Iran Oil & Gas: New Chapter for Cooperation

Iran’s oil and gas industry is witnessing a sensitive period in history. The National Iranian Oil Company (NIOC) hosted “Transformation in Investment and Development in Upstream Oil and Gas Sector,” not only symbolizing massive capacities in this industry but also sending a clear message to domestic and foreign investors: Iran is open to international investment and technology.

During the event, more than 200 investment opportunities worth about $135 billion were introduced; a unique chance for investors looking for high-yield markets, massive reserves, and managed risk. Iran enjoys an exalted standing in the energy sector thanks to its 158 billion barrels of liquid hydrocarbon and 34 tcm of natural gas reserves. That, along with Iran’s geopolitical position, becomes attractive to investment.

Minister of Petroleum Mohsen Paknejad has repeatedly said investment in Iran’s oil and gas industry is free of restrictions as long as professional obligations and standards are respected. That, coupled with strategic changes in the awarding of projects, indicates Iran’s firm determination to transform its energy industry.

Iran is required by its national development plan to bring its crude oil production capacity to 4.58 mb/d and its natural gas output capacity to 1.34 bcm/d. These objectives could not be achieved unless sufficient capital and technology are absorbed. So far, 16 IPC agreements have been signed for developing 23 oil and gas fields for $27 billion, 9 of which are underway for $13 billion.

Iran’s focus on investment, production, and structural transformation is proof of its readiness for a more active role in the future of global energy.

It is high time that big decisions were taken to stabilize Iran’s standing in the coming decades.

$135bn Investment Up for Grabs in Oil Sector

A national event was held on April 22 on transformation in investment and development in the upstream oil and gas sector. In attendance were First Vice President Mohammad Reza Aref, Minister of Petroleum Mohsen Paknejad, senior officials from National Iranian Oil Co. (NIOC) a group of MPs, CEOs of banks, representatives of capital market and chambers of commerce, ambassadors, representatives of foreign companies, Iranian E&P companies, oil and gas industry associations and companies, and private sector actors and investors.  

During the event, opportunities for investment and financing in the sector of flare gas capture, fast-built processing units’ construction, gas compressor stations building, water making projects, pipe-laying, crude oil storage tanks, smart pigging, electricity generation and transmission and efficiency, and logistics were presented.

Minister Paknejad said more than 200 opportunities for investment and financing were presented, worth more than $135 billion.

“The investment opportunities have been presented concerning a wide spectrum of projects, including development of 100 oil and gas fields, innovate projects in flare gas capture, building processing units, trunklines, compressor stations and even smart pigging,” he said, adding that solutions and incentives would be provided for facilitating investment in a bid to spare investors any challenge.

Openness to Talks

Paknejad introduced new incentives and financing packages, saying an oil guarantee fund would be set up to support investors in this strategic industry.

“We are ready for negotiations with the private sector about the type of contracts,” he said.

Referring to the fact that the event was focused upon “investment”, “production” and “structural transformation”, he said: “The Ministry of Petroleum has thus far signed 16 IPC contracts for developing 23 oil and gas fields for more than $27 billion. Nine contracts, valued at $13 billion, are underway, and the rest are close to finalization.”

The minister also said agreements had been signed for gas compression at the massive offshore South Pars gas field with a $17 billion investment, adding: “We hope that this agreement would take effect soon so that its implementation would begin in partnership with local contractors.”

Under the 7th National Economic Development Plan, said Paknejad, oil production is planned to reach 4.58 mb/d and gas production to hit 1.34 bcm/d, both requiring investment.

No Restrictions

Asked about the presence of American companies in Iran’s petroleum industry in case Tehran and Washington reach an agreement, Paknejad said: “We have no restrictions on using foreign investment and engaging international companies involved in the oil and gas sector, provided that they comply with obligations and conditions.”

“That is a general rule. We don’t wait for the result of the talks. There are favorable potentialities in the country for absorbing technology and investment. To use such potential, we need to exercise synergy and facilitation. The problems can be resolved definitely by looking inside. That is what we believe in in the petroleum industry.”

Paknejad also said that the Russian-Iranian Business Council would sign a final statement about its expert-level meetings, whose minutes would be announced later.

Innovative Models

Vice President Aref said, with the second-largest natural gas reserves and third-largest oil reserves, the upstream oil and gas sector in Iran is a key parameter of global energy equations.

“The Islamic Republic of Iran is ready to present attractive investment packages, innovative partnership models, international guarantees, and special privileges to clear the way for major investors’ involvement with key oil and gas projects. We are seeking financial investment and favor sustainable strategic partnerships based on mutual long-term interests,” he said.

Political Will

Noting that the oil and gas sector is an economic and investment advantage in Iran, Aref said: “Investment in the upstream oil and gas industry chiefly involves developing oil and gas fields, exploration blocks, flare gas gathering, building pipelines, storage tanks, compressor stations, water desalination facilities and optimization projects among others.”

He said the 8% economic growth rate envisaged in the 7th Plan would be possible by using domestic financial potential and transparent and profitable mechanisms in various sectors, including oil and gas.

“Under the 7th Plan, by transforming Iran into the regional center of energy exchanges, gas exports and imports should increase respectively 40 bcm and 20 bcm/y. Realizing the objective of oil and gas industry development would require $110-120 billion in investment, the bulk of which should be provided through domestic and foreign resources,” he added.

Aref said enhancing oil and gas production capacity and upgrading refineries and related technologies are top priorities of the 7th Plan.

Under the present circumstances, the Ministry of Petroleum finances its investments by tapping the National Development Fund of Iran (NDFI), signing oil deals, and issuing bonds. Of course, Iranian banks have become active in this sector over recent years.

Speedy Investment

Hamid Pourmohammadi, head of the Plan and Budget Organization (PBO), touched on the necessity of presenting incentives to investors, saying the rate of return on investment would be increased to 23% while investors would also benefit from surplus revenue, not to mention the process of contracts would pick up speed.

He said the Economic Council recently adopted an investment decision, adding: “In the current calendar year, named Investment for Production, the internal yield of projects would increase from 14-15% to 20-23% to offer more attractiveness to investors. Furthermore, in financing the projects, NDFI’s facilities rate would be raised by 2%.”

He also said that tax concessions would be applied to the oil and gas sector within the framework of Article 20 of the 7th National Development Plan.

“These concessions can add to motivation for investment, particularly in underprivileged areas. The 14th administration is trying to facilitate the granting of these concessions to be applied directly,” he added.

Financing Guideline

The strategic value of these opportunities goes beyond the volume of investment and constitutes the main advantage of these packages in designing new tools of design, contracts, and facilities, which are presented to reduce risk for investors, accelerate the return of capital, and make projects more transparent.

In line with this approach, the guideline for financing upstream oil and gas agreements was unveiled. Adopted by the National Financing Council last October, the guideline is the consequence of months of efforts, consultation, and meetings between NIOC, the banking system, the Ministry of Economy and Finance, PBI, and E&P companies.

Under this guideline, NIOC-certified investors can benefit from a variety of advantages for financing upstream projects. A variety of tools, including a performance bond certificate based on future production, a certificate based on debts falling due or not, and a commodity deposit certificate or a crude oil and gas condensate delivery draft.

Minister Paknejad said the diversity of the contracts’ mix for the private sector can allay investors’ concerns about the restrictions of NIOC contract types.

“IPC agreements and public-private partnership contracts, along with the new financing guideline, would clear the way for developing joint and independent fields,” he added.

During the ceremony, the first performance bond certificate valued at $104 million was issued for financing development projects of ” Dana Energy” in the Abadan, West Paydar, and Sohrab fields.

Investment Concession Package

A 10-point investment concession package aimed at developing the upstream oil and gas industry in Iran was unveiled. The package was recently adopted by the Economic Council to facilitate signing and implementing upstream oil and gas contracts with a view to realizing the objectives set out in the 7th Plan for the purpose of increasing crude oil production capacity to 3.8 mb/d and natural gas production capacity to 1.34 mcm/d.

The package comprises sweetening upstream contracts, upgrading production from oil and gas fields, as well as aggregate production above estimates enshrined in contracts.

Oil Guarantee Fund

Minister Paknejad announced the signing of a memorandum of association between shareholders of the Petroleum Industry Guarantee Fund (PIGF) with a €300 million capital and the potential to issue letters of guarantee up to $6 billion.

The fund has been designed jointly by NIOC, banks, Iran Energy Exchange (IRENEX), and E&P companies to support investors in upstream projects.

He also said a new financing instrument – Petrocrowd – had been developed to gather private investment in the petroleum industry.

PIGF is expected to support financing oil, gas, and petrochemical projects. It is acting within the framework of production and infrastructure financing regulations. It has 20 key stakeholders: Bank Parsian, Bank Tejarat, Bank Refah Kargaran, Bank Sina, Bank Shahr, Bank of Tourism, Bank Mellat, Bank Melli, MAPNA E&P companies, Dana Energy, Pasargad Energy Development Co. (PEDC), Persia Oil and Gas Industry Development Co. (POGIDC), Sina Energy, SeaLand Engineering & Well Services, Maroon Karan Co., Petropars, OIEC, IRENEX, Iranian Oil Industry Ventures (IOIV), and NIOC.  

The idea behind PIGF is to issue letters of guarantee in both upstream and downstream petroleum industry projects and support active companies for more effective access to the capital market. Investment in financing instruments associated with oil, gas, and petrochemical projects lies within the purview of PIGF.

Contract Terms

Hamid Bovard, CEO of NIOC, said that based on the recent decision by the Economic Council, petroleum industry contracts would be signed within six months. He added that the decision was made in line with instructions from the Supreme Leader on shortening the time until contracts are signed.

Noting that in absorbing investment, the rate of return on investment would vary between 20% and 23%, he said: “Furthermore, favorable financial packages have been developed for attracting investors, including tax exemptions. The idea has been to modify financing guidelines and make the mix of contracts more flexible to facilitate

continued cooperation between the local private sectors and foreign companies.

Bovard said arrangements had been made for 50 oil fields and as many gas fields.

64 Oil Fields

Reza Aqebati, director of engineering and development of NIOC, said on the sidelines of the event: “Currently, we have 283 oil and 138 gas reservoirs in addition to 200 oil and gas fields. We presented 64 oil fields for development during this seminar, which require $43 billion in investment.”

Noting that the 64 fields would be introduced in the form of 48 packages to would-be investors, he said: “We expect that development of these fields would lift Iran’s oil production capacity by 1.3 mb/d.”

22 onshore and 11 offshore green fields have been introduced to investors. Moreover, 20 onshore and 11 offshore brown fields have been presented,” he added.

Aqebati said: “Within the area run by National Iranian South Oil Co. (NISOC), we forecast that by developing these fields with $14 billion in investment, we would see a 570,000 b/d oil output hike. Moreover, within the area of Petroleum Engineering and Development Co. (PEDEC) and Arvandan Oil and Gas Production Co. (AOGPC), $5 billion in investment would result in a 215,000 b/d output hike.”

Iranian Offshore Oil Company (IOOC) would also see a 287,000 b/d output hike, Iranian Central Oil Fields Company (ICOFC) 122,000 b/d, Pars Oil and Gas Co. (POGC) 50,000 b/d, and Khazar Exploration and Production Co. (KEPCO) 40,000 b/d.

According to Aqebati, NIOC has incorporated a wide spectrum of investments into the packages, adding: “Investors can choose between packages smaller than $100 million, between $100 million and $500 million, between $500 million and $1 billion, and greater than $1 billion.”

“In undeveloped onshore fields, we forecast 5.2 billion barrels of oil in recoverable reserves. With $8 billion in investment, we would see a 334,000 b/d output hike,” he said.

50 Gas Fields

Aqebati also said 35 onshore gas fields had been presented, requiring more than $13 billion in investment.

He said that 14 offshore gas fields have also been introduced, requiring $27 billion in investment.

“The packages of investment presented here are classified under two categories: Khami fields run by NISOC with high pressure and output, and offshore fields run by ICOFC,” he added.

“The packages include 35 projects for 50 gas fields, which would increase national gas production capacity by 500 mcm/d with about $41 billion in investment,” Aqebati said.

He said POGC was expected to see its output increase up to 7 bcf/d with more than $18 billion in investment, while ICOFC would see a 5.5 mcf/d gas output hike with $8.3 billion in investment. 

He said that IOOC can increase its output capacity by investing $9 billion, while NISOC can raise its output by 2 bcf/d by investing $5 billion. He added that AOGPC can invest $200 million to supply an additional 200 mcf/d of gas.

Aqebati said untapped onshore fields are estimated to hold 71 tcf of gas in recoverable reserves with a production capacity of 7 bcf/d. Their development requires $13 billion in investment.

These fields are largely diverse, with their package starting from $50 million. The Bibi Hakimieh, Kavir Kouh, Samand, Shahin, and Karoun fields are cases in point,” he said.

Exploration Potential

NIOC officials introduced exploration projects of the petroleum industry by explaining the latest geological achievements and studies, saying various areas had potential for oil and gas exploration and production.

Mohioddin Javari, NIOC’s director of exploration, offered full details of exploration studies, saying: “Our field of activity includes onshore and offshore exploration studies, including the Persian Gulf and the Gulf of Oman. We have presented a general map of hydrocarbon deposits in the country, indicating significant oil and gas potential in various areas of Iran.”

$6.5bn Oil Output Realistic

Ali Aqa-Mohammadi, the head of the Economic Group of the Supreme Leader’s Office, said: “Under previous administrations, petroleum ministers concluded that 6.5 mb/d oil production capacity would be possible.”

He said that under the 14th administration, an action plan has been adopted to that end.

One key obstacle has been the process of signing agreements, he said, adding: “It took more than three years to sign an agreement, but today, with a modified guideline, increased yield, diversity in financing methods, and different interaction with investors, the path has been facilitated significantly.”

Beta Financing Package

During the event, the Beta financing instrument was unveiled. It is focused on attracting private capital for generative and development petroleum industry projects.

An IOIV initiative, Beta, has been developed for innovation in financing methods and orientation of the existing money stock towards industries with high value-added for economic privatization. Beta has been designed to support petroleum industry projects as well as small- and medium-sized enterprises. It is aimed at facilitating the financing of projects.

A total of 14 specialized panel discussions were held on the upstream sector and three on refining and distribution.

IPC Deals Rate of Return at 20%

The National Iranian Oil Company (NIOC), in conjunction with implementing new economic policies to facilitate the awarding and execution of upstream oil and gas agreements, has recently unveiled 200 investment opportunities. One key feature in the latest economic package is the increased rate of return on investment in IPC deals to 20% in foreign currency. Financial facilities are also envisaged for investors.

Amir Moqiseh, director of investment and business at NIOC, told “Iran Petroleum” that currently, the whole process- from the start of talks to the commencement of construction- lasts only 6-7 months. He also said that the framework for agreements in the new package involves a variety of deals from IPC to EPCF, EPDF, and production sharing agreements.

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

NIOC introduced about 200 opportunities for investment. Which projects are prioritized?

In presenting investment opportunities, the projects associated directly with enhanced oil and gas recovery are prioritized because the main purpose of NIOC was to attract investment and financing to address local needs. The first series of projects pertains to the development of oil and gas fields under various contract frameworks, projects for increasing production from NIOC-run fields. The second series comprises prioritized projects, more specifically development of oil and gas fields, exploration blocks, flare gas capture, compressor stations, processing facilities, and logistics.

Do the introduced projects and packages focus on financing or equipment supply?

We prefer the agreements to be like an investment package. I mean that prospective investors would be responsible for the construction and operation. Naturally, commodity supply is a key segment of the job, and would-be foreign investors are required to partly use local services and commodities under the “Maximum Use of National Manufacturing and Service Potential and Supporting Iranian Commodity Act”. Therefore, in parallel with sourcing necessary commodities, preparations would be made, and incentives would be offered for facilitating the financing of projects. Attracting foreign investment to implement petroleum industry projects is also of high significance, and NIOC warmly welcomes it.

What advantages and attractiveness do these projects have for foreign investors?

The most attractive package that was presented was a new economic package arranged for upstream oil and gas projects that are subject to high-level decision-making organs. The most important element in this package is the increase in IPC rate of return to above 20% in foreign currency, which is attractive enough when compared with local markets and regional rivals. Furthermore, we have considered tax facilities for these contracts, which are certainly among the advantages of our contracts compared with others. Another issue is that the process of signing agreements has been shortened and facilitated. Based on agreement with state bodies, we consider a 6-7-month time lapse from the adoption of the development plan by investors to the start of construction work. These issues are significant for the private sector as well as domestic and foreign investors, giving them assurances for decision-making. Another important point concerning building confidence with investors is transparency in the introduction of opportunities and throughout talks. Therefore, 200 investment opportunities along with necessary technical and economic information for decision-making by investors, including the type of contracts, full description of services, initial estimate of field deposits, and the amount of investment, were presented to enable would-be investors to choose the best opportunity after making a comparison. 

What mechanism have you worked out in the investment projects for the local private sector to rival foreign investors?

We hope that ongoing negotiations for sanctions lift prove fruitful, because the country is undoubtedly suffering from the sanctions. No matter how much we try to maximize domestic financial resources, the potential and need in this area are so great that the presence of foreign investors in the oil industry is essential, both in terms of technology and financial resources, as well as finance and capital. Therefore, by anticipating the presence of foreign investors, the mechanism of these contracts has been designed in a way that is attractive to them. Another point is that in the current IPC contracts, there are conditions and the possibility of foreign investors joining domestic contractors and investors, and the infrastructure for this has been created. In addition to the fact that we have approved a financing policy for upstream contracts, specifically IPCs, the National Finance Council has approved a financing policy that is in line with the financing of the contracts themselves. This policy helps domestic contractors to have a greater share in the contract when facing foreign investors. For instance, previously, if foreign companies entering Iran had a 90% share due to their higher financial strength, the Iranian side’s share was about 10%. But under the new directive, Iranian companies can apply the new policy to provide financing, and have a higher share in the contract and a higher partnership with foreign

parties. Even companies that currently have a contract, in case a foreign investor joins them, it is possible that a higher share will be considered for domestic companies. This will help local companies not to worry about this issue from now on. Also unveiled at the event is the Petroleum Industry Guarantee Fund, which, upon NIOC’s proposal and in partnership with banks and the private sector, will create a platform on which the private sector can rely to finance its projects up to $6 billion. This fund will help a specific sector achieve production goals by accepting oil industry contracts as guarantees.

How will NIOC supervise investors and companies willing to cooperate?

NIOC has been on the path towards maturity when it comes to contracts and the treatment of investors. My predecessors at the NIOC Directorate of Investment and Business made significant efforts to put us in the position where we are today, and we are also making efforts for a better standing. NIOC, the Ministry of Petroleum, and the administration have prepared the necessary legal infrastructure to welcome investors. The infrastructure available in the oil sector today is almost unrivalled. More important than the infrastructure is the mindset of those who intend to be involved in the negotiations and the process of attracting investors. Upon instructions by Mr. Hamid Bovard, CEO of NIOC, 6 negotiating teams have been established so that we can start the work immediately after investors show up. We have also made essential modifications to contracts for the upstream sector and public-private partnerships. Therefore, we are ready to start talks shortly after presenting opportunities and issuing a call for investment in the contracts that do not need negotiations. NIOC is informed of all details step by step.

What types of contracts are envisaged now?

Our upstream contracts follow the IPC model for most fields. We also have EPCF and EPDF contracts. For Caspian Sea fields and one or two joint fields off the Persian Gulf, depending on the capacity enshrined in the 7th National Development Plan, we are ready to negotiate a production sharing agreement (PSA). It is noteworthy that all contract types in the packages are our proposals to investors. Alongside all these interactions, we are even ready to discuss the type of contracts, and we have no restrictions.

Given the necessity of using new technologies, especially in the development and exploration of oil and gas fields, what steps have been taken to introduce new technologies?

We have a package of critical technologies needed by NIOC, including Smart PIG technology, which is one of our essential needs, and the investment opportunity for it was presented at this event. In addition, within the framework of IPC contracts, the proposals submitted must necessarily have a technological aspect, especially in projects submitted by foreign investors. The same package unveiled at the event also includes a provision to encourage investors to use new technologies, stating that if a company can produce more oil and gas with new technologies than foreseen in the contract, it will be subject to incentive payments above the amounts mentioned in the contract. In addition to encouraging domestic and foreign investors to produce more, this encourages them to use new and state-of-the-art technologies.

In conclusion, how do you see the current status of NIOC and its outlook in interacting with domestic and foreign investors?

Although we currently have upstream and ongoing investment contracts, most of which are with Iranian companies, in light of our potential, we can reach a more desirable point. In the Ministry of Petroleum and the Planning and Budget Organization, an approach has taken shape that we cannot manage projects and upstream development alone, and that we need to benefit from the capabilities of the private and non-governmental sectors. Today, NIOC is open to various markets and capabilities for more partnerships so that it can create wealth for future generations through upstream development. With this approach, we hope that a significant opening will be created for the further prosperity of the upstream business. On the other hand, the private and non-governmental sectors should trust and direct their capital towards productive businesses so that, after the overture in international relations, this interaction will boost.

ICOFC Offers $13.5bn Investment Opportunities

The director of investment and development at Iranian Central Oil Fields Company (ICOFC), Shirin Mohajer, has announced 25 investment packages worth $13.5 billion in oil and gas projects. In an interview with “Iran Petroleum”, she said that once all development projects operated by ICOFC come online, Iran would see its gas output grow 100-140 mcm/d. ICOFC administers more than 85 fields scattered in 18 provinces. Its subsidiaries are South Zagros Oil and Gas Production Company (SZOGPC), East Oil and Gas Production Company (EOGPC), West Oil and Gas Production Company (WOGPC), and Sarajeh Operational Area in Qom. ICOFC currently accounts for about 25% of national gas production, which is stored at the Sarajeh and Shourijeh gas storage sites. In the Khangiran area, which is the only gas field in northeast Iran, 65 mcm/d of gas is produced, i.e., 8% of national output, supplying demand from the six provinces of Khorasan Razavi, North Khorasan, South Khorasan, Golestan, Mazandaran, and partly Semnan. These figures indicate ICOFC’s significant role in gas supply and storage.

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

What is ICOFC’s main approach in the current calendar year?

In light of the extent of its administered area and having three main offshoots – SZOGPC, EOGPC, and WOGPC – ICOFC is responsible for the bulk of the country’s gas supply. Undoubtedly, the development of gas fields, sustainable feedstock supply to gas refineries, and overcoming gas imbalance are our priority alongside the development of oil fields for output hike under the 7th National Economic Development Plan. Given the motto chosen for the current calendar year - investment in production - ICOFC, affiliated with National Iranian Oil Company (NIOC), is making its best to enhance its oil and gas production. ICOFC’s projects include gas field development, oil field development, construction of compressor stations, development of gas refineries, building sweetening units, and crude oil storage tanks. They are all aimed at helping increase national oil and gas output and contributing to the preservation of the supply from oil and gas fields, mainly green fields. The development of green fields would help remove gas imbalance and supply feedstock to gas refineries sustainably. ICOFC feeds five gas refineries. In case all these projects come online, 100-140 mcm/d of gas would be added to the national output. Regarding oil fields, I would like to say that some oil fields that have been supplying oil for years need to undergo development for enhanced recovery. We also have fields that are intact and have been recently discovered. Development of these fields would be done within the framework of investment contracts for their assessment, development, and early recovery.

How much does ICOFC’s investment projects add up to?

ICOFC has offered 25 packages of investment, worth $13.5 billion. Some of these packages have already received the necessary permit, including a license from the Economic Council, for $7 billion from the Plan and Budget Organization (PBO). We are in the process of obtaining permits for other investment packages. Would-be investors may choose any of the 25 packages. But the projects that have received an investment license will be awarded sooner.

Which sector is prioritized in your investment projects? Financing or technology import?

One requirement in ICOFC’s investment projects is that bidders are expected to be financially competent and have the necessary technical and construction potential. Field development is mainly done within the framework of IPC agreements under which the investor and E&P company would work shoulder-to-shoulder with one another. These companies often enter upstream contracts in a consortium that is responsible for commodity supply. They are long-term agreements signed with investment companies. In our terminology, an investor is responsible for financing, construction, development, manufacturing, and supply of the commodity as well as development of the field, as long as the agreement is in effect.

What mechanism is effective for overseeing E&P companies and their investor?

There are certainly requirements and oversights mandated by NIOC. There is a clear list of E&P companies to undergo assessment after registration. NIOC releases a list of companies every two years. This assessment is precise, and all necessary information is obtained from applicants until a list of E&P companies is released for one or two years. That pertains to assessing the technical and construction capacity, commodity supply potential, and even financial capabilities of companies. After these phases, an MOU and a confidentiality agreement are signed for the development of a single field or a cluster of fields. Under these MOUs, applicants present their technical and financial proposals after an initial assessment of the fields. These proposals include modalities of implementation of the development plan, identifying necessary commodities and their sourcing, as well as financial estimates. In studying oil field development, some issues like the length of field output ceiling maintenance, output level, and timeframe of implementation, maximum efficient recovery, and applying state-of-the-art technology and know-how are among the points to be taken into consideration in the technical proposals of companies.

How can ICOFC’s projects be attractive for would-be investors?

Oil and gas projects are naturally attractive to a large extent, mainly because of assurances over the return on investment in the short term and having a yield of more than 20%. That explains why NIOC’s projects offer a good rate of return on investment in light of their low construction costs. Although many aspects of development are tied to sanctions lift, it should be noted that we have good projects in terms of contracts and investment, making them attractive to both domestic and foreign investors. Therefore, ICOFC is open to local and foreign investment in its projects. Furthermore, thanks to our experience in implementing IPC and EPCF agreements, we can have good interaction with foreign investors. Under the present circumstances, given NIOC’s initiative for attracting investment, the process of awarding and implementing projects is accelerated and facilitated.

Do the investment packages consider modern technologies?

A segment of field development agreements pertains to transferring in new technologies. In new oil field contracts, an appendix is added to that effect. Depending on the category of project and its construction work, using AI can also be an option for monitoring the status of reservoirs and wells and output levels. Although the agreements initially include generalities about the development of fields, there is an option in the contracts obligating investors to use cutting-edge technology. We don’t restrict companies to using any specific technology and let them use new technologies based on the circumstances, potential, and challenges of their fields. One attractive feature of new oil contracts is the possibility of revising modalities and updating them based on the results obtained from the field for maximum efficient recovery.

Iran, Russia Deepen Energy Ties

The 18th meeting of the Russian-Iranian Business Council (RIBC) was held in Moscow from 23 to 25 April. Iran’s minister of petroleum, Mohsen Paknejad, headed a delegation to Moscow to attend the meeting. He held separate meetings with Russian Deputy Prime Minister Alexander Novak and Russian Energy Minister Sergei Tsivilev. The RIBC’s agreement was signed by Paknejad and Tsivilev. It paves the ground for the development of strategic cooperation in various economic sectors between Tehran and Moscow. An achievement of this round of the RIBC meeting was the agreement signed between the Pediatric Cell and Gene Therapy Research Center of the Tehran University of Medical Sciences and the Federal State Budgetary Institution Hematological Research Center of the Ministry of Health and Social Development of the Russian Federation.

Minister Paknejad said on the sidelines of the meeting that an agreement was reached between Iran and Russia on the modalities of an earlier MOU the two countries had signed for Russia to deliver 55 bcm/y of natural gas to Iran.

Upstream Cooperation

After the conclusion of the meeting, Paknejad said the Ministry of Petroleum would be following up on the implementation of the agreements.

Committees specializing in commercial, economic, financial, banking, transport, customs, industrial, mining, energy, healthcare, agriculture, tourism, and technological sectors were in attendance.

According to Paknejad, the MOUs signed between Iran and Russia would set the scene for enhanced economic cooperation, particularly under the present international circumstances.

Iran and Russia are both major oil and gas producers. That is why they agreed to cooperate in the upstream oil and gas sector.

“Following up on the MOU signed with Gazprom, establishing a gas hub in Iran, gas trading, cooperation in the petrochemical value chain, and swapping petroleum products were among key issues discussed in the meeting,” said Paknejad.

During a press conference, he touched on strategic cooperation in the atomic energy sector, saying: “Joint projects regarding peaceful use of nuclear energy have been agreed upon.”

“Activation of the International North-South Transport Corridor (INSTC) with the focus on the completion of the Rasht-Astara railway as the missing link of this transit route is on the agenda,” he said.

Stressing banking cooperation, he said: “Creating sustainable banking platforms to facilitate trade and investment, harmonizing standards to develop bilateral trade, strengthening trade centers, and developing cooperation in the domains of agriculture, health, and customs were other topics discussed at the meeting.”

“Although the path to other cooperation is open, the main focus of the RIBC meeting will be on realizing the above axes, and success in these areas will be the criterion for evaluating the development of economic relations between Iran and Russia,” he said.

Referring to the endorsement of the Iran-Russia Strategic Cooperation Treaty, he said: “As this treaty takes effect, a new chapter begins in sustainable and balanced cooperation.”

He emphasized overseeing the implementation of the agreements and removal of domestic barriers, hoping that Iran-Russia cooperation would reach a stable and effective level.

$4bn Investment

Regarding the outlook for Russian firms’ presence in Iran’s petroleum industry, he said: “The current volume of trade exchanges between the two nations is far below real potential, and the implementation of the Iran-Eurasia free trade agreement would facilitate Russian companies’ investment in Iran’s oil and gas industry.”

“I believe that the current volume of trade exchanges between Iran and Russia, which totals $5 billion, is far from the economic potential of the two countries. This figure is far from what it must be, and therefore it requires a significant jump,” he said.

Paknejad said the Russian government was determined to be involved in Iran’s energy projects, adding facilities envisaged in joint statements are focused on the energy sector.

“We’ve already got four oil contracts with Russian firms developing seven oil fields in Iran. Their investment totals $4 billion, which we think can increase,” he said.

“By following up on agreements and cooperation, Russian companies would see their presence increase in oil and gas development projects in Iran,” he said. “Iran is ready for closer cooperation with the Russian side in various energy projects, and we hope that this cooperation would yield results with tangible interests for both nations.”

Banking Cooperation

Paknejad referred to banking cooperation between Iranian and Russian central banks in recent years, saying: “Connecting the financial messaging networks and debit card systems of the two countries was an effective step in facilitating investment and enhancing trade.”

“Extending such cooperation to the sectors associated with experience sharing to friendly nations and such international bodies like the BRICS and the Shanghai Cooperation Organization (SCO) may boost the Iranian and Russian economic resilience against external threats and strengthen strategic proximity between the two countries.”

The minister highlighted the key role of RIBC meetings, saying: “This structure prepares the ground for developing cooperation in the energy, financing, banking, investment, transport, agriculture, and nuclear sectors among others.”

“Removing obstacles in the way of cooperation and formulating new solutions for expanding interactions should top the agenda of both public and private sectors,” he said.

Gas Transit Via Azerbaijan

Asked about Iran’s planned gas imports from Russia, Paknejad said: “An MOU had been earlier signed for Iran to import 55 bcm a year of gas (about 150 mcm/d) from Russia. Transmission routes were studied, and agreement was reached on the Republic of Azerbaijan’s territory as the land route.” 

Russia’s gas would be delivered to Iran in Astara, he said, adding: “Arrangements were underway between Russia and Azerbaijan. The second phase of this project will be finalized in the future.”

Oil Market

In response to a question about any necessity for OPEC+ to boost its June oil output, he said: “There are a variety of indicators and factors that may affect oil prices in the market. One of them is the tariffs. There are challenges between China and the US and some other countries in this regard. Another issue to be taken into consideration is the amount of oil OPEC+ supplies on the market. Along with OPEC+ fellow members, we intend to adopt decisions for market stability under the present circumstances.”

“As the president of the 2025 OPEC Conference, I’m in talks with my counterparts from other nations and OPEC+ members to regulate the amount of oil supply,” he said.

Asked if he meant the oil supply would increase, he explained: “I mean some sort of balance, which may mean increase or decrease. There are some other compensatory methods about which OPEC+ has made decisions, and we’re currently stabilizing these decisions.”

Big Jump

Russia’s Tsivilev said Iran and Russia had reached numerous agreements in the oil and gas sector.

“Such cooperation is based on joint and strategic interests, which can boost Iran’s standing in the regional energy supply chain,” he said.

He added that Iran and Russia recently signed the Strategic Cooperation Treaty, which would open a new horizon for Iran-Russia ties and facilitate interaction between business entities of the two nations.

About the Iran-Eurasia Free Trade Agreement, he said: “This agreement becomes effective on 15 May, which would remove the bulk of obstacles in the way of bilateral trade. Iran-Russia trade reached $4.8 billion in 2024. This agreement can clear the way for a bigger jump in economic and energy cooperation.”

Highlighting the key role of the RIBCS, Tsivilev said it should provide necessary frameworks for the maximum use of Iran-Russia potentialities.

Russian President Vladimir Putin recently signed a law approving a strategic partnership agreement between Russia and Iran, following the endorsement of both houses of parliament.

Russia’s upper house of parliament, the Federation Council, approved the deal during its 16 April meeting, after it was ratified by the lower house, the State Duma, on 8 April.

The 20-year collaboration seeks to expand cooperation between Russia and Iran across multiple sectors, with the possibility of automatic extension for subsequent five-year periods.

President Putin and Iranian President Masoud Pezeshkian signed the two-decade comprehensive strategic partnership agreement in Moscow on 17 January.

Iran, Russia Determined for Economic Cooperation

Iran and Russia have, over recent years, taken fundamental steps to expand their cooperation in economic, military, and political domains. Iranian Foreign Minister Abbas Araqchi has said that never throughout history have Iran-Russia ties been as strong as they are today. Therefore, the 18th meeting of the Russian-Iranian Business Forum (RIBF) in Moscow is of high significance. Representing Iran in the meeting, the Ministry of Petroleum is determined to benefit from existing opportunities to clear the way to improve cooperation between the two nations. Ali Mohammad Mousavi, deputy minister of petroleum for international affairs and trading, has given an important assessment of the RIBF meeting, stating that Russia’s ratification of its strategic cooperation agreement with Iran, reciprocally adoption of the Iran-Eurasia Free Trade Agreement in Iran, would help upgrade cooperation between Tehran and Moscow. The meeting is expected to discuss economic, trade, financial and banking relations, transport, logistics and customs, industry and mining, agriculture, energy, health, culture, tourism, science and technology.

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

RIBF has thus far held 17 meetings. What activities has RIBF been generally involved in?

RIBF is active in all sectors of mutual interest, including development of trade, economic, financial and banking cooperation, transport and logistics, customs, petroleum industry, industry and mine, agriculture, peaceful nuclear energy, health, culture and media, tourism, science and technology, regional issues, communications and space among others to remove obstacles in the way of cooperation to adopt approaches for further cooperation in the future.

What have been the key achievements of RIBF in recent years?

As far as the achievements of previous RIBF meetings are concerned, I need to highlight several points. Trade between the two nations has doubled in recent years to $4 billion. The International North-South Transport Corridor (INSTC) has become active with the focus on functioning at full capacity by developing infrastructure and completing the Rasht-Astara railway as the missing link of INSTC. Banking cooperation has expanded using a reliable and suitable payment system and using national currencies reciprocally to facilitate trade and investment. Cooperation has been upgraded in the agriculture sector, including the supply of basic commodities and trading of farming products.

During previous meetings, documents have been signed for cooperation. How much progress has been made in these projects?

The clauses in the documents have been negotiated and agreed upon to be applicable so that organizations and ministries can actively function and see their performance assessed, which would push agreements in the way of further development of economic and commercial cooperation. After each meeting, the performance of ministries and relevant organizations is assessed with regard to compliance with the clauses enshrined in the documents. Iranian organs are seriously following up on this issue. In addition to the documents of cooperation, bilateral documents have been signed for further cooperation and trade between the two countries. Some of them are as follows: agreement to connect messaging systems and recognizing debits cards mutually, activation of INSTC by agreement to build the Rasht-Astara Railway, signing agreement to exempt tourism visa, agreement between Iran National Standards Organization (INSO) and Russia’s Federal Agency on Technical Regulating and Metrology (GOST R).

How can Iran-Russia economic cooperation help neutralize sanctions?

The Ministry of Petroleum has, since 2021, been mandated to hold RIBF meetings. Due to unjust Western sanctions slapped on both countries and the current economic and international circumstances, Iranian and Russian officials hold a different view of RIBF meetings. Both sides are following up severely on the implementation of agreements and memoranda of understanding. Iranian and Russian officials and experts are trying their best to benefit from the existing opportunities to defeat sanctions and expand their cooperation in all sectors. That is why messaging systems and debit cards of the two countries have been connected, and national currency-based payment is being finalized. Cooperation has also expanded in technical and engineering sectors, the export of equipment and pharmaceuticals, and some other sectors.

How has cooperation with Russian companies contributed to upgrading energy infrastructure and, more specifically, increasing oil production in Iran?

Over recent years, major agreements have been signed with Russian companies to develop oil fields in the country, with investment by Russian companies totaling $4 billion. The most important agreements include the development of the Abadan and West Paydar fields (76% completed), Cheshmeh Khosh, Dalpari, and East Paydar (26% completed). The key point is that more agreements have been signed with Russian companies in some other fields.

A strategic agreement with Russia pertains to gas imports from Russia in order to increase Iran’s share of international gas trading. Is it on the agenda?

The strategic cooperation MOU was signed on June 26, 2024, between National Iranian Gas Co. (NIGC) and Russia’s Gazprom Export to enhance gas trading and swap and create a gas hub in Iran. Contractual talks have been continuously underway at high levels, and most clauses have been agreed upon. Given the necessity of accelerating the implementation of this strategic agreement, the 18th meeting of RIBF would definitely handle this issue.

How have RIBF meetings affected Iran’s non-oil exports?

Trade cooperation between the two countries has doubled to about $4 billion in recent years. As the bulk of trade cooperation between the two countries pertains to agriculture and basic commodities, over recent years and particularly after Western companies’ pullout from Russia, cooperation has expanded between the two countries in technical and engineering, equipment and machinery, pharmaceutical and medical equipment sectors.

Parsian Refinery Processed 17 bcm of Gas in 1 Year.

The Parsian Gas Refinery is a sophisticated natural gas processing facility located in Iran. Located 9 km from the city of Mohr in Fars Province in southern Iran, it came online in two phases from 2002 to 2006. It is tasked with processing gas supplied from the four independent Tabnak, Shanol, Homa, and Varavi gas fields in Fars. The facility’s nominal gas processing capacity currently stands at 80.6 mcm/d. The processed gas is fed into the national gas grid to be used by households, industrial, and business purposes across Iran. The gas condensate from this refinery is also delivered to refineries and petrochemical plants for the production of gasoline and aromatics.

Alamdar Babaei, the CEO of the Parsian Gas Refinery, has told “Iran Petroleum” that it produced over 17 bcm of gas and 4 million barrels of condensate last calendar year. “In a bid to improve its efficiency and reduce its costs, the Parsian gas refinery envisions numerous projects for the current calendar year. Financing these projects requires attracting domestic and foreign investment,” he said.

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

What development projects were prioritized during the second half of last calendar year for the Parsian gas refinery? How well did they progress?

During the second half of the last calendar year (ending on March 20), numerous projects were envisioned, the most important of which was the overhaul of the turbines of the Parsian 2 power plant. It is now 70% completed. In parallel, corrosion control measures were implemented entirely at Unit 400 and Unit 500. A risk-based inspection (RBI) system has also been underway, with 30% progress now. Generally speaking, by implementing these projects, we intend to improve the performance of the refinery and upgrade its operational systems. Other development measures underway include completing the operational residential facilities, infrastructure installations, and water supply network. Like in similar refineries, the main focus is upon sustainable output and improved reliability through optimal management of operations and physical assets at the Persian refinery. New projects are pursued in such a direction.

How much gas did this refinery produce last calendar year?

It produced a total of 17.585 bcm of gas and 4.515 million barrels of condensate, up respectively 9.8% and 3.5% year-on-year. Meanwhile, 1.264 bcm of gas was delivered to Parsian Sepehr Refining Co., up 21.8% year-on-year. Such growth is mainly due to the timely maintenance and optimization of the refinery equipment. Therefore, gas and condensate delivery have significantly increased.

What have you done to upgrade the refinery equipment?

Last calendar year (ending on March 20), in addition to supplying common consumer commodities, we undertook effective measures to supply commodities required for overhaul, as well as some other equipment like KV valve, tube bundle, reboiler transducer, flare tip unit 400 and 500, and Siemens turbine compressor blades. Some equipment has been purchased for firefighting. For overhauling and upgrading compressor stations’ turbines, we supplied spare parts for more than €1.25 million. Hence, the refinery was upgraded with a high-quality project implementation.

What development projects do you plan in the current calendar year? How much investment would be needed?

Building a sweetening unit to compensate for the shortage of feedstock supply from the upstream sector, implementing flare gas sale projects, and reforming high-pressure flare networks at Parsian 2 for reducing environmental pollution, energy management, and increased safety are among the projects we have underway in the current calendar year. Significant investment is needed for these projects. For instance, reforming the high-pressure flare network of Parisan 2 would require IRR 1,300 billion, and building a sweetening unit would require more than €300 million in investment. To provide this investment, talks have been held with domestic resources and the private sector, while plans have been made for attracting foreign investment. As required by the Directorate-General of Supervision on Petroleum Product Exports and Exchanges, installation of a metering station for the gas delivered to the national trunkline and the installation of a metering system for the condensate delivered to Petro Peyman Dana are underway. Moreover, launching a 100MW power plant using local know-how for power supply and building a 132kV substation is underway.

How much capacity increase do you predict with the new projects?

We predict that the development and operation of the Eram and Pazanan fields and the construction of a sweetening unit in the coming years would bring the Parisan gas refinery’s capacity to 30 mcm/d. The Eram gas field with 19 tcf (540 bcm) of gas in place, 13 tcf (370 bcm) of which is recoverable, lies 200 km south of Shiraz. The Pazanan gas field also holds 19.5 tcf of gas in place and 436 million barrels of condensate.

Have any measures been taken to use innovative and emerging technologies to enable the refinery to boost its efficacy?

Yes, in a bid to improve its efficiency and reduce costs, new technologies have been used in the Parsian gas refinery. For instance, cleaner robots for swabbing pipes, building a system to monitor compressors for predicting possible flaws, an equipment corrosion-detecting system using AI-based equipment as well, and using AI for quality control of condensate have been of help.

What achievements has the Parisian gas refinery made following all these measures?

In the second half of last calendar year, the Parisan gas refinery implemented numerous projects and applied modern technologies to improve production capacity, boost safety, and reduce operational costs. These projects, particularly in upgrading equipment, improving refining processes, and applying modern technologies to inspection and repair, have boosted efficiency and reduced costs. The refinery’s outlook is bright for the coming years, as with the current trend of development, the refining capacity of the facility would increase significantly.

Iran Shale Oil Recovery Know-how

Mehrab Rashidi

Director, Hydrocarbon Systems Study Group, NIOC Directorate of Exploration

Bahman Soleimani

Deputy Head for Geoscience, NIOC Directorate of Exploration

Manouchehr Daryabandeh

Director, Geochemical Studies Group, NIOC Directorate of Exploration

The Directorate of Exploration of the National Iranian Oil Company (NIOC) has embarked on centralized studies over recent years to explore unconventional resources. Now, with some of these lab studies having confirmed the existence of significant unconventional deposits in Iran, the country has mastered the technical know-how to extract shale oil.

The present article aims to review reasons and objectives of feasibility study projects on unconventional resources while presenting a summary of the activities and results of projects carried out on exploring shale oil, shale gas and gas hydrate.

Background

Unconventional hydrocarbon accumulations, in general, consist of resources that could not be extracted economically or by applying conventional methods and technologies. The main difference between continuous (or unconventional) hydrocarbon accumulations and conventional hydrocarbon accumulations lies in the presence of a specific oil reservoir, the extent of expansion, the contact surface between oil-gas and oil-water, and their pressure system. Unconventional hydrocarbon accumulations include shale oil, shale gas, tight oil sandstones, tight gas, coalbed methane (CBM), shallow biogenic gas, and gas hydrates.

Underground unconventional reservoirs are divided into two categories:  oil shale and gas shale, in which the source rock is shale and the oil or gas is accumulated within the shale itself or in adjacent low-permeability reservoir layers. Therefore, these low-permeability reservoirs are classified into two categories: oil-bearing oil shale (or tight oil) or gas-bearing gas shale, depending on the degree and maturity of the source rock.

The following is a review of the specifications of these resources:

Oil Shale

Oil shales are fine-grained, organic-rich sedimentary rocks from which large volumes of oil can be extracted through pyrolysis and distillation. These rocks are often at the surface or have undergone some burial and are immature or slightly mature in terms of thermal maturity. Total oil shale reserves are estimated to be about 409 million tonnes of oil in place in 33 countries. That does not take into account many reserves and resources that have not yet been thoroughly studied, and their volumes have not been made public. Among the leading countries in the field of studying and extracting this resource are Estonia, Jordan, the United States, and Australia.

The best-known of these deposits is the Green River Formation in the US. In Iran, these resources have been studied for the first time in the Qalikuh area of ​​Aligudarz County in Lorestan Province, where organic-rich horizons lie within the Sargalo (Middle Jurassic) and Garo (Lower Cretaceous) formations.

Gas Shale

Among unconventional gas reservoirs, gas shale is considered one of the main reservoirs in which gas produced from organic-rich source rock is trapped within this layer and not released. These organic-rich layers are often of very low porosity and permeability. In gas shale reserves, the hydrocarbon system is formed within the gas source layer, and this layer acts as the source, reservoir, and caprock. The gas available in shale gas reserves exists in two forms: absorbed and free. Horizontal drilling and hydraulic fracturing are used to produce from these reservoirs. The top producers of such a resource are China and the US. In Iran, shale gas resources have been identified and evaluated in the Sargol and Garo shale formations of Middle Jurassic and Lower Cretaceous age in the Lorestan region of the Zagros sedimentary basin.

Shale Oil

Shale oil is one of the most important and largest types of underground oil reserves in which shale is the source rock and the oil is accumulated within the shale or in an adjacent layer. In other words, any accumulation of hydrocarbons produced by artificial and stimulated methods, such as hydraulic fracturing from layers with very low porosity and permeability, such as shale, siltstone, sandstone, and carbonate layers, is called shale oil or tight oil. Massive shale oil reservoirs have relatively poor petrophysical properties (porosity, permeability, etc.). These tight reservoirs are widely distributed and have porosity less than 10% and permeability less than 1 * 10-3 µm2. The US, Argentina, China and Canada are among the most important countries producing oil from this source. It is predicted that a huge volume of shale oil will exist in tight layers and reservoirs in Iran’s oil basins due to the potential of a suitable and efficient hydrocarbon system. The Abadan, Dezful, and Moghan plains have been identified as the most susceptible areas for this type of unconventional resource and have been suggested for further studies.

Gas Hydrate

Gas hydrate is a gas molecule (mainly methane) trapped in a network of water molecules linked by hydrogen bonds. Gas hydrate is classified as an unconventional hydrocarbon reservoir and is considered one of the world’s potential future energy sources. Based on the results of the experimental recovery of hydrate deposits and taking into account the required technology and production costs, methane gas produced from these deposits is expected to be distributed in East Asia in the coming years and throughout the world energy network for a decade after that. 

This reflects that, like the oil/gas reserves of Chile, production from hydrate deposits will also have a significant impact on the world energy market. Japan and China are leading the way in studying such resources. In Iran, initial and supplementary research and studies have also been carried out in the waters off the Gulf of ​​Oman.

Coal Bed Methane (CBM)

One of the unconventional gas resources is methane, which is found in coal layers. This new gas resource has been the center of attention since the 1980s as a huge source of marketable gas. Currently, many countries, including China, the US, and Australia, are looking to produce and develop technical know-how to produce from these resources. According to statistics, coal layers store large amounts of methane gas (10,000 to 30,000 tcf). China, the US, Australia, and India are among the countries that are active in the exploration and production of CBM. Initial studies in Iran show that coal mines in the areas of Tabas, Kerman, and Tazreh of Shahroud are suitable for further studies and evaluations in this regard.

Tight Gas

Tight gas reservoirs are those with very low permeability from which dry gas is produced. In terms of lithology, these reservoirs can also be sandstone, carbonate, and shale. A tight gas reservoir is often a sandstone or carbonate rock reservoir (with or without fractures) with an in-place permeability of less than 0.1 millidarcy. In many completely tight reservoirs, their in-place permeability may be less than 0.001 millidarcy. The matrix permeability of these sandstones is very low. The very poor communication of pores and fine capillaries causes very low permeability. The gas that flows in these types of rocks is usually at a low rate, and formation fracturing methods are required for production.

Unconventional Resources in Iran

Today, unconventional hydrocarbon resources, and specifically shale oil and gas, are one of the issues that have changed the rules of game in the world’s energy arena, and the US, due to its possession of the technology for commercial extraction of this type of oil and gas and its benefit from their vast resources in various parts of its territory, has not only designed a positive economic outlook for itself, but also is expected to change the world’s energy equations. These actions will have significant security, political, and economic implications, and countries with or without production of these resources will play different roles in shaping new power relations in the international arena. Given current projections of shale oil and gas production in the US and the price conditions for shale oil and gas extraction, it is expected that the US’s position in the world will improve through energy self-sufficiency and freedom from energy supply constraints. According to statistics, in 2018, North America became an exporter of oil and gas in 2021, and was able to disrupt the balance of production in global equations, which will result in a shift in the focal point of investment in oil and gas, the use of competitive advantage, and a change in the global balance of political and economic power.

Within the framework of the Five-Year National Economic Development Plan and the “Maximum Exploration of Iranian Hydrocarbon Resources on a Global Scale” vision, and due to its precise and accurate knowledge of global and local changes, the NIOC Directorate of Exploration has embarked on exploring unconventional hydrocarbon resources alongside conventional resources within sedimentary areas.

Before the Islamic Revolution, only three studies had been conducted on shale oil in Qalikuh in Lorestan. In 2009, the NIOC Directorate of Exploration embarked on feasibility studies to identify and assess the volume of such resources based on drilled exploration wells and surface geological outcrops. That yielded numerous reports.

Since 2016, the Directorate has introduced short-term and long-term plans to identify unconventional hydrocarbon reservoirs across Iran. The plans have been adopted within the framework of feasibility studies, and the idea is to benefit from the entire scientific and lab potential both locally and internationally within the framework of governing regulations of the NIOC Directorate of Exploration.

According to the program, the most important work topics in unconventional hydrocarbon resources include oil shale, gas shale, and gas hydrate as the leading areas, as well as CBM, shale oil, and tight gas, which have been evaluated in the past years and have yielded significant achievements and results.

The most important reasons for conducting studies and assessments of unconventional hydrocarbon resources in Iran are as follows:

1. Sustainable energy supply through exploration of unconventional hydrocarbon resources in line with the general policies of national development plans;

2. Determining the volume of unconventional hydrocarbon reserves in line with the exploration, development, and operation of national reservoirs;

3. Providing a diverse energy mix from various hydrocarbon reserves;

4. Growing trend of technology towards exploration and commercial production, and reducing the cost of recovery from unconventional resources;

5. Growing importance of unconventional resources in the supply and development of energy in the world;

6. Planning and investment in unconventional hydrocarbon resources in the world, especially neighboring countries and OPEC members;

7. Forecasting the high volume of hydrocarbon reserves in the country’s sedimentary basins;

8. An effective step in resolving the energy imbalance, especially gas, considering the significant volume of shale gas reserves;

9. Helping supply gas and meet gas needs in implementing projects to enhance extraction in production areas.

Activities in Iran                           

Shale Oil

The research project “Exploration Studies to Determine Volume of Reservoirs and Assessing Features of Unconventional Oil (Middle-Upper Jurassic Oil Shales) in Qalikuh Area of Lorestan Province” was conducted in two phases, starting in 2010, by the Petroleum Institute and the Petroleum Engineering Department of the University of Tehran in collaboration with domestic and foreign research centers and companies. The first phase of studies and preparation of geological maps and exploration and mineral evaluation operations, geochemical studies, initial assessment of oil yield potential, and calculation of oil shale reserve volume were carried out. In the second phase, using advanced methods, the maximum oil production potential or actual oil yield potential of oil shale in the Sargalu and Garu formations was determined, and production methods were introduced. In this phase of the study, the recoverable volume of oil per ton increased significantly. In this phase of the study, the volume of oil extracted per ton increased significantly. In addition, oil production from oil shale on a laboratory scale (semi-industrial) and environmentally friendly was localized for the first time in the country. The technology available in oil shale production and localization methods has also been created to create a laboratory system to build an industrial system in the region. The implementation of this project is completely technological, and its final product is the design and construction of the first shale oil production system in Iran. With the completion of the current project, Iran has become one of the few countries with the technical knowledge to operate the shale oil industry.

Gas Shale

The project for “Identifying and Evaluating Shale Gas Resources in the Middle Jurassic to Lower Cretaceous Sedimentary Sequences in the Lorestan Region” was signed with the Research Institute of Petroleum Industry (RIPI) in 2014, partnering with internationally recognized institutes. It was carried out in two phases and resulted in achievements such as developing methods and identifying shale gas reserves in the Lorestan region; providing the initial volume of in-place and recoverable gas and oil in these unconventional reserves; and an economic assessment of the identified reserve and a proposal to drill a pilot well for gas shales. In the first phase, by conducting geological, geophysical, petrophysical, and geochemical studies, an initial assessment of shale gas resources in the Sargalu and Garu formations was carried out, and susceptible areas were identified. In the second phase, detailed geoscience, petroleum engineering, and model earthworks studies were conducted along with hydrocarbon system modeling in the susceptible areas, and the volume of in-place and recoverable gas reserves was determined. Finally, by conducting a technical-economic feasibility study on gas shales in the Lorestan region, 21 potential areas were identified, and among these, one area was identified as the best candidate for pilot well drilling.

Gas Hydrate

Projects to identify and conduct detailed geophysical surveys of gas hydrate resources in Iranian high seas were implemented in two phases since 2014 by RIPI in cooperation with companies, universities, and well-known international institutes abroad. These studies led to the measurement and modeling of rock physics related to gas hydrate on samples obtained from drilling boreholes (the first time in Iran), the construction of a virtual well (the first time in Iran), and the estimation of the initial volume of gas hydrate resources and free gas beneath them. In the supplementary part, a more accurate identification of the expansion and volume of gas hydrate resources and free gas beneath them in Iranian waters, the introduction of suitable exploration target locations for drilling gas hydrate resources and free gas beneath them, and the feasibility study of drilling deep waters containing gas hydrate, and the determination of drilling priorities.

The goals of these study projects in the field of unconventional resources also include achieving the technological value chain for the exploration and identification of unconventional hydrocarbon resources in Iran to restore the country’s energy development strategy; studying and identifying the minimum limits and potential of unconventional reserves in Iran’s exploration areas; also providing the minimum and initial volume of in-place and recoverable gas and oil in these unconventional reserves throughout the country to outline the country’s energy development strategy; and providing proposed exploration and production study packages and defining one or more blocks for investment in the exploration and production of unconventional resources (for domestic and foreign investment).

It is obvious that to achieve the aforesaid goals, macro-management (governance) issues and requirements are necessary so that, given the importance and investment of various countries, especially Iran’s neighboring countries, such as Saudi Arabia, Bahrain, and Oman, the competitiveness of NIOC can be maintained in this field in terms of energy security. One of these requirements is to review and categorize the limits of existing powers and laws in the exploration and production of resources in terms of legal, financial, and investment. It is also necessary to support the introduction of exploration blocks and conduct joint studies with foreign and Iranian companies and research institutions that have advanced technologies in the field of exploration and production of unconventional hydrocarbon resources. In this regard, it is necessary to increase the level of managerial and technical know-how through holding domestic and foreign training courses, attending global conferences and using international expert consultants in this field. That requires major planning and special attention.

$87bn Investment in the Petchem Sector

Iran’s petrochemical production capacity is close to 100 mt/y, which is expected to increase in line with the objectives of the 7th National Economic Development Plan and under the aegis of arrangements made by the National Petrochemical Company (NPC). The 7th plan envisages the annual petrochemical production capacity to reach 131 mt/y. The development plan is based on reducing sales of raw materials, development of downstream industries, attracting investment and increasing productivity so that the petrochemical industry would experience 8% annual growth. Therefore, the petrochemical industry must attract domestic and foreign investment to realize its development goals. Hamid Reza Ajami, NPC’s director of investment, said $87 billion has been invested in the petrochemical industry, $26.3 billion of which has been sourced from overseas. Thanks to such investment, 75 petrochemical plants have generated 96 mt production capacity.

Foreign Resources

The petrochemical industry is a key industry at the national and global levels. It supplies the needs of a wide spectrum of downstream industries. Development and expansion of petrochemical industry capacity through attracting domestic and foreign investment may play an effective role in the growth and development of national industry and economy, not to mention enhancing such indicators as GDP, trade balance and per capita income.

Although there is a focus upon using domestic financing like the National Development Fund of Iran (NDFI), the Central Bank of Iran (CBI), and financial institutions, Ajami said: “Using these sources would facilitate a limited growth that would in the short term hold the country behind others. Therefore, scientifically speaking, in my view, foreign sources of financing should be used while taking into consideration their risk. This issue is specifically significant in light of international efforts aimed at isolating Iran.”

Ajami said that 142 projects with more than $102 billion in investment are underway with a production capacity of more than 132 mt a year.

Investment Opportunity

Based on estimates of the NPC Directorate of Investment, the petrochemical projects envisioned in the 7th National Development Plan would require $24 billion in investment. So far, $12 billion has been spent on these projects that have had 40% progress. They would need another $12 billion to become fully operational.  

Referring to investment needed for NPC projects for increased production in the current calendar year, Ajami said: “The 8th Plan projects for petrochemical industry development would also need $10 billion in investment. Therefore, petrochemical industry development under the 7th and 8th plans would require $22 billion in domestic and foreign investment.”

Petchem Events

Ajami touched on ways for introducing opportunities to investors in the petrochemical projects, saying: “The idea is to introduce opportunities for investment in the petrochemical industry through organizing specialized events like oil, gas, and petchem exhibition, and Iran Petrochemical Forum (IPF).”

There will be also arrangements for holding the second conference on investment in the petrochemical industry, one section of which would focus on introducing investment opportunities. Some studies have been carried out on the manner of attracting domestic and foreign investment by establishing financial entities within the Directorate of Investment with a view to providing investment. Once ambiguities are removed, they would become feasible,” he said.

Intl. Cooperation

For years, economic and international restrictions emanating from sanctions have cast a shadow over the country, yet these restrictions have not prevented the development of the petroleum industry in Iran. One of the most important obstacles resulting from sanctions restrictions is international communications and presence in global markets, but Iran has not neglected the development of its projects in this industry and, given its significant potential for growth, has still maintained its international links.

To that effect, Ajami said: “With the imposition of sanctions against Iran, cooperation with foreign companies and financial institutions has faced some difficulties, but at the same time, appropriate cooperation has been and is continuing with China, Russia, CIS countries, the Indian subcontinent, Latin America, and African countries.”

Hassan Abbaszadeh, CEO of NPC, recently referred to the forthcoming forum on Iran-Africa economic cooperation, noting that in addition to exploring Africa’s diverse markets for Iranian petrochemical markets, the event would provide a chance for foreign companies to get familiar with Iranian petrochemical markets through B2B meetings.

Ajami emphasized exploring new markets, saying: “In the event of implementing value chain completion and development plans, it is necessary to identify new and diverse export markets in addition to existing traditional markets. These markets include countries in the region, members of the Shanghai Cooperation Organization, BRICS member states, Eurasia, African countries, etc.”

Investment Management

While planning is underway for the current calendar year, the performance of the last calendar year should not be forgotten. Basic agreements were given for 17 new projects last calendar year, while basic agreements were renewed for another 39 projects.

Furthermore, to explore and attract domestic and foreign investors, a booklet on investment opportunities in Iran’s petrochemical industry has been prepared in Persian, Arabic, English, Chinese, and Russian, and hard copies and electronic copies have been made available to applicants. Another issue that needs to be mentioned is the processing of applications from applicants for investment and the implementation of petrochemical projects through the comprehensive system of permits and plans for the oil industry online and electronically, without the need for in-person visits, which is still ongoing as an ongoing activity.

The NPC Directorate of Investment was established to manage investment in the petrochemical sector. It has held meetings with various special zones to reach an agreement with them. Parsian Energy-Intensive Industries Special Economic Zone, Qeshm Free Zone, and Chabahar Free Zone are cases in point.

Moreover, to improve the state of cooperation, a memorandum of understanding was signed with the Secretariat of the High Council of Free Trade, Industrial and Special Economic Zones on the topic of “preparing a roadmap for cooperation to attract investment and support the development of petrochemical, petrochemical refining industries, downstream units and industrial clusters, as well as the balanced and targeted development of the aforementioned industries in free and special economic zones, which aims to enhance product exports, prevent raw material sales and reduce imports of strategic petrochemical products”. These domestic activities demonstrate the country’s readiness and alignment of decision-making institutions with the petrochemical industry officials. They also demonstrate Iran’s desirable capacities in projects, science-based institutions, and domestic manufacturers, which ultimately will lead to a clear and transparent picture of this industry’s capabilities and also introduce it to global markets.

Iran, Iraq Sign MOU to Boost Oil Cooperation

Iran’s Minister of Petroleum, Mohsen Paknejad, signed memoranda of understanding for further cooperation with neighboring Iraq during his recent visit there.

During his two-day state visit, Minister Paknejad met with Iraqi Deputy Prime Minister for Energy Affairs and Minister of Oil Hayan Abdul Ghani. During the meeting, they underscored the need for further cooperation in the oil and gas sector.

On the sidelines of this meeting, MOUs were signed on the exchange of investment, offshore exploration using capabilities and potential of Iranian companies, using associated petroleum gas from Iraqi oil fields to feed NGL plants with the private sector investment. The MOUs were generally aimed at exchanging specialists and investment and operating joint projects for the purpose of securing mutual interests.

In the meetings, the Iranian and Iraqi officials explored prospects for cooperation and mechanisms on how to expand interactions in the oil and gas sector.

Abdul Ghani touched on promising investment projects in Iraq, saying: “Iraq is making efforts to become self-reliant in the production of petroleum products and is willing to expand technical and investment cooperation with Iran.”

Paknejad also received Iraqi Minister of Electricity Ziad Ali Fadhil in Tehran, where they emphasized the development of cooperation in the oil, gas, petrochemical, and electricity sectors.

Gas Odor Laser Detector Developed in Iran

The first homegrown laser detector for gas odor has been developed by the Research Institute of Petroleum Industry (RIPI).

Aimed at upgrading gas grid safety, the detector was unveiled at Hormuzgan Province Gas Co. The event was overseen by the CEO of National Iranian Gas Co. (NIGC), Saeed Tavakoli;Deputy Minister of Petroleum for Engineering, Research and Technology, Omid Shakeri; president of RIPI, Azim Kalantari Asl; Director of Hormuzgan Province Gas Co., Reza Rafiei, and other senior oil and gas industry managers and experts.

Tavakoli said the detector was a key step in upgrading safety and progress of the gas industry, heaping praise on provincial gas experts. 

“Launching such projects is largely promising despite all restrictions, drawing a bright horizon for the gas industry,” he added.

He said the project was the product of cooperation with provincial gas experts, adding: “Our colleagues at Hormuzgan Province Gas Co. managed to develop the odor laser detector, which is used for measuring and controlling odorants in the gas grid. Since it addresses public safety and health, it is highly important.”

“This device has some key features. First, it can identify five odorants; second, it may be standardized in the future; third, this project is expected to be commercialized; and fourth, it is to be used online,” he said. “Even in the future, it may be used for detecting the gas network end and measuring the output. Unlike other catalytic analyzers that have to be replaced after some time, this new device is laser-based and therefore lasts longer.”

Infrastructure Development for EVs Adopted

Following an Economic Council decision, the Ministry of Petroleum has embarked on developing infrastructure for electric vehicles (EVs).

Mohammad Sadeq Azimifar, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), said National Iranian Oil Products Distribution Company (NIOPDC) had been mandated to build at least one EV charging point at fuel stations to be constructed.

Therefore, new fuel stations are required to set up EV charging points and develop infrastructure for EVs. Regarding existing gas stations, EV charging points may be added following arrangements made with station owners.

NIORDC is also set to unveil plans for renovating the decrepit fleet.

Azimifar said NIORDC is fully ready to cooperate with the private sector, adding: “We’re trying to offer numerous investment opportunities to clear the way for the active presence of investors. Implementing these projects can upgrade national energy security while contributing to employment and economic growth.”

He said diversifying financing methods for attracting investment into the refining industry was necessary, adding: “Proper governance in the body of the refining industry can guarantee sustainable yields for shareholders. NIORDC supports any policy that would help upgrade production capacities, reform the consumption structure, boost productivity, and protect investment in the refining industry,” he said.

Record Winter Gas Transmission Set

CEO of Iranian Gas Transmission Co. (IGTC), Peyman Khazraei, said, last winter, gas transmission set a record in Iran.

“The last record was set by the transmission of 880 mcm/d of gas, which is unprecedented in the history of the Iranian gas industry,” he said.

“Through interaction with other elements of this chain and owing to relentless efforts, IGTC managed to play a major role in adding a new golden page to the gas industry’s track record,” he added.

Communications constitute the main pillar of the process of production, transmission, and distribution of natural gas. IGTC’s Directorate of Telecommunications and Telemetry is responsible for the operation, infrastructure, and communications of the National Iranian Gas Company (NIGC). It runs 800 telecom stations, 9,000 fiber-optic networks, and 4,000 km of microwave network,” said Khazraei.

He said that 208 turbocompressors had come online for the first time, while 20 compressor stations were running at full capacity, and the gas transmission capacity of some facilities like Khonj, Kheyrgoo, and Jahrom had increased.

He said that arrangements had been made in advance for passing the winter.

Given a 20-70% growth in infrastructure, pipelines, facilities under commissioning, compressors, and gas transmission equipment over the past five years, manpower has grown only 15%, which requires a serious revision in the organizational structure.

NIOC Guarantees Investment Security

The CEO of National Iranian Oil Company (NIOC), Hamid Bovard, has announced NIOC’s full support for investors and economic actors.

“NIOC is ready to offer all necessary guarantees for investment security in upstream oil projects,” he said.

“NIOC is determined to benefit from the private sector capital in major petroleum industry projects,” he added, noting that NIOC was encouraged to organize an event titled “Transformation in Investment and Iran Upstream Oil and Gas Development”.

The petroleum industry is the locomotive of Iran’s economy, he said, adding: “In the petroleum industry, production and development are not separate from each other. To achieve the desired output level, it is necessary to attract investment on a large scale.”

Bovard said investment risk would decline within the framework of flexible oil contracts, adding: “By guaranteeing security and creating maximum yield, we would create sufficient room for financial benefits from investment.”

“By attracting effective investment into petroleum industry projects, in addition to the balanced development of oil and gas fields, we can benefit from the potential of various contractors in construction, which would be of help to job creation and economic prosperity.”

Bovard said one of NIOC’s plans is to absorb  foreign investment , adding: “These resources are potentially available and for benefiting from these potentialities, we need to sweeten the terms and conditions of investment contracts in favor of financial incentives.”

He said NIOC was flexible in reforming contract structures, adding: “Given the necessity of investment, there is full readiness to receive views and proposals from pundits in various economic sectors to provide necessary conditions for facilitating investment and creating bilateral attractions in the petroleum industry contracts.”

Bovard reiterated that efforts should never stop in this sector, adding: “The petroleum industry approach in the 14th administration is flexible in this regard. No specific model of contract is mandated, and there is readiness to explore weaknesses and put into practice necessary proposals for making contracts more attractive.”

The NIOC chief said new contracts would guarantee a high return on investment. He said that their yields would be guaranteed in foreign currency.

Bovard expressed hope that barriers in the way of investment in the Iranian petroleum industry would be removed.

Petchem Co. Saves on Forex Costs

The head of judiciary, Gholam Hossein Mohseni-Ejei, said recently that continuous production by the Hegmataneh Petrochemical Plant in Hamedan would save on hard currency spending.

Referring to the signing of an agreement for feedstock supply to this plant, he said: “When production becomes constant at this plant, we would see that dependence on importing some medical equipment would decline, and it would help save on foreign currency spending.”

He emphasized the continuity of revival of production units across the country, adding: “We need to take serious measures for increasing the production capacity of all industrial and manufacturing entities. Our measures for boosting capacity should not be short-lived and limited to a specific period.”

Ejei said that the judiciary would constantly monitor the fulfilment of commitments in this regard.

Hassan Abbaszadeh, CEO of National Petrochemical Company (NPC), said: “With the agreement which is set to be finalized soon, we hope that the production chain of this plant will be completed so that we can provide the necessary feedstock in the province.”

“Our objective is to be able to build a feedstock supply unit next to this plant in Hamedan Province to guarantee the stability of the value chain and prevent any repetition of past problems,” he said.

 

Iran Nominees to Serve as WPC Vice Chair

Iran’s nominees have been elected as vice chairs for forums at the 25th World Petroleum Congress (WPC) in Saudi Arabia, an event bringing together global energy industry leaders.

The 25th WPC, themed “Pathways to a Sustainable Energy Future for All,” will be held in Saudi Arabia in May next year.  Qatar, hosted the event once, and this is the second time in the congress’s 90-year history that another country in the Middle East hosts the event.

A key focus of the event will be how the energy industry can transition to a future that effectively addresses social, environmental, and economic challenges.

The event will be attended by energy industry leaders, including heads of state, ministers, CEOs, heads of international organizations, engineers, and academics, who will discuss the latest developments in policy, technology, research, and innovation to advance the sector.

Following coordination made between the National Iranian Oil Company (NIOC) and the WPC Secretariat, six Iranian nominees were selected as vice chairs for the congress’s forums. NIOC has planned for maximum participation by Iranian oil and energy sector representatives.

Technical papers will be presented across five main thematic blocks and 31 sub-forums. The responsibility for reviewing papers and managing the forums will fall to each forum’s chair and two vice chairs.

Saudi Arabia (the host) and China lead with 10 representatives each, followed by Kazakhstan with nine and Kuwait with eight. The US and Canada each have six representatives, the same as Iran. The UK, Germany, Japan, Russia, and Brazil rank below Iran in terms of the number of representatives.

The 25th WPC’s planning committee has invited industry professionals and researchers to submit paper abstracts under specified themes for review by 2 May 2025. NIOC will support the authors of accepted papers to attend the congress.

 

Hegmataneh Petchem Key Role in PVC Supply

The CEO of Hegmataneh Petrochemical Plant, Nasser Shamkhani, has said that this facility can fully supply the national need for PVC needed for medical purposes.

“With 50-60% of the plant’s nameplate capacity, it would be possible to fully meet domestic need for vital medical equipment manufacturing and export the surplus to other countries,” he said.

Shamkhani added that Hegmataneh Petrochemical Co. was established in 2002 under a decision made by Cabinet ministers and the Board of Directors of National Petrochemical Company (NPC) to manufacture medical-grade PVC.

In 2009, the application of Article 44 of the Constitution, which obligates privatization, stopped the project. That continued until 2018 when the manufacturing unit was shut down.”

He added that after it was listed among the second jump petrochemical companies, the problem of shareholding was resolved, and the plant restarted work.

Referring to medical-grade PVC production at Hegmataneh, he said: “This product is widely used in manufacturing key medical equipment like blood bags, infusion sets, and oxygen masks.”

“In case this unit is shut down, the country would have to import these products, which would impose significant hard currency costs,” he added.

“Since operation and before the judiciary’s intervention, less than 8% of the necessary feedstock was received because no long-term agreement had been signed.”

Shamkhani said following a joint meeting between the justice departments of the provinces of Khuzestan and Hamedan, 10,000 tonnes of feedstock received approval, which would be enough for three to four months.

PVC’s combination of properties enables it to deliver performance advantages that are hard to match.

 It is durable, light, strong, and fire resistant, with excellent insulating properties and low permeability. By using various additives in the manufacturing process, features such as strength, rigidity, color, and transparency can be adjusted to meet specific needs.

The two main application areas for single-use medically approved PVC compounds are flexible containers and tubing: containers used for blood and blood components, for urine collection or ostomy products, and tubing used for blood taking and blood giving sets, catheters, heart-lung bypass sets, hemodialysis sets, etc.

In Europe, the consumption of PVC from medical devices is approximately 85,000 tons each year. Almost one-third of plastic-based medical devices are made from PVC.

South Pars Attractive to Oil Investors 

The director of economic development and investment of Pars Special Economic Energy Zone (PSEEZ), Mahmoud Sheikh-Mamou, has described investment in oil and gas projects, downstream petrochemical industries, and transformative industries in South Pars as attractive.

He noted that completing infrastructure and processing industries will create numerous job opportunities in the zone.

Sheikh-Mamoo noted that while 12 industrial, recreational, and infrastructure projects have been introduced to investors, Pars Oil and Gas Company (POGC) will also present key development projects in gas and oil fields located within the three energy special economic zones of South Pars.

He emphasized that investing in oil and gas projects, processing industries, and downstream petrochemicals in PSEEZ is both attractive and in line with domestic and global market needs. With the completion of infrastructure and processing facilities, significant employment opportunities will emerge there.

He said that during the current calendar year, maximum efforts will be made to support and encourage investment in PSEEZ as the country’s energy hub. Key incentives include customs duty exemptions for imported goods and equipment, long-term tax exemptions for locally produced goods, and access to abundant and diverse petrochemical raw materials.

He noted that while the value-added tax (VAT) exemption—previously a key benefit of special economic zones—was eliminated in recent years, efforts are underway through relevant authorities, including the Secretariat of the Supreme Council of Free Trade-Industrial and Special Economic Zones, to reinstate it, at least partially.

The director highlighted the expertise and capital of domestic private-sector investors, pointing out that over the past decade, regulations have been established to facilitate financing and executing projects through public-private partnerships (PPP). Infrastructure projects in the region can now be implemented via private sector collaboration under PPP contracts, with several industrial and service projects already underway using this model.

Sheikh-Mamoo emphasized that special economic zones are designed to facilitate easier access to global markets. He expressed hope that with improving conditions and the full or partial lifting of sanctions, international investors will be able to participate in the region, boosting economic growth and employment.

AOGPC Ready to Receive Investment

Abdollah Ozari Ahvazi, CEO of Arvandan Oil and Gas Production Company (AOGPC), has said that the company would be ready to receive investment after offering opportunities in clear terms.

“The country’s oil and gas industry is endowed with massive reserves, technical infrastructure, specialized manpower, and unrivaled potential like in West Karoun. That is conducive to domestic and foreign investment,” he said.

Investment in this sector, along with enhanced production and productivity, would bring about fundamental changes in economic growth and job creation, he said. “Such countries as Japan, China, Singapore, and Malaysia faced restricted access to foreign capital in some periods. But by relying on domestic resources and directing them towards production and infrastructure, they could build big economies.”

“Likewise, Iran can use domestic reserve funds, and networking between producers and industrial clusters to go a similar way,” said Ozari Ahvazi.

“To that end, creating legal grounds like adopting supportive laws and modifying some laws in favor of investment, stability in economic investments, facilitating issuance of business permits, and removing key obstacles to production is necessary.”

Ozari Ahvazi said granting long-term facilities with low interest rates, upgrading investment security, tax exemptions, and public awareness about the importance of investment in production are among the key incentives.

“Creating a single window for investors and offering specialized consultations would facilitate access to upstream projects,” he added.

“Given great potential in the oil and gas sector, investment in Iran is faced with such challenges as inflation, price fluctuations, high interest rates, sanctions, and economic stagnation,” he said.

New Investment Methods Unveiled

Deputy Minister of Petroleum for International Affairs and Trading Ali Mohammad Mousavi said new methods of investment in upstream projects have been presented.

“The oil and gas industry should be a safe and stable environment for domestic and international investors,” he said.

He said the main objective behind the “Transformation in Iran Upstream Oil and Gas Investment and Development” event was to align investors’ demands with the petroleum industry’s expectations.

“This event presents opportunities for investment and financing of NIOC projects in various sectors,” he said.

Mousavi said development of oil and gas fields, new methods of gas compression, flare gas gathering, building processing units, building gas compressor stations, water-making projects, crude oil pipeline and storage facility construction, smart pigging, power generation and transmission, and optimization projects were among investment opportunities that were presented to would-be investors.

He said this event was a step in favor of the motto chosen for the current calendar year. i.e., investment for production.

“Familiarizing applicants with new models of investment in the oil and gas industry and introducing opportunities to all applicants, including local and foreign would-be investors, can help remove possible barriers to investment in this industry,” he added.

Mousavi said the petroleum industry is highly attractive to applicants for investment due to its great potential.

During the event, in light of the Ministry of Petroleum’s macro policies, the economic attractiveness of investment in NIOC projects was highlighted. Assurances were given over the profitable return of investment while NIOC’s investment contracts’ financing was discussed,” he said.

Mousavi said winning domestic and foreign investors’ trust in the Iranian oil and gas industry required structural reforms, transparency, and creating a safe economic space.

The seminar, he said, was aimed at explaining political stability in the Iranian business environment, particularly in the petroleum industry, introducing investment incentives, expressing financial transparency, and guaranteeing investors’ rights for access to political and economic risks, along with improving the business environment.

The idea was to present the oil and gas industry as a safe and stable environment for domestic and foreign investment, said Mousavi.

Optimal use of energy diplomacy to ensure investors, prioritizing the private sector and streamlining bureaucracy in facilitating the process of issuance of licenses, and granting attractive tax exemptions are among solutions to increase investment in the petroleum industry.

According to Mousavi, various aspects of IPC agreements for oil and gas field development were explained during the seminar.

EU Has Energy Security Dilemma

More than three years after Russia invaded Ukraine, Europe’s energy security is fragile.

U.S. liquefied natural gas helped to plug the Russian supply gap in Europe during the 2022-2023 energy crisis.

But now that President Donald Trump has rocked relationships with Europe established after World War Two, and turned to energy as a bargaining chip in trade negotiations, businesses are wary that reliance on the United States has become another vulnerability.

Against this backdrop, executives at major EU firms have begun to say what would have been unthinkable a year ago: that importing some Russian gas, including from Russian state giant Gazprom, could be a good idea.

That would require another major policy shift, given that Russia’s invasion of Ukraine in 2022 made the European Union pledge to end Russian energy imports by 2027.

Europe has limited options. Talks with LNG giant Qatar for more gas have stalled, and while the deployment of renewables has accelerated, the rate is not fast enough to allow the EU to feel secure.

"If there is a reasonable peace in Ukraine, we could go back to flows of 60 bcm, maybe 70, annually, including LNG," Didier Holleaux, executive vice-president at France's Engie, told Reuters in an interview.

The French state partly owns Engie, which used to be among the biggest buyers of Gazprom's gas. Holleaux said Russia could supply around 20-25% of the EU's needs, down from 40% before the war.

The head of French oil major TotalEnergies, Patrick Pouyanne, has warned Europe against over-relying on U.S. gas.

"We need to diversify, many routes, not over-rely on one or two," Pouyanne told Reuters. Total is a large exporter of U.S. LNG and also sells Russian LNG from the private firm Novatek.

"Europe will never go back to importing 150 billion cubic meters from Russia like before the war ... but I would bet maybe 70 bcm," Pouyanne added.

France, which produces large amounts of nuclear power, already has one of the most diversified energy supplies in Europe.

Germany relied heavily on cheap Russian gas to help drive its manufacturing sector until the Ukraine war, and has fewer options.

In Leuna Chemical Park, one of Germany’s biggest chemical clusters, hosting plants of Dow Chemical and Shell among others, some makers say Russian gas should return quickly.

Russia used to cover 60% of local needs, mainly through the Nord Stream pipeline, which was blown up in 2022.

"We are in a severe crisis and can’t wait," said Christof Guenther, managing director of InfraLeuna, the operator of the park.

He said the German chemical industry has cut jobs for five quarters in a row, something not seen for decades.

"Reopening pipelines would reduce prices more than any current subsidy programs," he said.

"It’s a taboo topic," Guenther added, saying many colleagues agreed on the need to go back to Russian gas.

Almost a third of Germans voted for Russia-friendly parties in the February federal election.

ExxonMobil Fails to Find Commercial Gas in Cyprus

An exploration drill by ExxonMobil offshore Cyprus has failed to find commercial quantities of natural gas, the island’s energy ministry said.

Drilling operations had been completed at the Elektra-1 well in Block 5 of the exclusive economic zone (EEZ) of Cyprus, it said.

"Well data and preliminary evaluation work indicate the presence of natural gas in non-commercial quantities," the Ministry of Energy, Commerce and Industry said.

ExxonMobil executives had previously described the prospect, based on seismic data assessments, as promising.

The drill was conducted by a consortium of ExxonMobil Exploration and Production Cyprus as operator, and with QatarEnergy International E&P LLC.

According to the operator’s early assessment post-drilling, Elektra-1 yielded encouraging results, confirming the existence of a hydrocarbon system and good quality reservoirs.

The data collected during the drilling operations was being evaluated to determine the consortium's future plans in Block 5, the energy ministry said.

A drillship deployed by the consortium would now move to another block in Cyprus's EEZ to conduct exploration drilling at another well, named Pegasus-1.

BP Discovers Oil Off US Gulf Coast

BP has made an oil discovery at the Far South field in the U.S. Gulf of Mexico, it said, as the energy major seeks to grow production under a strategy reset announced earlier this year.

The exploration well was drilled in Green Canyon Block 584 about 120 miles (193.12 km) off the coast of Louisiana. Both the initial well and a sidetrack encountered oil. Preliminary data indicates a potentially commercial volume of oil and gas, the company said in a statement.

It also said it plans to increase output in the Gulf of Mexico to 400,000 boe/d by 2030. It expects global production to reach 2.3 to 2.5 mboe/d by the end of the decade, with potential to grow through 2035.

London-listed shares of BP were up 4.72% in early trade.

BP is the operator of Far South with a 57.5% interest, while partner Chevron holds 42.5%.

BP announced a strategy shift in February to turn around its underperformance, cutting planned investment in renewable energy to refocus on oil and gas.

Around 1 mboe/d is expected to be delivered from the U.S. onshore and offshore regions by 2030.

BP plans more exploration in the ocean basin. It has approved the development of the Kaskida oilfield, which lies in a complex geological structure called the Paleogene, and plans to go ahead with a second Paleogene development, Tiber, later this year, CEO Murray Auchincloss told a conference last month.

NextDecade Strikes LNG Supply Deal with TotalEnergies

U.S. liquefied natural gas (LNG) producer NextDecade said it has signed a 20-year deal to supply France's TotalEnergies with 1.5 million tonnes per annum (MTPA) from its Rio Grande facility's planned fourth liquefaction facility, or train.

NextDecade has so far contracted a total of 4.6 MTPA of LNG from Train 4 on a long-term basis, most recently with a Saudi Aramco subsidiary, and expects existing long-term commercial agreements to be sufficient to support a favorable Final Investment Decision (FID).

The Rio Grande LNG export plant has suffered repeated delays and has been in development for years, with the first train expected to reach completion by 2027.

Deals for the fourth train are subject to NextDecade taking a positive final investment decision (FID) on the project.

TotalEnergies is an early investor in Rio Grande and the largest offtaker of U.S. LNG, exporting more than 10 million tonnes annually from several producers under long-term contracts. The French oil major plans to grow that position to more than 15 million tonnes by 2030 as the company pursues a dual strategy of investing in both natural gas and renewable energy.

Patrick Pouyanne, Total's chairman and CEO, told Reuters in an exclusive interview in February that he hoped to further expand the U.S. LNG portfolio by helping Rio Grande add a fifth, sixth, or seventh train over the next decade.

Russia Sees Booming Gas Business by 2050

Russia, the world's second biggest oil exporter and the second largest natural gas producer, sees stable crude production and significant growth in natural gas production and exports over the next quarter century, according to its new energy strategy.

Russia’s pipeline gas exports to Europe, once its main trading partner, collapsed following the 2022 invasion of Ukraine, though Russian crude exports have continued to world markets.

According to Russia's new energy strategy published by the government, Russia targets natural gas exports, including sea-borne liquefied natural gas (LNG) and supplies via pipelines, at 293 bcm in 2030, up from 146 bcm in 2023.

It is expected to jump to 438 bcm in a targeted scenario in 2050. The document is a long-term vision of the Russian energy sector, which also sets goals.

The strategy sees stable annual oil production of 540 million metric tons a year (10.8 mb/d) through to 2050, up from 531 million tons in 2023.

Oil exports are also forecast to stay broadly stable, at 235 million tons per year in 2030 - 2050, slightly up from 234 million tons in 2023.

The West has imposed a myriad of sanctions against Russia over the conflict in Ukraine, including restrictions on oil exports and some supplies of LNG.

Russia has been unable to start LNG deliveries to customers from the Arctic LNG-2 plant, which started super-cooled gas output in December 2023, due to the U.S. sanctions.

In its energy strategy, Russia expects LNG exports to jump to 142 bcm in 2030 from 45 bcm in 2023 and further to 241 bcm in 2050.

Italy Eni and Argentina YPF Sign LNG Deal

With the demand for gas on the rise, Italy’s energy giant Eni has made a move to join forces with Argentina’s oil and gas firm YPF to work on jointly evaluating a phase of a proposed liquefied natural gas (LNG) project in the Sierra Grande Norte, on the South American country’s Atlantic coast.

The CEOs of the two companies have signed a memorandum of understanding (MoU) to evaluate Eni’s participation in the Argentina LNG large-scale upstream and midstream integrated gas development project promoted by YPF.

This project is designed to develop the resources of the Vaca Muerta onshore gas field and serve international markets by exporting, in various phases, up to 30 million tons per year (mt/y) of LNG by the end of the decade.

Claudio Descalzi, Eni’s CEO, highlighted: “YPF’s choice of Eni as a strategic partner stems from the specific and distinctive know-how we have developed in FLNG projects in Congo and Mozambique, and from the recognition of our global leadership in implementing projects with this technology.”

The MoU between the duo covers the project phase related to the development of upstream, transportation, and gas liquefaction facilities for two floating LNG (FLNG) units of 6 mt/y each, for a total of 12 mt/y.

Horacio Daniel Marín, YPF’s President and CEO, underlined: “We are very pleased to sign this agreement with Eni, which would allow us to accelerate the timeline for the Argentina LNG project. We see great interest worldwide, both from large production companies and from countries seeking to purchase gas from Vaca Muerta.”

The natural gas from the project is set to be transported through 580-kilometer pipelines to the LNG plant in the Sierra Grande Norte, Rio Negro Province. While Phase 1 entails two FLNG units near the shore, Phase 2 envisions the construction of a 10 mt/y onshore modular liquefaction plant, anticipated to be enlarged with two trains as part of Phase 3 to reach up to 30 mt/y.

In partnership with the operator, Pampa Energía, YPF holds a 54% stake in the Sierra Chata unconventional concession, which is situated 150 kilometers northwest of Neuquén and described as one of Vaca Muerta’s most prospective gas assets.

The MoU with Eni follows the memorandum of understanding related to LNG export, which YPF inked with three Indian players: Oil and Natural Gas Corporation (ONGC), Gas Authority of India Limited (GAIL), and ONGC Videsh.

Goldman Sachs Expects 2026 Falling Oil Prices

Goldman Sachs expects oil prices to decline through the end of this year and next year because of the rising risk of a recession and higher supply from the OPEC+ group.

The bank expects Brent and WTI oil prices to edge down, averaging $63 and $59 a barrel, respectively, for the remainder of 2025, and $58 and $55 in 2026.

The bank has cut its global demand growth forecasts for the fourth quarter of 2026 by 900,000 barrels-per-day since mid-March due to an escalating trade war between the U.S. and China.

Beijing increased its tariffs on U.S. imports to 125%, hitting back against President Donald Trump's decision to raise duties on Chinese goods and raising the stakes in a trade war that threatens to upend global supply chains.

The Wall Street brokerage forecasts that despite the market already accounting for some future inventory builds, large surpluses of 800,000 b/d in 2025 and 1.4 mb/d in 2026 will continue to exert downward pressure on oil prices.

In a scenario of a global economic slowdown or a complete reversal of the 2.2 million bpd of voluntary cuts by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, Brent oil prices could likely fall into the $40 range in 2026, and potentially drop below $40 in an extreme combined scenario, the bank said.

Brent crude futures slipped to trade around $64.72 a barrel while WTI futures were at $61.44.

Goldman Sachs also lowered its U.S. shale supply forecast for the fourth quarter of 2026 by 500,000 b/d.

PDVSA Suspends Oil Loading Permits to Chevron

Venezuela’s state oil company, PDVSA, has canceled several authorizations it had granted U.S.-based producer Chevron to load and export Venezuelan crude in April, three sources with knowledge of the decision said.

The cancellations follow U.S. President Donald Trump's imposition of tariffs on Venezuela's oil buyers. The suspensions also come after Washington canceled key licenses last month to a handful of PDVSA partners and customers, including Chevron, which had allowed them to operate and export Venezuelan oil under exemptions to the U.S. sanctions on the South American country.

The U.S. Treasury Department gave the companies until May 27 to wind down operations and complete purchases. Chevron was exporting about 250,000 barrels per day (bpd) of Venezuelan crude to the U.S. under its license.

In early April, Washington imposed a 25% tariff on buyers of Venezuelan crude and gas, a measure experts said could hurt China the most.

Two of the cargo cancellations by PDVSA involve tankers that had already loaded, so the oil would have to be returned to ports, while a third had not loaded, one of the sources said.

PDVSA and Chevron did not immediately reply to requests for comment. It was not immediately clear if the cargoes would be rescheduled.

The government of Venezuelan President Nicolas Maduro again rejected the U.S. measures. Officials have said they amount to an "economic war".

The tariffs on Venezuela's oil buyers earlier this month prompted the temporary suspension of some cargo loadings, particularly those bound for China, which is the largest recipient of Venezuela’s oil. But the loadings were resuming.

Chevron, whose exports of Venezuelan crude were not affected by the tariffs because of its license, had not been impacted by the measures until now, according to the sources and shipping data showing tanker movements.

Wood Mackenzie Cuts 5-Year US Wind Energy Outlook

A prominent energy research firm slashed its five-year outlook for new U.S. wind energy projects by 40%, citing Trump administration policies and concerns about the economy.

Wood Mackenzie expects the United States to install 45.1 gigawatts of wind, both onshore and offshore, through 2029. It had originally forecast installations of 75.8 GW over that period, the firm said in a statement.

U.S. power consumption is expected to rise to record highs in 2025 and 2026, jumping nearly 3% this year from 2024's all-time high, the Energy Information Administration said last month amid growing demand from data centers dedicated to artificial intelligence.

Wind energy was already facing a slowdown in the United States before President Donald Trump in January issued an order to pause new federal wind leasing and permitting, calling wind turbines ugly, expensive, and harmful to wildlife.

"We're not going to do the wind thing. Big, ugly windmills. They ruin your neighborhood," he said. Former President Joe Biden saw wind power as vital to his strategy of decarbonizing the U.S. power sector to fight climate change.

The U.S. wind market was the smallest it has been in a decade last year, with the installation of 5.2 GW compared with 7 GW in 2023. Wind installations had almost doubled that amount in 2021 and 2022 ahead of the expected expiration of a federal tax credit for clean energy, which was later extended for a decade in the Inflation Reduction Act in August 2022.

"While we expect the market to rebound somewhat, ongoing uncertainty around future US wind policy and economic pressures will likely constrain growth in the near-term compared to previous forecasts, despite sustained demand for power," Wood Mackenzie research analyst Stephen Maldonado said in a statement.

Mitsubishi May Invest in Alaska LNG Project

Japanese trading house Mitsubishi Corp may consider investing in an LNG project in Alaska, though any decision will require careful review, Chief Executive Katsuya Nakanishi said.

An Alaskan delegation visited Japan to brief policymakers and meet possible backers of the $44 billion natural gas project in the U.S. state, which is part of President Donald Trump's push to boost U.S. gas exports.

"We have been approached and are considering it," Nakanishi told reporters when asked about possible participation in the Alaska LNG project.

"However, we need to conduct thorough due diligence," he said, noting that this project has been proposed many times in the past and is not new to the Trump administration. 

Mitsubishi plans to carefully evaluate its feasibility, considering factors such as the 1,300 km (808 miles) distance to the West coast, the need to build liquefaction facilities, and future LNG demand in Southeast Asia and other regions. 

According to Alaskan officials, the project is likely to attract U.S. investors for most of the pipeline part, while any equity from Japan or other Asian buyers will likely be tied to offtake from the liquefaction plant that will prepare the gas for export. 

Mitsubishi said it planned to invest at least 4 trillion yen ($27 billion) over the next three years to drive growth and aimed to lift its net profit to 1.2 trillion yen in the 2027/2028 financial year.

Unveiling its new three-year management strategy starting this month, Mitsubishi also said it would maintain its basic policy of progressive dividends and flexible share buybacks, including a plan to buy back up to 1 trillion yen of its shares from April 4 to March 31, 2026. 

Over the three-year period, Mitsubishi plans to allocate about 1 trillion yen to sustaining capital expenditure and more than 3 trillion yen to growth investments.

In a scenario where it had excess cash, the company would evaluate the allocation of those funds to investments or additional shareholder returns after considering its investment pipeline and other factors, it said in a statement.

In February, Mitsubishi, which took a 52.2 billion yen impairment charge on its domestic offshore wind projects in the nine-month period ended in December, forecast a net profit of 950 billion yen for the year that ended March 31. 

Nakanishi said that the company hoped to reach a conclusion on its domestic offshore wind projects around this summer, without providing other details. 

For the year that began this month, Mitsubishi predicted its net profit would fall to 700 billion yen, but it would boost its dividend by 10 yen to 110 yen per share. 

Legendary U.S. investor Warren Buffett's Berkshire Hathaway is among the largest Mitsubishi shareholders, holding a 9.67% stake.

Venezuela Energy Supply and Exports

Shuaib Bahman

Int’l Affairs Analyst

Venezuela was once a prominent oil market player in the world. For years, it has been experiencing a sharp decline in its energy supply due to political tumults along with economic mismanagement and international sanctions. By late 2024, the oil and gas production outlook in Venezuela indicates an intertwined layer of challenges and gradual improvement, impacting both local affairs and exports.

Oil Output

Venezuela has seen its crude oil production grow in recent months to 914,000 b/d as recorded late last year, up 17% from previous reports announced by OPEC. It is however a long shot away from its 3 mb/d oil supply in the early 2000s. The current output levels in Venezuela show unresolved structural challenges that have been intensified due to underinvestment, widespread mismanagement, and restricted access to international markets due to sanctions.

While the US has lifted some sanctions on Venezuela to control global oil prices, this has helped the country’s production growth to some extent, but a significant increase in drilling and extraction capabilities will require significant foreign investment to fully realize its potential production capacity. Forecasts suggest that if these investments are properly implemented, production levels could increase to around 1 million b/d by the end of 2025.

Gas Production

Venezuela’s gas sector is also faced with significant challenges. It is estimated to hold the 7th largest gas reserves in the world with 6,300 bcm of gas deposits. Venezuela is currently supplying 22.6 mcm/d of gas, up from the preceding years. Some international companies are operating key projects there, but political stability and economic reforms are prelude to any improvement in gas production.

Oil Exports

Venezuela’s oil exports have seen a relative recovery in recent years, particularly in 2023-2024, when crude oil exports averaged around 550,000 b/d, generating approximately $4.04 billion in revenue. Despite continuing political challenges, including significant sanctions from the US, Venezuelan authorities have managed to expand their export market and gain traction in countries such as China and Turkey. In 2024, China became the largest recipient of Venezuelan oil, receiving 351,000 b/d, followed by the US with approximately 239,000 b/d.

These changes in export capacity have been attributed to Venezuela’s partnerships with major IOCs, including Chevron, which resumed operations in the country under special licensing agreements with the United States. Such partnerships are crucial for enhancing operational production and export capabilities, although they are precariously linked to broader geopolitical dynamics and evolving US policy on sanctions.

Challenges Ahead

Venezuela’s energy sector is grappling with multiple challenges: persistent hyperinflation, political instability, a lack of maintenance of existing infrastructure, and a climate of public distrust that is worrying both domestically and internationally. In addition, misallocation of resources, inadequate maintenance of aging infrastructure, and the loss of a skilled workforce have contributed to a decline in production levels. The inability to carry out necessary overhauls and upgrades to refineries and pipelines has also led to frequent production outages, significantly hampering the country’s export capacity.

Venezuela, on the other hand, has faced increasing challenges in exporting its heavy crude, characterized by the need to blend lighter crude to produce a marketable product. A persistent shortage of essential diluents complicates extraction and transportation processes, drives up operating costs, and limits export volumes.

At the same time, the Venezuelan economy is heavily dependent on oil, with oil accounting for almost 95 percent of export revenues. This suggests that the Venezuelan economy is overly dependent on oil revenues. At a time when such revenues are increasingly vulnerable to external shocks and fluctuations in global oil prices.

Moreover, the country’s significant energy exports have not been effectively translated into improved economic conditions for the people. Reports suggest that the decline in production levels over the past decade has exacerbated poverty levels and led to widespread shortages of basic goods within the country.

Future Outlook

Venezuela’s current energy landscape is characterized by fragile but slowly increasing oil and gas production, amid ongoing socio-economic challenges and international scrutiny. Given Venezuela’s vast resources, the potential for improving energy production and exports remains. This is contingent on effective governance, transparent economic reforms, and a stable foreign policy, particularly in the absence of US coercion.

With the world’s largest proven oil reserves, estimated at nearly 300 billion barrels, Venezuela has a huge opportunity to increase its oil production and exports. With global demand for oil expected to increase in the coming years, Venezuela’s vast reserves could play a key role in meeting this demand. If Venezuela can overcome its internal challenges and effectively use its resource wealth in a more sustainable manner, the path ahead could see the country reclaim its position as a vital energy supplier.

Sino-US Tariff War Impact on Oil/Gas

Shuaib Bahman

Intl. Affairs Analyst

A trade war between the United States and China, the world’s top economies, has intensified over recent years. The latest indication is mutual sharp import tariff hikes. China has vowed to fight to the end in the face of US bullying, taking countermeasures against President Donald Trump’s administration.    

The US-China tariff war has fundamentally changed the course of global energy trade, with lasting consequences for both countries and the international energy market. As the growth of energy trade between the US and China has been hampered by rising tariffs and mutual distrust, the Sino-American trade war has become a major source of uncertainty.

Before the trade war, China was a major buyer of US crude oil and liquefied natural gas, but the conflict has forced China to diversify its import sources. On the other hand, reduced access to the Chinese market has increased US reserves and intensified competition with alternative suppliers. This threatens the US’s “preserving energy supremacy” agenda. Given the multiple dimensions of the trade war and the wide-ranging impacts it will have on the energy sector, assessing this issue is of great importance.

Trade War

The trade war between the United States and China has escalated into a full-blown economic confrontation with significant implications for the global energy sector. The tariff war officially began in January 2018, when then-US President Trump imposed tariffs and trade barriers on China. The measures were aimed at changing what the US called China’s “unfair trade practices” and “intellectual property piracy.” By the end of 2019, the US had imposed tariffs on about $350 billion worth of Chinese imports, while China had retaliated with tariffs on $100 billion worth of US exports.

In 2025, with Trump back in the White House, tensions have flared again. The Trump administration increased tariffs on Chinese goods by 10% on February 1 and then by the same amount on March 4. In response, China imposed a 15% tariff on American goods, including agricultural products. Then, on April 2, the US raised the overall import tariff rate to 54%.

The US then increased its tariffs on Chinese goods to 145%, and China increased its tariffs on American goods from 84% to 125%. These increases represent one of the most intense trade disputes in recent history, fundamentally altering the course of bilateral trade and having profound impacts on the energy sectors of both countries.

Energy Trade Impact

The latest tariffs, a 125% tariff on Chinese goods and an 84% tariff on U.S. imports, have nearly doubled the price of U.S. oil in China compared to last year. The 84% tariff on US goods would nearly double the cost of US crude to China, or $51 more per barrel. This would make it uneconomical for Chinese refineries to import US crude.

To mitigate the impact of the tariff war on its oil and gas sector, China has adopted a multi-pronged approach, including increasing domestic production, diversifying import sources, and strengthening national energy security. China has also reduced its imports of gas and crude oil from the US and increased its purchases from traditional suppliers such as Australia for gas and Saudi Arabia for crude oil. China’s efforts to enhance domestic production and diversify import sources reflect its efforts to reduce its dependence on specific suppliers, particularly the US.

At the same time, the tariff war has led to changes in the mix of China’s energy imports. China’s approach also reflects a focus on energy security and reducing vulnerability to geopolitical tensions. Traditional suppliers such as Saudi Arabia and emerging players such as Russia, Brazil, and Malaysia have benefited from China’s reduced dependence on US energy imports. For example, the Power of Siberia natural gas pipeline and Russian gas projects have strengthened the country’s role in China’s energy supply.

China has also increased its domestic production and diversified imports to bolster its energy security. This strategic shift reflects China’s concerns about dependence on foreign sources, particularly the US, and is likely to have long-term impacts on global energy markets.

The trade war has also led to a shift in oil markets, with the US exporting more oil to Europe and other Asian markets rather than to China. West Texas Intermediate (WTI) has been hit hard by the trade tensions between the US and China and changes in energy demand. In addition, China’s decision to impose tariffs on US gas is creating uncertainty in an industry that will play a vital role as part of America’s global energy dominance.

Future Outlook

Trade wars lower oil prices through several interconnected mechanisms. First, they reduce overall economic activity and industrial production. When countries impose tariffs on each other’s goods, factory output typically declines because export markets shrink, which directly reduces energy consumption in factories and manufacturing plants.

Accordingly, the International Energy Agency (IEA) has estimated a significant decline in global oil demand since January 2025, with a decline of about 2.4 mb/d, almost 60% of which is due to a decline in industrial activity in China. Higher US tariffs on China have created uncertainty in the market and may delay global growth, raising concerns for oil demand.

However, the long-term effects of the tariff war depend on whether the tensions continue. Here are a few scenarios:

1. Resolution scenario: Improved relations could open up opportunities for renewed cooperation in LNG and crude oil exports, although rebuilding trust will take time.

2. Continuation scenario: Continued tensions could perpetuate current changes in supply chains and strengthen the dominance of alternative suppliers in China’s energy market.

Regardless of how China and the US approach each other in the future, the tariff war has already caused structural changes in global energy trade patterns. For example, the tariff war has led to the creation of regional supply chains in which countries rely on flexibility and diversification rather than reliance on a single supplier. This trend may lead to fragmented global energy trade structures.

Therefore, the above trend has not only affected energy security but also changed supply chains and capital flows. These changes are likely to have lasting effects on the global energy landscape, regardless of how the current trade dispute is resolved.

The Day Oil Gushed in Masjed Soleiman

Lying in the heart of Masjed Soleiman (MIS), Well No. 1 has been supplying petroleum for more than a century. This area has gained fame for hosting the first oil well in Iran and the Middle East. The day oil gushed out of this well on 26 May 1908 is named “Oil Discovery Day” in Iran. For the inhabitants of MIS and on a larger scale for all Iranians, Well No. 1 indicates a new and brilliant chapter in Iran’s history.

It was 4:00 am when petroleum seep occurred from 1,200 feet underground and rose as high as 75 feet above the ground. According to files from the Abadan oil refinery, the news was telegrammed immediately to George Bernard Reynolds and the UK government in London. It marked the day the first Middle East oil gushed from the “Darreh Khersoun” area of MIS.

D’Arcy Concession

Well No. 1 of MIS started oil production in 1911 when commercial oil was extracted for the first time in Iran and the Middle East. Oil exploration activities had begun several years back in May 1901 under the rule of the Qajar king Muzaffar al-Din Shah. British industrialist and businessman William Knox D’Arcy moved to explore oil and drill wells in Iran using mechanical drilling rigs. D’Arcy had initially dispatched his representative Alfred L. Marriott to the Persian Court to obtain a license for oil exploration and extraction across Persia, except for the northern provinces of Khorasan, Mazandaran, Astarabad (today’s Gorgan), and Azarbaijan province. The D’Arcy Concession was valid for 60 years, beginning 27 May 1901. D’Arcy dispatched a technical group led by Reynolds to Iran. Reynolds was a British geologist with experience of drilling in oil-rich Sumatra. He started drilling wells in Qasr-e Shirin and Ramhormoz in 1902 while, in parallel, making preparations for drilling in the Naftun area of MIS.

Two years later, the group realized that it could not strike oil in the Shardin area of Ramhormoz, but found signs of oil in Naftun. That inspired Reynolds with hope to continue the drilling work in MIS and by January 1908, the first oil well drilling started there.

Petroleum Seep

D’Arcy spent about 500,000 British pounds up to 1903, but no result was achieved. As financial resources ended, drilling was halted. In a bid to get another 100,000 pounds, D’Arcy had to partner with Burma Oil Company, a British firm.

Amid hopelessness due to prolonged drilling, oil suddenly gushed early morning on 26 May 1908. The stench of this black substance opened a new chapter in Iran’s history, pushing the country into the club of petrostates. The extraction of 8,000 gallons of oil changed the social history of MIS and subsequently Iran. That was followed by drilling more oil wells, which finally numbered 300.

The discovery of oil in Iran led to the establishment of the Anglo-Persian Oil Company (APOC). From 1908 to 1928, the MIS oil field was the only source of oil extraction in Iran.

Century-Old Well

The MIS oil field was initially producing 500 b/d, which gradually rose to reach 127,000 b/d in 1934. The output dropped during the campaign for nationalization before growing anew. The oil production from this field was 61,000 b/d in 1959. Output declined and increased intermittently during the following years. In 1991, its production stood at 10,000 b/d and is now reportedly producing 5,000 b/d. Given Iran’s total output at 4 mb/d, this field accounted for about one-tenth of the national output in 2008. The decline in the field’s output is because it is in the second half of its lifecycle. Over 100 years, 1.14 billion barrels of oil have been produced from this field in total. Currently, not much oil remains recoverable there. In 2011, oil production from MIS increased to 28,000 b/d, which was not stable due to the reservoir’s life.

MIS is known as the birthplace of oil. The oldest processing installations emerged for the first time in the Middle East. MIS is now a narrator of Iran’s oil industry history. That is why the Ministry of Petroleum decided to set up a Museum of Oil Treasury in MIS to showcase Well No. 1 among other historical sites. Well No. 1 is now like a museum under the authority of the National Iranian Oil Company (NIOC).