and activity.
Seddiqi said RIPI is the only body qualified to assess catalysts used in oil, gas and petrochemical industries in Iran.
“Assessing the effectiveness of foreign catalysts and assessing the performance of domestically-made Claus catalysts have always topped our agenda. That is why we first launched a pilot plant for assessing Claus process alumina and titania catalysts,” he said.
Seddiqi said this pilot assesses with precision all alumina and titania catalysts used in the oil and gas industries.
The specifications of this pilot include developing gas feedstock with different percentages of H2O, H2S, CS2 and SO2, loading 5 to 30 cc of catalysts, equipment with online gas analysis system for feedstock and product, temperature monitoring system, water/sulfur separation system, full water separation system for dry gas analysis and compliance with international standards.
The preliminary tests conducted for assessing titania catalyst made by Axens confirm the results reported by this company.
Wastewater Treatment Pilot Plant in Iran Petroleum Industry
Over recent years, development of industries and factories has caused more environment pollution. Contaminants released into water, spread many diseases and they also threaten limited sources of clean water. In the long-term, polluted water will inflict irreparable damage on social and economic development.
But by using wastewater treatment methods, the society’s health could improve while wastewater could be recycled to serve regions facing water shortage.
Fajr Petrochemical Company receives all wastewater released from petrochemical plants in the Mahshahr Special Economic Petrochemical Zone. The R&D Center of this company plans to design wastewater treatment pilot plants within the framework of its strategic objectives of safeguarding the environment.
Industrial wastewater treatment covers the mechanisms and processes used to treat waters that have been contaminated in some way by anthropogenic industrial or commercial activities prior to its release into the environment or its re-use.
Most industries produce some wet waste although recent trends in the developed world have been to minimize such production or recycle such waste within the production process. However, many industries remain dependent on processes that produce wastewaters.
Azim Mojarrad, director of Fajr Petrochemical R&D department, says a major step towards acquiring technology for biological treatment of industrial wastewater in the petroleum industry is to use pilot plants.
“Despite significant progress made in recent years regarding modeling of treatment process, the main point in the indigenization of technical knowledge of most processes is to design and operate pilot plants,” he said.
“This issue is of greater significance particularly in biological processes because the experience-based nature and unknown complexities related to the mechanism of biological treatment reactions like specifications of mechanisms, hydraulic transfer and mass transfer have made development of a precise mathematical model impossible and; therefore construction of pilot plants and conducting field studies are inevitable in these cases,” he added.
Regarding this treatment pilot plant, Mojarrad said: “The pilot plant has the potential to analyze all industrial as well as home sector wastewaters. Moreover, all petrochemical plants producing industrial wastewater can use this pilot plant for assessing and analyzing the wastewater.”
He said that the pilot plant designed to treat Fajr Petrochemical Company’s wastewater, five biological processes have been integrated for that purpose, adding: “It means that all processes which should normally be assessed in separate pilot plants have been integrated in this pilot plant with all technical and theoretical aspects being taken into consideration. This project significantly reduces construction costs.”
Mojarrad said this pilot plant, whose capacity is one cubic meter per hour, is being constructed on 224 square meters of land.
This project is aimed at increasing the capacity of wastewater treatment units, providing better conditions for the treatment of wastewater, using new chemicals for more effective treatment of wastewater and facilitating more research on wastewater treatment.
“The technical knowledge for integrating five biological wastewater treatment units in a single pilot plant is the main innovate aspect of this project. Furthermore, testing and optimization of domestically produced chemicals, reduction of pilot construction costs for access to technology and optimization of process are other innovative aspects of this pilot,” said Mojarrad.
He said that this pilot plant can become an industrial plant to serve other sectors.
The project, whose implementation lasted one year, has cost IRR 8 billion.
Petroleum Museums in Iran and Across the World
By Hamid-Reza Shakeri-Rad & Parisa Sadeqieh
Old Petroleum
Oil exploration and consumption does not date back to recent decades, but its inseparable integration into politics, society and technology is still young as it was born with the invention of engine. That is why historians divide the history of oil exploration and use into two periods; old and new. Old Petroleum dates back to four millennia ago when oil was used in the construction of walls, towers and fortresses in Babylon. Oil jerricans unearthed around Babylon are proof of the use of this vital substance long time ago.
New Petroleum
The modern history of petroleum industry started in the 19th century when Scottish chemist James Young developed a method for distilling paraffin from coal. That was when industry started making bonds with oil. This black gold contributed to industrial and technological developments, but it also fanned fuels of military conflicts in the 20th century. Oil and politics were intertwined when the World War II broke out in 1939.
Oil Tied to Culture and Politics
Oil’s ties with industry and politics have got deeper and deeper in the recent decades. The depth of these ties is such that the contemporary history of the world, particularly oil-rich countries, could not be studied without taking into consideration the role of oil.
The emergence of science and culture could not be viewed alone without taking into account the role of oil. The pace of progress in science and culture registered a significant growth following the exploration, production and refining of oil. In the science sector, machinery, spaceship and airplane were invented and in the culture sector, cinema, printer and gallery emerged.
That was how the petroleum industry took control of history and economy in the world and oil was thrown into bold relief in political decision-makings.
Visual History
In addition to making contribution to scientific and cultural progress, the petroleum industry was experiencing daily growing progress per se. Over a century, oil created a new world with new methods of exploration, production and refining resulting in the development of new technologies. Causing big changes during a century marked a valuable history for oil. The history of petroleum industry also needed preservation and historians were registering historic events surrounding oil, mainly cultural and social aspects. However, the history of oil is strongly tied to politics and economy because petroleum industry is growing fast. Therefore, a visual history is needed to keep the future generations abreast of changes in the petroleum industry.
Petroleum Museum
Gathering photos and documents related to oil contracts and concessions in petroleum museums is the best method of putting on display the history of creation of the petroleum industry. One can easily understand the effects of progress in the petroleum industry on other branches of science and technology.
By visiting petroleum museums, people will understand their country's dependence on oil production and will assess the success of oil-rich countries in putting their potentials into practice.
In light of such knowledge, analysts will examine the strong and weak points of this industry in order to sketch out a more dynamic future based on their view of the past. Philosophers believe that progress in science and technology follows a linear route and that scientific achievements are rooted in the past.
Therefore, a petroleum museum will be able to show the route of progress from past to present and sketch a roadmap for petroleum industry to find solutions for production and efficient use of this never-ending asset.
1st Petroleum Museum
The first petroleum museum, designed to be constructed in the United States, never got approval and it was finally built on personal costs. Jeff Peterson, who owned a restaurant and a gas station, started gathering pumps, signs, jerricans, bottles and other materials left by his ancestors. In order to commemorate and promote this family job, Peterson put on display more than 70 kinds of pumps, oil, jerricans and other materials on display in his restaurant. Those who went to his restaurant to have food enjoyed watching the items in his museum.
Peterson later expanded its collections and gathered anything related to gasoline and gas pump. After the death of his first wife in 1980, he moved to near Washington DC and opened a restaurant there. Months later, he died from cancer and his second wife Susan dedicated the valuable collection to Museum of History and Industry (MOHAI) in Seattle, WA. A petroleum section was set up in this museum.
Then, Canada moved to build a big petroleum museum, followed by oil-rich Norway and Russia.
Petroleum Museums in Norway, France
Most European countries have set up their own petroleum museums, but France and Norway are prominent. The petroleum museum in France is very old, and Norway enjoys huge oil reserves and state-of-the-art technology. France’s Petroleum Museum was set up in May 1967 in order to preserve the memory of activities which had been done in north of Alsace for years. Visitors to this museum see documents, photos, oil exploration materials, geological data, drilling, pumping and refining tools. This museum reviews five centuries of oil history in north Alsace.
The Norwegian Petroleum Museum was opened on 20 May 1999. In Norwegian language the museum is called Norsk Oljemuseum. The unusual architecture has made the museum a landmark in the Port of Stavanger. Seen from the sea, the museum looks like a small oil platform. The museum focuses on offshore petroleum activity, especially in the North Sea.
Petroleum Museum in Iran
Iran is the standard-bearer of petroleum industry in the Middle East. In order to register this historic reality in the memories, Iran would need more than any other country in the region to have a museum which would introduce the country in the best possible way.
Establishment of a petroleum museum will be also an important factor for connecting the petroleum industry to tourism, earning the country more profits from oil.
In 2001, the first petroleum museum was launched in the northeastern city of Sabzevar. This museum puts on display a valuable collection of the first generation of pumps, measurement vessels as well as photos showing recovery from Iran’s first oil well in Masjed Soleyman. The building housing the museum dates back to the 1940s, registered under the name of Anglo-Iranian Oil Company. But after the nationalization of Iran’s petroleum industry, this building was renamed National Iranian Oil Company. Nearly 5,000 people visit this museum every year. This high level of enthusiasm for visiting this museum spurs motivation for building more petroleum museums.
Deeper Connection with Past
Iran’s contemporary historical, cultural and social developments are connected to petroleum industry more than thought. But the string getting us acquainted with the past and opening a future before us is losing color. We need to know where the Iranian stand and which route they should choose towards the future.
A museum can create deep-rooted connection between mankind and the past. The Petroleum Museum in Sabzevar was established based on this motivation; however, this museum does not provide a genuine picture of the petroleum industry’s role in Iran’s economy and culture. More museums are still required to be set up in the country. To that effect, Petroleum Minister Bijan Namdar Zangeneh has ordered the construction of three other petroleum museums in the oil-rich cities of Abadan and Masjed Soleyman, as well as in the capital Tehran.
Location for Petroleum Museum
Masjed Soleyman is known as the birthplace of petroleum industry in Iran. The first oil well which caused a historic turn in Iran was drilled in this city. Iran’s first oil refinery was constructed in Abadan due to its proximity to Masjed Soleyman. Abadan oil refinery was also the first treatment facility in the Middle East. Tehran is the capital and all strategic decisions about oil are made in the capital. The petroleum museums envisaged to be built in these cities will represent their connection to oil.
“The [petroleum] museum in Masjed Soleyman will identify and gather data pertaining to oil history and exploration, Abadan museum will be the museum of refining and resistance and Tehran will house the museum of oil science and technology,” Maryam Azarmand, arts director of Iran’s petroleum museums, said.
A study conducted in the US shows that ordinary people owe 90 percent of their knowledge about energy to their visits to petroleum museums. Therefore, if ordinary people have a clear understanding of exploration, extraction and recovery of fossil energies they will understand more effectively warnings issued by officials about efficient use. Therefore, one of the most important services petroleum museums can render in Iran would be enlightenment of public opinion about the petroleum industry and heading off threats emanating from insufficient knowledge.
Strategic groups established in Iran for the construction of museum are gathering everything related to oil, including photos, artifacts and documents.
Available Data
Azarmand said petroleum museums will benefit from the specifications of cities in which they are to be constructed.
“In Masjed Soleyman, Oil Well No. 1, gas refinery, oil streams and petroleum industry museum garden are among elements creating potentials for the establishment of museum in this city,” Azarmand said.
Abadan, which is home to the first oil refinery in the Middle East, is well known to all Iranians. During eight years of imposed war (1980-1988), Abadan proved its strategic role in Iran’s contemporary history.
Azarmand said Abadan Refinery, jetties, cranes and the city architecture constitute the main causes for the existence of a petroleum refinery in this city.
In the meantime, constructing a museum in Tehran may be more important than Abadan and Masjed Soleyman. Every year, many tourists visit Tehran which has the largest population in the country. Therefore, a petroleum museum in Tehran will be totally different from museums in other cities. Tehran’s petroleum museum will provide training to ordinary people and future generations about oil exploration and production.
“Petroleum Industry Museum in Tehran should follow an interactive method to provide information about the formation of oil and gas in layers of earth and the methods of extraction, production and refining. A historical, social, political and cultural interpretation of oil within the framework of documents and library is also important in this museum,” said Azarmand.
Conclusion
Iran’s oil officials have realized the significance of ordinary people’s acquaintance with oil industry issues. To that effect, they have taken steps in order to make them more familiar with oil through displaying documents. That requires establishment of petroleum museum in the cities which are in a way connected to the petroleum industry.
This process is hoped to help people get familiar with oil and its vital role in the individual and social life of everyone.
By documenting this process within the framework of petroleum museums, the future of this vital substance will be safeguarded.
Petroleum Museums in Iran and Across the World
By Hamid-Reza Shakeri-Rad & Parisa Sadeqieh
Old Petroleum
Oil exploration and consumption does not date back to recent decades, but its inseparable integration into politics, society and technology is still young as it was born with the invention of engine. That is why historians divide the history of oil exploration and use into two periods; old and new. Old Petroleum dates back to four millennia ago when oil was used in the construction of walls, towers and fortresses in Babylon. Oil jerricans unearthed around Babylon are proof of the use of this vital substance long time ago.
New Petroleum
The modern history of petroleum industry started in the 19th century when Scottish chemist James Young developed a method for distilling paraffin from coal. That was when industry started making bonds with oil. This black gold contributed to industrial and technological developments, but it also fanned fuels of military conflicts in the 20th century. Oil and politics were intertwined when the World War II broke out in 1939.
Oil Tied to Culture and Politics
Oil’s ties with industry and politics have got deeper and deeper in the recent decades. The depth of these ties is such that the contemporary history of the world, particularly oil-rich countries, could not be studied without taking into consideration the role of oil.
The emergence of science and culture could not be viewed alone without taking into account the role of oil. The pace of progress in science and culture registered a significant growth following the exploration, production and refining of oil. In the science sector, machinery, spaceship and airplane were invented and in the culture sector, cinema, printer and gallery emerged.
That was how the petroleum industry took control of history and economy in the world and oil was thrown into bold relief in political decision-makings.
Visual History
In addition to making contribution to scientific and cultural progress, the petroleum industry was experiencing daily growing progress per se. Over a century, oil created a new world with new methods of exploration, production and refining resulting in the development of new technologies. Causing big changes during a century marked a valuable history for oil. The history of petroleum industry also needed preservation and historians were registering historic events surrounding oil, mainly cultural and social aspects. However, the history of oil is strongly tied to politics and economy because petroleum industry is growing fast. Therefore, a visual history is needed to keep the future generations abreast of changes in the petroleum industry.
Petroleum Museum
Gathering photos and documents related to oil contracts and concessions in petroleum museums is the best method of putting on display the history of creation of the petroleum industry. One can easily understand the effects of progress in the petroleum industry on other branches of science and technology.
By visiting petroleum museums, people will understand their country's dependence on oil production and will assess the success of oil-rich countries in putting their potentials into practice.
In light of such knowledge, analysts will examine the strong and weak points of this industry in order to sketch out a more dynamic future based on their view of the past. Philosophers believe that progress in science and technology follows a linear route and that scientific achievements are rooted in the past.
Therefore, a petroleum museum will be able to show the route of progress from past to present and sketch a roadmap for petroleum industry to find solutions for production and efficient use of this never-ending asset.
1st Petroleum Museum
The first petroleum museum, designed to be constructed in the United States, never got approval and it was finally built on personal costs. Jeff Peterson, who owned a restaurant and a gas station, started gathering pumps, signs, jerricans, bottles and other materials left by his ancestors. In order to commemorate and promote this family job, Peterson put on display more than 70 kinds of pumps, oil, jerricans and other materials on display in his restaurant. Those who went to his restaurant to have food enjoyed watching the items in his museum.
Peterson later expanded its collections and gathered anything related to gasoline and gas pump. After the death of his first wife in 1980, he moved to near Washington DC and opened a restaurant there. Months later, he died from cancer and his second wife Susan dedicated the valuable collection to Museum of History and Industry (MOHAI) in Seattle, WA. A petroleum section was set up in this museum.
Then, Canada moved to build a big petroleum museum, followed by oil-rich Norway and Russia.
Petroleum Museums in Norway, France
Most European countries have set up their own petroleum museums, but France and Norway are prominent. The petroleum museum in France is very old, and Norway enjoys huge oil reserves and state-of-the-art technology. France’s Petroleum Museum was set up in May 1967 in order to preserve the memory of activities which had been done in north of Alsace for years. Visitors to this museum see documents, photos, oil exploration materials, geological data, drilling, pumping and refining tools. This museum reviews five centuries of oil history in north Alsace.
The Norwegian Petroleum Museum was opened on 20 May 1999. In Norwegian language the museum is called Norsk Oljemuseum. The unusual architecture has made the museum a landmark in the Port of Stavanger. Seen from the sea, the museum looks like a small oil platform. The museum focuses on offshore petroleum activity, especially in the North Sea.
Petroleum Museum in Iran
Iran is the standard-bearer of petroleum industry in the Middle East. In order to register this historic reality in the memories, Iran would need more than any other country in the region to have a museum which would introduce the country in the best possible way.
Establishment of a petroleum museum will be also an important factor for connecting the petroleum industry to tourism, earning the country more profits from oil.
In 2001, the first petroleum museum was launched in the northeastern city of Sabzevar. This museum puts on display a valuable collection of the first generation of pumps, measurement vessels as well as photos showing recovery from Iran’s first oil well in Masjed Soleyman. The building housing the museum dates back to the 1940s, registered under the name of Anglo-Iranian Oil Company. But after the nationalization of Iran’s petroleum industry, this building was renamed National Iranian Oil Company. Nearly 5,000 people visit this museum every year. This high level of enthusiasm for visiting this museum spurs motivation for building more petroleum museums.
Deeper Connection with Past
Iran’s contemporary historical, cultural and social developments are connected to petroleum industry more than thought. But the string getting us acquainted with the past and opening a future before us is losing color. We need to know where the Iranian stand and which route they should choose towards the future.
A museum can create deep-rooted connection between mankind and the past. The Petroleum Museum in Sabzevar was established based on this motivation; however, this museum does not provide a genuine picture of the petroleum industry’s role in Iran’s economy and culture. More museums are still required to be set up in the country. To that effect, Petroleum Minister Bijan Namdar Zangeneh has ordered the construction of three other petroleum museums in the oil-rich cities of Abadan and Masjed Soleyman, as well as in the capital Tehran.
Location for Petroleum Museum
Masjed Soleyman is known as the birthplace of petroleum industry in Iran. The first oil well which caused a historic turn in Iran was drilled in this city. Iran’s first oil refinery was constructed in Abadan due to its proximity to Masjed Soleyman. Abadan oil refinery was also the first treatment facility in the Middle East. Tehran is the capital and all strategic decisions about oil are made in the capital. The petroleum museums envisaged to be built in these cities will represent their connection to oil.
“The [petroleum] museum in Masjed Soleyman will identify and gather data pertaining to oil history and exploration, Abadan museum will be the museum of refining and resistance and Tehran will house the museum of oil science and technology,” Maryam Azarmand, arts director of Iran’s petroleum museums, said.
A study conducted in the US shows that ordinary people owe 90 percent of their knowledge about energy to their visits to petroleum museums. Therefore, if ordinary people have a clear understanding of exploration, extraction and recovery of fossil energies they will understand more effectively warnings issued by officials about efficient use. Therefore, one of the most important services petroleum museums can render in Iran would be enlightenment of public opinion about the petroleum industry and heading off threats emanating from insufficient knowledge.
Strategic groups established in Iran for the construction of museum are gathering everything related to oil, including photos, artifacts and documents.
Available Data
Azarmand said petroleum museums will benefit from the specifications of cities in which they are to be constructed.
“In Masjed Soleyman, Oil Well No. 1, gas refinery, oil streams and petroleum industry museum garden are among elements creating potentials for the establishment of museum in this city,” Azarmand said.
Abadan, which is home to the first oil refinery in the Middle East, is well known to all Iranians. During eight years of imposed war (1980-1988), Abadan proved its strategic role in Iran’s contemporary history.
Azarmand said Abadan Refinery, jetties, cranes and the city architecture constitute the main causes for the existence of a petroleum refinery in this city.
In the meantime, constructing a museum in Tehran may be more important than Abadan and Masjed Soleyman. Every year, many tourists visit Tehran which has the largest population in the country. Therefore, a petroleum museum in Tehran will be totally different from museums in other cities. Tehran’s petroleum museum will provide training to ordinary people and future generations about oil exploration and production.
“Petroleum Industry Museum in Tehran should follow an interactive method to provide information about the formation of oil and gas in layers of earth and the methods of extraction, production and refining. A historical, social, political and cultural interpretation of oil within the framework of documents and library is also important in this museum,” said Azarmand.
Conclusion
Iran’s oil officials have realized the significance of ordinary people’s acquaintance with oil industry issues. To that effect, they have taken steps in order to make them more familiar with oil through displaying documents. That requires establishment of petroleum museum in the cities which are in a way connected to the petroleum industry.
This process is hoped to help people get familiar with oil and its vital role in the individual and social life of everyone.
By documenting this process within the framework of petroleum museums, the future of this vital substance will be safeguarded.
Oil Exploration in Khuzestan; Social and Cultural Upshot
Oil exploration in the southwestern Khuzestan province lasted nearly half a century, and caused changes in the population balance of the oil-rich region. This change affected political, social, economic and cultural aspects of the Khuzestan population. One of the most important changes was the spread of urbanization phenomenon which emerged in Iran along with oil exploration.
Temporary Housing
In early 1910s, Anglo-Persian Oil Company (APOC) had 2500 employees, 50 of whom were European. Housing so many people in a region in Iran was a breakthrough. Houses had been built with locals as temporary shelters, but they were used for a long time. In 1911, Masjed Soleyman-Abadan pipeline was laid out and became operational a year later. Short before the outbreak of the World War I, the APOC was close to bankruptcy. But the British government saved the company by purchasing 51 percent of this stakes.
Welfare Services
Several days after APOC was salvaged, the WWI broke out and the company pocketed big profits. That was when the company decided to allocate sums to the welfare of its staff. The welfare services included power supply, water pipe laying, building road, hospital, school, cinema, swimming pool and club as well as launching the first wastewater treatment system.
When the number of the company’s staff rose to 20,000 in 1922, the cities of Abadan and Masjed Soleyman were flooded with Iranian migrants. Job opportunities and recreational facilities attracted Iranians. The price of land and housing jumped quickly in the above-mentioned cities.
Urbanization in Iran
Urbanization gathered steam in the late 1920s in Iran. Urban problems surfaced and APOC was forced to destroy shoddily-constructed buildings in Abadan to build residential compounds.
In the early 1930s, the company had to cut the number of its staff under the impact of global economic downturn. But after the economic crisis subsided, the company resumed construction work in 1934.
Challenges
Construction of oil parks in Iran continued up until the start of WWII and the occupation of Iran by Allied forces. But since the oil company and military organs had vacancies, the population in these cities grew spectacularly. In 1943, 120,000 lived in Abadan and 50,000 in Masjed Soleyman. These figures were high for that time. Living became more and more difficult in Abadan. Food supply and housing faced challenges due to runaway inflation and unfair distribution. After the end of the war, the oil company resumed its construction projects, but it could not handle all urban challenges because of the extension of the cities.
To resolve this problem, the company demarcated the parks housing its staff in order to separate employees from workers. The company intended to offer better services to its employees and guarantee their security, health and welfare more effectively.
Demarcation
Abadan Oil Park, which is the first township in Iran, was administered as if it were a village. Abadan Refinery was like a palace which separated aristocrats from ordinary people. The roads and pipelines serving managers and workers were also separate.
This method of settlement construction started in Iran for the first time in Abadan following the exploration of oil.
These settlements were in fact separating the petroleum industry from other industries while helping the APOC to provide services to its employees and workers more effectively.
Rasht, Where Rainfall Never Stops
We made a two-day visit to the northern province of Guilan. I had already visited this green province and had a clear perception of the province, especially the capital Rasht. But this time our visit was arranged by the provincial department of the National Iranian Oil Products Distribution Company (NIOPDC).
Upon arrival in the city, we went to the building of Guilan zone of NIOPDC in Rasht and planned our new visit to this tourism destination. We decided to visit historic monuments in Rasht after lunch and visit the countryside the day after. We had plans to visit Fouman and Masouleh villages. I was very eager to have lunch in Rasht because I already knew that Guilanis have a talent in cuisine and that the food they made suit the taste of all Iranians. Broad bean stew, sour kebab, white fish and wild leek pickle are well known to every Iranian. My colleagues and I ordered sour kebab with Rashti-cooked rice. Due to incessant precipitation, the north of Iran is the best place for growing rice. Residents of Northern provinces, particularly Guilan, are especially skilled in cooking rice.
Historic Squares
After lunch, I left with a photographer and a chauffeur familiar with monuments. The driver said our first destination was a square in the city center. The square was named after martyrs. The city center showcased Rasht’s old architecture. The houses and shops had been built based on a traditional architecture and even the stuff sold in the shops represented the city and its culture. The square and the statues installed there were more historic. The central square was fascinating. A statue of legendary fighter Mirza Kouchak Khan Jangali (1880-1921) sitting on a horse and holding a weapon in hand was built in the square. Known as the Jungle Combatant, Mirza Kouchak Khan Jangali is a national hero thanks to his uprising against foreigners for land grab.
Due to heavy traffic conversion around this square, police do not allow vehicles stop in the streets leading to the city center. We had to get off the car to walk the rest to the square.
Diplomatic Architecture
As we got off the car, I saw again two buildings which I had seen in my childhood. These buildings, whose memories had stuck in my mind, revived my memories. The Post Office and Municipality buildings in Rasht are monuments registered as national heritage. The Municipality building was built 100 years ago. It was initially designed by Russian architects, but due to differences between Iran and Russia, the Germans were invited to complete it. Both are monumental buildings similar to Iran’s Foreign Affairs Ministry building in Tehran.
It seems that Iran’s diplomatic architecture followed a specific style in the past century in order to preserve its historic status in public minds.
The Rasht Municipality was of special significance and it was the most official organ dealing with urban affairs. The façade of the Municipality is adorned with two crossed keys representing the past role of this organ.
Occupied with the history of the municipality in Rasht, a sound similar to a church bell ringing attracts my attention. I turn my head and I see a watchtower striking 19 hours.
Travelling in the Time Tunnel
We go towards the southeastern and we keep watching the Post Office built some 108 years ago. Motifs of Achaemenid combatants have been engraved on the wooden doors of this building. The Zoroastrian-era Farwahar symbol is seen at the top of the entrance door. I step in. I see post employees receiving letters and parcels from people. I ask the guardian to let me into the main building and I get in. Walking up the stairs, I felt strange. I imagined myself in Qajari attire with my husband coming here to mail rice to Tehran. I was travelling in the Qajar era. A very old stair, wooden doors which make a noise when they open and close, old mosaics covering the floor and old table and chairs are reminiscent of long time ago.
Everyone else entering this building will experience the same feeling I did. You would think you are there to post a letter to your beloved ones studying overseas. That was an excellent feeling which rarely occurs.
I was in the time tunnel which I had only experienced in the movies. But the interesting point was that these buildings were still being used for the same purpose they had been built.
Kiosk-Style Residence
My mobile phone rings, which means timeout. I have other places to visit, too. The driver said it was getting dark and we have to visit the kiosk edifice in Rasht. Almost all historic cities in Iran house a kiosk edifice. Shiraz, Arak and Qazvin have also kiosk buildings. It seems that this architecture style was common in the final years of Qajar dynasty. Owners of big gardens used to build kiosk edifices as residence. Rasht’s kiosk is built in the middle of a park which is a former vast garden owned by Akbar Khan Biglar Beigi.
Biglar Beigi had constructed a kiosk-form building from wood and gypsum. This building is four-storey but it looks as a three-storey building from outside. The kiosk is erected in a section of the park to serve as a natural wind-catcher. Beautifully-adorned wooden columns and fences and a hexagonal room are seen at the top of the building.
The building has been surrounded by a river flowing on both sides and giving an attractive perspective of the edifice.
This building has become a handicraft workshop. An exhibition is also under way near the workshop.
Mirza Kouchak Khan Jangali Tomb
We had to cross the old Soleyman Darab district in the south of the city to reach where Mirza Kouchak Khan Jangali is laid to rest. The tomb is located in the middle of a cemetery where martyrs of eight years of imposed war (1980-1988) and the Constitutional Revolution of Iran (1905-1907) are buried. Next to this tomb is laid to rest Dana Ali, a revered descendant of a Shia Imam. Many people of Rasht come to this cemetery every week to pay tribute to the martyrs.
The driver said the cemetery becomes crowded with people every Thursday evening. It was dark and we had to take a rest in order to resume our visit the following day.
Stepped Village
The following day, we headed for Masouleh whose pictures I had earlier seen on postal cards. It was the first time I was travelling to this stepped village built in the mountain. Our guide was speaking about tourist attractions in Masouleh. We could never imagine that it could be cool at this time of the year as temperature is so high everywhere else.
Masouleh is a village in a mountainous region. In the winter, it experiences heavy snowfall and freezing temperatures and in the summer, it is cool.
Historical names for the city include Māsalar and Khortāb. It was founded in the 10th century AD.
Masouleh is approximately 60 km southwest of Rasht and 32 km west of Fouman. The village is 1,050 meters above sea level in the Alborz mountain range, near the southern coast of the Caspian Sea. The village itself has a difference in elevation of 100 meters.
Masouleh architecture is unique. The buildings have been built into the mountain and are interconnected. Courtyards and roofs both serve as pedestrian areas similar to streets. Masouleh does not allow any motor vehicles to enter, due to its unique layout. It is the only city in Iran with such a prohibition. However, the small streets and many stairs simply wouldn't make it possible for vehicles to enter.
Handicraft is the main profession in Masouleh. Before arriving at the village, we passed by a market where women were knitting. Men were selling pottery, leatherwork, pastry and other local food. The weather was cool and humid and visitors were buying locally knitted shawls to cover themselves from cold weather.
Yellow clay coats the exterior of most buildings in Masouleh. This allows for better visibility in the fog.
Buildings are mostly two -storey made of adobe, rods and bole. A small living room, big guest room, winter room, hall, WC and balcony are usually found in the 1st floor. A cold closet, barn and stable are located on the floor below, which are connected to the upper floor by several narrow steps inside the building.
Business Village
Photographers in the market lent local attire to visitors to get souvenir photos. I also took pictures in traditional attire.
The market kept me so busy that I totally forgot the village itself. The driver had told us that the residents of Masouleh face the threat of rock fall, avalanche and flooding. I was wondering what has motivated people to come and start living there. I finally got the answer to my question. In the sixth century AH, Masouleh was the only connection road between Guilan and Azerbaijan. Therefore, many businessmen had to take that route. They used to rest at this point. Later on, they concluded that Masouleh enjoyed a good position and that it had access to Guilan from north, to Zanjan from south and to Azerbaijan from west. For this reason, they finally decided to settle there. That is why most people in Masouleh are involved in business.
From the rooftop of the houses, we take a look at a green plain and try to breathe fresh air.
An advantage with Masouleh is that no car can ply the streets of Masouleh due to its stepped structure; therefore, we can benefit from this silence to enjoy ourselves. I envy my colleague living near Masouleh.
Rasht, Where Rainfall Never Stops
We made a two-day visit to the northern province of Guilan. I had already visited this green province and had a clear perception of the province, especially the capital Rasht. But this time our visit was arranged by the provincial department of the National Iranian Oil Products Distribution Company (NIOPDC).
Upon arrival in the city, we went to the building of Guilan zone of NIOPDC in Rasht and planned our new visit to this tourism destination. We decided to visit historic monuments in Rasht after lunch and visit the countryside the day after. We had plans to visit Fouman and Masouleh villages. I was very eager to have lunch in Rasht because I already knew that Guilanis have a talent in cuisine and that the food they made suit the taste of all Iranians. Broad bean stew, sour kebab, white fish and wild leek pickle are well known to every Iranian. My colleagues and I ordered sour kebab with Rashti-cooked rice. Due to incessant precipitation, the north of Iran is the best place for growing rice. Residents of Northern provinces, particularly Guilan, are especially skilled in cooking rice.
Historic Squares
After lunch, I left with a photographer and a chauffeur familiar with monuments. The driver said our first destination was a square in the city center. The square was named after martyrs. The city center showcased Rasht’s old architecture. The houses and shops had been built based on a traditional architecture and even the stuff sold in the shops represented the city and its culture. The square and the statues installed there were more historic. The central square was fascinating. A statue of legendary fighter Mirza Kouchak Khan Jangali (1880-1921) sitting on a horse and holding a weapon in hand was built in the square. Known as the Jungle Combatant, Mirza Kouchak Khan Jangali is a national hero thanks to his uprising against foreigners for land grab.
Due to heavy traffic conversion around this square, police do not allow vehicles stop in the streets leading to the city center. We had to get off the car to walk the rest to the square.
Diplomatic Architecture
As we got off the car, I saw again two buildings which I had seen in my childhood. These buildings, whose memories had stuck in my mind, revived my memories. The Post Office and Municipality buildings in Rasht are monuments registered as national heritage. The Municipality building was built 100 years ago. It was initially designed by Russian architects, but due to differences between Iran and Russia, the Germans were invited to complete it. Both are monumental buildings similar to Iran’s Foreign Affairs Ministry building in Tehran.
It seems that Iran’s diplomatic architecture followed a specific style in the past century in order to preserve its historic status in public minds.
The Rasht Municipality was of special significance and it was the most official organ dealing with urban affairs. The façade of the Municipality is adorned with two crossed keys representing the past role of this organ.
Occupied with the history of the municipality in Rasht, a sound similar to a church bell ringing attracts my attention. I turn my head and I see a watchtower striking 19 hours.
Travelling in the Time Tunnel
We go towards the southeastern and we keep watching the Post Office built some 108 years ago. Motifs of Achaemenid combatants have been engraved on the wooden doors of this building. The Zoroastrian-era Farwahar symbol is seen at the top of the entrance door. I step in. I see post employees receiving letters and parcels from people. I ask the guardian to let me into the main building and I get in. Walking up the stairs, I felt strange. I imagined myself in Qajari attire with my husband coming here to mail rice to Tehran. I was travelling in the Qajar era. A very old stair, wooden doors which make a noise when they open and close, old mosaics covering the floor and old table and chairs are reminiscent of long time ago.
Everyone else entering this building will experience the same feeling I did. You would think you are there to post a letter to your beloved ones studying overseas. That was an excellent feeling which rarely occurs.
I was in the time tunnel which I had only experienced in the movies. But the interesting point was that these buildings were still being used for the same purpose they had been built.
Kiosk-Style Residence
My mobile phone rings, which means timeout. I have other places to visit, too. The driver said it was getting dark and we have to visit the kiosk edifice in Rasht. Almost all historic cities in Iran house a kiosk edifice. Shiraz, Arak and Qazvin have also kiosk buildings. It seems that this architecture style was common in the final years of Qajar dynasty. Owners of big gardens used to build kiosk edifices as residence. Rasht’s kiosk is built in the middle of a park which is a former vast garden owned by Akbar Khan Biglar Beigi.
Biglar Beigi had constructed a kiosk-form building from wood and gypsum. This building is four-storey but it looks as a three-storey building from outside. The kiosk is erected in a section of the park to serve as a natural wind-catcher. Beautifully-adorned wooden columns and fences and a hexagonal room are seen at the top of the building.
The building has been surrounded by a river flowing on both sides and giving an attractive perspective of the edifice.
This building has become a handicraft workshop. An exhibition is also under way near the workshop.
Mirza Kouchak Khan Jangali Tomb
We had to cross the old Soleyman Darab district in the south of the city to reach where Mirza Kouchak Khan Jangali is laid to rest. The tomb is located in the middle of a cemetery where martyrs of eight years of imposed war (1980-1988) and the Constitutional Revolution of Iran (1905-1907) are buried. Next to this tomb is laid to rest Dana Ali, a revered descendant of a Shia Imam. Many people of Rasht come to this cemetery every week to pay tribute to the martyrs.
The driver said the cemetery becomes crowded with people every Thursday evening. It was dark and we had to take a rest in order to resume our visit the following day.
Stepped Village
The following day, we headed for Masouleh whose pictures I had earlier seen on postal cards. It was the first time I was travelling to this stepped village built in the mountain. Our guide was speaking about tourist attractions in Masouleh. We could never imagine that it could be cool at this time of the year as temperature is so high everywhere else.
Masouleh is a village in a mountainous region. In the winter, it experiences heavy snowfall and freezing temperatures and in the summer, it is cool.
Historical names for the city include Māsalar and Khortāb. It was founded in the 10th century AD.
Masouleh is approximately 60 km southwest of Rasht and 32 km west of Fouman. The village is 1,050 meters above sea level in the Alborz mountain range, near the southern coast of the Caspian Sea. The village itself has a difference in elevation of 100 meters.
Masouleh architecture is unique. The buildings have been built into the mountain and are interconnected. Courtyards and roofs both serve as pedestrian areas similar to streets. Masouleh does not allow any motor vehicles to enter, due to its unique layout. It is the only city in Iran with such a prohibition. However, the small streets and many stairs simply wouldn't make it possible for vehicles to enter.
Handicraft is the main profession in Masouleh. Before arriving at the village, we passed by a market where women were knitting. Men were selling pottery, leatherwork, pastry and other local food. The weather was cool and humid and visitors were buying locally knitted shawls to cover themselves from cold weather.
Yellow clay coats the exterior of most buildings in Masouleh. This allows for better visibility in the fog.
Buildings are mostly two -storey made of adobe, rods and bole. A small living room, big guest room, winter room, hall, WC and balcony are usually found in the 1st floor. A cold closet, barn and stable are located on the floor below, which are connected to the upper floor by several narrow steps inside the building.
Business Village
Photographers in the market lent local attire to visitors to get souvenir photos. I also took pictures in traditional attire.
The market kept me so busy that I totally forgot the village itself. The driver had told us that the residents of Masouleh face the threat of rock fall, avalanche and flooding. I was wondering what has motivated people to come and start living there. I finally got the answer to my question. In the sixth century AH, Masouleh was the only connection road between Guilan and Azerbaijan. Therefore, many businessmen had to take that route. They used to rest at this point. Later on, they concluded that Masouleh enjoyed a good position and that it had access to Guilan from north, to Zanjan from south and to Azerbaijan from west. For this reason, they finally decided to settle there. That is why most people in Masouleh are involved in business.
From the rooftop of the houses, we take a look at a green plain and try to breathe fresh air.
An advantage with Masouleh is that no car can ply the streets of Masouleh due to its stepped structure; therefore, we can benefit from this silence to enjoy ourselves. I envy my colleague living near Masouleh.
Rasht, Where Rainfall Never Stops
We made a two-day visit to the northern province of Guilan. I had already visited this green province and had a clear perception of the province, especially the capital Rasht. But this time our visit was arranged by the provincial department of the National Iranian Oil Products Distribution Company (NIOPDC).
Upon arrival in the city, we went to the building of Guilan zone of NIOPDC in Rasht and planned our new visit to this tourism destination. We decided to visit historic monuments in Rasht after lunch and visit the countryside the day after. We had plans to visit Fouman and Masouleh villages. I was very eager to have lunch in Rasht because I already knew that Guilanis have a talent in cuisine and that the food they made suit the taste of all Iranians. Broad bean stew, sour kebab, white fish and wild leek pickle are well known to every Iranian. My colleagues and I ordered sour kebab with Rashti-cooked rice. Due to incessant precipitation, the north of Iran is the best place for growing rice. Residents of Northern provinces, particularly Guilan, are especially skilled in cooking rice.
Historic Squares
After lunch, I left with a photographer and a chauffeur familiar with monuments. The driver said our first destination was a square in the city center. The square was named after martyrs. The city center showcased Rasht’s old architecture. The houses and shops had been built based on a traditional architecture and even the stuff sold in the shops represented the city and its culture. The square and the statues installed there were more historic. The central square was fascinating. A statue of legendary fighter Mirza Kouchak Khan Jangali (1880-1921) sitting on a horse and holding a weapon in hand was built in the square. Known as the Jungle Combatant, Mirza Kouchak Khan Jangali is a national hero thanks to his uprising against foreigners for land grab.
Due to heavy traffic conversion around this square, police do not allow vehicles stop in the streets leading to the city center. We had to get off the car to walk the rest to the square.
Diplomatic Architecture
As we got off the car, I saw again two buildings which I had seen in my childhood. These buildings, whose memories had stuck in my mind, revived my memories. The Post Office and Municipality buildings in Rasht are monuments registered as national heritage. The Municipality building was built 100 years ago. It was initially designed by Russian architects, but due to differences between Iran and Russia, the Germans were invited to complete it. Both are monumental buildings similar to Iran’s Foreign Affairs Ministry building in Tehran.
It seems that Iran’s diplomatic architecture followed a specific style in the past century in order to preserve its historic status in public minds.
The Rasht Municipality was of special significance and it was the most official organ dealing with urban affairs. The façade of the Municipality is adorned with two crossed keys representing the past role of this organ.
Occupied with the history of the municipality in Rasht, a sound similar to a church bell ringing attracts my attention. I turn my head and I see a watchtower striking 19 hours.
Travelling in the Time Tunnel
We go towards the southeastern and we keep watching the Post Office built some 108 years ago. Motifs of Achaemenid combatants have been engraved on the wooden doors of this building. The Zoroastrian-era Farwahar symbol is seen at the top of the entrance door. I step in. I see post employees receiving letters and parcels from people. I ask the guardian to let me into the main building and I get in. Walking up the stairs, I felt strange. I imagined myself in Qajari attire with my husband coming here to mail rice to Tehran. I was travelling in the Qajar era. A very old stair, wooden doors which make a noise when they open and close, old mosaics covering the floor and old table and chairs are reminiscent of long time ago.
Everyone else entering this building will experience the same feeling I did. You would think you are there to post a letter to your beloved ones studying overseas. That was an excellent feeling which rarely occurs.
I was in the time tunnel which I had only experienced in the movies. But the interesting point was that these buildings were still being used for the same purpose they had been built.
Kiosk-Style Residence
My mobile phone rings, which means timeout. I have other places to visit, too. The driver said it was getting dark and we have to visit the kiosk edifice in Rasht. Almost all historic cities in Iran house a kiosk edifice. Shiraz, Arak and Qazvin have also kiosk buildings. It seems that this architecture style was common in the final years of Qajar dynasty. Owners of big gardens used to build kiosk edifices as residence. Rasht’s kiosk is built in the middle of a park which is a former vast garden owned by Akbar Khan Biglar Beigi.
Biglar Beigi had constructed a kiosk-form building from wood and gypsum. This building is four-storey but it looks as a three-storey building from outside. The kiosk is erected in a section of the park to serve as a natural wind-catcher. Beautifully-adorned wooden columns and fences and a hexagonal room are seen at the top of the building.
The building has been surrounded by a river flowing on both sides and giving an attractive perspective of the edifice.
This building has become a handicraft workshop. An exhibition is also under way near the workshop.
Mirza Kouchak Khan Jangali Tomb
We had to cross the old Soleyman Darab district in the south of the city to reach where Mirza Kouchak Khan Jangali is laid to rest. The tomb is located in the middle of a cemetery where martyrs of eight years of imposed war (1980-1988) and the Constitutional Revolution of Iran (1905-1907) are buried. Next to this tomb is laid to rest Dana Ali, a revered descendant of a Shia Imam. Many people of Rasht come to this cemetery every week to pay tribute to the martyrs.
The driver said the cemetery becomes crowded with people every Thursday evening. It was dark and we had to take a rest in order to resume our visit the following day.
Stepped Village
The following day, we headed for Masouleh whose pictures I had earlier seen on postal cards. It was the first time I was travelling to this stepped village built in the mountain. Our guide was speaking about tourist attractions in Masouleh. We could never imagine that it could be cool at this time of the year as temperature is so high everywhere else.
Masouleh is a village in a mountainous region. In the winter, it experiences heavy snowfall and freezing temperatures and in the summer, it is cool.
Historical names for the city include Māsalar and Khortāb. It was founded in the 10th century AD.
Masouleh is approximately 60 km southwest of Rasht and 32 km west of Fouman. The village is 1,050 meters above sea level in the Alborz mountain range, near the southern coast of the Caspian Sea. The village itself has a difference in elevation of 100 meters.
Masouleh architecture is unique. The buildings have been built into the mountain and are interconnected. Courtyards and roofs both serve as pedestrian areas similar to streets. Masouleh does not allow any motor vehicles to enter, due to its unique layout. It is the only city in Iran with such a prohibition. However, the small streets and many stairs simply wouldn't make it possible for vehicles to enter.
Handicraft is the main profession in Masouleh. Before arriving at the village, we passed by a market where women were knitting. Men were selling pottery, leatherwork, pastry and other local food. The weather was cool and humid and visitors were buying locally knitted shawls to cover themselves from cold weather.
Yellow clay coats the exterior of most buildings in Masouleh. This allows for better visibility in the fog.
Buildings are mostly two -storey made of adobe, rods and bole. A small living room, big guest room, winter room, hall, WC and balcony are usually found in the 1st floor. A cold closet, barn and stable are located on the floor below, which are connected to the upper floor by several narrow steps inside the building.
Business Village
Photographers in the market lent local attire to visitors to get souvenir photos. I also took pictures in traditional attire.
The market kept me so busy that I totally forgot the village itself. The driver had told us that the residents of Masouleh face the threat of rock fall, avalanche and flooding. I was wondering what has motivated people to come and start living there. I finally got the answer to my question. In the sixth century AH, Masouleh was the only connection road between Guilan and Azerbaijan. Therefore, many businessmen had to take that route. They used to rest at this point. Later on, they concluded that Masouleh enjoyed a good position and that it had access to Guilan from north, to Zanjan from south and to Azerbaijan from west. For this reason, they finally decided to settle there. That is why most people in Masouleh are involved in business.
From the rooftop of the houses, we take a look at a green plain and try to breathe fresh air.
An advantage with Masouleh is that no car can ply the streets of Masouleh due to its stepped structure; therefore, we can benefit from this silence to enjoy ourselves. I envy my colleague living near Masouleh.
Guilan Zone of NIOPDC
The Guilan zone of NIOPDC which arranged our two-day visit to this Northern Province is tasked with distributing oil products across the province.
Last winter, Guilan experienced an unprecedented cold snap. Due to heavy snowfall, connection roads to many villages were cut; however, Guilan zone of the company managed to supply fuel effectively.
Fardin Cheraji, managing director of NIOPDC zone in Guilan, said the company supplied fuel with its strong fleet.
Guilan houses more compressed natural gas (CNG) stations than other provinces. It indicates the high quantity and quality of fuel supply to these stations.
Under Cheraji’s management, the NIOPDC zone in Guilan province has been awarded HSE certificate.
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