Successful Year for the Petroleum Industry

Iran’s petroleum industry has left behind a successful year despite unjust sanctions have been in effect. During the last calendar year to March 20, Iran increased oil production and export, improved its energy diplomacy at the regional and global levels, exported technical and engineering services to other countries, started production from the delayed Phase 11 of the massive South Pars gas field and the Sepehr and Jofair fields, supplied gas during winter without any interruption, and during the final days of the year struck development deals with local companies, whose results would be seen in the current calendar year.

Agreements have been signed with four Iranian contractors to construct 14 gas compressor platforms and 14 associated backup platforms for $20 billion. With this agreement, Iran started building offshore compressor platforms which are expected to come online in four years.

Moreover, agreements have been signed between the National Iranian Oil Company (NIOC) and domestic companies, worth $13 billion, for developing six oil fields. That would increase Iran’s oil output by 400 tb/d.

Minister of Petroleum Javad Owji said that early production from these fields would start in the current calendar year. The six oil fields are estimated to earn Iran $15 billion annually.

Although it welcomes foreign investors, the Ministry of Petroleum has not sat idle. Rather it has moved to thoroughly implement incomplete projects, accelerate flare gas capture projects, enhance recovery from joint fields, and proceed with its energy diplomacy.

Thanks to the Ministry of Petroleum’s efforts in terms of flare gas gathering the Research Institute of Petroleum Industry (RIPI) received the 2024 Award of the Gas Exporting Countries Forum (GECF) due to its unrivaled research work.

$13bn Deals Signed

New Agreements to Lift Iran Oil Output 400 tb/d

On 17 March, the National Iranian Oil Company (NIOC) signed agreements, worth $13 billion, with local companies to develop six oil fields. That would add 400 tb/d to Iran’s oil production.

Minister of Petroleum Javad Owji said at the signing ceremony that early production from the six fields would begin in the current calendar year.

“The annual revenue from the output hike from the 6 fields would be $15 billion, not to mention 60,000 job opportunities which would be created,” he said.

Iran’s oil production has been growing since three years ago. That is while US sanctions are in effect, barring foreign companies from any activity in Iran. The Ministry of Petroleum has said it welcomes foreign investment in the petroleum industry; however, it has not tied the development of this sector to the presence of foreign companies. A recent case in point is the agreements signed for the development of the Azadegan, Azar, Masjed Soleyman, Sumar, Saman, and Delavaran oil fields with domestic companies.

Iran does not release any data on its oil exports due to sanctions, but Iranian contractors have managed to raise national output. Completion of oil projects and implementation of new projects explain why oil output has increased under the 13th administration.

Drilling Rigs

Minister Owji has said that nearly 130 incomplete projects, worth $28.5 billion, have been completed under the 13th administration in the petroleum industry while 50 more projects are underway in the upstream and downstream sectors, which would help raise output and generate value-added.

Mohsen Khojasteh-Mehr, the CEO of NIOC, said the six fields would be developed by Iranian banks and E&P companies. The fields contain 38 billion barrels of oil in place. After development, they would see their output grow from 400 tb/d to 600 tb/d. Fifty drilling rigs are planned to handle new drilling and workover of 615 wells.

The minister has also said that the importation of 160 petroleum industry commodities had been banned to support domestic manufacturers, adding they had been replaced with local products. In addition to local manufacturers, more than 660 knowledge-based companies have been engaged in cooperation with the petroleum industry.

While hoping to rely on local contractors for enhancing oil and gas output in the absence of foreign investors, the Ministry of Petroleum intends to hire knowledge-based companies to help overcome numerous challenges the petroleum industry is faced with due to sanctions.

Over the past three years, thanks to the active diplomacy that the Ministry of Petroleum has pursued in Latin America, more than 200 items of imported commodities have been made locally and exported to Latin American nations. Last calendar year, the minister said, at least 1.8 million items had been delivered to Venezuela’s El Palito refinery.

Azadegan $11.5bn Deal

To develop the giant Azadegan oil field, NIOC signed an $11.5 billion agreement with a consortium of 9 companies for a cumulative oil supply of 2,558 million barrels over 20 years.

The initial MOU for the feasibility study on developing the Azadegan field was signed in July 2022 between NIOC and E&P companies with banks and the National Development Fund of Iran (NDFI) involved. Then two E&P companies teamed with Iranian banks and NDFI to develop the Azadegan field to bring its production from 205 tb/d to 550 tb/d under an Iran Petroleum Contract (IPC) deal.

Azadegan is estimated by various assessments to contain 32 billion barrels of oil in place, mainly in the Sarvak, Kajdomi, Gadvan, and Fahlyan reservoirs. Until recently, the Azadegan field had been split into North Azadegan and South Azadegan for development.

Given the high volume of crude oil in place, mainly heavy crude oil, the existence of numerous reservoirs, location in the Hoveyzeh Marshes with special ecological and environmental conditions, proximity to the Iran-Iraq border, the existence of unexploded ordnance from the imposed war and development field by Iraq in its Majnoun field, which is shared with Azadegan, development of this field has technical complications. 

Located in Abadan Plain, the Azadegan oil field lies some 80 km west and southwest of Ahvaz and covers about 1,500 sq km of land along the Iran-Iraq border. Known as the 10th largest oil field in the world, Azadegan is the largest jointly-owned oil field in Iran. Azadegan is the most important greenfield and least-developed oil reservoir in Iran, with a high capacity for enhancing national output.

Tightest Field

The Azar oil field, which Iran shares with Iraq, is one of the most sophisticated oil fields in Iran in terms of technical and engineering structure. It was always among fields up for development by foreign firms due to the necessity of high technology. Despite general belief, Oil Industries Engineering and Construction Company (OIEC) developed its first phase. Now, NIOC has signed a $1.36 billion agreement with Sarvak Azar Engineering and Development (SAED), an E&P company, to develop its second phase under a 20-year agreement. The cumulative production from this field is expected to reach 177 million barrels. The preliminary plan for the development of the Azar oil field was drawn up by OIEC in 2011 when it was awarded the project. One year later, SAED started developing the field which started producing oil from its four oil wells in March 2017. The field saw its output reach 30 tb/d in October 2017 and 65 tb/d by January 2021 from 11 new and 8 old wells.

The second phase involves drilling 19 new wells (18 producing wells and 1 waste disposal well), installing downhole pumps in the new producing wells, workover on 19 producing wells and installing downhole pumps, mine clearance, road construction, wellhead installations, line pipes, separator, multiphase pumps, and hydraulic fracturing. That is forecast to create 4,000 job opportunities directly and indirectly in Ilam Province.

The advantages of this project include enhanced recovery from the Azar field, absorbing more than $1 billion in private investment, a $7 billion return on investment, and obliging contractors to use local technical savvy and services.

The Azar field lies in the Anaran exploration block in Ilam Province, more specifically 20 km from the city of Mehran and 70 km south of the city of Ilam. Azar has the upper and lower Sarvak reservoirs with an API gravity of 30. Azar is estimated to hold 4.4 billion barrels of oil in place.

Masjed Soleyman (MIS) Oil Field

The MIS oil field is more than 115 years old. It is the oldest oil field in the Middle East. Recovery from this field has been significantly down in recent years. NIOC signed a $260 million agreement with Sina Energy Development Company (SEDCO) for 14 years to bring the cumulative production from MIS to 21 million barrels.

Construction work on this project, with a direct investment of $259.9 million, involves drilling 15 new wells (13 horizontal production wells plus 2 appraisal production wells), workover and completion of 5 existing wells, installing 70 downhole pumps, launching existing production units, building roads, wellhead installations, pipelines, separator and upgrading reservoir simulation models.

The advantages of this project include the absorption of investment, accelerating development of the field, and the estimated return of $1.35 billion in revenue.

The initial MOU for the feasibility study on developing the MIS field was signed in March 2022 between NIOC and SEDCO for an output target of 9 tb/d.

The MIS field is estimated to hold 6.3 billion barrels of oil in place. NIOC plans to spend $2 million on improving local infrastructure to boost welfare within the framework of its social responsibility.

Sumar, Saman and Delavaran

Development of the Sumar, Saman, and Delavaran fields was awarded by NIOC to two Iranian companies – Well Services of Iran (WSI) and Petro Iranian Arvand (PIA) – for 20 years with a view to a cumulative production of 40.4 million barrels.

Construction work involves $245.1 million in direct investment for the drilling of 10 new wells including 6 producing wells (2 in Sumar, 3 in Saman, and 1 in Delavaran), three appraisal-production wells (1 for each field), 1 appraisal well (in Sumar), workover and completion of two existing wells in Saman and Delavaran, installing three downhole pumps in Delavaran field wells, mine clearance, road building, wellhead installations, pipelines, separator and upgrading reservoir simulation models.

The advantages of this project include absorption of investment, accelerating the development of the field and the estimated return of $1.6 billion in revenue, sustainable feedstock supply to the Kermanshah oil refinery, and reducing fuel oil production at the facility.

The initial MOU for the feasibility study on developing the three fields was signed between NIOC, WSI, and PIA in April 2023. Now the agreement signed for their development aims at 9 tb/d total output.

The Sumar field lies 3 km southwest of Gilan-e Gharb in Kermanshah Province. The Saman field is located 17 km southeast of Naftshahr in Kermanshah Province and the Delavaran field is situated 85 km from Ilam in Ilam Province. The three fields are estimated to hold 410 million barrels of oil in place.

NIOC plans to spend $2.5 million on improving local infrastructure to boost welfare within the framework of its social responsibility.

$20bn Contracts Signed for SP Compression Platforms

On 10 March, Pars Oil and Gas Company (POGC) signed a $20 billion agreement with four Iranian contractors to build 14 compression platforms and their 14 backup platforms.

This agreement marked the starting point for Iran’s construction of offshore compression platforms. The 14 platforms are planned to become operational in four years. The gas production capacity of the giant offshore South Pars gas field has reached 707 mcm/d.

Addressing the signing ceremony, Minister of Petroleum Javad Owji said that in the absence of any gas compression project, South Pars would see pressure fall off during continued production. “By operating these projects, in addition to an extra 90 tcf of gas and 2 billion barrels of condensate from South Pars, we would see $900 billion in revenue in Iran,” he said.

South Pars is currently instrumental in Iran’s energy supply security. Iran and Qatar jointly operate South Pars, which is known as North Dome in Qatar. Iran owns 30% of the entire field with the remaining 70% in Qatar’s territorial waters.

Iran started extracting gas from South Pars in the 2000s. It is currently supplying half of Iran’s energy needs, more than 45% of gasoline demand, 93% of fuel for power plants, and a major part of feedstock for petrochemical plants. That proves the significance of South Pars in Iran’s energy supply security. Furthermore, the fall-off in production from oil and gas fields is a natural phenomenon that would befall any field sooner or later. South Pars is no exception to this rule. Studies conducted by POGC indicate that this field would experience a fall-off in the coming years. Therefore, the National Iranian Oil Company (NIOC) carried out three measures to increase gas recovery from this field. First, it drilled 35 new wells under an agreement worth $1.1 billion with four Iranian E&P companies. The second one was acidizing gas wells in South Pars, which is underway. Third, it was necessary to boost the platforms’ pressure.

Iran decided to boost South Pars pressure in 2017, for which it signed a deal for SP11 development with a consortium comprising France’s Total (now TotalEnergies), China’s CPCI, and Iran’s Petropars. However, due to US sanctions, the $4.8 billion deal was not implemented. Due to the significance of energy security and the key role of South Pars, the 13th administration decided to conduct feasibility studies on the compression platforms by relying on local manufacturers without any foreign help.

Technology Acquired

It was initially imagined that Iranian manufacturers would not be able to build giant 20,000-tonne platforms due to a lack of expertise and necessary offshore infrastructure. However, NIOC conducted all-out studies on how to build such platforms both onshore and offshore. To that end, 9 gas fields from across the globe, which bore a resemblance to South Pars in terms of gas sourness, offshore water depth, and gas compression, were chosen. Then, in collaboration with local consulting companies, these fields were modeled for compression. The studies indicated that the compression project had to be carried out offshore. Furthermore, offshore enhanced recovery would yield $70 for one barrel of gas condensate and 33 cents for one cubic meter of gas. Based on these studies, offshore compression would earn the country higher income.

Compression Platforms

For local manufacturers to build such platforms in Iran, the volume of compression platforms changed. Throughout its studies on SP11, Total had envisaged 2, 3, and 5 bcf platforms for that purpose. However, the Iranian team working on this project concluded that due to sanctions and the necessity of construction of these platforms inside the country, a 1 bcf platform would be ideal.

Seven zones in South Pars were considered for gas compression platforms. Instead of installing a 20,000-tonne platform, this capacity was divided between two platforms in each zone so that local contractors would be able to build such platforms. Therefore, talks began with four Iranian contractors for this big national project. Finally, POGC signed the $20 billion agreement with Petropars, Oil Industries and Engineering Construction Company (OIEC) and Khatam al-Anbia Construction HQ.

90 tcf Output Hike

Owji said at the signing ceremony that the compression project would add 90 tcf to the gas recovery and 2 billion barrels to gas condensate recovery from South Pars, which would earn the country $900 billion.

The minister said the planned compression had remained undecided since 2017, adding that just several months ago, Qatar signed an agreement with foreign companies for gas compression in its sector of the gas field.

Noting that Iran gets 70% of its gas from South Pars, he added that 45% of feedstock to oil refineries was provided by this field. He added that gas compression platforms would allow for continued gas recovery for another 70 years.

Highlighting the high potential of Iranian contractors and manufacturers, Owji said: “Thanks to NIOC planning, the compression platforms would become operational within four years.”

The minister said that South Pars accounted for 50% of Iran’s total gas reserves, adding: “Under the 13th administration, sanctions have failed to stymie oil and gas development. Last calendar year, for the first time in four decades, Iran experienced 20% growth in the oil and gas sector for three consecutive seasons.”

No Cut-Price Oil

Owji said that Iran’s economic growth had doubled thanks to oil when compared to the growth rate oil excluded. He said that in the 7th summit of the Gas Exporting Countries Forum (GECF) held in Algeria, Iran’s average gas production growth was announced at 5%, far above the global average rate of 2.5%.

“Iran is facing tougher sanctions than those imposed in 2018, but oil exports have reached six-year highs now,” he said.

Owji dismissed rumors of Iran selling oil at a discount, adding: “International organizations have acknowledged that Iran faces no obstacle in selling its oil. We are currently bringing our crude oil price close to global prices.”

“When the 13th administration took office, oil recovery from the fields in Khuzestan Province, i.e. 58 fields, was 1.7 mb/d, but it has now reached 2.7 mb/d," he said.

Border Platforms

Mohsen Khojasteh-Mehr, the CEO of NIOC, described the project as the biggest event in the history of the Islamic Republic, for energy security while engaging local contractors.

Noting that South Pars came to fruition thanks to Iranian contractors, he said South Pars would experience a rebirth with this agreement.

“In addition to its role in gas and condensate production, gas compression would result in enhanced gas recovery while preventing gas migration,” he said.

Khojasteh-Mehr said border platforms would be prioritized as they would preclude gas migration.  

Each compression platform would require four 30MW compressors. The NIOC managing director said compressors would be sourced domestically as much as local manufacturers and contractors have the necessary potential.

More Oil Reserves

Khojasteh-Mehr said Iran added 2.5 billion barrels of oil equivalent to its known crude oil and natural gas reserves last calendar year, while several new oil fields were discovered.  

He said exploration had not ended in the South Pars area as a new exploration well had recently been drilled and completed, while a second exploration well was under review.

The NIOC managing director also said that Iran exercised “undeniable sovereignty over part of the Arash gas field”, which has recently been the subject of unfounded dispute. 

West Karoun Oil Supply Nears 1 mb/d

Mahnaz Mohmmad-Qoli

Arvandan Oil and Gas Production Company (AOGPC) is operating projects mainly in West Karoun, specifically Darquain, North Azadegan, South Azadegan, Yadavaran, and Yaran. The oil produced by these fields is delivered to export terminals and the Abadan refinery through West Karoun’s pumping station. The oil production capacity of West Karoun’s fields is more than 420 tb/d, which is planned to rise to 1 mb/d by 2024 as new projects are close to coming online. CEO of AOGPC Abdollah Ozari Ahvazi tells “Iran Petroleum” that the company managed to fully meet its production target last calendar year.

The following is the full text of the interview he gave to “Iran Petroleum”:

What projects are currently being developed in this area?

In West Karoun, all fields are being developed by domestic companies and there is no foreign firm present in West Karoun. Sohrab, Sepehr, and Jofair are under development. After the first phase of development by the Petroleum Engineering and Development Company (PEDEC), they would be assigned to AOGPC. Talks are underway for the development of the second phases of North Azadegan, South Azadegan, and Yadavaran as well as the third phase of Darquain. No agreement has so far been struck.

What development projects does AOGPC have underway?

AOGPC is in charge of operating West Karoun fields. The major fields are developed by PEDEC before being transferred to AOGPC. However, there are some small and medium-sized fields being developed by AOGPC. The main fields in West Karoun are Azadegan, Yadavaran, Darquain, Sepehr and Jofair, Sohrab, Susangerd, Arvand, Minou, Khorramshahr, Moshtaq, Omid and Band Karkheh. The big fields like North Azadegan and South Azadegan that are developed by PEDEC are either under development or have been transferred to AOGPC after the first phase of development and have been assigned to AOGPC. AOGPC was developed in its first phase by drilling 163 wells. Currently, AOGPC is in charge. Development of other sections of these fields by PEDEC is being negotiated. Darquain has been developed in the first and second phases and transferred to AOGPC. Its third phase of development is being discussed by PEDEC with Iranian, Chinese, and Russian companies.

What stage are Sohrab, Sepehr, and Jofair fields in now?

They are among medium-sized fields. AOGPC conducted studies on their development over recent years. After technical approval by NIOC, they are at the stage of signingthe agreement. PEDEC is tasked with implementing the agreement for developing these fields. The Sepehr and Jofair fields are currently producing 15 tb/d of oil in the early production phase, but the figure is projected to reach 110 tb/d. Sohrab’s 3 tb/d of oil is also being delivered to the North Azadegan production center for processing. According to planning, development of this field would be completed in three years to bring production from Sohrab to 30 tb/d.

How about the situation of the Yadavaran field?

Phase 1 of the Yadavaran field was developed by PEDEC, and financed by a Chinese company. Talks are still underway for the second phase of development.

Could you tell us about the development of the Susangerd, Arvand, and Minoo fields?

Preliminary studies have been concluded for the development of the Susangerd field whose development would be implemented in two phases. The field’s output would reach 60 tb/d, but no investor has been selected so far. AOGPC has drilled two appraisal wells at the Arvand field, but the wells are yet to be completed. Once the results of these wells are known, companies would move to develop this field whose oil is light. The field is expected to produce 20 tb/d of oil. The Minoo field is currently in the phase of appraisal by NIOC Directorate of Exploration and no final report has yet been submitted. An exploration well has been drilled in this field. Last calendar year, AOGPC presented an early production plan for this field to NIOC, which depends on the finalization of the NIOC Directorate of Exploration’s report. It would be possible to drill another well in this field. Early production from this field is expected to reach 1.5 tkb/d.

What happened to the development of the Khorramshahr field in the light of cooperation with Iraq?

We held talks with the Iraqi side on the development of this field to make up our minds. It has been decided that Iran and Iraq jointly develop oil fields they share. Khorramshahr is a case in point. For the time being, it has been decided that they jointly carry out studies in this field. NIOC Directorate of Exploration is also conducting its studies separately.

What measures have been taken to prevent gas flaring?

Two fundamental measures are underwayto prevent gas flaring. First and foremost, to prevent gas flaring at the Darquain field, the associated petroleum gas from this field is injected into the reservoir. Another measure has been that gas flare from the North Azadegan and Yadavaran fields provide feedstock to the first phase of the Hoveyzeh plant. Another measure for preventing gas flaring has been the signing of a $73 million agreement with Persian Gulf Petrochemical Industries Company (PGPIC) and the Hoveyzeh plant for the delivery of the remaining flare gas from West Karoun fields. This agreement has been signed for 30 months, after which there would be zero flaring in West Karoun. Currently, 120 mcf/d of gas from Yadavaran and North Azadegan - 30 mcf/d from North Azadegan and 90 mcf/d from Yadavaran – is delivered to the Hoveyzeh gas capture plant. If flare gas from Darquain and other fields is added, the figure would reach 220 mcf/d.

Will the case of gas flaring at West Karoun be closed forever?

Yes, there would be no more flare gas. For the new fields including Sohrab, Sepehr, and Jofair, associated gas is forecast to be delivered to the Hoveyzeh plant.

What stage is the integrated development of the Azadegan field in now?

Last calendar year, NIOC signed an MOU with some banks and the National Development Fund of Iran (NDFI) for investment in the North and South Azadegan fields and its integrated development. Therefore, Dasht Azadegan Arvand Oil and Gas Production Company (DAAOGPC) was established. Numerous meetings have so far been held. We are not limited to this company, and other companies can help develop this field. As far as the development of North and South Azadegan is concerned, the minister of petroleum and the CEO of NIOC haveemphasized accelerating the work. The Azadegan field is projected to produce 550-570 tb/d of oil. Technical talks for the unitized development of this field are expected to conclude by 2025, after which necessary permits would be issued for financing by domestic banks. That would bring an end to the Azadegan development file, which would reach the production ceiling in seven years.

What measures have been taken to prevent pressure fall-off at West Karoun fields?

West Karoun fields are yet to enter into the second half of their lifecycle. We are planning water injection into these fields. The Azadegan field is a case in point. Water injection is to be assigned to the contractor of the field development.

How are production maintenance plans implemented in West Karoun fields?

Drilling and construction of five pipelines for the West Karoun plant are on the agenda of AOGPC. Furthermore, 8 wells are to be drilled, which would include 2 new development wells for Phase 3 of Darquain and 6 workover wells for output maintenance at North Azadegan, South Azadegan, and Darquain.Another contract involves drilling 6 new wells and 6 workover wells in Darquain. They would be of great help to the development of this field. These wells are to be drilled outside Phase 3 of Darquain. In Phase 3, some modifications are needed in the production plant.

To what extent are knowledge-based companies engaged?

We are focusing on knowledge-based work for production enhancement.Ultrasonic operation has been employedfor the removal of asphalt inside wells. For the first time, we have developed this technology in the country. This method would help open the wells without having to use a single drop of chemicals. This is a new method, and for the first time a knowledge-based company, backed by AOGPC, is handling this job. This method currently applies to a single well at the Azadegan field but is planned to be applied to other wells in this field, too. Another project was gas detection, which is being used for the first time in oil fields. That can help detect the gas movement inside the reservoir, which is a good method for the exact location of drilling of wells. Currently, drilling is done based on studies, calculations, and modeling. Gas detection would help enhance oil and gas production from the reservoir. Another method, aided by a knowledge-based company, for one of Darquain’s wells, is a multiphase flowmeter (MPFM) which is installedat the wellhead. This device, in which radioactive materials have been used, measures the levels of oil, salt, and water in a well. This data could be achieved in real-time, which would help better control the well. That can help us examine the well’s behavior. It can also drive us towardthe digitalization of wells. It is one of AOGPC’s plans. We intend to develop this device in portal, mobile, and stationary forms. We have also provided necessary services to the knowledge-based company in question to develop this method. It is a prelude to making wells smart.

What is the share of domestic manufacturing in AOGPC’s activities?

86% of items used in West Karoun fields are domestically manufactured. Furthermore, AOGPC staff have also invented MOM equipment, which is widely used and which Iran had to import. The valves built in Iran fare better than foreign ones. It was unveiled at the PetroTech Exhibition in Tehran in January at RIPI. Good progress has also been made in the development of microprocessors. A plant has been inaugurated in Shiraz for this purpose. We may hope that our country will become independent in microprocessors. We are also in talks with an Iranian electronic company to develop electronic boards to strike a deal for building electronic boards for oil equipment. 

AOGPC Keeps Oil and Gas Production

Mahnaz Mohammad-Qoli

Aghajari Oil and Gas Production Company (AOGPC) is one of the oldest oil and gas producers in Iran. It is in charge of production from the Aghajari, Karanj, Paranj, Parsi, Ramshir, Rag Sefid 1, Pazanan 1, and Maroun oil fields. In addition to oil and gas production, AOGPC supplies more than 33% of the feedstock needs of the Bandar Imam Petrochemical Plant, more than half of the Bu Ali Petrochemical Plant’s feedstock (11 tb/d of naphtha) as well as the feedstock of the Persian Gulf Bidboland refinery. AOGPC is the chokepoint of oil passage from oil-rich areas to refineries and export terminals. The feedstock for all petrochemical plants exceeds the AOGPC-run area.

17 mcm/d Feed

Javad Taqizadeh, the CEO of AOGPC, has said the company meets 20% of national oil needs. Underscoring the key role of AOGPC in the national economy, he said the company met its output product last calendar year. He added that AOGPC is set to meet its target in the current calendar year to 20 March 2024, as well.

Overhaul and safety arrangement at Gas and Liquid Gas Plant 1000, pigging at Gas and Liquid Gas Plant 1600 helped increase gas production in the AOGPC-run area last calendar year, he said, adding that AOGPC injected 17 mcm/d of gas into the national network.

Flare Gas Capture

Flare gas capture in East Karoun is to become operational in Gachsaran and Maroun under an agreement with Persian Gulf Petrochemical Industries Company (PGPIC) and Maroun Petrochemical Company by March 2026. Therefore, this project is becoming operational in the Aghajari, Rag Sefid, Ramshir, and Pazanan fields.

The Aghajari field has five gas capture stations with capacity to gather 147 mcf/d of gas. This project is nearly 45% completed. At the Rag Sefid field, there would be a capacity for capturing 120 mcf/d of gas. Once gas compressor stations are launched at Rag Sefid and a 10 km pipeline is operational, 60 mcf/d of flare gas will be captured.

At the Pazanan field, in light of the existence of a dehydration and compression plant, 25 mcf/d of associated gas is captured to be delivered to the Aghajari dehydration plant and then on to the Persian Gulf Bidboland gas refinery. The flare gas capture project for the Ramshir field is 53% completed. It is expected to come online next calendar year, to 20 March 2025.

Low-pressure wells Yield 500 kb

Taqizadeh underscored the significance of retaining the production rate at AOGPC, adding that some arrangements should be made for increased output from these fields, some of which are now in the second half of their life. Therefore, by recovering oil from low-pressure wells, AOGPC has managed to achieve breakthroughs. Applying a new design at the mobile separator in low-pressure wells, 6 wells became operational at the Pazanan field. From March 2023 to December 2023, more than 500,000 barrels of oil were recovered from these six wells, each of which saw their output up 3 tb/d. Given the significance of production capacity building, the plan for production of a minimum of 5 tb/d from eight low-pressure wells along with the proposal for using multiphase pumps instead of mobile separators has been submitted for the first time at AOGPC to prevent gas flaring. In case of success, this plan would apply to all low-pressure and low-yield wells of the National Iranian Oil Company (NIOC).

Boosting safety and changing valves at three wells without any repair rig is another key measure taken by this company. Taqizadeh said AOGPC has seen its production grow 38 tb/d thanks to modifications made to the wells. Offering solutions and implementing the pilot plan for the operation of 6 low-pressure and low-yield wells of the Pazanan field, using a mobile separator and rotary jet nozzle as well as xylene solvent for an output hike of 9 tb/d are among these measures.

Taqizadeh also touched on the modifications made to gas lift lines from the Parsi and Paranj fields with a 6 tb/d output hike, as well as 72 operations by coiled tubing on 29 wells, 16 of which have seen their production restored with the flow of 23 tb/d.

Noting that AOGPC’s oil supply is not halted even a single day and referring to overhaul work at Liquid Gas Plant 1500 Plant, which supplies 335 of the feedstock needs of the Bandar Imam Petrochemical Plant, he said: "Without having to put the plant out of service, we applied pulsed eddy current (PEC) to gauge the entire plant, which was unique as in addition to feeding the Bandar Imam Petrochemical Plant, it helped keep the production flow."

400 Industrial and Non-Industrial Items

Protecting equipment, pipelines, and installations is highly significant at AOGPC. In the current calendar year to 20 March 2024, more than 400 items of industrial and non-industrial equipment have been repaired and renovated by AOGPC experts for its operational areas.

Repairing and renovating 149 power transformers, repairing and renovating 130 processing valves in different sizes and classes, repairing and renovating 153 cranes in various units, and repairing and renovating 5 Sulzer and Ruston turbines constitute some of this equipment.

Procuring and installing a pilot for 88 wells in less than a month for the safety of wells and pipelines and boosting safety on 312 meters of critical points of the oil export pipeline to prevent oil waste, guarantee oil export and prevent environmental pollution are among other measures taken by AOGPC in this regard. 

New Methods

AOGPC is one of the leading companies applying new operational methods. The overhaul of the gravitational tank of the Maroun 2 desalination unit is a case in point, which was carried out over 7 months concerning standard principles. Previously, the overhaul of these tanks lasted about 18 months, but thanks to efforts made by the company’s technicians, a 30 tb/d output decline was prevented, not to mention gains and profits. In another case, 18,225 points at this company were gauged by ultrasonic methods, showing a 77% jump during the first three quarters of the current calendar year from the year before.

American Valves Repaired

The diversity of wellhead and downhole valves at AOGPC and the continued use of these valves has resulted in the establishment of a plant to repair wellhead and downhole valves. Effective measures are being taken at this plant. US-made Mac valves which are disposable were repaired there, last year. Taqizadeh said the US manufacturers of these valves cannot repair them. He said 21 tools were built to repair these valves, which was a breakthrough. As far as reparation of valves is concerned, more than 130 valves ranging from 4 to 42 inches in diameter were repaired at this plant.

60 tb/d Blended Oil

The geography of AOGPC is such that it is located between the oil-rich areas of Maroun Karoun and Masjed Soleyman and the Goreh pumping stations. AOGPC’s performance affects the entire production by the fields administered by the National Iranian South Oil Company (NISOC). Using three pumping stations, AOGPC is playing the role of terminal for oil export lines and may be viewed as the chokepoint of Iranian oil exports. In the wake of processing modifications last calendar year at the Aghajari oil pumping stations, it became possible to receive 60 tb/d of blended oil from the Bahregan oil platforms. That is very important in light of NIOC’s need to stabilize and diversify oil production grades.

Highlighting the role of this processing modification in the stability of blended oil receipt, Taqizadeh said: "The Omidieh oil pumping stations, using refinery pipes and export terminals, handle four grades of light, heavy, ultra-heavy and blended oil, becoming the chokepoint of NIOC’s export. Thanks to this processing modification, it is currently possible to receive an additional 60 tb/d of blended oil from the Bahregan oil platforms. This capacity may be increased."

1,173 Items Manufactured

Last calendar year, AOGPC manufactured 775 items needed in various installations. The figure jumped to 1,173 for the first nine months of the current calendar year. These domestically manufactured items have been aimed at production growth and maintenance. AOGPC has been a leading company in benefiting from the domestic manufacturing potential. AOGPC has signed 5 agreements with local suppliers, some of which pertain to knowledge-based companies.

Industrial waste treatment and reusing it is another key issue at AOGPC. With the formation of an R&D team and the cooperation of a knowledge-based company, the desalting waste is treated to produce sodium carbonate, sodium bicarbonate, ammonium chloride, barium sulfate, liquid CO2, and distilled water. Hence, in addition to waste treatment at AOGPC, an important step is taken in favor of protecting the environment.

Gas Refineries Process 1 bcm/d in Iran

Mahnaz Mohammad-Qoli

National Iranian Gas Company (NIGC) has taken various measures related to gas production, processing, transmission, and exports. The most important measures have been increasing the refining capacity to 1.074 bcm/d, arranging for stability in gas supply in northern Iran by investing $950 million, boosting gas export potential, and capturing flare gas in South Pars refineries. To learn more about NIGC’s activities, “Iran Petroleum” interviewed Hossein Ali Mohammad-Hosseini, director of “Incorporate Planning” at NIGC.

Could you tell us about the current status of gas processing, transmission, and distribution in Iran?

With the current refining capacity, natural gas is being produced at the rate of 1.074 bcm/d by 20 refineries (in addition to gas receipt points) and delivered to the national gas distribution network. Natural gas delivery to remote areas across the country and export terminals is being done by 39,100 km of high-pressure pipeline and 90 gas compressor stations equipped with 333 turbocompressors. Natural gas distribution is carried out daily between 27.5 million subscribers in 1,255 cities and 39,700 villages in the domestic, business, industrial, and agriculture sectors and 101 power plants via 444,000 km of pipelines. From 2016 to 2022, natural gas supply by refineries jumped from 207 bcm to 268 bcm. Adding imported gas and gas withdrawal from underground storage sites, gas delivery increased from 215 bcm to 272 bcm over the said period.

One measure aimed at offsetting gas imbalance is the further expansion of underground gas storage facilities. What has been done to that effect?

As far as natural gas storage expansion is concerned, following ministerial order, NIGC plans to increase natural gas storage capacity by developing the upstream and downstream sectors in the Shourijeh and Sarajeh fields and the Kashan salt dome (by attracting BOT investment). The upstream and downstream development of the Bankol, Mokhtar, and Gezel Tappeh fields has been assigned to the National Iranian Oil Company (NIOC). Once completed, withdrawal capacity from storage facilities would increase from 30 mcm/d to 114 mcm/d, which requires investment in the development of underground storage sites and building operational infrastructure to benefit from such capacity. Boosting natural gas storage capacity would increase from 3.25 bcm to 7 bcm a year under the 7th National Development Plan. As far as natural gas storage capacity in surface facilities is concerned, some arrangements have been made. The minister of petroleum has ordered the preparation of a plan for attracting investment to increase natural gas supply stability through building mini-LNG, CNG, and SNG stations as well as facilities to convert imported LNG to natural gas. That would require investment by the private sector and necessary management for natural gas supply to such units. NIGC is now ready to receive proposals to be technically and economically reviewed. Over 15 applications have so far been filed for mini-LNG and CNG facilities. A mini-LNG unit is planned to be built by Mobarakeh Steel Mill. Preliminary negotiations have also been held for LNG imports to be stored by Iran LNG Company and the establishment of a regasification unit and gas supply to industries

How are the adoption, revision, and application of energy standards in various sectors?

The ISO 50001 energy management standard has been applied to gas refineries, as well as provincial gas companies and all areas of the Iranian Gas Transmission Company (IGTC). Energy Service Companies (ESCOs) are also to be engaged.

What is the mechanism of the Iran Energy Exchange (IRENEX) and the private sector’s activity through energy efficiency and environment bylaws?

So far, five projects of natural gas efficiency have been adopted by a parliamentary committee tasked with energy efficiency and the environment. The idea is to create an energy efficiency and environment market to overcome related challenges. NIGC has submitted its proposals for the final edition which is being reviewed by the High Council of Energy. According to the decisions made by the High Council of Energy in the current calendar year, three articles have been adopted to develop and upgrade the energy efficiency and environment market, which would require ministries of petroleum and energy to issue certificates for saved energy carriers for peak and off-peak periods. Furthermore, depending on the category of the certificate, the highest authority at the subsidiaries of ministries of petroleum and energy are required to offer guarantees on the delivery of saved energy carriers to buyers in line with IRENEX regulations. In case of non-delivery of the energy carrier outlined in the certificate for peak and off-peak periods, a mechanism would be worked out by the Planning and Budgeting Organization, which would be approved by the Economic Council.

Over recent years, a key issue has been to prevent gas flaring. What role does NIGC have in this regard?

NIGC is engaged in self-supply of gas to industries through involvement in the upstream gas sector by prioritizing flare gas. In November 2022, the NIGC Board of Directors adopted the mechanism for NIGC’s transactions with flare gas buyers to prevent gas flaring at refineries, reduce harmful environmental impacts, generate value-added from these resources, and create opportunities for investment and business. That has defined interaction with flare gas and associated petroleum gas buyers that want to transmit light gas extracted from them. Fees and commissions are also enshrined. After the adoption of these rules, its implementation mechanism was endorsed by the NIGC Board. Private companies volunteering to buy flare gas have signed agreements with NIOC to transmit light gas. They have been introduced to IGTC to agree on a local swap. Auction bids have been also held for flare gas produced by the Ilam and South Pars gas refineries for the annual sale of 1.26 bcm a year of flare gas from the first to tenth refineries of South Pars Gas Complex (SPGC), as well as 50 mcm a year of flare gas from the Ilam refinery. The investment needed for this project is IRR 86,000 billion for implementing flare gas capture at South Pars refineries, which would finally result in a 621 mcm/y cut in gas flaring at Site 1, and a 261 mcm/y cut at Site 2. One-year project at Site 1 is 20% completed, and at Site 2 is 5% completed. In addition, the auction bid for selling CO2 produced by the Khangiran and Bidboland refineries is underway.

How much investment would be needed for the sustainable processing, transmission, and distribution of gas under the 7th National Development Plan?

Based on the 7th National Development Plan endorsed by the parliament, which is yet to be signed into law, unprocessed gas production would reach 1.239 bcm/d by the end of the plan. Handling such volume of gas production would require constructing natural gas pipelines at 2,533 km in length, as well as 1,500 km of primary and secondary pipes, at least 12 compressor stations on IGAT-7, IGAT-9, and IGAT-11, as well as building and developing new gas refineries by 2027. In light of the continued expansion of infrastructure for gas supply, NIGC is committed to investing about $41 billion during the 7th National Development Plan. Rich gas production reached 905 mcm/d last calendar year, which would reach 1,408 mcm/d by 2031 as required by the High Council of Energy. Natural gas supply to NIGC totals 1,253 mcm/d, whose transmission would require building new refineries, completion of IGAT-12 and IGAT-13 as well as associated compressor stations. NIGC’s current refining capacity is over 1.043 bcm/d (excluding the dehydration capacity of storage units), which would reach 1.117 bcm/d with the completion of the refinery of SP14 and the increased capacity of the Ilam refinery. Comparing rich gas volumes indicates that given the Iran LNG refinery capacity, more than 294 mcm/d (equivalent to 5 refineries similar to South Pars refineries) would be added to NIGC’s refining capacity. The investment needed for building new refining units in the previous scenarios is estimated at $15 and $18 billion, respectively. With the assumption of no quantitative or qualitative loss in the feedstock of South Pars refineries and enhanced recovery at 9 South Pars refineries, ethane production from gas refineries in the country would reach 8,800 tonnes a year. Based on the same assumption, liquid gas production by gas refineries is estimated to reach 10 million tonnes, annually.

What potential or practical MOUs are underway concerning gas exports or talks?

Natural gas trading is underway by exporting gas to Turkey and Iraq, bartering gas with Armenia’s electricity, and swapping Turkmenistan gas to Azerbaijan and Nakhichevan. Given Iran’s position as the second largest holder of known gas reserves in the world, as well as its geopolitical and geographical advantages, contracts and MOUs signed with neighboring nations as well as opportunities for natural gas trading and transit; and the plan for Iran to become a gas trading hub have been notified to NIGC. Benefiting from export opportunities would require building the necessary infrastructure in the natural gas refining, transmission, and storage as well as expansion of gas network capacities for boosting gas transactions with regional and transregional parties. Iran’s natural gas exports stood at 9.068 bcm in 2016, which reached 109.986 bcm in 2022. Gas imports stood at 5.868 bcm and 1.495 bcm, respectively in the sam

1-ICOFC Committed to Feeding Gas Refineries

The head of Iranian Central Oil Fields Company (ICOFC), Mehdi Heydari, has said that this company would remain committed to supplying gas needed to feed the Parsian, Fajr Jam, Sarkhoun and Farashband (Phase 2) gas refineries.

Heydari made the remark when he was addressing a meeting on predicting output by ICOFC’s subsidiaries – South Zagros Oil and Gas Production Company (SZOGPC), East Oil and Gas Production Company (EOGPC) and West Oil and Gas Production Company (WOGPC) – in the first half of next calendar year.

Speaking about projects for supplying feedstock to gas refineries, he said: “The sustainable feedstock supply plan for the Parsian gas refinery involves construction of the Homa and Varavi gas compressor stations as well as the Tabnak gas field's separation center, and the accelerated development of Pazanan and Eram fields.”

Regarding objectives sought in these projects, he said: “In the Homa gas compressor station project, 12 mcm/d of gas production would be guaranteed for a period of 12 years while in the Tabnak gas field's separation center, 36 mcm/d of gas would be promised.”

“Production of 7 mcm/d of gas for six years from the Varavi gas compressor station and another 8 mcm/d from the Shanol gas compressor station would be targeted,” he added.

Heydari also said that the Pazanan field would be developed swiftly with a view to producing 15 mcm/d gas that would feed the Parisan gas refinery.

He also said that the Eram gas field would be producing 15 mcm/d after development that would also go to the Parsian refinery.

Touching on gas supply to the Fajr Jam refinery, he said that the planned Kangan gas compressor station would be supplying 30 mcm/d of gas for 15 years, a reconfigured gas compressor station in the Naar field would produce 18 mcm/d of gas for 10 years, development of the SefidZakhour, Haligan and SefidBaghoun fields would guarantee 27 mcm/d of gas while the Gardan and Khartang, once developed, would offer 28 mcm/d.

As far as feedstock for the Sarkhoun gas refinery is concerned, a gas compressor station is planned to guarantee 5 mcm/d of gas from the Sarkhoun field for a period of four years.The Aghar and Dey fields development with respectively 20 mcm/d and 5 mcm/d would serve the second phase of the Farashband refinery.

2-Oil/Gas Deals Worth $14bn Signed

 The CEO of National Iranian Oil Company (NIOC) Mohsen Khojasteh-Mehr has said that more than $14 billion worth of new deals are being struck this calendar year to  19 March 2024 for oil and gas field development.

He added that construction would start on gas compression project in the giant offshore South Pars gas field.

Khojasteh-Mehr said NIOC was tasked with oil and gas production, adding: “NIOC is currently supplying 1 bcm/d of gas, the bulk of which going to domestic and business sectors with the rest going to power plants and industries.”

He said that under the 13th administration, production growth accelerated to reach economic growth and bring about prosperity and generating revenue.

Noting that all projects undertaken by the Ministry of Petroleum and NIOC have been for production growth, he said: "Under the 13th administration, oil production increased 60%, leading to increased crude oil and gas condensate exports three times more than the former administration."

“Under this administration, gas production also grew 70 mcm/d, generating higher revenue for the country,” he said.

“Gas recovery from the joint South Pars gas field, which accounts for 70% of national gas production, has crossed 700 mcm/d,” said Khojasteh-Mehr.

The NIOC chief said Iran was exporting all the crude oil remained after feeding its oil refineries. “Thanks to NIOC’s initiatives, under the 13th administration, in addition to traditional markets, we have achieved new markets for exporting oil and our crude oil and gas condensate exports are continuing.”

“Under the 13th administration, $21 billion has been invested incompleting half-complete projects and embarking on new oil markets. These projects have either come online or we have signed agreements for them,” he said.

Khojasteh-Mehr said that the most important projects were gas production from SP11 and inauguration of SP14. He said development of SP11 was a breakthrough and a source of honor for the Islamic Republic.

3-GOGPC Output Up 30 tb/d

Gachsaran Oil and Gas Production Company (GOGPC) has seen its oil output by up 20 tb/d under the 13th administration, the company’s CEO said.

Gholam Reza Kamali added that GOGPC had experienced an overall 12-fold increase in its oil production.

He was addressing a meeting on five-year forecasts for oil and gas production from GOGPC-run fields. Ali Reza Daneshi, the CEO of National Iranian South Oil Company (NISOC), was in attendance.

Kamali said GOGPC was mainly producing crude oil, natural gas, liquefied petroleum gas (LPG) and naphtha.

GOGPC covers an area 350-400 km long and 150 km wide, lying in the four provinces of Fars, Khuzestan, Bushehr and Kohguiluyeh& Boyer Ahmad.

“GOGPC is seated in the city of Gachsaran. It is one of the main subsidiaries of NISOC, running 23 oil fields, 16 of which being operational. We have also 857 wells and 105 separators connected thereto,” said Kamali.

“As a specialized and strategic company in southern Iran, GOGPC is steering onshore oil exports, feeding petrochemical plants and refineries. Therefore, it is known as the heart of Iran's oil,” he said.

Kamali said that following the policies adopted by the 13th administration, GOGPC has managed to meet its oil and gas production targets.

Hassan Shahrouei, the CEO of Karoun Oil and Gas Production Company (KOGPC), also said that KOGPC had increased its oil and gas production grow 67% and 23% respectively year-on-year.

4-SPGC Flare Gas Capture Project Going Ahead

The head of engineering at South Pars Gas Complex (SPGC), Mehdi ShafieiMotahar, said the facility’s flare gas capture project was going ahead normally. He added that the project, which is expected to be completed by August, would reduce flare gas emissions by about 1,200 mcm a year at 12 refineries.

He said that the project was 25% completed, adding that it would bring flare gas emissions down from 8.7 mcm/d to 5.3 mcm/d. It has already been cut to 7.4 mcm/d, he added.

“Following orders from the President and Minister of Petroleum, pursuant to decisions instructed upon SPGC, we undertook the three phases of purchase, construction and auction bid for flare gas,” he said.

“Fortunately, good measures have been undertaken in the purchase, construction and auction bid phases of flare gas capture,” said Shafiei.

He added that the objectives set for nine refineries had been met within a year, noting that three refineries were still dealing with challenges. 

Flaring persists to this day because it is a relatively safe, though wasteful and polluting, method of disposing of the associated gas that comes from oil production. Utilizing associated gas often requires economically viable markets for companies to make the investments necessary to capture, transport, process, and sell the gas.

Flaring may be required for safety reasons. Extracting and processing oil and gas involves dealing with exceptionally high, and changeable, pressures. During crude oil extraction, a sudden or dramatic increase in pressure could cause an explosion. Although rare, industrial accidents involving oil and gas can result in destructive, dangerous, and long-lasting fires that are difficult to contain and control. Gas flaring allows operators to de-pressurize their equipment and manage unpredictable and large pressure variations by burning any excess gas.

Flaring is, of course, totally unproductive and can be avoided far more easily than many other sources of greenhouse gas (GHG) emissions. The gas could be put to good use and potentially displace other more polluting fuels, such as coal and diesel, that generate higher emissions per energy unit.

5-South Pars to Sustain Butane, Propane Exports

The project for constructing a propane/butane pipeline from the refineries of Site 1 of South Pars to the jetties of Pars Petrochemical Port is a major project undertaken by Iran Gas Engineering and Development Company (IGEDC).

BijanGorjian manager of Iran Gas Trunkline 9 (IGAT-9) at IGEDC, said once operational, this installation would help sustain butane and propane exports from South Pars.

Underlining the necessity of implementation of this project, he said: “Since the current propane and butane pipelines stretching to the petrochemical export jetty have experienced technical faults, construction of that line was prioritized in order to preserve the sustainability of exporting these two products.”

Regarding the timeframe set for the project, he said: “This project is scheduled for 15 months, but studies are under way to cut it down to 10 months, which depends on numerous factors. The project is now 8% completed, which is ahead of schedule.”

Sirvan Amini, manager of LPG pipeline project, also said that the pipelines currently carrying propane and butane to the petrochemical export jetty have experienced some technical glitches after long years of operation.

He said that the -41 C temperature of propane and -6 C temperature of butane running through these pipelines had resulted in in the freezing of the coating of these pipes.

Apart from that, he added, the manual handling of the valves and increased steam due to fluid heating would increase the loading time from 22 hours to 6-7 days, causing $40,000 in daily fine.

“Cutting exports would be impossible and this zone is one of our country's export chokepoints. Therefore, repairing propane and butane export pipes is highly significant and the main objective of building new pipeline is that the current pipelines would be decommissioned before being commissioned anew after repair. Therefore, this project is necessary for export stability,” he said.

Highlighting the complexity of the new project, he said: “The number of stakeholders in this corridor represents one of the challenges we are faced with. Any activity requires arrangement with several divisions and units and permits are required for daily activities. Another challenge we are faced with is the high number of pipelines in this corridor, which prioritizes the HSE issue and subsequently more sensitivity.”

6-€70mn Invested in Refining Sector

CEO of National Iranian Oil Refining and Distribution Company (NIORDC) Jalil Salari said €70 million worth of agreements have been signed for expanding infrastructure in the refining industry.

He said that three or four refining companies had developed their own technical knowhow for catalyst production, compressor manufacturing and upgrading fuel oil quality.

“In terms of exporting technical and engineering services by knowledge-based companies, nearly €50 million worth of services has been transferred overseas,” he added.

Salari expressed hope that partnership between the public and private sectors would help finance and accelerate development projects in the refining industry.

He said knowledge-based companies had to increase their share of refining projects, adding: “We have so far performed successfully in empowerment. What has been neglected is the issue of commodity chain. If we can develop a commodity chain in the oil sector and bring all knowledge-based companies under the same authority, we can benefit from the capacity of all of them and more important events would take place.”

“In some NIORDC offshoots, many people are developing knowhow, but we have to engage them in partnership with knowledge-based entities. Under the aegis of such partnership, will we be able to create job opportunities and benefit from the potential of academic elites,” he said.

"We've identified the commodity chain, which would be an economic measure to all refining facilities,” he added.

Salari said that financing was a major challenge to knowledge-based companies, adding: “Although we have already a financing instrument, we are looking for an upgraded model to let knowledge-based companies cooperate with our colleagues and we can implement the shareholding model based on intellectual property, in which case both would receive technical savvy.”

He said that legal measures had been adopted in line with knowledge-based economy, adding: “At this stage, it is necessary to accelerate the assessment regime of projects, particularly first-time manufacturing ones. We have requested that the Office of Vice President for Science and Technology and the Ministry of Petroleum accelerate their assessment process. We need IRR 50,000-100,000 billion in investment.”

Salari said: “Some projects have been introduced to upgrade the quality of 9 oil refineries in the country. They would need more than $6 billion in investment.”

Value Chain Completion to Boost Petchem Output

Iran’s petrochemical industry makes up 28% of regional and 2.75 of global petrochemical production capacity.The CEO of the National Petrochemical Company (NPC), Morteza Shah-Mirzaei, saidIran exported $16 billion worth of petrochemicals to world markets during the last calendar year to March 2023. Surplus products are exported as the petrochemical industry’s priority is to supply local needs with a view to value chain completion.

Currently, a variety of petrochemical projects are planned as part of the value chain completion scheme.

Today, 550 grades of petrochemical products are produced in Iran and supplied to domestic and foreign buyers and customers. Currently, 68 petrochemical projects are being implemented in Iran, and in line with the policy of completing the value chain, 20 national self-sufficiency projects have been defined to help complete the value chain.

In line with identifying and introducing investment opportunities, NPC has conducted a comprehensive study of the petrochemical industry value chain and presented opportunities for value chain completion within the framework of 20 packages in the five propylene, methanol, ethylene, aromatic, and butylene chains with a rated capacity of 3.8 mt. The investment envisaged for these projects is estimated at $4.2 billion, which would earn the country $4.4 billion annually.

Hassan Abbaszadeh, NPC’s director of planning, has said these projects are aimed at providing feedstock to holdings, some of which have taken the initiative for investment in this sector.

Furthermore, value chain projects have been introduced to the private sector so that they would have the necessary information on the value chain projects and decide about investment.

Currently, 36 heads of agreement have been signed with a capacity of 5 million tonnes a year. Seven more projects are waiting for investors.

Most petrochemical projects in the value chain document belong to the propylene chain. Two methionine projects are awaiting permits as they have already found investors. One would be operated by the Abadan Petrochemical Co, a subsidiary of Amin Petroleum & Petrochemical Investment Co. (Tappico),and the Maroun Petrochemical Plant, near the Abadan refinery which would feed it. Negotiations have also been held with a prospective investor for an acrylonitrile project. In the methanol chain, except for a silicon project, all projects have found investors.

Most projects envisaged in the value chain have investors. Some have made good progress like SAP (super absorbent polymer), methylamine, and acetic acid projects. As permits have been issued for them, they are likely to become operational before the 13th administration ends its term in office.

Macro Projects

Iran’s petrochemical production capacity was 84.5 mt a year when the 13th administration took office. It now stands at 92 mt. Abbaszadeh has forecast the petrochemical industry production capacity to reach 110 mt by the end of the administration’s mandate. Investment in the petrochemical industry has totaled $100 billion under the 13th administration.

In addition to implementing value chain projects in the petrochemical industry, there are plans underway to guarantee sustainable feedstock supply to petrochemical plants. For this purpose, some macro projects are envisaged. A case in point is the Persian Gulf Bidboland flare gas capture and enhanced ethane recovery from 18 phases of the South Pars gas field. The Persian Gulf Bidboland refinery can process 56 mcm/d of flare gas, which can earn the country $1.5 billion in annual revenue. Flare gas capture in West Karoun would also prevent the flaring of more than 6 bcm of gas a year.

The enhanced ethane recovery from South Pars is envisaged through modifying the operating conditions of some equipment of the refinery. Each refinery would account for an extra 1.3 mt a year of ethane, which would be valued at $35 million annually, or $315 million for the entire 18 phases. That would also be useful for the environment and value chain completion in the downstream industry.

Last July, an MOU was signed by the Ministry of Petroleum and an Iranian company for enhanced ethane recovery from 9 refineries of South Pars. Minister of Petroleum Javad Owji said South Pars was producing 700 mcm/d gas, which had increased after the long-delayed SP11 came online. Currently, 66% of the ethane produced at South Pars refineries is recovered, while the rest is fed into the national trunkline and burnt.

4 Petchem Plants

In line with the LPG value chain development and propylene production, the permit has been issued by the Ministry of Petroleum for 13 propylene dehydrogenization (PDH) projects. Alay Mahestan, Tadbir, and Pars have been selected as prioritized PDH projects. The main issue with PDH projects is licenses and related permits.

Over recent years, due to the higher growth of propylene demand than ethylene, low-cost feed, low investment rate, internal rate of return, and high conversion rate, the use of direct processes such as PDH and methanol to olefin and propylene (MTO/ MTP) has increased compared to indirect methods of propylene production.

Currently, the nominal capacity of propylene production in the country is about 1.2 mt, which does not meet the 4 mt needs of industriesfor propylene and its derivatives. On the other hand, the propylene value chain imports last calendar yearyielded about $1 billion, which is equivalent to the investment and operation cost of "two PDH units" with a capacity of 500,000 tonnesto produce propylene and its downstream chain.

The Alay Mahestan petrochemical project involves a propane-to-propylene unit, which would then produce polypropylene from propylene. This project can produce 450,000 tonnes and is currently 17% completed.

Propane-to-propylene is also envisaged at Tadbir Petrochemical Plant’s PDH unit. The investment envisaged for this project is $1 billion. The Pars Petrochemical Plant’s PDH project is another one that would produce 600,000 tonnes of propylene and then 500,000 tonnes of polypropylene.

The Kian petrochemical project is another project in the oil and gas value chain. It is one of the development projects in the 2nd and 3rd jump. Phase 1 of this project includes olefin units (ethylene, propylene, benzene, butadiene) and polyolefin (variations of heavy polyethylene), while Phase 2 includes propylene oxide units, ethylbenzene, styrene monomer, and exo alcohols. Its olefin unit has been designed by BASF, Linde, Uhde, and Mitsubishi. Its environmental standards are the latest while it has a simultaneous benzene and propylene value chain. The Kian plant would produce feedstock for polyolefin, polystyrene, polyols, acetone, phenol, polyester, dying industry, PTA, and lubricants. Construction was started on this project in March 2021.

Investment in Mahshahr Petchem Zone, Win-Win Game

Mahshahr Special Economic Petrochemical Zone (MSEPZ) is Iran’s second petrochemical hub. It is now offering opportunities for investment in its second phase of development. Morteza Shah-Mirzaei, the CEO of the National Petrochemical Company (NPC), has said that Iran would always remain open to foreign investment to develop its petrochemical industry. From 1997 to early 2022, around $19 billion was invested in MSEPZ, $1 billion of which pertained to infrastructure preparations. Payam Barzegar, the CEO of MSEPZ, has said that 114 companies were active in the zone. According to him, 39 projects are underway there, whose completion would add 5.6 million tones to MSEPZ’s production capacity to bring it to about 13 mt/y.

Iran’s petrochemical industry is among the highly efficient ones and attractive to investors. It has experienced significant growth in the past two decades. By supplying more than 550 grades of products, it is set to cross 92 mt/y by March. The petrochemical output capacity would go beyond 180 mt/y by the end of the 8th National Economic Development Plant. Given the global demand for high-value petrochemical products, NPC’s approach in Iran is focused on value chain completion. From now on, petrochemicals will be produced based on the consumer market and value chain completion. Given Iran’s top oil and gas reserves as well as the country’s access to sufficient feedstock, high seas, specialized manpower, and well-equipped production units; petrochemical projects are technically and economically viable. That would prevent raw materials sales. Iranian petrochemical projects are mainly located in the three hubs of Assaluyeh, Mahshahr, and Makran. The projects are yet to come online in Makran. Expectations are high that some projects in this nascent petrochemical zone will become operational before the 13th administration bows out.

$45bn Sold

The Bandar Imam Petrochemical Plant (BIPP), located in Mahshahr, recently celebrated its 50th anniversary. Former service workers and Japanese nationals who used to work there were in attendance. The agreement for the construction of BIPP, initially named Iran-Japan Petrochemical Company (IJPC), was signed in 1973 between NPC and five Japanese companies led by Mitsui. The project was 73% completed when the 1979 Islamic Revolution occurred. Construction resumed after the revolution, but the imposed war in 1980 led to the pullout of Japanese contractors, which brought the project to a total halt. After the war ended in 1988, construction was resumed. NPC engaged in talks with Japanese partners, but the latter pretexted the economic non-viability of the project to quit work there in 1989 despite seven rounds of talks. IJPC was then renamed Bandar Imam Petrochemical Company (BIPC).

NPC hired top European petrochemical firms and Iranian contractors and experts to renovate the plant, heavily damaged during the imposed war, under a five-year plan. The aromatic unit, the last reconstructed unit, was relaunched entirely by Iranian engineers and contractors with no foreigner having been involved.

Addressing the ceremony, Shah-Mirzaei said: “Although the Japanese failed to cooperate with us with the toughening of sanctions, we continue to welcome foreign investment in this industry.”

Sepahdar Ansari-Nik, CEO of BIPC, said the company is planning for the coming five decades. He cited sustainable production, transition to green industry, digital transformation systems, corporate agility, and social responsibility as the new perspectives of BIPC. BIPP’s production capacity has increased by 3 mt/y with 9 products to be added to its product mix. Therefore, BIPP would be supplying 40 varieties of products.

Over the past five decades, BIPC has sold $45 billion worth of products, earning the country $22 billion in hard currency revenue. Over this period, it has purchased $21 billion worth of liquid feedstock and naphtha from the National Iranian Oil Company (NIOC) and the National Iranian Oil Refining and Distribution Company (NIORDC). However, BIPP activities are not limited to this sector. Since its establishment, it has financed $5 billion worth of national petrochemical projects.

Ansari-Nik said 9,500 persons were continuously working for BIPC, adding it has had a great contribution to local employment.

MSEPZ Output Capacity up 5.6 mt/y

Of a total of 114 companies operating in MSEPZ, 21 companies are involved in upstream and midstream activities and the rest are involved in downstream work, including service and environmental activities.

This hub’s production capacity stands at 7.5 mt/y. Currently, 39 various upstream, midstream and downstream projects are underway at MSEPZ. Their full implementation with a $5 billion investment would add 5.6 mt/y to MSEPZ’s production capacity. Barzegar has said the projects in favor of value chain completion would be prioritized.

The second phase of MSEPZ is also expected to be arranged. Initial feasibility studies began in 2016, but they did not pay off. The 13th administration renewed efforts for both phases. Fourteen investment packages have been drawn up in this sector. Any investor willing to invest can start work within a month. It has also to be added that due to the stable profitability of the petrochemical industry, some major holdings and their subsidiaries are interested in investing in the second phase.  

MSEPZ officials have said the second phase would result in the creation of more jobs and the attraction of more investment. Moreover, it would prevent raw materials sales and end imports.

The feasibility studies conducted for the second phase pay special attention to investment opportunities, feedstock supply, local market needs, and global market perspectives. It has also to be taken into consideration that NPC’s priority in MSEPZ is that investment be made in the upstream sector so that necessary infrastructure would be established for feedstock supply. However, Barzegar has said the ideal would be coherent development of the upstream and downstream sectors in this zone.

51 million ton Petchem Projects

In parallel with identifying opportunities for investment and introducing them, NPC has facilitated using them in the future. It has also conducted a comprehensive study on the value chain of the petrochemical industry and introduced opportunities for investment in 20 packages involving the five chains of propylene, methanol, ethylene, aromatics, and butylene with an overall nominal capacity of 3.8 mt/y with an investment of $4.2 bn with capacity to supply $4.4 billion worth of downstream products. These projects have been introduced as national self-sufficiency projects based on the holdings’ access to necessary feedstock. Some holdings have offered to invest in this sector, for which NPC is issuing permits. So far, 36 heads of agreement have been issued with a capacity of more than 5 mt/y. Seven more projects are awaiting investment.

Currently, the seventh development plan is underway. Sixty-six petrochemical projects with an annual capacity of 51 million tonnes are under construction. The investment required for these projects is estimated at $35 billion, of which $10 billion has been provided. Once operational, these projects would bring the petrochemical production capacity from 92 mt/y in the current calendar year to 110 mt/y by the end of the term in office of the 13th administration. The total investment in this industry amounts to $85 billion. If we add the planned $15 billion investment to it, it would reach $100 billion by the end of the 13th administration’s mandate.

IP-136/7

Iranian Catalyst Exports Racing Ahead

A campaign launched a couple of years ago for domestic production of widely used Iranian catalysts, has reached the phase of export. Many knowledge-based and technological companies have gone through economic toughness and overcome financial and legal obstacles to become self-sufficient in production and export. In other words, these companies have managed to win a significant share of the regional and global catalyst markets, while supplying domestic needs. One case in point is Sarv Oil and Gas Company (SARVCO), which was established in the early 2000s and is now a leading manufacturer of widely used catalysts in the petrochemical industry.

Mehran Rezaei, the director of engineering and research at SARVCO, says SARVCO is a private company involved in producing a variety of catalysts for the oil, gas, petrochemical, and steel industries as well as launching GTL units. He said that SARVCO has managed to produce all necessary catalysts used in the process of production of methanol, ammonia, and urea, catalysts for converting ethylene in the petrochemical industry and downstream industry’s catalysts for transforming methanol to formaldehyde. He said SARVCO is currently a leading Iranian catalyst producer with an international reputation.

“Like many other knowledge-based companies, SARVCO has been seeking to supply part of its products to foreign markets. That is why over the past two years, arrangements have been made for presence in Russia’s market,” he said.

Rezaei said the only catalyst used in the world for ethylene production is acetylene hydrogenation, which a few foreign companies can produce. For 35 years, he said, Iranian petrochemical plants were importing it.

The acetylene hydrogenation catalyst is a strategic catalyst topping sanctioned commodities. However, SARVCO has managed to manufacture this catalyst and bring it to commercial production, thereby neutralizing sanctions.

Production of this catalyst began in February, said Rezaei, adding that this valuable commodity has been delivered to a commercial company for industrial use.

Noting that the petrochemical industry requires the ability to produce ethylene and synthesis gas, he said: “SARVCO has now managed to produce both gases to enable the petrochemical industry to become self-sufficient.”

“The bulk of the catalyst market has, in recent years, been monopolized by Indian and Chinese companies. Petrochemical companies had to pay heavy costs for the purchase of catalysts, but now the bulk of catalyst needs has been supplied,” said Rezaei. He added that SARVCO had already exported more than $20 million worth of catalysts to just Russia.

otivation for Production Chain Completion

Rezaei said Iran’s first commercialized catalyst, i.e. primary reforming catalyst, was used by the Shiraz Petrochemical Plant’s ammonia unit in 2007. “After producing that catalyst, we were motivated to produce more catalysts to complete the production chain,” he added.

Highlighting the unequal rivalry in catalyst production and market supply, he said: “Foreign manufacturers used to sell us products at high prices while purchasing our products at low prices. That is why we tried to take control of the catalyst production chain,” he said.

Rezaei said SARVCO’s catalysts were being used by the Masjed Soleiman, Morvarid, Bushehr, Hengam, and Apadana petrochemical plants. He added: “Three of SARVCO’s products have been supplied on international markets like Russia, Iraq, and Venezuela since three years ago”.

“We exported 1,163 tonnes of catalysts to Russia, 192 tonnes to Iraq, and 267 tonnes to Venezuela. The trio has ordered another 1,000 tonnes,” he said.

Rezaei said SARVCO saw its dream come true by exporting Iranian catalysts on global markets, adding: “Our current production capacity is 4,000 tonnes. However, after studying local and global markets, we felt we needed to boost this capacity. Therefore, we launched our 6,000-tonne plant.”

“The least we have achieved over two decades has been to manufacture 30 varieties of widely-used catalysts, half of which are destined for export,” he said.

Rezaei said SARVO was supplying methanol catalysts to Zagros, Aryan Methanol, Marjan, Bushehr, Apadana, and Shiraz petrochemical plants as well as about 95% of the ammonia catalyst needs of ammonia units in the country.

Rezaei said efforts were underway to expand activity in local and foreign markets, adding: “The state sector has stepped into this market and absorbed much-specialized manpower. But since there is no intellectual property regulation in effect in Iran, it could not be prosecuted.”

“This unequal market affects the private sector and in case state-owned companies outnumber private companies in the catalyst market, private companies will face problems. Therefore, we are worried about any further presence of state-owned companies in the catalyst market,” he said.

Iran has, in recent years, moved to support knowledge-based companies to produce catalysts. Self-sufficiency has not been achieved in the production of some catalysts, but Ministry of Petroleum officials have noted that full self-sufficiency is drawing closer. Minister of Petroleum Javad Owji has promised that catalyst production would be focused upon to meet industrial needs. Petrochemical Research and Technology Company (PRTC), which is tasked with producing Iranian catalysts, possesses 92% of the technical know-how of 85% of catalysts used in Iran. All domestically produced catalysts are of high quality and up to standards. Some CIS and South American governments have formally called Iran to share its technical savvy for catalyst production with them. A knowledge-based Iranian company exported about $9 million worth of catalysts to Russia in the first half of the current calendar year.

Iran has made such breakthroughs even though its petroleum industry remains subject to tough sanctions.

Oil Market Sentiments and Changing Fundamentals in 2024

ereydoun Barkeshli

Energy Market Analyst

International oil markets are dynamic and sentiments can shift frequently. Market fundamentals evolve as well, but often over a long period. When the COVID-19 lockdowns ended in late 2020, oil markets adjusted over one year and with lots of planning and sacrifices by OPEC and the alliance. Nevertheless, short to medium-term market sentiments and fundamentals are interconnected. In the meantime throughout 2023, global oil markets underwent significant recalibration due to the post-pandemic global and geopolitical tensions, notably the war in Ukraine and the Zionist Regime war on Gaza and Palestine. Markets had not anticipated any of those events. However, the international oil market has attuned to unexpected events during the last several decades.

These events led to the realignment of benchmark crude oil prices to pre-war and COVID-19 levels and a reshuffling of global trade flows. OECD economies experienced a slowdown in economic performance and lower oil demand, while there was some increase in upstream investments reaching the highest level since 2015. It is noteworthy that the investment patterns in downstream sectors were not in harmony with the upstream. Over 64 percent of additional refining capacity was added in the Global South.

China and its impact on the global oil markets is a major ingredient of any market analysis. In 2023, China witnessed a surge in oil consumption due to the impact of lifting COVID-19 restrictions, allowing a period of robust growth in oil and energy demand in the country. However, most forecasts; including my presumption suggest a lower demand forecast for 2024. Figures vary from the OPEC Secretariat and the International Energy Agency. IEA has estimated some 500 tb/d increase in Chinese demand, while OPEC Secretariat and other reliable sources such as BP suggest a surge of Chinese demand by about 1mb/d. It is also important to note that China is a net refined oil product country and as such, its demand is not to be considered consumption.

The deceleration in demand for China’s imports is attributed to the Chinese normalization of economic activities and strategic shifting towards renewable sources of energy and higher efficiency.

Crude Oil Market Dynamics

Crude oil market growth is continuously expanding due to several factors such as booming transportation, rising population, and expanding petrochemical industries that are vital for the production of most items needed for the expansion of renewable energies. Petrochemical products are essential for agricultural and green technologies. This trend is a constant and ever-growing pattern in every society.

By 2050, the world’s population is expected to grow by 2 billion, to 9.7 billion from the current 7.7 billion. This means that the additional population requires extra public and private transportation, and household and personal grooming products such as detergents, plastics, and cosmetics. These factors are expected to enhance crude oil demand, supporting the global crude oil market on a high growth path.

As the global oil market continues to grapple with several impactful factors influencing the trajectory, the examination of oil markets reveals a complex landscape shaped by diverse elements. The complex nature of geopolitics plays a pivotal role, frequently causing fluctuations in oil prices that resonate across the world. However, concurrently, the meticulous analysis of oil supply versus demand offers critical insights into the sector’s stability and prospects.

Within this complex and intricate web, OPEC emerges as a formidable and significant influence over market dynamics and price stability, while the ascent of emerging economies introduces fresh challenges and opportunities in the field of the international petroleum industry. Most possibly, a missing link here is the absence of a dominant international petroleum exchange that helps to facilitate the task of market stability and price management by the Organization of Petroleum Exporting Countries.

Nevertheless, as for fundamentals, the market is not going to run out of surprises. As seen in 2023, Iran’s oil output production and exports took most traders by surprise. Other surprises on the supply side would possibly be from Venezuela and Libya.

Shale Oil Factor

When discussing oil market fundamentals, it is impossible to ignore shale. In 2023, the United States accounted for 70 percent of the shale oil global output. It produced 8.1 mb/d of shale oil against 3.6 mb/d back in 2010. Shale oil production led the country to the highest oil production in history. Shale led the country from a net oil importer to a net oil exporter. Shale oil changed the US geopolitical and geo-energy map. Washington turned away from the Middle East and ignored the region only to return after the Zionist Regime’s act of genocide in Gaza.

It is interesting and strategically important that other countries such as China, Poland, and Germany are also eagerly advancing towards shale oil exploration and production. The United States closely guards the spread of shale technologies to other parts of the world to preserve its dominance in the shale business.

I am not going to speculate on the Peak Oil Shale era. A couple of eminent market watchers believe that shale oil peak oil is too close and that it will not go anywhere higher than the 2023 peak. However, it is better to be more cautious. Some major multinational oil companies have started moving into shale and as such we may better wait for transparency.

Geopolitical Factors

The international oil market is often perplexed by geopolitical events. Tensions between countries, specifically those with high oil reserves and production or those with a huge volume of imports, send shocks through pricing mechanisms and oil normal fiscal performance. The impact is sometimes lasting, for better or worse but sometimes short. Owing to complicated alliances and rivalries amongst producers and consumers and the interplay of major world powers, often abundant supply capacity with the producers does not help curb shocks and sudden price movements.

An obvious case in mind is about Middle Eastern oil and trade. China buys three-quarters of its oil from the Middle East. India also imports the bulk of oil requirements from the Middle East. Therefore, both countries need to see peace and stability in the region. In between, the United States of America does not buy oil from the region. As such, a disturbed and unstable Middle East sounds perfect for the US.

It is noteworthy that currently oil reserves and production are geographically more diverse than a decade ago. Given the two major conflicts in Ukraine and the Zionist Regime’s atrocities in Gaza, there is still a relatively mild geopolitical risk premium on the market and price patterns. I presume that the current geopolitical risks on prices are in the range of $3 to $ 5 per barrel. There is however a potential risk that the hostilities might spread to other parts of the Middle East. The Zionist Regime’s brutality is limitless and the United States is trapped in the Zionist Regime’s wars.

The year 2024 is exceptional in that there are elections in some 35 countries. The countries on the election calendar of 2024, make up for almost half of the world population. Some of these countries play important roles but move cautiously to avoid any fallout from their actions toward the war-affected regions. India, Pakistan, the United States, and Mexico are among the countries that must face their elections. As for the US, they need to support the Zionist Regime overwhelmingly even though they know that it has no strategic objectives in Gaza and is in the business of blood counts. Other countries such as India and Pakistan could do better to mediate and help a ceasefire but are hesitant. As such once there is a spread of war in the region the geopolitical risks premium can go much above despite the availability of excess capacity with the producers.

Africa is now a more powerful player in oil production than before. Nigeria, Angola, Gabon, and areas in the Horn of Africa and Central Asian Republics are playing a pivotal role in the global energy markets. International oil companies have entered Africa and South America in a big way. Angola recently left OPEC+ in a bid to show the green light to the international oil companies to invest in that country. Diverse patterns of oil reserves and production help to appease the strategic significance of oil as a vital asset.

Ongoing exploration projects and current drilling activities inject a steady stream of supply. However, these projects are consistently measured against the steady demand growth in most parts of the world.

In this context, energy policies and consumption behavior contribute to investment and capacity built up within OPEC and the alliance. Environmental policies of major oil consumers within the OECD are engineered to curb oil production and influence prices.

OPEC+ in 2024

The decision taken by OPEC and the alliance on November 30 of last year has begun to prove right. By right, I mean the best decision given the situation in the world oil markets during the last quarter of 2023.

As for 2024, it is crucial to note that the year will probably be a half and a half in the sense that there is not going to be a rosy condition during the first half and particularly the first quarter of the year when demand is seasonally weak. It is important to note that the output cuts advocated by OPEC+ started in January 2024. As such market will not price it in for their price calculus earlier than the medium to end of the first quarter.

An important factor that OPEC and the alliance took a close look at, is the level of inventories and stocks built up by major consumers. As for the United States of America, the country has virtually abandoned the SPR policy and doctrine that was decided and agreed upon by the IEA. The US was a major net importer of crude oil back in the 1970s when IEA was formed and compulsory Strategic Petroleum Reserves (SPR) was adopted. Today the country is a net exporter and does not find it necessary to hold SPR. America’s SPR is not for strategic objectives but as a commercial cushion against possible price fluctuations.

European countries need SPR because they are net importers of crude, products and gas. Ukraine’s war accelerated the EU’s vigor toward SPR and added further to their oil stockpiles. Here’s an important factor that divides the Western Atlantic alliance in so far as oil and energy policies and doctrines are concerned.

Having said that, to the best of my take, the IEA has somehow lost its relevance to the international oil market in so far as the OECD is concerned. The pivot role of the Paris-based International Energy Agency has been to monitor the supply and demand balance to make sure that member countries have always enough strategic crude stock pileups for emergencies. The idea was designed and developed by the US. As such for the IEA to stay relevant in the current international oil market, they keep producing controversial statistics to undermine OPEC Secretariat data and oil market reports. Market realities have proved that OPEC statistics and findings are much better accommodating to market realities since 2015.

It is important to refer to inflation in major consuming economies, as well. There’s a powerful correlation between inflation and the price of oil. OPEC and the OPEC+ constantly want to know how much is the value of their oil exports in real terms and inflation-deducted. It is also relevant for consumers. Oil as a major source of energy is used not only to fuel the economy but for the production processes of many goods from the auto industry to petrochemicals, construction materials, or agriculture. As such high oil prices affect the economy and the level of inflation in consuming countries, too.

It is also important to note that the emergence of renewable sources of energy has contributed to the elevation of the level of inflation in major industrial economies. Renewables such as solar and wind have improved their cost competitively in recent years. Other sources of so-called green hydrogen energy are not competitive and they increase production costs of goods and services that are produced using those sources of energy. This was discussed during the COP28 Summit in Dubai in late November and Early December 2023. OPEC argued that the current relatively high level of inflation in the Western economies has nothing to do with the price of oil, but because of the additional costs burden of the consumers who have opted to use energies other than oil and gas. Having said that, one significant factor that would impact oil prices in 2024 lies in the likelihood of the US Federal Reserve policies and runaway inflation due to money priming culture of Federal Reserves on the eve of every election cycle in demonstrating an image of positive performance of the current occupant of the White House.

Oil and International Trade

The global value of crude oil and refined products reached $ 3 Trillion in 2023. This is up 10 percent from 2022. It is estimated that the total value of crude oil will reach $1.8 Trillion in 2024. This volume of the trade of a single commodity is 16.4 percent of the total global trade (World Bank Annual Report, 2023). These figures indicate that crude oil will remain a dominant player and market indicator for a long time to come. No single commodity generates such a huge volume of transactions and money flow at any time in the documented history of trade. European countries earned a total of €359 billion from tax on sales of petroleum products in 2022. This volume is nearly three times bigger than what Saudi Arabia earns from its total crude oil exports in one year.

EU’s tax on petroleum has nothing to do with the price of oil. The European tax regime is fixed and decided by the government’s fiscal regime. As such when international oil prices are low, EU governments collect the same amounts of taxes. As such lower world oil prices, do not encourage additional consumption for end users. This is different from say China and India where at higher oil prices, they reduce the amount of taxes on petroleum refining and distribution chain.

he decision taken by OPEC and the alliance on November 30 of last year has begun to prove right. By right, I mean the best decision given the situation in the world oil markets during the last quarter of 2023.

As for 2024, it is crucial to note that the year will probably be a half and a half in the sense that there is not going to be a rosy condition during the first half and particularly the first quarter of the year when demand is seasonally weak. It is important to note that the output cuts advocated by OPEC+ started in January 2024. As such market will not price it in for their price calculus earlier than the medium to end of the first quarter.

An important factor that OPEC and the alliance took a close look at, is the level of inventories and stocks built up by major consumers. As for the United States of America, the country has virtually abandoned the SPR policy and doctrine that was decided and agreed upon by the IEA. The US was a major net importer of crude oil back in the 1970s when IEA was formed and compulsory Strategic Petroleum Reserves (SPR) was adopted. Today the country is a net exporter and does not find it necessary to hold SPR. America’s SPR is not for strategic objectives but as a commercial cushion against possible price fluctuations.

European countries need SPR because they are net importers of crude, products and gas. Ukraine’s war accelerated the EU’s vigor toward SPR and added further to their oil stockpiles. Here’s an important factor that divides the Western Atlantic alliance in so far as oil and energy policies and doctrines are concerned.

Having said that, to the best of my take, the IEA has somehow lost its relevance to the international oil market in so far as the OECD is concerned. The pivot role of the Paris-based International Energy Agency has been to monitor the supply and demand balance to make sure that member countries have always enough strategic crude stock pileups for emergencies. The idea was designed and developed by the US. As such for the IEA to stay relevant in the current international oil market, they keep producing controversial statistics to undermine OPEC Secretariat data and oil market reports. Market realities have proved that OPEC statistics and findings are much better accommodating to market realities since 2015.

It is important to refer to inflation in major consuming economies, as well. There’s a powerful correlation between inflation and the price of oil. OPEC and the OPEC+ constantly want to know how much is the value of their oil exports in real terms and inflation-deducted. It is also relevant for consumers. Oil as a major source of energy is used not only to fuel the economy but for the production processes of many goods from the auto industry to petrochemicals, construction materials, or agriculture. As such high oil prices affect the economy and the level of inflation in consuming countries, too.

It is also important to note that the emergence of renewable sources of energy has contributed to the elevation of the level of inflation in major industrial economies. Renewables such as solar and wind have improved their cost competitively in recent years. Other sources of so-called green hydrogen energy are not competitive and they increase production costs of goods and services that are produced using those sources of energy. This was discussed during the COP28 Summit in Dubai in late November and Early December 2023. OPEC argued that the current relatively high level of inflation in the Western economies has nothing to do with the price of oil, but because of the additional costs burden of the consumers who have opted to use energies other than oil and gas. Having said that, one significant factor that would impact oil prices in 2024 lies in the likelihood of the US Federal Reserve policies and runaway inflation due to money priming culture of Federal Reserves on the eve of every election cycle in demonstrating an image of positive performance of the current occupant of the White House.

Oil and International Trade

The global value of crude oil and refined products reached $ 3 Trillion in 2023. This is up 10 percent from 2022. It is estimated that the total value of crude oil will reach $1.8 Trillion in 2024. This volume of the trade of a single commodity is 16.4 percent of the total global trade (World Bank Annual Report, 2023). These figures indicate that crude oil will remain a dominant player and market indicator for a long time to come. No single commodity generates such a huge volume of transactions and money flow at any time in the documented history of trade. European countries earned a total of €359 billion from tax on sales of petroleum products in 2022. This volume is nearly three times bigger than what Saudi Arabia earns from its total crude oil exports in one year.

EU’s tax on petroleum has nothing to do with the price of oil. The European tax regime is fixed and decided by the government’s fiscal regime. As such when international oil prices are low, EU governments collect the same amounts of taxes. As such lower world oil prices, do not encourage additional consumption for end users. This is different from say China and India where at higher oil prices, they reduce the amount of taxes on petroleum refining and distribution chain.

1-Eni Envisages 2nd Gas Hub in Indonesia

Eni plans to establish a new gas production hub around last year’s 5-Tcf GengNorth discovery in the North Ganal PSC offshore East Kalimantan.

CEO Claudio Descalzi discussed the company’s plans in a meeting with Indonesia’s President Joko Widodo.

Aside from the 1-Bcf/d hub at Geng North in the northern Kutei Basin, Eni is looking to extend plateau output at 750 MMcf/d from its existing facilities in the southern offshore Kutei Basin, supported by the ongoing development of the East Merakes and Maha fields and near-field exploration.

2-Floating Solar Energy Pilot in Norway

Fred. Olsen 1848 has deployed a 50 x 50-m, 124 kW floating solar pilot offshore Risør, Norway, which it expects to complete this spring.

The project is a testing ground for improving the components of the BRIZO floating PV technology, which is designed to follow the motion of the ocean while withstanding local offshore conditions.

The floating solar modules, which can operate in inland waterways, nearshore or fully offshore, can move individually within a pre-tensioned rope mesh, preventing collisions, and the company claims. The design addresses the challenges posed by wave and wind loads as the environmental forces are distributed through the mesh and mooring system.

BRIZO is accompanied by an operations and maintenance catamaran. Next-phase work will focus on the foundational design work to support a 3-MW system for commercial application.

3-Drilling in Dorado Area Offshore Australia

Santos and Carnarvon Energy are working to secure a rig for a next phase of drilling in the Bedout sub-basin offshore Western Australia.

The two companies are partners in the Dorado and Pavo field developments, and they are looking to drill near-field prospects in exploration permits WA-435, 6, 7 & 8-P to increase the resource base close to the planned offshore infrastructure and gas targets to support the Phase 2 gas development.

They have identified five prospects: Ara, Wallace, Wendolene, Starbuck, and Pavo South. According to Carnarvon, recent studies have focused on productivity in the northern blocks, particularly around the gas-prone Ara prospect.

Timing for the next round of exploration drilling in the Bedout exploration permits will depend on future regulatory approvals, the company added, in particular the new consultation process relating to the preparation of environmental plans, along with drilling rig availability and customary joint venture approvals.

4-NFE to sell LNG produced in Mexico

The US Customs and Border Protection has issued a ruling confirming that the transportation of LNG produced at New Fortress Energy’s (NFE) FLNG facility offshore Altamira, Mexico, by non-US qualified vessels, would not violate the Jones Act.

As a result of this ruling, NFE is now able to sell and deliver LNG produced at its FLNG facility offshore Mexico to US locations, including Puerto Rico.

“We are extremely pleased to receive this ruling for our FLNG facility since it not only supports one of the company’s largest projects but also supports the people of Puerto Rico,” said Wes Edens, NFE chairman and CEO.

5-Afentra Updates Drilling Programs Offshore Angola

Afentra has issued an update on development plans for Block 3/05A offshore Angola, in which the company has a minority (5.33%) interest.

An extended production test continues at the Gazela Field, where operations were restored last March with the Gaz-101 well averaging 970 bbl/d through the remainder of 2023.

The test is designed to help determine the long-term resource potential and the development concept for the Caco-Gazela discovery. In addition, a seabed survey will be acquired over the Punja discovery to support planning for a future gas pipeline as part of a potential zero-flaring wellhead platform development.

Gaza War Impact on Oil Market

Global energy markets are closely watching the ongoing invasion of the Zionist regime in Palestine. The future remains uncertain. With the outbreak of the new round of attacks on 7 October 2023, severe concerns were raised about the possible escalation of tensions and its regional spillover to the extent that it might disrupt the oil and gas supply by Middle Eastern nations. Global concerns might have eased thanks to a diplomatic offensive launched to contain the crisis, which has subsequently spared energy markets any new shock, at least so far. However, the possibility of the involvement of other parties in the war is not ruled out, in which case, energy markets and the global economy would experience chaos.

The international economy has, over recent years, been exposed to a variety of challenges and suffered irreparable damage. While global markets had yet to recover from the shock of the COVID-19 pandemic, which exposed them to the biggest shutdown in 2020, the war between Russia and Ukraine broke out, affecting the supply chain of many raw materials, minerals, and strategic products such as energy carriers. In the meantime, the outbreak of a new war in the Gaza Strip, which has stoked unrest in the Middle East region, has posed threats to the main pillars of the economy, particularly in the energy sector and maritime and air transit. In addition to the direct and indirect expenditures of war, if it expands with the involvement of regional or international parties, much more dire consequences should be expected,because an expansion of conflict would mean more challenges at the geographical and geopolitical levels that can have devastating consequences.

War and Economy

Traditionally, war is considered one of the biggest threats to the economy of any country because it affects and sometimes paralyzes economic activities such as tourism, travel, trade, logistics, construction projects, energy production and transmission, and industries among other sectors. Furthermore, war can disrupt the business of large and small-sized companies and force them to escape the consequences of military conflicts to preserve their capital or, in the best conditions, stop their business activities.In addition, wars led to the exclusion of young laborers from the labor market because most of them would be dispatched to the front lines. Therefore, war disrupts the micro and macro levels, as well as the loss of material and human resources.Wars do not only affect the countries that are directly involved in the military battle, but depending on the geographical extent, theyalso have a significant impact on the strategic commodities market and the international supply chain, as well as the countries’ contribution to the international economy. In such a situation, it is important toprepare to deal with the consequences of war.

Mideast Tensions

Currently, the world economy is facing many challenges due to the escalation of tension in the Gaza Strip. The impacts of these challenges have reached the global economy in different ways. For example, the occurrence of direct threats to the stability of global energy resources, especially oil and natural gas, due to the geographical proximity to energy reservoirs in the Middle East region, as well as existing threats to regional and global sea and air transportation, are considered as the economic consequences of the Gaza war.

Accordingly, the ongoing war in the Gaza Strip has caused global concerns about the possibility of affecting oil and gas production in the Middle East and, as a result, disrupting global energy markets. This new development has added geopolitical risks to global crude oil and gas pricing.After the start of this war, the price of Brent reached $92 per barrel on October 18, an increase of more than $7 from the previous month. The same applies to the gas market. In such a way the spot prices of LNG in Asia increased by more than 48% and reached about $19 per million BTU on October 18 while this price on October 6 was around $12.8 per million BTU.

One of the direct impacts of the war in the Gaza Strip, which has had a significant impact on energy supply, is the suspension of supply by the Tamar gas field, whose production reached about 10.25 bcm in 2022. That would halt a 1.5 bcm/y of gas supply to top markets, which would cause challenges to European nations that have been deprived of Russian gas following the start of the war on Ukraine.

In addition to natural gas markets, oil markets have not been spared the fallout from the Gaza war that has boosted concerns about the possible direct damage to crude oil facilities in the Middle East. About 33.3 mb/d, or 32.8% of world total production, is likely to face risks in case the war goes on. Furthermore, the continuation of the war in Gaza is likely to jeopardize shipping via regional waterways. That explains why the escalation of tension rapidly raised oil prices in the first week to bring Brent prices to above $91 a barrel, while it was hovering around $85 just before the war.

Perspective

Any extension of the Gaza war will likely inflict two severe shocks on energy markets.

Supply shock: Such shock would first and foremost fundamentally change global oil or natural gas production. As history has shown, such shocks are the outcome of conflicts or geopolitical changes that give rise to political changes at the regional and international levels. For instance, the outbreak of the Russian war on Ukraine in February 2022 partly stopped Russia’s gas supply to Europe, which led to a 148% jump in European gas prices year-on-year. The first Persian Gulf War in 1990 also caused a record 53% surge in oil prices for three months (August-October 1990).
Demand shock:Such shock is associated with high energy consumption under the impact of global economic cycles. A case in point is the 2008 global financial downturn that largely contracted economic activities and slashed oil prices by 102% year-on-year. Such shocks often occur when demand for oil or gas experiences a strong growth or supply and demand grow significantly together. That is exactly what happened during the COVID-19 pandemic when oil prices were down sharply due to economic turmoil in the world. Therefore, it could beargued that dynamic supply or demand would determine how energy price shocks would occur.

Generally speaking, any extension of war can stir up oil markets and bring prices up to $100 a barrel. But in case a war destroys some production and transport installations the prices would easily exceed $100 a barrel, which would consequently destabilize the global economy as inflationary pressure would reach its maximum to pave the way for the economy to slip into a complicated period of depression as oil and gas prices go up simultaneously.

Sino-US Economic Rivalry in 2024

The US and China have experienced tensions intermittently under both Republican and Democratic presidents despite expanding their ties over recent years. For decades, China was a major issue in US presidential elections. Using tough language against China is known to be a major tool in the hands of presidential hopefuls. However, US presidents have been divided on China. While Bill Clinton saw China as a “strategic partner”, his successor George W. Bush saw it as a “strategic rival and not a partner”. President Barack Obama was also committed to encouraging growing China to fulfill its responsible role. He pursued the policy of turning to Asia in a bid to contain China’s influence in East Asia. Donald Trump also pushed ahead with containing China by launching a trade war in a bid to expose it to political pressure and economic sanctions. Joe Biden did not reverse his predecessor’s policies and continued to consider containing China. Now, the prospect of Sino-U.S. rivalry in the current election year in the US and the possibility of Trump’s return to power is highly significant.

Over recent years, China has tried to take key measures in the economic, energy, technological, military, political, and security sectors in a bid to pursue a multilateral approach at the international level, which would upgrade its position while impacting US power.

Economic Strength

One of the most important strategies of China at the international level is the powerful pursuit of its economic growth. China’s economic growth was improved by economic reforms and its gradual opening to foreign investment since the late 1970s. The abundant population and low-cost labor together with easy conditions for investment and foreign activity in that country made it gradually become one of the major industrial and commercial centers of the world at the end of the 1990s.After the global financial crisis of 2008, while developednations were dealing with the losses caused by this crisis, China became a key driver for world economicgrowth. Over the past three decades, the country has become a major global center for the production of goods that are unaffordable in developed countries due to high labor costs.

Therefore, the US trade war with China, which started in 2018 and intensified economic competition between the two countries, affected not only the relations between Beijing and Washington but also the global economy. For this reason, many consider the US-China trade war to be the most important geopolitical competition of this century. Especially, in addition to the trade war, both sides benefit from existing political differences and tensions. China’s Xi Jinping can take advantage of having won the US enmity to strengthen his power and justify his Maoist inclinations. The same goes for US presidents. In addition, a foreign enemy has always pushed the Americans to unite. It has to be kept in mind that for US citizens, China is systematically violating human rights, jeopardizing global security, and threatening their nation both economically and commercially.

What can significantly impact China’s economic rivalry this year would be Trump’s election win. If elected president, Trump would continue to impose tough tariffs on China. It is important to recall that during his term in office, Trump adopted policies that none of his predecessors since the 1930s had ever done toward a trading partner. He mobilized the US public opinion against China for election purposes, while on 17 November 2018 imposing 10% customs duties on China’s $200 billion in imports, calling on China to reconsider its unfair trade procedures. Therefore, Trump’s presidential comeback would intensify the US-China economic rivalry because any escalation of the Washington-Beijing trade war would largely disrupt the global economy, which would be more impactful than during the first term in office of Trump. Trump’s firm determination to escalate trade tensions with Beijing heralds emerging economic risks this year. If elected president, Trump would impose a 10 percent tariff on nearly all $3 trillion in annual imports from all countries, including China.

Trump’s plans for trade with China are highly devastating. He has always taken pride in the tariffs he imposed on China as his signature achievement. Now he intends to toughen the same policy in case he can win the presidential race. However, Trump’s decisions would not harm only China; rather they can inflict damage on US consumers and companies. Bringing an end to normal trade with China would inflict $1.6 trillion in costs on the US economy, which would also axe more than 700,000 jobs. If Chinese imports are suppressed at this level, US companies would lose billions of potential customers. If Trump imposes heavier tariffs on imports from China, US companies would lose their market share in China and many third-worldcountries.

Outlook

A scrutinized review of the history of China-US relations shows there have been longstanding differences between them both politically and economically that have stoked up tensionsthat have impacted Beijing-Washington ties as well as the entire globe.

For the Americans, China’s strategy of soft diplomacy and balanced ties with international blocs in the world has weakened Washington’s standing, clearing the way for the emergence of influential poles at the international level. Needless to say, the US is afraid of China’s economic projects like “Made in China 2025” and “One Belt, One Road”, which are aimed at developing China’s technology and winning new markets. Therefore, it would stick with its economic rivalry with China.

Iran Futsal Needs More Infrastructure

AsgharQahremani is a famous futsal player in Iran. He was employed by the Ministry of Petroleum owing to his international titles. For years, he played as a goalkeeper for Iran’s futsal and he is currently training futsal goalkeepers.

In an interview with “Iran Petroleum”, Qahremani said futsal has been overshadowed by football which is internationally more popular.

The full text of the interview he gave to “Iran Petroleum” is as follows:

When did you first feel you were interested in futsal?

When I was an adolescent, there was no futsal in Iran. Like teenagers of my age, I played football. I used to live in the Majidiehneighborhood of Tehran. I remember well that the Sabalan pitch was one of the best soccer grounds in the country. I watched football teams play there, particularly the famous Yad-e Majidieh Memory. But I started playing football professionally when I joined the MehrShemiran team as a goalkeeper. Then, I joined the “Keshtirani” football club. It was in 1993 that I joined the futsal team to bid for the Ramadan Cup. I earned titles in futsal then. I was with the Fath team. Along with Babak Masoumi, Ahmad Pari Azar, KiumarsKazemi, and Reza Rezaei, I was invited to join the national futsal team. I was chosen as the best goalkeeper of the Ramadan Cup for three consecutive rounds.

What motivated you to become a goalkeeper in football and then futsal?

Every time I watched a football match, one of the most attractive and exciting posts was goalkeeping. One key reason might have been the movements, figures, and gestures to save. Everything had to be done in breathtaking conditions. Apart from my interests, I was also talented in goalkeeping. I was often placed on the main list, particularly for futsal. During my presence in the national futsal team, I participated in Asian matches four times. I was also present in the World Cup twice. I remember well that Iran’s team shined at Brazil's World Cup Futsal matches. I was 37 and it was my last presence as a futsal player. During all these years with the national futsal team, I attended many tournaments alongside top stars and we managed to achieve international success on many occasions. After that, I served as a trainer of futsal goalkeepers alongside the team coach, which largely helped me learn many points about goalkeeping.

Which teams were you playing with?

As a futsal player, I was with different teams like Islamic Azad University, Persepolis, and Shahr-e Aftab. Currently, I am the trainer of goalkeepers in the national futsal team.

How did you join the petroleum industry?

I joined the Ministry of Petroleum in 2004. It was exactly when the Ministry employed national champions. There was no futsal team at the ministry. We mainly played for the national team or cooperated with the sports affairs division.

Could you tell us about your cooperation with the Ministry of Petroleum’s Football School?

I was a trainer at the Football School for several years. Good talents were identified. That is in the past, the petroleum industry did not have founding teams in various disciplines. But thanks to HadiAfshari, director of physical exercisesat NIOC, founding teams were reactivated and the Football School became complementary to pioneering teams. Football training sessions are held in the Tehransarsports complex and from time to time notices are issued for would-be participants. Since the Iranian Offshore Oil Company (IOOC) had a football school, it was decided that the talented children of IOOC staff be identified and introduced to the school. The same process is underway for other petroleum industry companies.

How likely is success in absorbing talents for pioneering futsal teams?

Unfortunately, NIOC currently doesn’t have a futsal team. Futsal is a different sport. In our country, like every other country, many families prefer their children to play football. On the other hand, in addition to infrastructure issues, there are differences from a financial angle that may dissuade those interested in this discipline. For instance, the contract signed with a professional football goalkeeper is significant, while it is meager in futsal. Therefore, financial conditions may be highly influential. Futsal infrastructure is also an issue. We have now nearly 13 million persons interested in futsal, but there is no futsal school to help identify those competent for this discipline. However, thanks to a positive view of this discipline at NIOC, following talks with Hadi Afshar, a futsal school is planned to be established although no date has been set.

How Iran Oil Consortium Took Shape

Agreements have been a key element of the petroleum industry ever since this sector was created, yielding impacts in various political, economic, social, and cultural domains. A year after the overthrow of Premier Mohammad Mossadegh by the United States and the United Kingdom in the 1953 Iranian coup d'état, the British and American governments began pressuring the reinstated Shah of Iran into negotiations with Britain over the ownership of the Anglo-Persian Oil Company.

The dispute was finalized by incorporating a 25-year international Oil Consortium Agreement of 1954, dividing the aforementioned 50% ownership to foreign companies as follows. Forty percent to be divided equally (8% each) among the five major American companies; British Petroleum to have a 40% share; Royal Dutch/Shell to have 14%; and CFP, a French Company, to receive 6%. A year later in 1955,the US government ordered the 5 US companies to transfer 1% of their 8%, to several smaller companies because these companies had complained that “they were left out”.

The Agreement was signed on 31 August 1954 before being cleared by the National Consultative Assembly on 21 October 1954, and seven days later by the Senate. The duration of the agreement was 40 years, including an initial 25-year term, which would be renewed three times, each for five years. It contradicted the principle of nationalization of the petroleum industry in terms of sovereignty on national resources, duration of the contract, and profit-sharing.

The agreement was adopted in 51 articles. The main points from some articles were as follows:

Article 3 held that consortium members would establish an E&P company and a refining company that would serve as operating companies in line with the Netherlands law. These companies shall undertake to have this agreement signed by operators. They should be registered in Iran and each company’s Board should comprise seven members, two of whom would be chosen by NIOC.

Article 4 empowered the E&P company to carry out exploration, drilling, production, extraction, and recovery of crude oil and natural gas and operate distillation systems, process oil and gas, store oil and its products, and prepare it for shipment. Moreover, the refining company would be authorized to process crude oil and natural gas. As long as the agreement is in effect, operating companies’ rights will remain in full force and effect. Operating companies shall hire non-Iranian staff only for the posts that Iranians could not fill due to insufficient knowledge and experience. All necessary plans would be arranged and adopted in consultation with NIOC for industrial and technical training for Iranians to replace foreign staff.

Article 6 requires NIOC to deliver all inventories of warehouses, materials, machinery, and mobile devices; as well as transport vehicles and drilling tools to operating companies.

Article 7 sets conditions for the allotment of gratuitous land to operating companies for local distribution, which would otherwise pay rent.

Articles 13 and 14 authorize operating companies to receive commissions from commercial companies for exports and from NIOC for local consumption as set out hereunder: prospecting and production companies: 1 shilling per cubic meter of delivered oil; refining companies: 1 shilling per cubic meter of refined crude oil.

Article 17 assigns NIOC the task of non-industrial operations including supply of provisions, arranging for restaurants and eateries, clothes shops, technical and industrial training, social welfare facilities, and similar services.

Article 18 holds that the crude oil NIOC sells to commercial companies shall come under wellhead ownership of abovesaid companies.

Article 20 requires consortium members to supply 17.5 mcm of crude oil in 1955, 27.5 mcm in 1956, and 25 mcm in 1957. After the third year, the output should be balanced with the supply-demand flow in the Middle East.

Articles 22 and 23 require each commercial company to pay the equivalent of 12.5% of the announced price for crude oil to NIOC, which would be authorized to receive crude oil in return for paying in full or in part.

Article 28 says except for income taxes levied on commercial and operating companies, consortium members, commercial companies, their affiliates, and operating companies shall be exempt from any government tax. Nor shall their dividends be subject to any taxation.

Article 34 authorizes the entry of necessary materials and devices for operating companies as well as medications and hospital equipment without having to receive any license while benefiting from exemption from taxation and customs duties.

Article 35 holds that commercial companies and their affiliates shall be exempt from export duties or taxes in their purchases.

Article 37 empowers the Ministry of Finance to fully enforce this Agreement.

Article 41 stipulates in Sub-Article B that no legislative or administrative measure shall modify the terms of the agreement or disturb its performance, noting that any modification or termination shall be subject to agreement between the parties thereto.

Articles 42 and 43 focus on the settlement of disputes that may arise between the contracting parties, recommending direct talks in the first place. But if no result is achieved, a reconciliation committee is recommended, and finally, the case shall go to arbitration.

Article 48 notes that the Persian and English texts of the agreement are equally authentic, but in case of any dispute, the English text shall prevail.

Article 49 sets the duration of the agreement for 25 years plus three 5-year renewal periods.