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Bright Prospect Awaits Iran Oil
The olive branch extended by Iranian President Hassan Rouhani and Petroleum Minister Bijan Namdar Zangeneh to world oil giants on the sidelines of the World Economic Forum (WEF) in Davos provided a good chance for opening a new chapter in foreign investment attraction for the development of oil and gas fields and petrochemical projects.
Iran’s Petroleum Ministry is seeking cooperation of international oil and gas companies for the development of oil, gas and petrochemical industries. Zangeneh has been seriously pursuing more active energy diplomacy since taking office last August.
After Iran’s long-awaited conference to introduce new terms for oil contracts was reported to have been delayed, Zangeneh benefited from the WEF event to hold talks with oil and gas giants. For his part, the president has called for the continuation of talks with international companies for oil and gas cooperation.
These moves by Rouhani and Zangeneh underscore the significance of energy diplomacy and its effectiveness on Iran’s share of the world economy.
Remarks by chief executives of big oil companies following their meeting with the Iranian president and petroleum minister show that Rouhani’s policy of détente and Zangeneh’s oil diplomacy have proven fruitful.
Rouhani’s remarks that international sanctions against Iran’s energy sector will soon be lifted and announcing the readiness of Iran for striking contracts for the development of 40 new oil fields indicate the seriousness and firm determination of Iran in openness to the activities of foreign companies.
The presence of Iran’s petroleum minister in Davos was an effective step taken by the administration of President Rouhani for a better energy strategy which is based on Iran’s presence in world markets.
Iran’s constructive approach based on mutual respect neutralized an Iran-phobia wave triggered in some countries out of enmity. Iran’s breakthrough nuclear deal with six world powers disproved allegations of governments that imposed sanctions against the Islamic Republic.
Zangeneh’s remarks showed that Iran’s Petroleum Ministry is trying to broaden its presence in international economic bodies by practicing energy diplomacy and benefiting from international potentials.
That, along with reasonable reactions from opposite parties and avoiding politicization of economy and industry will strike a balance to the oil market and guarantee supply and demand security for both producers and consumers.
Rouhani Invites International Oil Companies to Invest in Iran
Iranian President Hassan Rouhani invited western oil companies to develop his country's vast hydrocarbon resources, during a speech Thursday, in light of the nuclear deal with the West that will allow Iran to open its doors to international businesses.
The invitation came during an address to oil company representatives at the World Economic Forum in Davos, during which he outlined the advantages of Iran's oil contracts, which are being modified in a bid to attract foreign investment.
"The diplomatic development has started to settle the nuclear issue, we think -- it is moving forward and will eventually restore Iran's relations with the West," Rouhani was quoted as saying by his official website president.ir, Platts reported.
He was speaking of the recent deal struck with the US and its allies in November, which has begun to relieve some of the strict international sanctions against Iran that have crippled its economy, in particular by cutting access to its oil revenues and banning major investment in the OPEC producer's oil and gas sector.
"This can expand our cooperation in the world especially for energy supply," he said, according to the website.
Rouhani said the Iranian oil ministry is refurbishing its traditional buyback formula, in a bid to attract international companies into its upstream sector.
Goals of the modification include "removal of all technical, financial and legal barriers under international rules," he said.
As well, the changes aim to attract the "cooperation of international oil companies and their participation in exploration, developments of fields, enhancement of oil recovery in Iran's big fields and expansion of this participation in all onshore and offshore areas for technical, financial and management cooperation."
He said that under the new contract model, "long-term cooperation, joint organization of exploration and development operations and of course repayment proportional to the risk that companies take will be considered."
Rouhani said the oil ministry would hold an international conference "in the coming months," when it would put forward the new contract model for "discussion and brainstorm, in order to receive the views of the world's oil companies and experts of this industry."
"Opportunities in Iran are abundant," he said. "Risks and costs are very low. Especially with the new contracts models and removing old barriers, it can be said that everything is set for the start of a new era of cooperation between this industry and big, reputable oil companies."
He pointed to "tens of exploration blocks with a probability of success over 70%," as some of the potential areas of collaboration.
Iran would also welcome foreign partnership in its downstream sector, Rouhani said, according to his website.
"Comprehensive programs have been defined for renovation of the existing refineries and building new ones.
"Vast plans have been designed for new petrochemical plants that will need close to $75 billion in an eight-year timeframe. This investment will raise the value of petrochemical products from around $20 billion per year [now] to more than $70 billion," he said.
The Iranian leader also criticized the sanctions that have restricted Iran's energy development.
"Any move or policy that prevents from the natural process of timely supply of energy in the world as our responsibility... such as illegal sanctions, is not only a move against a country but also against the world and all the nations," Rouhani said.
"Iran has prepared itself in all aspects for the new era of oil sector and is interested in attracting cooperation and participation of reputable companies in different upstream and downstream oil and gas sectors. I hope to see your presence in Iran's oil fields in close future," he said, when concluding his speech.
In his address to forum, Rouhani sought to woo investors with an offer to help create a new multilateral body tasked with stabilizing global energy supplies.
Rouhani told the annual gathering of business and political leaders from across the world that energy provided an important link between economic and security interests.
“The Islamic Republic of Iran is ready to engage in constructive cooperation in promoting global energy security by relying on its vast energy resources in a framework of mutual interest,” Rouhani said. “We are prepared to engage in a serious process to establish a reliable institution for this long-term partnership.”
Meeting With Foreign Officials
President Rouhani met with with Dutch Prime Minister Mark Rutte on the sidelines of the WEF.
“All of us must jointly fight terrorism throughout the region since the Syrian issue has no military solution and the spread of terrorism is not in favor of any country,” the Iranian president said.
Rouhani pointed to the existing potential to boost ties between Iran and the Netherlands, adding that the two countries can enhance their relations in various fields, particularly in the oil and energy sectors, industry, shipping and scientific domains.
Rutte expressed optimism about the expansion of economic and trade ties between the two countries.
In a separate meeting with his Azerbaijani counterpart Ilham Aliyev, Rouhani said Iran is ready to forge closer energy ties with the Republic of Azerbaijan and transfer its expertise in oil and gas exploration and extraction to its northern neighbor.
Rouhani said that Iran and the Republic of Azerbaijan share numerous affinities, which explains why Azerbaijan’s progress is very important for Iran.
He added that the further enhancement of trade and economic relations between Tehran and Baku can cement the interactions between the two neighboring countries, and the Islamic Republic of Iran is ready to transfer its experience in various fields, including oil, gas and petrochemical sectors, to Azerbaijan.
Aliyev, for his part, termed the cultural, religious and social commonalities between Azerbaijan and Iran as one of the strong points in the expansion of Baku-Tehran relations.
The two presidents also exchanged viewpoints on current regional issues, cultural ties, the Iranian nuclear issue, and the development of bilateral business cooperation, and invited each other to visit their respective countries.
Recently, Azerbaijan’s Ambassador to Tehran Javanshir Akhundov said there exists great potential for the enhancement of the ties between Iran and Azerbaijan, particularly in the fields of culture and economy.
On January 12, Iranian Ambassador to Baku Mohsen Pak-Ayin said a parliamentary delegation from Azerbaijan is expected to visit the Islamic Republic in the first half of this year.
Pak-Ayin underlined the need for the expansion of media ties between Iran and Azerbaijan in an effort to foil media propaganda aimed at hindering Tehran-Baku relations.
The Iranian diplomat also praised Tehran-Baku cooperation at regional and international levels, saying the two neighboring countries support each other’s positions in the international community.
Oil Giants Rushing to Iran
Russian Vice-Premier Arkady Dvorkovich said at the World Economic Forum that Iran will resume oil supplies,
The term will depend on the negotiators’ position, Dvorkovich said.
Both Russia and the United States took fruitful measures to settle the situation. Iran also took corresponding steps, the Russian vice-premier said.
France’s Total Chief Executive Officer Christophe de Margerie said Iran plans to offer oil companies improved terms to develop oil and natural gas fields once a trade embargo against the country is lifted,
Contracts will be “more sexy than before,” De Margerie said in an interview at Davos with Bloomberg TV. “They are definitely expecting the embargo to be lifted.”
Europe’s third-biggest oil company, which stopped work on Iran’s South Pars gas field in 2009 as the US tightened sanctions, has “no specific right to restart” work on previous projects, he said. “Our project when we left was ended.”
“The message was as usual ‘We have plenty of oil and plenty of gas. We need your management skills, we need your technology. We don’t really need your money,’” according to De Margerie. “He said ‘We would like you to come back in our country, which is prepared to offer you new terms, new contractual terms’” in a few months.
Iran’s priorities include developing South Pars, where Total had worked to increase export capacity, and redeveloping old fields to enhance output, the French executive said.
The Paris-based International Energy Agency, an adviser to 28 nations, estimated on Jan. 21 that purchasers imported about 1.07 million barrels a day from Iran in 2013. Oil prices fell in late November after Iran reached a preliminary agreement.
“The fact that they are telling us to start moving, to get ready, should mean that they are ready to make moves on the political discussions,” De Margerie said. “Otherwise there is no reason for them to come to tell us to be ready.”
Any production from Iran would come after 2017, he said.
Iran will have a new, attractive investment model for oil contracts by September, its president and oil minister told some of the world's top oil executives in Davos, part of its drive to win back Western business.
"The fact that the president of Iran came to the meeting today... is clearly a sign that Iran wants to open up to international oil companies," said Paolo Scaroni, chief executive of Italy's Eni (ENI.MI), who was at the meeting with Rouhani.
"It was an impressive presentation," said one of three further oil executives who were at the meeting and spoke with Reuters on condition of anonymity
"They said they are working on a new model to work with investors and are happy to see us," he added. "They not only need money but technologies. They are happy to have consultations about how new contracts shall work. They want to decide on the model by September."
"The message was - look at us, our geological risks are minimal, reserves are huge, come and we will create competitive terms and you will be happy. Your return on investments will be acceptable," another executive said.
"The best way for companies like us to go back to Iran is to follow strictly the sanctions and push both parties to reach an agreement which will lead to the lifting of sanctions one day," Scaroni said.
"I made it clear some time ago I'm not going back to Iran under old contract terms even if all sanctions are lifted."
Rouhani Invites International Oil Companies to Invest in Iran
Iranian President Hassan Rouhani invited western oil companies to develop his country's vast hydrocarbon resources, during a speech Thursday, in light of the nuclear deal with the West that will allow Iran to open its doors to international businesses.
The invitation came during an address to oil company representatives at the World Economic Forum in Davos, during which he outlined the advantages of Iran's oil contracts, which are being modified in a bid to attract foreign investment.
"The diplomatic development has started to settle the nuclear issue, we think -- it is moving forward and will eventually restore Iran's relations with the West," Rouhani was quoted as saying by his official website president.ir, Platts reported.
He was speaking of the recent deal struck with the US and its allies in November, which has begun to relieve some of the strict international sanctions against Iran that have crippled its economy, in particular by cutting access to its oil revenues and banning major investment in the OPEC producer's oil and gas sector.
"This can expand our cooperation in the world especially for energy supply," he said, according to the website.
Rouhani said the Iranian oil ministry is refurbishing its traditional buyback formula, in a bid to attract international companies into its upstream sector.
Goals of the modification include "removal of all technical, financial and legal barriers under international rules," he said.
As well, the changes aim to attract the "cooperation of international oil companies and their participation in exploration, developments of fields, enhancement of oil recovery in Iran's big fields and expansion of this participation in all onshore and offshore areas for technical, financial and management cooperation."
He said that under the new contract model, "long-term cooperation, joint organization of exploration and development operations and of course repayment proportional to the risk that companies take will be considered."
Rouhani said the oil ministry would hold an international conference "in the coming months," when it would put forward the new contract model for "discussion and brainstorm, in order to receive the views of the world's oil companies and experts of this industry."
"Opportunities in Iran are abundant," he said. "Risks and costs are very low. Especially with the new contracts models and removing old barriers, it can be said that everything is set for the start of a new era of cooperation between this industry and big, reputable oil companies."
He pointed to "tens of exploration blocks with a probability of success over 70%," as some of the potential areas of collaboration.
Iran would also welcome foreign partnership in its downstream sector, Rouhani said, according to his website.
"Comprehensive programs have been defined for renovation of the existing refineries and building new ones.
"Vast plans have been designed for new petrochemical plants that will need close to $75 billion in an eight-year timeframe. This investment will raise the value of petrochemical products from around $20 billion per year [now] to more than $70 billion," he said.
The Iranian leader also criticized the sanctions that have restricted Iran's energy development.
"Any move or policy that prevents from the natural process of timely supply of energy in the world as our responsibility... such as illegal sanctions, is not only a move against a country but also against the world and all the nations," Rouhani said.
"Iran has prepared itself in all aspects for the new era of oil sector and is interested in attracting cooperation and participation of reputable companies in different upstream and downstream oil and gas sectors. I hope to see your presence in Iran's oil fields in close future," he said, when concluding his speech.
In his address to forum, Rouhani sought to woo investors with an offer to help create a new multilateral body tasked with stabilizing global energy supplies.
Rouhani told the annual gathering of business and political leaders from across the world that energy provided an important link between economic and security interests.
“The Islamic Republic of Iran is ready to engage in constructive cooperation in promoting global energy security by relying on its vast energy resources in a framework of mutual interest,” Rouhani said. “We are prepared to engage in a serious process to establish a reliable institution for this long-term partnership.”
Meeting With Foreign Officials
President Rouhani met with with Dutch Prime Minister Mark Rutte on the sidelines of the WEF.
“All of us must jointly fight terrorism throughout the region since the Syrian issue has no military solution and the spread of terrorism is not in favor of any country,” the Iranian president said.
Rouhani pointed to the existing potential to boost ties between Iran and the Netherlands, adding that the two countries can enhance their relations in various fields, particularly in the oil and energy sectors, industry, shipping and scientific domains.
Rutte expressed optimism about the expansion of economic and trade ties between the two countries.
In a separate meeting with his Azerbaijani counterpart Ilham Aliyev, Rouhani said Iran is ready to forge closer energy ties with the Republic of Azerbaijan and transfer its expertise in oil and gas exploration and extraction to its northern neighbor.
Rouhani said that Iran and the Republic of Azerbaijan share numerous affinities, which explains why Azerbaijan’s progress is very important for Iran.
He added that the further enhancement of trade and economic relations between Tehran and Baku can cement the interactions between the two neighboring countries, and the Islamic Republic of Iran is ready to transfer its experience in various fields, including oil, gas and petrochemical sectors, to Azerbaijan.
Aliyev, for his part, termed the cultural, religious and social commonalities between Azerbaijan and Iran as one of the strong points in the expansion of Baku-Tehran relations.
The two presidents also exchanged viewpoints on current regional issues, cultural ties, the Iranian nuclear issue, and the development of bilateral business cooperation, and invited each other to visit their respective countries.
Recently, Azerbaijan’s Ambassador to Tehran Javanshir Akhundov said there exists great potential for the enhancement of the ties between Iran and Azerbaijan, particularly in the fields of culture and economy.
On January 12, Iranian Ambassador to Baku Mohsen Pak-Ayin said a parliamentary delegation from Azerbaijan is expected to visit the Islamic Republic in the first half of this year.
Pak-Ayin underlined the need for the expansion of media ties between Iran and Azerbaijan in an effort to foil media propaganda aimed at hindering Tehran-Baku relations.
The Iranian diplomat also praised Tehran-Baku cooperation at regional and international levels, saying the two neighboring countries support each other’s positions in the international community.
Oil Giants Rushing to Iran
Russian Vice-Premier Arkady Dvorkovich said at the World Economic Forum that Iran will resume oil supplies,
The term will depend on the negotiators’ position, Dvorkovich said.
Both Russia and the United States took fruitful measures to settle the situation. Iran also took corresponding steps, the Russian vice-premier said.
France’s Total Chief Executive Officer Christophe de Margerie said Iran plans to offer oil companies improved terms to develop oil and natural gas fields once a trade embargo against the country is lifted,
Contracts will be “more sexy than before,” De Margerie said in an interview at Davos with Bloomberg TV. “They are definitely expecting the embargo to be lifted.”
Europe’s third-biggest oil company, which stopped work on Iran’s South Pars gas field in 2009 as the US tightened sanctions, has “no specific right to restart” work on previous projects, he said. “Our project when we left was ended.”
“The message was as usual ‘We have plenty of oil and plenty of gas. We need your management skills, we need your technology. We don’t really need your money,’” according to De Margerie. “He said ‘We would like you to come back in our country, which is prepared to offer you new terms, new contractual terms’” in a few months.
Iran’s priorities include developing South Pars, where Total had worked to increase export capacity, and redeveloping old fields to enhance output, the French executive said.
The Paris-based International Energy Agency, an adviser to 28 nations, estimated on Jan. 21 that purchasers imported about 1.07 million barrels a day from Iran in 2013. Oil prices fell in late November after Iran reached a preliminary agreement.
“The fact that they are telling us to start moving, to get ready, should mean that they are ready to make moves on the political discussions,” De Margerie said. “Otherwise there is no reason for them to come to tell us to be ready.”
Any production from Iran would come after 2017, he said.
Iran will have a new, attractive investment model for oil contracts by September, its president and oil minister told some of the world's top oil executives in Davos, part of its drive to win back Western business.
"The fact that the president of Iran came to the meeting today... is clearly a sign that Iran wants to open up to international oil companies," said Paolo Scaroni, chief executive of Italy's Eni (ENI.MI), who was at the meeting with Rouhani.
"It was an impressive presentation," said one of three further oil executives who were at the meeting and spoke with Reuters on condition of anonymity
"They said they are working on a new model to work with investors and are happy to see us," he added. "They not only need money but technologies. They are happy to have consultations about how new contracts shall work. They want to decide on the model by September."
"The message was - look at us, our geological risks are minimal, reserves are huge, come and we will create competitive terms and you will be happy. Your return on investments will be acceptable," another executive said.
"The best way for companies like us to go back to Iran is to follow strictly the sanctions and push both parties to reach an agreement which will lead to the lifting of sanctions one day," Scaroni said.
"I made it clear some time ago I'm not going back to Iran under old contract terms even if all sanctions are lifted."
Oil Giants Willing to Return to Iran
Iran’s Petroleum Minister Bijan Namdar Zanganeh says major world oil companies have voiced readiness to set up shop in the country.
Zanganeh said oil giants attending the World Economic Forum (WEF) in the Swiss city of Davos announced that they were interested to enter the Iranian market.
“Iran’s presence at the Davos meeting was very positive and the reaction of prominent international corporations attests to that,” he said.
Zanganeh touched upon his meetings with high-ranking officials of oil companies at the WEF, and said: “These companies were interested in working in Iran and many of them arranged plans for talks.”
He also referred to the Petroleum Ministry’s plan to modify oil contracts, and noted that a committee was set up four months ago to examine the existing contracts and pinpoint the merits and demerits of the structure of buy-back deals.
“We are holding talks with oil companies to have their viewpoints as well,” Zanganeh said.
The new model of contracts should fulfill the expectations of the government and, at the same time, attract oil firms, the Iranian minister said.
A draft of the model will be ready by next month and it will be discussed at a meeting of experts in Tehran, Zanganeh said.
Time Ripe for S. Korea to Invest in Iran
President Hassan Rouhani has said that Iran’s economy is on the rise again and there is no obstacle can hinder the development of long-standing economic, scientific, cultural and trade ties between Tehran and Seoul.
In a meeting with visiting South Korean National Assembly Speaker Kang Chang-hee in Tehran, Rouhani said the time is ripe for South Korean firms to invest and participate in various energy projects in Iran
He added that following the new economic situation in Iran, many important international trade firms have expressed desire to invest and increase economic participation in the country.
“Under the current circumstances, our negotiations with international economic corporations [for investment in Iran] have gathered pace,” the Iranian president stated.
Rouhani called on South Korea’s private sector to strengthen cooperation with Iran and take on more projects in the Islamic Republic.
He further reaffirmed the peaceful nature of Iran’s nuclear activities and said, “Based on religious and moral principles, we are against weapons of mass destruction and condemn it.”
“We believe that the existing weapons of mass destruction in the world must be eliminated. We …oppose war, tension, instability and extremism in any part of the world,” the Iranian president pointed out.
Rouhani also said that Iran regards the nuclear deal clinched between Tehran and the five permanent members of the UN Security Council – Russia, China, France, Britain and the US – plus Germany as a “base for a comprehensive and permanent agreement.”
“Iran is determined to reach a permanent agreement [with the six powers] and if the other side also has such determination, we will obtain a comprehensive accord soon,” the Iranian president said.
On January 12, Iran and the six major world powers finalized an agreement on ways to implement the interim nuclear deal the two sides struck in Geneva on November 24, 2013.
The accord, which took effect on January 20, is aimed at setting the stage for the full resolution of the decade-old standoff over Iran’s nuclear energy program.
The South Korean parliamentary official, for his part, said that his country has complete trust in Iran and will try to restore mutual relations as soon as possible.
The Korean news website, The Chosun Ilbo, reported recently that South Korean companies are preparing to return to Iran’s market as the United States and the European Union (EU) have started easing sanctions against the Islamic Republic.
According to the website, South Korea was Iran’s fourth trade partner until 2012, when the US ratcheted up sanctions against the Islamic Republic over its nuclear energy program.
Kang added that Seoul seeks to improve its economic cooperation with Iran by settling problems.
A high-ranking parliamentary delegation, headed by the South Korean National Assembly speaker, made a three-day visit to Tehran.
This is the 5th South Korean parliamentary delegation to visit Iran since March last year.
Iran May Use Unfrozen Oil Money on Plane Parts
Iran is likely to spend oil funds, expected to be unfrozen with the implementation of its nuclear deal with world powers, for aircraft and car spare parts, an Iranian deputy petroleum minister has said.
Ali Majedi made the remarks in an interview with The Wall Street Journal as Iran’s nuclear accord with the Sextet of world powers took effect on January 20.
He said Iran may spend its oil money, currently stuck in foreign banks, on machinery and spare parts for aircraft and automotive industries.
The sanctions relief is targeted at Iran's aircraft, automotive and petrochemical industries. Billions of dollars in oil revenues will be also unfrozen.
Majedi said unfreezing Iran’s petrodollars opens “a new window of cooperation with the Europeans and the US.”
The official said Iran may also consider buying stocks in Asian refineries in a bid to strike long-term oil sale contracts.
He said Iran would likely spend the money on foodstuff, machinery and spare parts for the aircraft and automotive industries, citing France's PSA Peugeot Citroën as a particular, potential beneficiary.
On January 20, Iran suspended the enrichment of uranium to the 20-percent purity level at Natanz and Fordow nuclear sites in the presence of the International Atomic Energy Agency (IAEA) inspectors and removed connections between cascades of centrifuges used to produce 20 percent enriched uranium.
Iran also started the process to dilute and oxidize its 196-kg stockpile of 20-percent-enriched uranium.
On January 20, the Council of the European Union suspended part of its sanctions against Iran after the IAEA confirmed earlier in the day that Iran had halted 20-percent uranium enrichment under the Geneva agreement
Iran Petchem Sanctions Relief to Benefit Europe
European companies are likely to benefit most if a ban on selling petrochemical technologies into Iran is lifted, a top Iranian official has said.
In an interview with The Wall Street Journal in Tehran, Mohammad-Hossein Peyvandi, deputy head of National Petrochemical Company, said ending a ban on selling petrochemical technologies to Iran would "have an impact on European countries.
"Historically, we have relied more on the European market for technologies," he said, citing Italy, France and Germany as potential beneficiaries.
Peyvandi said Iran's petrochemical sector will spend USD 70 billion in the next 10 years, though he said the plans are partly contingent on sanctions being lifted.
As a result, he said, Iran's petrochemicals sector could generate an annual $50 billion in revenues by the next decade, up from USD 21 billion in the last Persian year ended March 2013, he said.
On January 20, Iran suspended the enrichment of uranium to the 20-percent purity level at Natanz and Fordow nuclear sites in the presence of the International Atomic Energy Agency (IAEA) inspectors and removed connections between cascades of centrifuges used to produce 20 percent enriched uranium.
Iran also started the process to dilute and oxidize its 196-kg stockpile of 20-percent-enriched uranium.
On January 20, the Council of the European Union suspended part of its sanctions against Iran after the IAEA confirmed earlier in the day that Iran had halted 20-percent uranium enrichment under the Geneva agreement.
Iran has reaped USD 9.o19 billion from exporting petrochemical products during the first ten months of the current calendar year (started on March 21, 2013), data from Iran’s Customs Administration show.
The data, released recently, showed that gas condensate made up USD 8.52 billion of Iran’s non-oil exports.
During the same period, Iran exported USD 33.788 billion of non-oil exports mainly to China, Iraq, the United Arab Emirates, India and Afghanistan.
Iran exported USD 5.905 billion of products to China, USD 4.79 billion to Iraq, USD 2.923 billion to the United Arab Emirates, USD 2.128 billion to India and USD 2.22 billion to Afghanistan.
Iran’s non-oil exports, which weighed 75.51 million tons, were 15.33 percent higher than a year ago.
They included iron ore (USD 1.104 billion), liquefied propane (USD 973 million) and urea (USD 906 million).
Iran earned USD 12 billion from exporting petrochemicals in the last Iranian calendar year which ended on March 20, 2013.
Nearly 60 countries, mainly from South and Southeast Asia, imported Iran’s petrochemical products in the previous Iranian calendar year.
New Chapter in OPEC-GECF Cooperation
Mohammad-Hossein Adeli, Iranian secretary-general of the Gas Exporting Countries Forum (GECF) met top world energy officials at tripartite symposium.
Dr. Adeli, met with Ms. Van der Hoeven, Executive Director of International Energy Agency (IEA) During the 4th IEA-IEF-OPEC Symposium hosted by Riyadh, Saudi Arabia on January 22, 2014.
Both officials agreed to cooperate within the framework of IEF with gas-consuming countries and for IEA to have closer interactions and active participation in the GECF lecture series.
Adeli also held a meeting with Prince Abdulaziz Bin Salman Al Saud, Saudi Arabian Deputy Minister of Petroleum and Mineral Resources at the one-day event.
In a separate meeting, Adeli visited Aldo Flores-Quiroga, Secretary General of the International Energy Forum (IEF).
During the meeting both officials committed to working closely together to facilitate information exchange in gas and discussed the possibility of strengthening cooperation in the JODI GAS Initiative and other similar energy related issues.
They both agreed to jointly take necessary steps to prepare for the JODI Gas session due in May, 2014.
The 4th IEA-IEF-OPEC Symposium facilitated sharing of insights and exchange of views about energy market trends and short, medium, and long-term energy outlooks.
This event was part of a wider joint program of work agreed by the three organizations and endorsed by energy ministers at the 12th International Energy Forum (Cancun, March 2010) as part of the Cancun Declaration.
Iran Ready to Supply Oil Products to Senegal
Iran’s Petroleum Minister Bijan Namdar Zangeneh has said Iran is ready to supply oil products to Senegal as Tehran eyes foothold in the African market.
“Iran can be a good supplier of oil products to Senegal and its own neighboring countries,” Zangeneh said in a meeting with visiting Senegalese Foreign Minister Mankeur Ndiaye in Tehran.
He added that Iran can also help renovate oil treatment facilities in Senegal.
Zangeneh said Iran is also willing to develop long-term cooperation in oil, gas and petrochemical production and refining with Senegal.
He expressed hope that the two countries would broaden energy cooperation in the near future.
For his part, Ndiaye said his country is interested in benefiting from Iran’s assistance in the construction of refineries, natural gas storage and sulfur supply to its chemical plants.
Iran sits atop the world’s largest gas and third largest oil reserve, according to Zangeneh who expressed the readiness of Iran’s state-run and private sectors for broader energy cooperation with the African country.
India Seeks More Investment in Iran
The Indian ambassador to Iran has expressed his country’s willingness to increase and diversify its investment in the Islamic Republic.
Addressing a gathering of businessmen in the southern Iranian province of Fars, Shri Dinkar Prakash Srivastava said New Delhi firmly seeks to expand economic and trade ties with Tehran.
Describing the current USD 173-million trade volume between Tehran and New Delhi as insufficient, the Indian diplomat called for the further enhancement of bilateral commercial ties.
Srivastava pointed to the purchase of Iranian crude oil by New Delhi and said India is one of the four countries which have imported a considerable amount of oil from Iran during the recent years.
The Indian official went on to say that his country needs large amounts of minerals such as copper, noting that Iran can meet the demands of the Indian market in this regard.
India is among Asia’s major importers of energy and relies on Iran to meet a portion of its energy demand. Iran was the second largest supplier of India’s crude before the tightening of US-led sanctions against Tehran about two years ago.
GECF Eyes Bank Establishment
The Gas Exporting Countries Forum (GECF) is planning to establish a bank in order to finance joint venture projects, GECF Secretary-General Mohammad-Hossein Adeli said.
“GECF member states have held talks about establishment of a joint back to fund joint venture projects,” Adeli told a press conference at the GECF Secretariat in Doha.
Adeli took over from Russia’s Leonid Bokhanovsky in 2014. He was elected to the post during the GECF ministerial meeting in Tehran last November.
Adeli has said he is determined to broaden cooperation between GECF member states in order to compete at the international level.
He said GECF is set to release regular reports about oil supply and demand, shale gas, development projects in different countries as well as gas pricing.
Adeli said international companies like Shell and ExxonMobil have been invited to attend the next GECF meeting in late January.
Adeli is a veteran Iranian diplomat with experience in economy and politics. He is a former governor of Central Bank of Iran (CBI) as well as a former ambassador to London.
GECF members account for 42 percent of the world’s gas production, 70 percent of the world’s gas reserves, 38percentof pipeline gas transmission and 85 percent of liquefied natural gas (LNG) trade.
Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, Venezuela, the United Arab Emirates and Oman constitute the 13 member states of GECF. The Netherlands, Kazakhstan and Norway have observer status and Iraq has recently joined the forum.
NITC Resumes Oil Delivery to Asia
The National Iranian Tanker Company (NITC) is poised to carry crude oil to Asian buyers in its own vessels as sanctions ease following the implementation of Iran’s nuclear deal with world powers, the NITC chief said.
“The obstacles to NITC’s services in carrying Iran crude oil to China, India, Turkey, Taiwan, Japan and South Korea according to the [determined export] ceiling have been removed based on Iran’s agreement with the P5+1,” Ali Akbar Safaei said.
On January 20, the EU Council suspended part of its sanctions against Iran according to the Geneva nuclear deal between Tehran and the Sextet of world powers – the United States, France, Britain, Russia, China and Germany - which was signed last November.
The decision was adopted in the course of the regular monthly meeting of EU Foreign Ministers in Brussels after the International Atomic Energy Agency (IAEA) confirmed earlier in the day that Iran had halted 20-percent enrichment of uranium under the Geneva agreement.
“Based on this [agreement], from now own, there will be no obstacles to insurance coverage, banking and other services related to international navigation for this company (NITC) with regards to crude oil delivery to the six destination countries (China, India, Turkey, Taiwan, Japan and South Korea) according to [the determined export] ceiling,” said Safaei.
The official added that NITC expects a “quick return” to the international oil market beyond the six Asian states.
Iran crude oil exports have increased in January for the third consecutive month as sanctions against the Islamic Republic are gradually relieved following the nuclear deal.
In its monthly report released on January 21, the International Energy Agency (IEA) said Iran’s December 2013 oil exports rose by 50,000 bpd to 1.15 million bpd.
Iran to Set Up Oil Museums
Petroleum Ministry public relations manager Akbar Nematollahi has said that three museums of petroleum industry have been agreed to be set up.
Nematollahi said the museums, approved by Petroleum Minister Bijan Namdar Zanganeh and his deputies, are aimed at familiarizing Iranians with the history of petroleum industry in Iran.
He said the first museum will open in the oil-rich city of Abadan where Iran’s main refinery is located. Old equipment as well as documents showing the history of the facility are to be put on display in the museum.
A second museum will be in Masjed Soleyam where the first oil well in Iran was drilled.
Nematollahi said the Masjed Soleyman museum will put on display historic documents about political and social conditions following the discovery and production of oil.
He added that the third museum will be held in Tehran so that visitors will get familiar with oil production process, starting from discovery to consumption.
Nematollahi said the Tehran museum will be a museum of science and technology.
Petroleum Ministry Trains Future Managers
Iran’s Petroleum Ministry is planning to establish a working committee to train and hire elites in the petroleum industry, the manager of Iran Petroleum Ministry Public Relations said.
Akbar Nematollahi said the establishment of the committee has already been approved by deputy petroleum ministers in order to make plans and policies for preparing elites to become petroleum industry managers.
He said training younger forces will not let any void following the retirement of veteran petroleum managers.
Nematollahi said Petroleum Minister Bijan Namdar Zanganeh has asked all his deputies to make contribution to the establishment of the committee.
He said the committee will choose qualified managers for Iran’s petroleum industry in the near future.
He added that Zanganeh has also insisted on the formation of management services unit in the petroleum industry.
Petroleum Ministry Spends 13.6tr Rials on Research
A senior Petroleum Ministry official has said that research projects worth 13.6 trillion rials have been defined in the petroleum industry over the past five years.
Mohammad-Ebrahim Shafiei, director for technology affairs, said most of the projects have already been implemented.
He stressed the need for proper interaction between petroleum industry and universities, research centers and the private sector.
Shafiei said the petroleum industry is required to focus on knowledge-based activities and seriously follow up on plans for indigenization of technology.
The official said Iran’s fifth five-year economic development plan, which ends in 2015, envisages 69 projects, worth seven trillion rials plus 28 million euros.
He said Petroleum Ministry prioritizes enhanced recovery projects.
Shafiei said National Iranian Oil Refining and Distribution Company (NIORDC), one of the main four subsidiaries of Petroleum Ministry, has established a research center for polymer membranes, developed software for FH-PRO and technical knowledge for constructing mini-refineries.
He said the other subsidiaries of Petroleum Ministry – National Iranian Oil Company, National Iranian Gas Company and National Petrochemical Company – have also made achievements.
Iran Operates 37 VLCCs
A senior official of National Iranian Oil Company (NIOC) says 37 very large crude carriers are operating in Iran’s crude oil export fleet.
Mohsen Qamsari, director for international affairs of NIOC, said Iran currently owns more than 60 vessels for oil exports.
Iran could export 11 million tons of crude oil with its 47 tankers in the last calendar year to March 2013.
NIOC envisages reaching the spot to export one billion barrels of crude oil.
When all sanctions are lifted against Iran, Iranian tankers will be able to sail in the waters of 50 countries across the world.
NIOC’s oil exports are financed by Central Bank of Iran (CBI) and they do not need any foreign finance.
Qamsari also said that Iran’s crude oil delivery to India faced no insurance obstacle.
In 2013, India bought 11.59 billion dollars of crude oil from Iran.
Iran to Introduce New Oil Contracts in London April 7-9
Mehdi Hosseini, director of Petroleum Ministry-appointed committee tasked with revising oil contracts to make them more attractive, says Iran will hold a conference in London April 7-9 to introduce new contract frameworks.
In an interview, he details the committee’s activities.
Q: Mr Hosseini! Why has the London conference set to introduce Iran’s new contract framework been postponed?
A: Actually speaking, the conference has not been put off. We just preferred to hold the conference for introducing contracts after Norouz [Iran’s New Year] celebrations in London. The London conference is scheduled for April 7 to 9. Earlier, the conference was supposed to be held in March. We changed the schedule because we are supposed to first hold a seminar in Iran to introduce the contracts. This seminar is to gather viewpoints inside the country.
Q: So the Tehran conference is just for domestic purposes?
A: Yes, this conference is a symposium during which we will present our contract models. We will also hear views of different social groups in this conference. We will hear from government officials, the private sector, academics and others. We plan to gather views first with a view to completing our working model. The international conference will be held in London in April.
Q: The change in the date of the London conference is speculated to be related to Iran’s interim deal with world powers.
A: No, there is no connection. The change in the date is just a technical issue and we wanted to hear many views.
Q: Given the fact that the contracts are totally new, is the parliament aware of the new frameworks?
A: We move within the framework of ratifications governing upstream sector and we respect all regulations. Our decisions are all legal. We move within the framework of the law like the Five-Year [Economic Development] Plan and Petroleum Law. We don’t need new regulations and we push our programs within the framework of existing law.
Q: On the sidelines of the 164th ministerial meeting of OPEC, Iran’s Petroleum Minister Bijan Namdar Zanganeh met with executive directors of seven European and American oil companies and invited them into Iran’s energy sector. Is the London conference limited to these seven companies or more companies have been invited?
A: According to our preliminary data, foreign companies are keen to invest in Iran’s petroleum industry. Mr Zanganeh’s meetings with oil companies, particularly European ones, has accelerated this trend and convinced the world that our move towards the lifting of sanctions is irreversible. If not, oil companies were not so willing to meet with Iran’s petroleum minister. We already know that the US companies have even offered to sponsor the conference. That is why the US Congress recently took position and warned oil companies against hasty move. It shows that we have created this move. The more important issue is that oil companies have the same assessment as ours. I mean that the sanctions are crumbling and are set to be lifted. I predict that the London conference will be reminiscent of the 1996 London conference which became the conference of the century. We hope that the same conference will repeat itself. The conference is organized by CWC Group led by Alirio Parra, a former Venezuelan minister of energy and mines. In his recent meeting with Iran’s OPEC governor Hossein Kazempour Ardebili, Mr Parra said the conference will receive rapturous international welcome.
Q: So the London conference will go beyond these seven companies and other companies including from Asia will attend.
A: Yes, not only Asian companies but also domestic companies will be present. We launched the website of the conference a few days ago and you will see that the conference is being warmly welcomed.
Q: Paolo Scaroni, chief executive of Italy’s Eni, said following his meeting with Mr Zanganeh that foreign companies are offering proposals for changes in the structure of oil contracts. Is that so?
A: We have dealt with this issue in two ways. First we have reviewed the principles of international contracts to learn about the best form of contracts for our region as far away as North Africa where we have rivals. To that effect, we have compared the contracts. Second, we have started consultations with international oil companies and gathered views of several big international companies. Therefore, we are in contact with these companies. I cannot specify them because they might not like me to reveal their names.
Q: Mr Scaroni has said that buy-back contracts are no longer attractive. Which changes does Eni want? Is revision of contracts a domestic or foreign requirement?
A: This necessity is due to trade conditions. We have buy-back deals which we defined for the development of oil fields. Then, we had gas, exploration and enhanced recovery. Buy-back deals might not be enough for all these sectors. These contracts had restrictions which were required at that time. Now, 20 years have passed and we have gained experiences. Buy-back was a framework developed by Iran and many foreign companies operated projects based on this framework. Billions of dollars were invested. South Pars [gas field] underwent development. Many projects were implemented. Such fields as Sirri, Darkhoein, Doroud and Azadegan have already been developed or are under development. Throughout this course, we gained experience and we realized our faults. International companies also weighed up the conditions in Iran and we acknowledge that [buy-back] deals crated some problems for them.
Q: What kind of problems?
A: The most important issue I want to highlight is that some articles in the buy-back contracts were one-sided and benefited only Iran. Therefore, they did not meet the expectations of foreign companies. When a company sees its expectations are not met will suffer losses and it will no longer be willing to operate projects. Eni’s chief executive has said he will not come to Iran as long as this framework exists. But that is not strange and nothing important will happen. In the revision committee, we focus on our national interests. The first point is to safeguard national interests. We define our contract framework based on our national interests in the light of the rules of game in international oil markets. We will never accept our national interests to be harmed.
In order to understand where these interests lie, we have to take into account economic benefits of development of hydrocarbon fields as well as technical and technical benefits of recovery from reservoirs. Then the committee will decide if any new model is needed.
Now, we think that it is necessary. So we have to learn the rules of the game. In today’s competitive market, capital and technology attract companies. We have to make an assessment of Iraq, Qatar, Kuwait and North African countries and find approaches to attract international companies to emerge victorious. Our petroleum industry needs billions of dollars in investment. Apparently, we need 150 billion dollars in investment. We cannot afford such a sum only from the country’s public budget. So, we have to attract foreign investment within the framework of our national interests for the development of oil and gas fields.
Q: Some have expressed concern that the revision committee may choose some frameworks like concessions or production sharing contracts which are no longer effective.
A: Concessions were buried forever after nationalization of oil industry in Iran. Gone is the period of concessions in Iran although they may still exist in industrialized countries and in Europe. But in Iran, they are dead and they are no longer on the agenda. We have studied the comparative positive and negative points in production sharing contracts, but we are not supposed to focus absolutely on this type of contracts.
Q: Some experts recommend production sharing contracts for fields Iran shares with neighbors.
A: We have two issues here. One is the model of our national contracts. This model must be such that it could be used everywhere and could attract companies. But you may need a contract for a specific case. We are not supposed to use these contracts. If an oil company offers to explore oil and gas in high-risk zones like Caspian Sea’s deep waters, we will not accept to invest hundreds of billions of dollars in such regions where hydrocarbon is unlikely to be discovered. For high-risk zones and joint fields which we want to develop as soon as possible, we have to take into account risk and reward. An international company accepts a risk and expects to be rewarded equally. That’s a rule in this game. We have to regulate our contracts in a way that if a company offers to work in a high-risk zone we should ensure it that it will be rewarded. Mr Zanganeh has said that our contracts will be better than Iraq’s and he means that when the risk is high companies must come and invest. If not, Caspian’s oil and central deserts will remain undeveloped forever. We have to do it at the expense of foreign companies, but consider rewards for them to cover risks. Our assessments so far show that Iraq’s contracts are not so attractive and we are seeing oil companies pulling out of Iraq.
Q: That might be for security concerns.
A: Not, it is due to technical issues in the contracts and not security issues of Iraq.
Q: You said concessions are no longer in effect and production sharing contracts are of help only in specific cases. Buy-back deals need to be reconsidered. So what would be the new model of contract?
A: First, Iran is introducing a new model which will find its way into international organs. Oil-rich countries and particularly developing countries are thirsty for contract models. Latin American and Middle Eastern countries are looking for service contracts, but they need effective models. We are also looking for effective models of contracts, no matter its name. We will be naturally moving towards service contracts, but we don’t attribute any name to them now. The important thing is the content of the contracts. The contracts must safeguard our national interests while being attractive enough within the framework of regulations governing Iran’s upstream sector to lure companies in the competitive market. I have to note here is that the entire competition is not summarized in the contract. We’ve got the upper hand in terms of contract and that is due to the properties of our country’s reservoirs. We don’t have only the world’s largest gas reserves, but also sit atop the world’s fourth largest oil reserves. Moreover, recovery from our reservoirs will be low-cost and low-risk.
Q: Some experts say Iran’s oil wells are aging while Iraq’s are not still mature. They say the need for secondary recovery increases investment risks.
A: No, that’s not so. You are partly right, but the conclusion is not. Our fields are large and they are currently in the second half of their life. Enhanced recovery is needed, but as you said, at high costs. But all our oil fields are not so. Nearly one million square kilometers of our country’s total area of 1.6 million square kilometers is covered with sedimentary layers where exploration potentials are high. When I was exploration director [at National Iranian Oil Company], surveys showed that 14 out of 17 wells drilled in Iran are successful. Above 85-percent potential is unique in the world. It was just in the exploration sector. As far as development is concerned, you can produce oil from all fields by spending four or five dollars [per barrel] while companies are investing in regions like West Africa, Gulf of Mexico, North Sea, Alaska and Siberia where oil recovery costs 40 or 50 dollars a barrel. These companies are currently investing in unconventional oil, heavy crude and shale oil. Oil companies need to spend 40 or 50 dollars for recovering each barrel of oil. These companies will be willing to come to Iran and work if they see that would not cost them more than five or six dollars. We have to take into account this advantage and the contract framework. We should not give concessions in return for nothing, nor should we dissuade companies. In this competitive market, we have to view our advantages and conclude about the model of a fair contract based on win-win approach.
Q: The committee to revise contracts was established in October. How much have you progressed?
A: We started our work two months ago. I think that we have made good progress from several aspects. We first reviewed different documents and studied various contracts. We reconsidered our own contracts. We have 20 years of experience and so we had to find our own flaws. We have had three generations of buy-back deals. We reviewed them and summed up our conclusions. We also studied the principles of contracts signed in 33 countries. We are comparing them in order to devise our own model in a more effective way. We have to know what others are doing in the competitive market. Doing so much work in two months has been remarkable. We hold regular meetings every Tuesday and discuss everything for five to six hours. Today, we are in a stage where we know what we need. We will start drafting contracts in two weeks and we will be able to detail them in the March symposium.
Q: To what extent do you think the London conference will be affected by sanctions conditions? Remarks by some US officials give rise to speculation that Iran’s nuclear standoff with the West is facing ups and downs.
A: I’m always optimistic and I have my own reasons to be optimistic. I think the process which has started is irreversible. The world has concluded that we have the nuclear knowledge which would not be seized from us. Whatever we have does not violate international regulations and whatever we have wanted lie within the framework of international regulations and safeguards. All political games over the past ten years have been due to the interests of a certain group of individuals, and more specifically Israel which wanted to be the sole nuclear power in the region. The world has realized that Iran is different and its nuclear rights need to be recognized. This right was recognized during this recent round of talks. They are all our rights; however, they have been endorsed. The US Congress has had negative stances vis-à-vis Iran and the reasons are clear. I don’t intend to insult the US Congress, but everyone knows that it is influenced by Israeli lobbies. In general, I believe that the European Union and the US have decided to resolve this issue. But it is not limited to our nuclear issue. We are a regional power and without us, the regional issues are not resolved. They have to coexist with us and seek our assistance.
Whatever the US president said recently shows that he is under growing pressure and he has to convince the lobbies. Personally, I don’t think he was speaking against us. He said that Iran’s nuclear program could not be dismantled. That’s too much. We say the same. Iran’s nuclear program could not be dismantled. Speaking in this way, the US president intends to convince others. So I think that this trend is positive and sanctions, which are really anti-humane, are expected to be lifted. I have to note that these sanctions have harmed us, have harmed our people, have harmed our businessmen, but the world needs Iran’s oil. It will be impossible to ignore Iran, with the world’s largest gas and fourth largest oil reserves, in the growing market. The global demand for oil is growing at a pace that the demand for oil will reach 110 to 120 mb/d in the coming two decades.
Q: But Iraq and Saudi Arabia have proven to be capable of replacing Iran’s oil.
A: No, that’s not so. We have to view this issue in the short-term and in the long-term. When the US invaded Iraq, some said the oil prices will go up to 100 dollars, which were around 20 dollars. I noted in an interview at that time that the oil prices will not rise despite attack on Iraq. Iraq was invaded and the oil prices did not rise. I was saying that this issue could be managed in the short term because there are huge strategic stocks in the world and they had reached their maximum at that time. Oil storage kept the prices low. Saudi Arabia’s extra production capacity was between two and three million barrels a day and therefore Iraq’s exit from the oil market was manageable.
Iran and Iraq could be eliminated [from the market] in the short-term, but I hold a long-term view. Shell, BP, International Energy Agency and OPEC say oil supply must reach 105 to 100 mb/d. It means demand for an extra 20 to 25 mb/d. How is that possible? How much investment is needed? How much investment can oil-rich countries make in this sector? What has world done for that purpose? This issue has become a major cause of concern for the world. The US is worried. China, a leading consumer, is worried now. So is India. Everyone is worried that supply and demand are distant from each other. Take into account demographic growth in the world. According to UN estimates, the world population will see a growth as big as the 1950 world population in 2050. Living standards are also growing. The Chinese are dropping bicycles and running cars.
Q: That’s right, but in industrialized countries, energy saving has proven effective.
A: I’ll explain later. We have also economic growth factor. Oil consumption will rise by 10 percent with a one-percent rise in the gross domestic product. The world will see three percent average economic growth. This three-percent growth will occur for energy too.
Environmental considerations and energy efficiency use were effective in the 1980s and 1990s, but they have reached limits. Once, the daily fuel consumption of an American car which burnt 30 liters a day was slashed to 6 liters which could be again reduced to four liters, but it could not be cut to zero or one liter.
In the coming decade, oil and gas will have 55 to 60 percent share in the world energy basket. Therefore, Iran could not be ignored. These sanctions are targeting the entire world. US and European oil companies have been deprived of a golden opportunity for trading. We are trying to prepare the conditions for oil companies to invest in Iran as sanctions are eased. In the meantime, we take into account our national interests while we plan to accomplish our energy supply task.
Q: One important point recently focused upon is to move towards long-term contracts. The history of oil contracts in Iran is marked by D’Arcy Concession, the 1933 contract and nationalization of petroleum industry in Iran. Then we reach the coup against Prime Minister Mohammad Mosaddeq, formation of consortium, Islamic Revolution, exit of oil companies and buy-back deals. It seems that Iran’s oil contracts have seen more ups and downs compared with other countries. What will be the advantage of long-term contracts?
A: The revision committee is discussing various options. Oil companies which enter high-risk oil trading activities are willing to be present in all stages of work. Oil projects are different from other businesses. Their inclination for presence in all stages of the project has two aspects: the first one is financial benefits. The company would prefer a 20-year contract to a 2-year one because the former is more profitable. The second aspect is that a 20 or 30-year process will bring in technologies and knowhow. These companies have experienced countries with various amounts of oil reserves. They have documented everything and make decisions based on their findings. They can work better on the long term. Therefore, companies prefer long-term projects for both technical and economic reasons. But how they will benefit us? Naturally, if we are supposed to develop our fields for optimal recovery we will need more sophisticated technologies than the technology required for the development of green fields. There is a 20, 25 or 30-year process for each field to reach its peak of activity. The fields are like human beings and they are different from factories. You need to deal with them based on your knowledge. A younger man does not refer to doctor as much as an older one. An old man would need medications and even surgery.
When a company is present such processes could be done much better. Moreover, we will need investment throughout the process. One may ask here if foreigners are supposed to do all the work. That is exactly we are thinking about. We have to reach frameworks. Now, we have a legal framework requiring a 51-percent share for Iran in any contract. This 51 percent share is reserved for local content. We also need to define frameworks in which our domestic industry will grow regularly to catch up with other companies like Shell, Total and other oil companies. Therefore, we plan to define these works so that we could become an exporter of oil technology and not remain a consumer forever.
Q: If the London Conference proves successful and the sanctions are lifted, how long do you think it will take for international oil companies to start work in Iran?
A: We have officially started our work long before the London conference and the lifting of sanctions. As part of our efforts, we are making preparations to define a framework for contracts and save time. In the past, we had to spend two, three or four years on discussing the terms of the contracts with foreign companies. If the contracts are transparent and drafted in clear terms, agreement will be reached in a shorter period of time. For us, no company – Asian, European and American – will face restrictions for presence in Iran. They slapped sanctions [on us] and now they can return to Iran. There are numerous valuable opportunities in the upstream oil and gas sectors in Iran for foreign companies.
It also depends on international companies that how quickly they intend to enter this phase. Following the 1996 London conference and the definition of buy-back deals, 80 to 90 companies immediately showed willingness to come to Iran. We have also the experience of Azerbaijan where companies quickly operated oil and gas projects following the collapse of the Soviet Union. Iraq is another example. It offered tender bids and foreign companies rushed to invest in that country. We can also expect foreign companies to invest in Iran, but I cannot set any timeframe. I think that international oil companies know pretty well that Iran is a paradise for their investment. This paradise will soon open its doors and the lucky ones will enter sooner than others.
Iran to Introduce New Oil Contracts in London April 7-9
Mehdi Hosseini, director of Petroleum Ministry-appointed committee tasked with revising oil contracts to make them more attractive, says Iran will hold a conference in London April 7-9 to introduce new contract frameworks.
In an interview, he details the committee’s activities.
Q: Mr Hosseini! Why has the London conference set to introduce Iran’s new contract framework been postponed?
A: Actually speaking, the conference has not been put off. We just preferred to hold the conference for introducing contracts after Norouz [Iran’s New Year] celebrations in London. The London conference is scheduled for April 7 to 9. Earlier, the conference was supposed to be held in March. We changed the schedule because we are supposed to first hold a seminar in Iran to introduce the contracts. This seminar is to gather viewpoints inside the country.
Q: So the Tehran conference is just for domestic purposes?
A: Yes, this conference is a symposium during which we will present our contract models. We will also hear views of different social groups in this conference. We will hear from government officials, the private sector, academics and others. We plan to gather views first with a view to completing our working model. The international conference will be held in London in April.
Q: The change in the date of the London conference is speculated to be related to Iran’s interim deal with world powers.
A: No, there is no connection. The change in the date is just a technical issue and we wanted to hear many views.
Q: Given the fact that the contracts are totally new, is the parliament aware of the new frameworks?
A: We move within the framework of ratifications governing upstream sector and we respect all regulations. Our decisions are all legal. We move within the framework of the law like the Five-Year [Economic Development] Plan and Petroleum Law. We don’t need new regulations and we push our programs within the framework of existing law.
Q: On the sidelines of the 164th ministerial meeting of OPEC, Iran’s Petroleum Minister Bijan Namdar Zanganeh met with executive directors of seven European and American oil companies and invited them into Iran’s energy sector. Is the London conference limited to these seven companies or more companies have been invited?
A: According to our preliminary data, foreign companies are keen to invest in Iran’s petroleum industry. Mr Zanganeh’s meetings with oil companies, particularly European ones, has accelerated this trend and convinced the world that our move towards the lifting of sanctions is irreversible. If not, oil companies were not so willing to meet with Iran’s petroleum minister. We already know that the US companies have even offered to sponsor the conference. That is why the US Congress recently took position and warned oil companies against hasty move. It shows that we have created this move. The more important issue is that oil companies have the same assessment as ours. I mean that the sanctions are crumbling and are set to be lifted. I predict that the London conference will be reminiscent of the 1996 London conference which became the conference of the century. We hope that the same conference will repeat itself. The conference is organized by CWC Group led by Alirio Parra, a former Venezuelan minister of energy and mines. In his recent meeting with Iran’s OPEC governor Hossein Kazempour Ardebili, Mr Parra said the conference will receive rapturous international welcome.
Q: So the London conference will go beyond these seven companies and other companies including from Asia will attend.
A: Yes, not only Asian companies but also domestic companies will be present. We launched the website of the conference a few days ago and you will see that the conference is being warmly welcomed.
Q: Paolo Scaroni, chief executive of Italy’s Eni, said following his meeting with Mr Zanganeh that foreign companies are offering proposals for changes in the structure of oil contracts. Is that so?
A: We have dealt with this issue in two ways. First we have reviewed the principles of international contracts to learn about the best form of contracts for our region as far away as North Africa where we have rivals. To that effect, we have compared the contracts. Second, we have started consultations with international oil companies and gathered views of several big international companies. Therefore, we are in contact with these companies. I cannot specify them because they might not like me to reveal their names.
Q: Mr Scaroni has said that buy-back contracts are no longer attractive. Which changes does Eni want? Is revision of contracts a domestic or foreign requirement?
A: This necessity is due to trade conditions. We have buy-back deals which we defined for the development of oil fields. Then, we had gas, exploration and enhanced recovery. Buy-back deals might not be enough for all these sectors. These contracts had restrictions which were required at that time. Now, 20 years have passed and we have gained experiences. Buy-back was a framework developed by Iran and many foreign companies operated projects based on this framework. Billions of dollars were invested. South Pars [gas field] underwent development. Many projects were implemented. Such fields as Sirri, Darkhoein, Doroud and Azadegan have already been developed or are under development. Throughout this course, we gained experience and we realized our faults. International companies also weighed up the conditions in Iran and we acknowledge that [buy-back] deals crated some problems for them.
Q: What kind of problems?
A: The most important issue I want to highlight is that some articles in the buy-back contracts were one-sided and benefited only Iran. Therefore, they did not meet the expectations of foreign companies. When a company sees its expectations are not met will suffer losses and it will no longer be willing to operate projects. Eni’s chief executive has said he will not come to Iran as long as this framework exists. But that is not strange and nothing important will happen. In the revision committee, we focus on our national interests. The first point is to safeguard national interests. We define our contract framework based on our national interests in the light of the rules of game in international oil markets. We will never accept our national interests to be harmed.
In order to understand where these interests lie, we have to take into account economic benefits of development of hydrocarbon fields as well as technical and technical benefits of recovery from reservoirs. Then the committee will decide if any new model is needed.
Now, we think that it is necessary. So we have to learn the rules of the game. In today’s competitive market, capital and technology attract companies. We have to make an assessment of Iraq, Qatar, Kuwait and North African countries and find approaches to attract international companies to emerge victorious. Our petroleum industry needs billions of dollars in investment. Apparently, we need 150 billion dollars in investment. We cannot afford such a sum only from the country’s public budget. So, we have to attract foreign investment within the framework of our national interests for the development of oil and gas fields.
Q: Some have expressed concern that the revision committee may choose some frameworks like concessions or production sharing contracts which are no longer effective.
A: Concessions were buried forever after nationalization of oil industry in Iran. Gone is the period of concessions in Iran although they may still exist in industrialized countries and in Europe. But in Iran, they are dead and they are no longer on the agenda. We have studied the comparative positive and negative points in production sharing contracts, but we are not supposed to focus absolutely on this type of contracts.
Q: Some experts recommend production sharing contracts for fields Iran shares with neighbors.
A: We have two issues here. One is the model of our national contracts. This model must be such that it could be used everywhere and could attract companies. But you may need a contract for a specific case. We are not supposed to use these contracts. If an oil company offers to explore oil and gas in high-risk zones like Caspian Sea’s deep waters, we will not accept to invest hundreds of billions of dollars in such regions where hydrocarbon is unlikely to be discovered. For high-risk zones and joint fields which we want to develop as soon as possible, we have to take into account risk and reward. An international company accepts a risk and expects to be rewarded equally. That’s a rule in this game. We have to regulate our contracts in a way that if a company offers to work in a high-risk zone we should ensure it that it will be rewarded. Mr Zanganeh has said that our contracts will be better than Iraq’s and he means that when the risk is high companies must come and invest. If not, Caspian’s oil and central deserts will remain undeveloped forever. We have to do it at the expense of foreign companies, but consider rewards for them to cover risks. Our assessments so far show that Iraq’s contracts are not so attractive and we are seeing oil companies pulling out of Iraq.
Q: That might be for security concerns.
A: Not, it is due to technical issues in the contracts and not security issues of Iraq.
Q: You said concessions are no longer in effect and production sharing contracts are of help only in specific cases. Buy-back deals need to be reconsidered. So what would be the new model of contract?
A: First, Iran is introducing a new model which will find its way into international organs. Oil-rich countries and particularly developing countries are thirsty for contract models. Latin American and Middle Eastern countries are looking for service contracts, but they need effective models. We are also looking for effective models of contracts, no matter its name. We will be naturally moving towards service contracts, but we don’t attribute any name to them now. The important thing is the content of the contracts. The contracts must safeguard our national interests while being attractive enough within the framework of regulations governing Iran’s upstream sector to lure companies in the competitive market. I have to note here is that the entire competition is not summarized in the contract. We’ve got the upper hand in terms of contract and that is due to the properties of our country’s reservoirs. We don’t have only the world’s largest gas reserves, but also sit atop the world’s fourth largest oil reserves. Moreover, recovery from our reservoirs will be low-cost and low-risk.
Q: Some experts say Iran’s oil wells are aging while Iraq’s are not still mature. They say the need for secondary recovery increases investment risks.
A: No, that’s not so. You are partly right, but the conclusion is not. Our fields are large and they are currently in the second half of their life. Enhanced recovery is needed, but as you said, at high costs. But all our oil fields are not so. Nearly one million square kilometers of our country’s total area of 1.6 million square kilometers is covered with sedimentary layers where exploration potentials are high. When I was exploration director [at National Iranian Oil Company], surveys showed that 14 out of 17 wells drilled in Iran are successful. Above 85-percent potential is unique in the world. It was just in the exploration sector. As far as development is concerned, you can produce oil from all fields by spending four or five dollars [per barrel] while companies are investing in regions like West Africa, Gulf of Mexico, North Sea, Alaska and Siberia where oil recovery costs 40 or 50 dollars a barrel. These companies are currently investing in unconventional oil, heavy crude and shale oil. Oil companies need to spend 40 or 50 dollars for recovering each barrel of oil. These companies will be willing to come to Iran and work if they see that would not cost them more than five or six dollars. We have to take into account this advantage and the contract framework. We should not give concessions in return for nothing, nor should we dissuade companies. In this competitive market, we have to view our advantages and conclude about the model of a fair contract based on win-win approach.
Q: The committee to revise contracts was established in October. How much have you progressed?
A: We started our work two months ago. I think that we have made good progress from several aspects. We first reviewed different documents and studied various contracts. We reconsidered our own contracts. We have 20 years of experience and so we had to find our own flaws. We have had three generations of buy-back deals. We reviewed them and summed up our conclusions. We also studied the principles of contracts signed in 33 countries. We are comparing them in order to devise our own model in a more effective way. We have to know what others are doing in the competitive market. Doing so much work in two months has been remarkable. We hold regular meetings every Tuesday and discuss everything for five to six hours. Today, we are in a stage where we know what we need. We will start drafting contracts in two weeks and we will be able to detail them in the March symposium.
Q: To what extent do you think the London conference will be affected by sanctions conditions? Remarks by some US officials give rise to speculation that Iran’s nuclear standoff with the West is facing ups and downs.
A: I’m always optimistic and I have my own reasons to be optimistic. I think the process which has started is irreversible. The world has concluded that we have the nuclear knowledge which would not be seized from us. Whatever we have does not violate international regulations and whatever we have wanted lie within the framework of international regulations and safeguards. All political games over the past ten years have been due to the interests of a certain group of individuals, and more specifically Israel which wanted to be the sole nuclear power in the region. The world has realized that Iran is different and its nuclear rights need to be recognized. This right was recognized during this recent round of talks. They are all our rights; however, they have been endorsed. The US Congress has had negative stances vis-à-vis Iran and the reasons are clear. I don’t intend to insult the US Congress, but everyone knows that it is influenced by Israeli lobbies. In general, I believe that the European Union and the US have decided to resolve this issue. But it is not limited to our nuclear issue. We are a regional power and without us, the regional issues are not resolved. They have to coexist with us and seek our assistance.
Whatever the US president said recently shows that he is under growing pressure and he has to convince the lobbies. Personally, I don’t think he was speaking against us. He said that Iran’s nuclear program could not be dismantled. That’s too much. We say the same. Iran’s nuclear program could not be dismantled. Speaking in this way, the US president intends to convince others. So I think that this trend is positive and sanctions, which are really anti-humane, are expected to be lifted. I have to note that these sanctions have harmed us, have harmed our people, have harmed our businessmen, but the world needs Iran’s oil. It will be impossible to ignore Iran, with the world’s largest gas and fourth largest oil reserves, in the growing market. The global demand for oil is growing at a pace that the demand for oil will reach 110 to 120 mb/d in the coming two decades.
Q: But Iraq and Saudi Arabia have proven to be capable of replacing Iran’s oil.
A: No, that’s not so. We have to view this issue in the short-term and in the long-term. When the US invaded Iraq, some said the oil prices will go up to 100 dollars, which were around 20 dollars. I noted in an interview at that time that the oil prices will not rise despite attack on Iraq. Iraq was invaded and the oil prices did not rise. I was saying that this issue could be managed in the short term because there are huge strategic stocks in the world and they had reached their maximum at that time. Oil storage kept the prices low. Saudi Arabia’s extra production capacity was between two and three million barrels a day and therefore Iraq’s exit from the oil market was manageable.
Iran and Iraq could be eliminated [from the market] in the short-term, but I hold a long-term view. Shell, BP, International Energy Agency and OPEC say oil supply must reach 105 to 100 mb/d. It means demand for an extra 20 to 25 mb/d. How is that possible? How much investment is needed? How much investment can oil-rich countries make in this sector? What has world done for that purpose? This issue has become a major cause of concern for the world. The US is worried. China, a leading consumer, is worried now. So is India. Everyone is worried that supply and demand are distant from each other. Take into account demographic growth in the world. According to UN estimates, the world population will see a growth as big as the 1950 world population in 2050. Living standards are also growing. The Chinese are dropping bicycles and running cars.
Q: That’s right, but in industrialized countries, energy saving has proven effective.
A: I’ll explain later. We have also economic growth factor. Oil consumption will rise by 10 percent with a one-percent rise in the gross domestic product. The world will see three percent average economic growth. This three-percent growth will occur for energy too.
Environmental considerations and energy efficiency use were effective in the 1980s and 1990s, but they have reached limits. Once, the daily fuel consumption of an American car which burnt 30 liters a day was slashed to 6 liters which could be again reduced to four liters, but it could not be cut to zero or one liter.
In the coming decade, oil and gas will have 55 to 60 percent share in the world energy basket. Therefore, Iran could not be ignored. These sanctions are targeting the entire world. US and European oil companies have been deprived of a golden opportunity for trading. We are trying to prepare the conditions for oil companies to invest in Iran as sanctions are eased. In the meantime, we take into account our national interests while we plan to accomplish our energy supply task.
Q: One important point recently focused upon is to move towards long-term contracts. The history of oil contracts in Iran is marked by D’Arcy Concession, the 1933 contract and nationalization of petroleum industry in Iran. Then we reach the coup against Prime Minister Mohammad Mosaddeq, formation of consortium, Islamic Revolution, exit of oil companies and buy-back deals. It seems that Iran’s oil contracts have seen more ups and downs compared with other countries. What will be the advantage of long-term contracts?
A: The revision committee is discussing various options. Oil companies which enter high-risk oil trading activities are willing to be present in all stages of work. Oil projects are different from other businesses. Their inclination for presence in all stages of the project has two aspects: the first one is financial benefits. The company would prefer a 20-year contract to a 2-year one because the former is more profitable. The second aspect is that a 20 or 30-year process will bring in technologies and knowhow. These companies have experienced countries with various amounts of oil reserves. They have documented everything and make decisions based on their findings. They can work better on the long term. Therefore, companies prefer long-term projects for both technical and economic reasons. But how they will benefit us? Naturally, if we are supposed to develop our fields for optimal recovery we will need more sophisticated technologies than the technology required for the development of green fields. There is a 20, 25 or 30-year process for each field to reach its peak of activity. The fields are like human beings and they are different from factories. You need to deal with them based on your knowledge. A younger man does not refer to doctor as much as an older one. An old man would need medications and even surgery.
When a company is present such processes could be done much better. Moreover, we will need investment throughout the process. One may ask here if foreigners are supposed to do all the work. That is exactly we are thinking about. We have to reach frameworks. Now, we have a legal framework requiring a 51-percent share for Iran in any contract. This 51 percent share is reserved for local content. We also need to define frameworks in which our domestic industry will grow regularly to catch up with other companies like Shell, Total and other oil companies. Therefore, we plan to define these works so that we could become an exporter of oil technology and not remain a consumer forever.
Q: If the London Conference proves successful and the sanctions are lifted, how long do you think it will take for international oil companies to start work in Iran?
A: We have officially started our work long before the London conference and the lifting of sanctions. As part of our efforts, we are making preparations to define a framework for contracts and save time. In the past, we had to spend two, three or four years on discussing the terms of the contracts with foreign companies. If the contracts are transparent and drafted in clear terms, agreement will be reached in a shorter period of time. For us, no company – Asian, European and American – will face restrictions for presence in Iran. They slapped sanctions [on us] and now they can return to Iran. There are numerous valuable opportunities in the upstream oil and gas sectors in Iran for foreign companies.
It also depends on international companies that how quickly they intend to enter this phase. Following the 1996 London conference and the definition of buy-back deals, 80 to 90 companies immediately showed willingness to come to Iran. We have also the experience of Azerbaijan where companies quickly operated oil and gas projects following the collapse of the Soviet Union. Iraq is another example. It offered tender bids and foreign companies rushed to invest in that country. We can also expect foreign companies to invest in Iran, but I cannot set any timeframe. I think that international oil companies know pretty well that Iran is a paradise for their investment. This paradise will soon open its doors and the lucky ones will enter sooner than others.
Iran Eyes 10% of World Gas Market
Enjoying huge natural gas reserves can provide opportunities for the development of the country. Natural gas, as a clean fuel, can meet domestic needs and also be exported. Since the 1973 oil shock, international energy markets have mainly focused on the development of petroleum industry and other sources of energy have been sidelined on the grounds that oil is the most important source. However, in recent years, gas has jumped to a special position in the world market and currently natural gas reserves in the world have increased several times in two decades.
Now we look at Iran which holds the largest gas reserves in the world. This gas must be extracted from deep underground and therefore the country’s gas industry will require a long-term horizon and a strategic look. In the near future, the “oil diplomacy” concept will become “gas diplomacy”.
In an interview, Azizollah Ramezani, director for international affairs of National Iranian Gas Company (NIGC), speaks about the role of Iran’s gas in the world market.
Q: Iran is forecasted to get a 10-percent share in the world gas trade. What short-term and long-term policies have been adopted for that purpose?
A: Petroleum Ministry and subsequently NIGC plan to raise production to beyond domestic consumption. That would facilitate gas exports. At present, domestic consumption plus gas exports equal production. In the coming years, new phases of South Pars gas field will come on-stream and it will be possible to make planning for exports in the future with a view to winning a 10-percent or bigger share in the world gas market.
Q: What do you think about the current and future gas prices in the region and in the world?
A: Natural gas prices vary in different markets and gas prices in LNG markets are much higher than pipeline gas prices. But on average, natural gas prices are lower than crude oil prices and they are set regionally. The future prices of natural gas will depend on a variety of factors including crude oil prices, development of technology for shale oil and gas production, GTL industry development, petrochemical industry development, environmental policies of leading energy consumers, construction of atomic power plants, world economic growth forecast and development of LNG industry.
Q: How can Iran find its way into big Asian and European markets in rivalry with world gas giants?
A: Access to big markets in Asia and Europe requires widespread study of the market, finding target markets, precise planning to raise gas production based on plans, using diplomatic potentials throughout talks, cohesive policymaking based on international conditions, integration and solidarity in areas related to natural gas trade or exports, respecting to gas supply commitments in line with international criteria and standards, development of international human resources particularly natural gas exports, imports and swap contracts, development of LNG industry, development of the necessary infrastructures including networks in international trade and law.
Q: Given the development of LNG industry in Iran, what policy has Iran adopted to that effect and what do you think about the market needs for this fuel?
A: Given the geographical position of countries producing and consuming natural gas and the countries’ need for natural gas, it will not be possible to supply gas to all countries through pipeline and LNG gas trade is inevitable. Therefore, our country has to establish gas liquefaction facilities in a bid to win a good share in the natural gas trade.
Q: How will a final deal for gas exports to India be possible?
A: Ira’s gas exports to India will be possible in two ways. One will be within the framework of a gas exports deal to Pakistan and then extension of the pipeline to Pakistan. The other option will be through pipeline through the Sea of Oman and the Indian Ocean. Negotiations have been held on both options and the Islamic Republic of Iran has voiced its readiness, but a final agreement largely depends on the will and seriousness of the Indian party.
Q: Would you please explain about Iran’s plan to export gas to Europe through increasing gas exports to Turkey?
A: In recent years, different European companies have shown interest in importing natural gas from Iran to meet their needs and also to diversity sources of energy and reduce dependence on limited sources. The European policy of reducing dependence on atomic energy will increase interest in natural gas import. For example, natural gas exports to Switzerland have resulted in the signature of an accord and serious negotiations are under way with Greece for gas exports. Gas exports to Europe are possible through various routes and construction of gas pipeline cutting through Turkey will be also a possible option. It seems that following the recent nuclear talks between the Islamic Republic of Iran and the P5+1 group of world powers, the grounds have become more appropriate for the continuation of talks with the European Union member states for gas exports to this continent. We will definitely benefit from this opportunity in the best possible way.
Q: It seems that more European countries are currently willing to purchase Iran gas. Have there been any negotiations to that effect? Which countries are willing to get Iran’s gas? What will be the effect of shale gases on this market?
A: Shale gas technology has been developed in recent years, but due to its environmental aspects, some limitations may be set about development of these sources. In any case, unconventional sources of gas could not completely replace conventional sources and therefore they are unlikely to hinder Iran’s serious presence in the European market.
Q: How will unconventional gas production in the United States affect regional and international markets?
A: Shale gas production in the US will change the route of gas trade in the world and the first impact will be a decline in the price of fossil energy in the US and this country will turn from a gas importer to a gas exporter. Subsequently, gas prices in the US’s target markets including Europe and Asia will be affected.
Q: How do you assess the conditions for attraction of foreign investment in gas projects and what opportunities exist for investors?
A: Conditions for attracting foreign investment in Iran’s gas projects are improving and upstream gas companies have had successful experience. Moreover, there are very good opportunities for foreign investors in the construction of gas refineries, high-pressure gas transmission pipeline, gas pressure booster stations, natural gas storage and liquefied natural gas.
Q: How do you see the role of such organizations as Gas Exporting Countries Forum (GECF) in the future market?
A: The role of international organizations including GECF depends on their activities and the adherence of member states to decisions. GECF has not a long background, but election of its new secretary-general from the Islamic Republic is expected to push this organization into bold relief so that this organization will reach maturity and blossoming. Under such conditions, it will be able to take effective steps towards convergence with member states, interaction with other countries, facilitating natural gas trade and raising the share of gas in the world energy mix.
Ahvaz Hosts Oil Show
Iran’s oil-rich province of Khuzestan, in southwest, held its fifth specialized petroleum industry show from January 14 to 16 in its capital city Ahvaz, which is the center of Iran’s oil production. The exhibition was sponsored by National Iranian South Oil Company (NISOC), National Iranian Drilling Company (NIDC), Khuzestan International Exhibitions Company, Iran Petroleum Ministry Public Relations Office and the main four subsidiaries of Petroleum Ministry – National Iranian Oil Company (NIOC), National Iranian Gas Company (NIGC), National Petrochemical Company (NPC) and National Iranian Oil Refining and Distribution Company (NIORDC).
The exhibition was inaugurated in the presence of Petroleum Minister Bijan Namdar Zangeneh, managing-directors of NISOC and NIDC, senior managers of oil companies based in southern Iran as well as directors and representatives of companies manufacturing parts and equipment for the petroleum industry.
Khuzestan province, the birthplace of Iran’s oil, houses the country’s biggest upstream and downstream companies. Due to its specific geographical position, the province is the best place for holding petroleum industry exhibitions. Khuzestan had held four petroleum industry and ten drilling industry exhibitions before this last one. This year, both were merged in order to reduce costs for manufacturing companies and put on exhibit the capabilities of all companies involved in the petroleum industry.
This year, more than 200 domestic companies involved in manufacturing parts and equipment used in the oil, gas, refining, petrochemical and drilling industries, attended the exhibition.
The number of participants this year was 35 percent higher than a year ago, and 46 percent of the companies, manufacturers and industrialists present in the exhibition were from Khuzestan province.
After Tehran’s annual international Oil and Gas Show, Ahvaz Oil Show is the most important petroleum industry exhibition in Iran. This year, the exhibition put on display the capabilities of domestic manufacturers in key petroleum industry equipment and parts and also provided a venue for the signature of agreements for cooperation between oil companies and private manufacturing companies for building the necessary equipment like gas turbines, components of gas compressors, processing pumps as well as drilling tools.
Panel discussions were also held on the sidelines of the exhibition whose organizers said the main objectives of the event included preparing the necessary grounds for cooperation between industrialists, manufacturers and petroleum industry commodities suppliers as well as identifying the requirements of outsourcers.
Wellhead Equipment Renovation
Zangeneh, who had travelled to Ahvaz along with President Hassan Rouhani on his first provincial tour, went straight to the oil show for inauguration. He also visited the booths in the exhibition and was briefed about the development of the first cathodic protection simulation software in Iran.
Zangeneh and his entourage talked with the representatives of companies present in the exhibition about the new achievements of domestic manufacturers who offered their proposals to the minister about domestic manufacturing.
After the inauguration, Zangeneh held a meeting with NISOC managers, during which he insisted on renovation and preparation of wellhead equipment and machinery in one to two years so that gas injection to wells could be done as gas production from the supergiant South Pars gas field rises.
Development of communications between the petroleum industry and universities was another point of discussion in the meeting. Zangeneh underscored the need for the signature of agreements with universities for benefiting from the knowledge of university graduates, exchange of experiences between universities and the petroleum industry and the familiarity of university graduates with oil projects.
Toehold in Iraq Market
Hamid-Reza Golpayegani, managing-director of NIDC, said more than 3,600 wells have been drilled and more than 100,000 technical operations have been conducted.
“NIDC holds around 50 percent of Iran’s market in technical operations and services and we have to make efforts to enter the Iraqi market,” he said.
Golpayegani said: “Training Iraqi specialized manpower by NIDC engineers is currently on the agenda and we are determined to have a share in the Iraqi market in the future.”
He added that more than 120,000 items of equipment, 10,000 of them largely used, are used in drilling. Golpayegani said 6,000 items are being manufactured domestically.
Domestic Manufacturers Massively Present
Hamid Bovard, managing-director of NISOC, said in the inauguration that Khuzestan accounts for the production of more than 80 percent of Iran’s total oil and 16 percent of total gas production. Moreover, Iran’s oldest oil refinery is located in this province.
“Since Khuzestan’s Fifth Oil, Gas and Petrochemical Company and its 11th Drilling Industry Exhibition were held at the same time, the show was warmly welcomed by Iranian manufacturers and industrialists and more than 250 companies were willing to attend,” said Bovard.
He said the number of companies present in the exhibition showed a 35 percent rise compared with the previous one, adding that 46 percent of the participants were from Khuzestan province.
Bovard said the exhibition provided oil companies and manufacturers with a change to interact and exchange knowledge and experience with a view to indigenizing equipment for the petroleum industry and developing the country and the Khuzestan province.
Budget Allocation for Knowledge Development
Bovard told a press conference on January 18 that more than 500 billion rials has been earmarked by NISOC for the development of technical knowledge for manufacturing petroleum industry equipment over the past two years.
He said the credit allocation has been made by the NISOC R&D Department for research projects in cooperation with scientific and research centers.
Noting that more than 70 percent of NISOC needs are met by domestic manufacturers, Bovard said: “In order to further support manufacturers and accelerate indigenization of petroleum industry equipment, a working committee comprised of this company’s engineers and local domestic manufacturers in Khuzestan has been set up.”
He said NISOC eyes indigenizing three important items of equipment – processing pumps, compressors and gas turbines. Bovard said a contract has been signed with a domestic manufacturing company for the indigenization of BB3 processing pump.
Industry Minister Visits Show
Minister of Industry, Trade and Mine Mohammad-Reza Nematzadeh visited the exhibition on January 15. He was being accompanied by a group of Khuzestan MPs, managing-directors of Petroleum Ministry subsidiaries as well as provincial officials.
He visited booths of oil companies and manufacturers of oil industry equipment and was briefed about domestic manufacturing in the petroleum industry.
Pipeline Manufacturing Deal
Another development in the exhibition was the signature of a tripartite contract between Ahvaz Pipe Mill, Oxin Steel Company and NISOC for the manufacturing of oil pipelines of 42-inch and 48-inch diameters.
The agreement, signed on the second day of the exhibition in the presence of NIOC chief Rokneddin Javadi, is worth 9.83 trillion rials.
Under the deal, Oxin Steel Company agrees to provide wide slabs for Ahvaz Pipe Mill to manufacture pipes NISOC needs for oil supply.
Downhole Equipment
Throughout the exhibition, a contract was signed for the manufacturing of optimized Rolls-Royce and Clark turbines for 1.14 trillion rials.
In order to develop technical knowledge for the indigenization of turbine components, contracts were signed for the manufacturing of CT and PT rotors of TB4000 Ruston turbines for 29 billion rials, manufacturing of 69 spare parts of shift rotors for 20 billion dollars and the manufacturing of 29 spare parts of solar turbines for 60 billion rials.
Nasser Kheradmand, director for logistics and commodity procurement of NISOC, said 23 projects for manufacturing downhole and wellhead equipment will be implemented at around 37 billion rials.
He said five projects for development of technical knowledge and indigenization of chemical and polymer materials, have also been signed at the NISOC for 39 billion rials.
PDC Drilling Bits
Polycrystalline diamond compact (PDC) drilling bits are manufactured in Iran with the support of NISOC. They vary in size from 1.2 to 8 inches.
The agreement for the mass production of PDC drilling bits was signed on the second day of the exhibition between NISOC managing-director and the head of Khuzestan Academic Jihad.
Under a 170-billion-rial contract, Manufacturing Technology Research Center of Khuzestan Academic Jihad will develop technical knowledge for the mass production of PDC drilling bits under supervision of NISOC engineers.
Several factors affect drill bit selection. Due to the high number of wells that have been drilled, using information from an adjacent well is most often used to make the appropriate selection. Two different types of drill bits exist: fixed cutter and roller cone. A fixed cutter bit is one where there are no moving parts, but drilling occurs due to percussion or rotation of the drill string. Fixed cutter bits can be either PDC or grit hotpressed inserts (GHI). Roller cone bits can be either tungsten carbide inserts (TCI) or milled tooth (MT). The manufacturing process and composites used in each type of drill bit make them ideal for specific drilling situations. Additional enhancements can be made to any bit to increase the effectiveness for almost any drilling situation.
Research Agreements
NISOC signed five research contracts with scientific and research centers. Development of technical knowledge, studying the performance of nano-additives in reducing confrontation between shale formations and drilling fluids, reducing water absorption and semi-industrial production of nano-additives at 17.8 billion rials is one of these contracts signed with the Research Institute of Petroleum Industry (RIPI).
Another agreement was to develop technical knowledge and study the performance of nano-additives used for reducing friction in drilling operations and their semi-industrial production at 15.7 billion rials. Another agreement is about acquiring technical knowledge for the production of nano-fluids used in thermal transducers and cooling towers with the objective to boost the effectiveness of heat transmission at five billion rials.
Books Unveiled
In a ceremony in the presence of the Petroleum Ministry public relations manager, NIOC human resources manager and NIOC public relations manager, three specialized books on petroleum engineering were unveiled on January 16.
The books, which have been compiled and printed by NISOC, are titled “Analysis of Uncertainty in Hydrocarbon Reservoirs Studies”, “Applied Reservoir Engineering” and “Well Logging”.
Iran Eyes Upwards of $150b Investment in Oil Sector
Hossein Amiri Khamakani, who is spokesman for the Energy Committee of the Iranian parliament, is an experienced and renowned energy expert. He has been following up on energy developments in recent years and has always expressed moderate views about policymaking in the oil and gas industries.
Khamakani favors development of domestic potentials for boosting production and attracting further investment. He believes that an active political diplomacy will help pave the way for investment by big foreign companies in the oil and gas sectors.
The veteran energy expert says development of energy sector is the priority of the Iranian economy.
The MP also said that Iran’s historic nuclear deal with world powers promises bright future for the country’s energy industries.
In an interview, Khamakani outlines his views.
Q: Following Iran’s nuclear deal with six world powers in Geneva, everyone is expecting the flow of investment into Iran’s petroleum industry from big companies across the world. How do you assess the conditions of this industry with regards to attraction of foreign investment?
A: The Geneva negotiations and influential smiles by negotiating parties set the stage for new equations in the world’s political and economic interactions with Iran. They also elicited numerous interpretations about the brightness of the future. The issue of foreign investment in Iran’s crucial oil and gas industries is definitely of great significance and has caught the attention of a large number of international companies and economic enterprises.
Inside the country, a growing need for attracting foreign investment is felt. The Fifth Five-Year Economic Development Plan (2010-2015), which forms a significant part of the country’s 20-year Vision Plan, we have to invest up to 150 billion dollars in the petroleum industry. If we divide this figure by the years of the plan, we need at least 30 billion dollars of investment a year in this industry.
During the first three years of the fifth plan, full attraction of investments envisaged in the plan has not been possible. Therefore, 50 billion dollars a year is required to be invested in Iran’s petroleum industry in the remaining two years.
This issue must be examined from two aspects. One is definition of domestic resources for this finance and the other one is overture in the energy sector to the world following the deal made throughout the Geneva talks.
Q: To what extent do you think we can be hopeful of big energy companies investing in Iran?
A: The administration of [President Hassan] Rouhani has taken office with the well thought out motto of “prudence and hope” and therefore prudence is more important than hope. It means that “prudence” is the strategy adopted by the administration to push ahead with talks and we pin “hope” on a final deal between Iran and the negotiating countries for the lifting of unilateral sanctions.
Therefore, we hope that foreign investment companies will increase their interaction with Iran’s petroleum industry as political and economic ties between both sides are reaching a point of moderation. I have to mention that both Iran and big energy companies are willing to cooperate because Iran sits adopt the world’s largest hydrocarbon reserves. A few countries are opposing the expansion of such interactions. It would be realistic to consider political domineering powers as the main obstacles to the presence and investment of international companies in Iran’s energy market.
Q: Iranian and foreign media and experts are always speculating about the potentials of Iran’s oil and gas industries. How much investment can these industries attract in the light of the country’s daily oil production? Is the 150-billion-dollar investment envisaged to be attracted realistic?
A: Studying Iran’s oil and gas industries’ potential for investment in the upstream and downstream sectors. The point of discussion is to see if the efficiency of Iran’s energy industry will match the level of investment. If we want to further go into details we have to ask if Iran’s petroleum industry is worth 150 billion dollars of investment. As you know Iran’s economic structure has experienced some flaws in the past years and it needs to be restructured. It needs investment. In the meantime, as non-oil revenues increase and the budget is weaned off oil, investment in other industries like agriculture becomes more justified.
In the meantime, it must be noted that energy is the main pillar of economic structure in the future of the world. Therefore, the significance of management of the future requires the importance of further activities in the oil and gas industries.
However, many factors are involved in the energy equations of the country.
One should not forget that the current projects operated by Petroleum Ministry are potentially capable of attracting more than 150 billion dollars. Iran’s Petroleum Minister Bijan Namdar Zanganeh is also planning to raise the country’s daily oil production up to Iran’s OPEC quota. Achieving this important objective requires investment.
If big oil companies in the world are given the possibility following the Geneva deal to invest in Iran, the country’s daily oil production will exceed its OPEC quota and it will facilitate the issue of strategic management in the energy and economic sectors and energy security equations in the region will be affected.
Q: Therefore, we can consider attraction of more than 50 billion dollars of investment in Iran’s petroleum industry, can’t we?
A: We should not assess the issues based on ambitious optimism. The government and Foreign Ministry should focus their efforts on winning political pressure relief for big and multinational oil companies which are very willing to invest in Iran’s energy market.
This issue will take time and in the short-term, the country’s oil polices must be defined based on domestic capabilities and finance. Of course, this standpoint is based on the principle of self-sufficiency and self-reliance. However, in a more general view, the world’s need for Iran’s oil and gas is undeniable and the future will make this issue clear. Doubtlessly, the world oil market owes its balance to Iran’s oil and therefore the future of energy diplomacy and the ongoing nuclear talks herald positive developments in the future.
Oil and Iran Revolution
By Parisa Sadeqieh
With the discovery of oil in the Middle East, the economy in the region grew significantly. The countries whose economy was dependant on agriculture and animal breeding were in possession of huge oil reserves. The rulers of these countries were naturally expected to take advantage of oil revenues for economic development. In Iran, the process of industrialization and economic development was under review in the 1960s, albeit not in a planned and target-oriented way. But the 1970s oil shock dramatically accelerated the pace of this process and the oil share of the gross national product (GNP) – comprised of oil, industry and mine, agriculture and services – jumped from nearly 13.66 percent in 1967 to 47 percent in 1974. Subsequently, the share of petrodollars in the government budget increased from 46 percent in the 1960s to 85.5 percent in 1974.
The process of industrialization through oil revenues put Iran’s economy in a deadlock because of the country’s agriculture-dependent economy. The shah regime decided to reconsider its relations for which it was required to consider agrarian reforms. But the government forgot about the traditional sector in its reform program. The agricultural sector which made up a high percentage of GNP lost its significance in Iran’s economy. In 1977, the share of agriculture in the GNP was only 9.31 percent.
On the one hand, economic and administrative turmoil in the country and weak economic infrastructure particularly with regards to roads, railway, post, telephone and energy facilities pushed industrialization policies to failure. On the other, economic development based on oil revenues resulted in unplanned and massive migration of villagers to cities, stagnation of the agricultural sector and production of losses for the traditional segments of the economy. Therefore, the first consequence of industrial development in Iran was the emergence of industrial laborers, expansion of urbanization and slum dwelling. These consequences were instrumental in national protests.
A sharp decline in Iran’s oil revenues in mid-1970s and overambitious development plans which mainly served the ruling regime’s military objectives had driven up the jobless rate, stoked up inflation, brought about housing crisis and caused huge foreign debts. All these economic woes paved the way for protests which led to the victory in 1979 of the Islamic Revolution. The movement which was triggered in May 1963 unseated the Pahvali monarchy in February 1979 and a new chapter started in Iran’s history.
As the Islamic movement, led by Ayatollah Ruhollah Khomeini, against the shah regime gained momentum, developments in the world oil market entered a new phase and it experienced its second historic shock. Under the Pahlavi regime, Iran was the second largest crude oil importer and it was instrumental in the oil market balance. Therefore, any instability in Iran affected the market balance. This lack of balance was not necessarily due to oil undersupply in the markets; it was rather a psychological impact on the market. After industrialized countries left behind the 1973 oil crisis, the Organization of the Petroleum Exporting Countries (OPEC) decided to adopt new policies to gradually increase the oil prices. OPEC predicted that its pricing scheme would be successful without causing any oil shock in the market. This prediction was based on the assumption that crude oil supply will not experience any significant disruption, i.e., all other producers will maintain their share of the market.
Under such circumstances, Iran’s oil exports declined gradually until they were halted. The staff of Tehran Oil Refinery went on strike on September 10, 1978 in protest against the massacre of protestors two days before. The protests spilled over to oil-rich regions in southern Iran and Abadan Oil Refinery. The death of 11 Abadan refinery staff in a cinema inferno added to protests.
Iran’s oil production, which stood at 5.9 mb/d in the first half of 1978, sharply fell to 700,000 b/d – enough just for domestic consumption, in late December that year. Consequently, the world oil production lost nearly 5 mb/d or 10 percent. In those days, the US’s strategic stocks were much lower than today and stood around 68 million barrels due to assurances by the International Energy Agency (IEA) in those years. The US’s then energy secretary James Schlesinger said his country would have to ration oil in case of total halt to Iran’s oil exports. Oil-rich countries like Libya, Algeria and Iraq took advantage of Iran’s turmoil and demanded that oil prices rise although Saudi Arabia and its OPEC allies insisted on moderate oil prices and raised their production to 2 mb/d in a fruitless effort to make up for the Iran void.
Psychological Sub-Impulse
The halt to Iran’s crude oil exports confronted the industrial world with an unpredicted event and industrialized countries did not know how the Iranian revolution would affect the flow of oil.
With the victory in 1979 of the Islamic Revolution, all policies of the shah regime were seriously reconsidered and new policymakers chose a new way with a view to realizing the ideals and objectives of the revolution in different social, political, economic and cultural sectors. The oil sector was no exception and the revolutionary government defined its oil polices based on domestic and international realities.
Oil Production Policy
One of Pahlavi regime policies which underwent revision following the 1979 revolution was the country’s daily oil production. Iran’s revolutionary establishment opposed 6 mb/d production and they focused on lowering oil output. Iran’s oil production was lowered from 6 mb/d to 4 mb/d and subsequently the country’s oil exports fell to 3.2 or 3.3 mb/d from 5 mb/d. The main reasons behind lower oil production were as follows:
Revolution and Oil Price
The issue of pricing has always been a challenging subject with regards to oil. The formation of OPEC was to a great extent due to disputes between oil exporting countries and oil companies on the oil price and some companies’ arbitrary moves in lowering oil prices.
In the first OPEC gathering following the 1979 Islamic Revolution, Iran called for maximum oil price hikes, expressing its discontent with the relatively low oil prices within the framework of OPEC long-term policies.
Due to big differences between oil prices in the free and official markets and also because of low oil prices compared with other energy products, Iran proposed 35 dollars a barrel for oil on April 1, 1980.
Annulment of Contracts
In the wake of the nationalization of Iran’s oil industry in March 1952, this industry was expected to come under full authority of the Iranian government. But the August coup the same year did not let it happen. The nationalization of oil industry was ignored and contracts were signed with different companies. This policy continued up to the 1979 Islamic Revolution. In the aftermath of the revolution, a law was adopted which annulled all oil contracts considered to be in contrast with the nationalization of oil industry in Iran. Therefore, all oil contracts which threatened the independence of this industry were declared null and void. The newly established Petroleum Ministry took control of planning for oil production and exports.
Iran Revolution and West Reaction
Up to the 1979 revolution, Iran was the island of stability for the West. But after the revolution, Iran grew into a potential threat to their interests. The West imagined that the factors which elevated Iran to the position of the region’s gendarme could now target their interests. Iran’s strategic position on the one hand and the dominant revolutionary ideology on the other elicited concerns from the Western governments.
In 1979, of 62.75 mb/d of oil produced in the world on average, 30.93 mb/d, or 49.3 percent, belonged to OPEC with Persian Gulf countries contributing 26.84 mb/d. Before the revolution, nearly 17 mb/d oil was carried in very large crude carriers through the Strait of Hormuz. The US was scarcely dependent on the Persian Gulf oil which supplied 30 percent of West Europe’s needs and 60 percent of Japan’s. It meant the West’s strategic dependence on the region.
The Western governments imposed rounds of sanctions on Iran’s oil, but they failed to paralyze Iran’s oil industry.
Conclusion
The revolutionary movement of the Iranian people managed to leave significant impacts on the oil markets. The wave of strikes by Iranian oil staff started in September 1978 and resulted in a halt to Iran’s oil exports. The halt left psychological impacts on the oil market and encouraged companies and countries to buy more oil. The oil market plunged into tumult and the oil prices picked up.
After the revolution, the shah regime’s oil policies were reconsidered seriously and the country focused on lowering oil production while calling for oil prices to rise. Another revolutionary move was the annulment of contracts which were in contrast with the nationalization of oil industry.
In return, industrialized countries particularly the US embarked on a campaign against the Islamic Revolution. Deployment of rapid reaction forces, establishment of [Persian] Gulf Cooperation Council and making efforts to deemphasize the Persian Gulf region and the Strait of Hormuz were among reactions of the West to Iran’s revolution. The West finally pitted Iraq against Iran in order to trigger the second oil stock.
More than three decades on since the revolution, a nuclear deal signed between Iran and world powers is expected to resolve misunderstandings and convince the Western governments that the Islamic Republic of Iran is an independent, intellectual and reasonable establishment which has defined its policies based on dignified interaction with the world.
The policies announced by Iran’s Petroleum Minister Bijan Namdar Zangeneh and his recent meetings with chief executives of oil giants indicate that Iran’s oil industry has defined its future programs based on reasonable interaction from an economic perspective.
Oil and Iran Revolution
By Parisa Sadeqieh
With the discovery of oil in the Middle East, the economy in the region grew significantly. The countries whose economy was dependant on agriculture and animal breeding were in possession of huge oil reserves. The rulers of these countries were naturally expected to take advantage of oil revenues for economic development. In Iran, the process of industrialization and economic development was under review in the 1960s, albeit not in a planned and target-oriented way. But the 1970s oil shock dramatically accelerated the pace of this process and the oil share of the gross national product (GNP) – comprised of oil, industry and mine, agriculture and services – jumped from nearly 13.66 percent in 1967 to 47 percent in 1974. Subsequently, the share of petrodollars in the government budget increased from 46 percent in the 1960s to 85.5 percent in 1974.
The process of industrialization through oil revenues put Iran’s economy in a deadlock because of the country’s agriculture-dependent economy. The shah regime decided to reconsider its relations for which it was required to consider agrarian reforms. But the government forgot about the traditional sector in its reform program. The agricultural sector which made up a high percentage of GNP lost its significance in Iran’s economy. In 1977, the share of agriculture in the GNP was only 9.31 percent.
On the one hand, economic and administrative turmoil in the country and weak economic infrastructure particularly with regards to roads, railway, post, telephone and energy facilities pushed industrialization policies to failure. On the other, economic development based on oil revenues resulted in unplanned and massive migration of villagers to cities, stagnation of the agricultural sector and production of losses for the traditional segments of the economy. Therefore, the first consequence of industrial development in Iran was the emergence of industrial laborers, expansion of urbanization and slum dwelling. These consequences were instrumental in national protests.
A sharp decline in Iran’s oil revenues in mid-1970s and overambitious development plans which mainly served the ruling regime’s military objectives had driven up the jobless rate, stoked up inflation, brought about housing crisis and caused huge foreign debts. All these economic woes paved the way for protests which led to the victory in 1979 of the Islamic Revolution. The movement which was triggered in May 1963 unseated the Pahvali monarchy in February 1979 and a new chapter started in Iran’s history.
As the Islamic movement, led by Ayatollah Ruhollah Khomeini, against the shah regime gained momentum, developments in the world oil market entered a new phase and it experienced its second historic shock. Under the Pahlavi regime, Iran was the second largest crude oil importer and it was instrumental in the oil market balance. Therefore, any instability in Iran affected the market balance. This lack of balance was not necessarily due to oil undersupply in the markets; it was rather a psychological impact on the market. After industrialized countries left behind the 1973 oil crisis, the Organization of the Petroleum Exporting Countries (OPEC) decided to adopt new policies to gradually increase the oil prices. OPEC predicted that its pricing scheme would be successful without causing any oil shock in the market. This prediction was based on the assumption that crude oil supply will not experience any significant disruption, i.e., all other producers will maintain their share of the market.
Under such circumstances, Iran’s oil exports declined gradually until they were halted. The staff of Tehran Oil Refinery went on strike on September 10, 1978 in protest against the massacre of protestors two days before. The protests spilled over to oil-rich regions in southern Iran and Abadan Oil Refinery. The death of 11 Abadan refinery staff in a cinema inferno added to protests.
Iran’s oil production, which stood at 5.9 mb/d in the first half of 1978, sharply fell to 700,000 b/d – enough just for domestic consumption, in late December that year. Consequently, the world oil production lost nearly 5 mb/d or 10 percent. In those days, the US’s strategic stocks were much lower than today and stood around 68 million barrels due to assurances by the International Energy Agency (IEA) in those years. The US’s then energy secretary James Schlesinger said his country would have to ration oil in case of total halt to Iran’s oil exports. Oil-rich countries like Libya, Algeria and Iraq took advantage of Iran’s turmoil and demanded that oil prices rise although Saudi Arabia and its OPEC allies insisted on moderate oil prices and raised their production to 2 mb/d in a fruitless effort to make up for the Iran void.
Psychological Sub-Impulse
The halt to Iran’s crude oil exports confronted the industrial world with an unpredicted event and industrialized countries did not know how the Iranian revolution would affect the flow of oil.
With the victory in 1979 of the Islamic Revolution, all policies of the shah regime were seriously reconsidered and new policymakers chose a new way with a view to realizing the ideals and objectives of the revolution in different social, political, economic and cultural sectors. The oil sector was no exception and the revolutionary government defined its oil polices based on domestic and international realities.
Oil Production Policy
One of Pahlavi regime policies which underwent revision following the 1979 revolution was the country’s daily oil production. Iran’s revolutionary establishment opposed 6 mb/d production and they focused on lowering oil output. Iran’s oil production was lowered from 6 mb/d to 4 mb/d and subsequently the country’s oil exports fell to 3.2 or 3.3 mb/d from 5 mb/d. The main reasons behind lower oil production were as follows:
Revolution and Oil Price
The issue of pricing has always been a challenging subject with regards to oil. The formation of OPEC was to a great extent due to disputes between oil exporting countries and oil companies on the oil price and some companies’ arbitrary moves in lowering oil prices.
In the first OPEC gathering following the 1979 Islamic Revolution, Iran called for maximum oil price hikes, expressing its discontent with the relatively low oil prices within the framework of OPEC long-term policies.
Due to big differences between oil prices in the free and official markets and also because of low oil prices compared with other energy products, Iran proposed 35 dollars a barrel for oil on April 1, 1980.
Annulment of Contracts
In the wake of the nationalization of Iran’s oil industry in March 1952, this industry was expected to come under full authority of the Iranian government. But the August coup the same year did not let it happen. The nationalization of oil industry was ignored and contracts were signed with different companies. This policy continued up to the 1979 Islamic Revolution. In the aftermath of the revolution, a law was adopted which annulled all oil contracts considered to be in contrast with the nationalization of oil industry in Iran. Therefore, all oil contracts which threatened the independence of this industry were declared null and void. The newly established Petroleum Ministry took control of planning for oil production and exports.
Iran Revolution and West Reaction
Up to the 1979 revolution, Iran was the island of stability for the West. But after the revolution, Iran grew into a potential threat to their interests. The West imagined that the factors which elevated Iran to the position of the region’s gendarme could now target their interests. Iran’s strategic position on the one hand and the dominant revolutionary ideology on the other elicited concerns from the Western governments.
In 1979, of 62.75 mb/d of oil produced in the world on average, 30.93 mb/d, or 49.3 percent, belonged to OPEC with Persian Gulf countries contributing 26.84 mb/d. Before the revolution, nearly 17 mb/d oil was carried in very large crude carriers through the Strait of Hormuz. The US was scarcely dependent on the Persian Gulf oil which supplied 30 percent of West Europe’s needs and 60 percent of Japan’s. It meant the West’s strategic dependence on the region.
The Western governments imposed rounds of sanctions on Iran’s oil, but they failed to paralyze Iran’s oil industry.
Conclusion
The revolutionary movement of the Iranian people managed to leave significant impacts on the oil markets. The wave of strikes by Iranian oil staff started in September 1978 and resulted in a halt to Iran’s oil exports. The halt left psychological impacts on the oil market and encouraged companies and countries to buy more oil. The oil market plunged into tumult and the oil prices picked up.
After the revolution, the shah regime’s oil policies were reconsidered seriously and the country focused on lowering oil production while calling for oil prices to rise. Another revolutionary move was the annulment of contracts which were in contrast with the nationalization of oil industry.
In return, industrialized countries particularly the US embarked on a campaign against the Islamic Revolution. Deployment of rapid reaction forces, establishment of [Persian] Gulf Cooperation Council and making efforts to deemphasize the Persian Gulf region and the Strait of Hormuz were among reactions of the West to Iran’s revolution. The West finally pitted Iraq against Iran in order to trigger the second oil stock.
More than three decades on since the revolution, a nuclear deal signed between Iran and world powers is expected to resolve misunderstandings and convince the Western governments that the Islamic Republic of Iran is an independent, intellectual and reasonable establishment which has defined its policies based on dignified interaction with the world.
The policies announced by Iran’s Petroleum Minister Bijan Namdar Zangeneh and his recent meetings with chief executives of oil giants indicate that Iran’s oil industry has defined its future programs based on reasonable interaction from an economic perspective.
Argentina Petchem Sector Investing in Shale Plays
Argentina's petrochemical sector plans to step up investment in developing oil and natural gas supplies from shale plays like Vaca Muerta, helping to boost feedstock supplies to expand production capacity, a senior government official said.
"This sector is getting involved in the investment process of Vaca Muerta to secure the resources that they need as raw materials," Industry Minister Debora Giorgi said in a televised press conference.
Of the six biggest polymer and plastics producers, "at least two" have started investment plans for shale development, she said after meeting with sector representatives. The first was Dow Chemical. It entered a partnership in September with Argentina's state-run YPF to develop a pilot production project for shale gas on the El Orejano block. They will invest a combined $188 million in the first year to drill 12 wells for shale gas resources, targeting the Lajas, Sierras Blancas and Vaca Muerta plays.
The companies estimate peak production could surpass 3 million cubic meters/day.
With the additional supplies of gas, Giorgi said petrochemical companies would be able to increase production and expand capacity at their plants, helping to reduce imports of gas, gas-based feedstock and petrochemicals. Polymer producers, for example, have been increasing imports of ethylene as feedstock, in particular during the May-to-September cold season when gas shortages peak.
Dow plans to use the additional gas supplies from its partnership with YPF to boost gas feedstock supplies at its plants in Bahia Blanca, which have capacity to produce 700,000 mt/year of ethylene and 600,000 mt/year of HDPE, LDPE and LLDPE.
Dow buys gas-based ethane feedstock for these plants from Compania Mega, in which Dow, YPF and Brazil's state-run Petrobras are the main shareholders. Mega processes the gas at a plant in Bahia Blanca and sells the ethane as well as supplies of butane, propane and natural gasoline to makers of petrochemicals and other finished products.
China Curbs Coal, Oil Consumption
China is expected to continue increasing energy efficiency this year, resulting in muted growth in oil and coal consumption, according to new projections unveiled by the National Energy Administration.
Total energy consumption in China is expected to rise 3.2% year on year to 3.88 billion mt of coal equivalent or mtce this year, according to the NEA, which is under the purview of central economic planner the National Development and Reform Commission.
In contrast, coal consumption will edge up 1.6% year on year to 3.8 billion mt while apparent demand for oil will rise 1.8% year on year to 510 million mt, the NEA said. Apparent demand for natural gas this year will increase 14.5% year on year to 193 billion cu m.
China is estimated to use 0.71 mtce of energy to produce every Yuan 10,000 ($1,653) of GDP, an energy intensity rate that is 3.9% lower than last year and down 12% from 2010, NEA said.
Overall consumption of non-fossil fuels will rise to 10.7% of total energy consumption this year, with the proportion of natural gas at 6.5%, the agency said, without giving any data for 2013.
Coal consumption as a proportion of the total energy mix will fall below 65% in 2014, NEA said.
Kenya Moves Closer to Getting Commercial Oil
Kenya has moved closer to striking commercially-viable oil after Tullow Oil made new discoveries in the northern part of the country.
The company announced on Wednesday that it had made discoveries at Amosing-1 and Ewoi-1 in Block 10BB in northern Kenya. For that, Tullow believes there is more oil in Kenya than it had earlier estimated.
“As a result of the latest successes and recently-reported discoveries at Ekales-1 and Agete-1, Tullow has updated its estimate of discovered resources in this basin to over 600 mmbo,” the company announced in a statement.
$28b Shah Deniz Gas Export Project Gets Go-Ahead
The BP-led Shah Deniz consortium have taken a final investment decision for the Stage 2 development of the gas field offshore Azerbaijan.
This involves expanding the existing overland South Caucasus pipeline through Azerbaijan and Georgia, and constructing the Trans-Anatolian Gas Pipeline (TANAP) across Turkey and the connecting Trans-Adriatic Pipeline (TAP) through Greece, Albania, and into Italy.
These projects, along with gas transmission infrastructure to Bulgaria, will create a new Southern Gas Corridor to Europe.
Investments at Shah Deniz will include drilling and completion of 26 new subsea wells and construction of two bridge-linked platforms. Onshore there will be new processing and compression facilities at Sangachal.
BP estimates the total cost of Shah Deniz Stage 2 and the various pipeline projects at around $28 billion. These will transport 16 bcm/yr (565 bcf/yr) of gas from the giant offshore field around 3,500 km (2,175 mi) to consumers in Georgia, Turkey, Greece, Bulgaria, and Italy.
The consortium is targeting first gas for late 2018, starting with sales to Georgia and Turkey. Deliveries to Europe will follow a year later.
New Suppliers Boost China Oil Imports
China is trimming dependence from some top oil suppliers, such as Saudi Arabia, as greater availability of global oil helps Beijing diversify its sources of foreign crude.
The changing makeup of China's foreign oil suppliers is one example of how weaker demand from buyers in the US, Europe and Japan is reshaping global trade flows. Beijing hopes the gradual shift in oil shipments can help it reduce dependence on a key group of suppliers—though new shipments in many cases are coming from politically risky areas.
Chinese customs data released recently showed China's crude imports declined or stagnated from some of its largest oil suppliers in 2013, including Saudi Arabia, Kuwait and Venezuela.
Oil Majors Shy Away From First Major Kurdish Export Deal
The oil is ready and waiting – but buyers are few and far between.
That is the predicament facing officials from the Kurdistan Regional Government – Iraq’s northernmost province – as they target regular exports of crude that could give a new level of economic viability to their fledgling nation.
Since the US-led invasion of Iraq a decade ago, the Kurdish government has been developing its oil industry in defiance of the central government in Baghdad. Crude is now finally flowing via pipeline to Turkey and the KRG has invited bids for it.
A successful tender would catapult the tiny region into the middle ranks of global oil exporters and give its politicians leverage in their dispute with the central government over who should oversee the sale of Kurdish oil.
But there is a pressing problem: the largest energy companies and traders are steering clear for fear of upsetting Baghdad, which controls major crude oil supply contracts and some of the world’s largest production projects.
“We will not be involved in KRG tenders until we have a much better understanding of the ramifications for our relationship with Iraq,” says a senior executive at one of the world’s largest energy companies. Two other major energy companies also said they would not take part in the tender, but all declined to be named.
Kurdistan’s giant reserves and attractive geology have made it a hotspot for the world’s largest energy companies, with operators from ExxonMobil to Total taking up exploration licences in recent years.
But current production of about 200,000 barrels a day is tiny in the context of a global market of 90m barrels a day, and has not been enough to tempt the largest companies into participating in the Kurdish tender.
Executives are also wary of stepping into a dispute which has pitted the KRG and Turkey – which wants Kurdish oil and gas to feed its energy-hungry economy – against Baghdad and the US, which is worried that independent exports of Kurdish crude oil could presage a break-up of the Iraqi state.
Deep Panuke Facilities Offshore Canada
Tideway has completed an offshore installation program for EnCana’s Deep Panuke gas development offshore Nova Scotia, eastern Canada.
Under the $14.4-million contract, Tideway deployed for the first time its Inclined Fallpipe System (IFPS).
Deep Panuke is 250 km (155 mi) southeast of Halifax, in an area prone to high waves and strong seabed currents. First gas from the development is due to be transported this year to Goldboro on the mainland via a subsea pipeline.
Petrobras Offers Exploration Plan
Petrobras reports that the consortium of Petrobras (40%), Shell (20%), Total (20%), CNOOC (10%), and CNPC (10%), along with Pré-Sal Petróleo SA (PPSA), has approved the group’s 2014 working and investment plan for the offshore Libra block, located in the ultradeep waters of the presalt Santos basin. The approved 2014 capital expenditure is $400 million to $500 million.
UK Unveils Latest Offshore Licensing Round
Britain’s Energy Minister Michael Fallon has invited bids for the UK’s 28th offshore licensing round.
“The licensing of new areas forms an essential part of our long-term economic plan by enabling the exploration necessary to ensure we fully realize our remaining reserves which could be as much as another 20 Bbbl,” Fallon said.
Some blocks excluded from earlier licensing rounds for environmental reasons will remain off-limits. This includes blocks in or overlapping with the boundaries of the Moray Firth off northeast Scotland, and Cardigan Bay Special Area of Conservation off West Wales.
Oonagh Werngren, Oil & Gas UK’s operations director, said the association welcomes the announcement of the latest licensing round.
“Exploration in the North Sea has been challenged in recent years in both the number of exploration wells being drilled and their success rates. Recent data from the Department for Energy and Climate Change (DECC) demonstrates that in 2011, the UK continental shelf (UKCS) experienced a 50% drop in the number of exploration wells drilled, a number which has so far yet to recover,” he said.
Mubadala Proves More Gas Offshore Sarawak
Mubadala Petroleum has discovered gas in the Sintok structure offshore Sarawak, according to partner Petronas.
The Sintok-1 well was drilled in block SK320, 240 km (149 mi) northwest of Bintulu, to a TD of 2,775 m (9,104 ft). It encountered gas in the main target reservoir.
Analysis of well data indicates a 292-m (958-ft) gas column. Studies continue to assess the volume of the discovery.
This was the third gas find on the block since it was awarded in February 2010.
Syn-Rift Discovery in Deepwater Angola Presalt
Cobalt International Energy Inc. (NYSE:CIE), in partnership with the National Concessionaire Sonangol and block 21 partners, reports the first discovery in the Syn-rift interval in the Bicuar #1A presalt deepwater exploratory well offshore Angola.
The well was drilled to a measured depth of 5,739 m (18,829 ft) and encountered 56 m (184 ft) of net pay from multiple presalt intervals. Results of logging, coring, and fluid acquisition confirmed the existence of both oil and condensate in multiple intervals. No free gas zones or water contacts were observed. All well data was collected via openhole logging.
Vallourec Opens Premium Connections Complex in Saudi Arabia
Vallourec has inaugurated its finishing plant for oil and gas tubes in Saudi Arabia.
Dammam-based Vallourec Saudi Arabia will provide heat treatment and threading for the full range of VAM premium connections, using hollows provided by Vallourec’s pipe mills, and will have an annual capacity of 100,000 tons.
Vallourec acquired the facility, formerly known as Saudi Seamless Pipes Factory Co., in 2011. The French contractor upgraded its heat treatment and finishing lines and added a premium threading line and a coupling shop.
Industrial Coating in Oil Industry
Given the diversity of climatic conditions in Iran and the impacts of weather on industrial equipment and installations including oil, gas and petrochemical facilities, the issue of oil installations corrosion and its harmful and dangerous consequences gets more significance. One of the best methods for protecting facilities against corrosion would be using coatings in order to increase the longevity of installations. At present, the average life of industrial coatings in the world is seven to ten years old. The coating research group of the Research Institute of Petroleum Industry (RIPI) is trying to raise the longevity of Iranian industrial coatings from two years to the global standard level.
Homeira Shariat Panahi, head of the coating research group of RIPI, says: “One of the most important activities of this group is to conduct research about how to improve the performance and useful life of industrial coatings, designing, formulation, manufacturing and optimization of protective coatings used against corrosion in the oil, gas and petrochemical industries. Water-based coatings which are resistant to environmental conditions and corrosion, and pose no threat to the environment are among the coatings this group has conducted research on.”
“So far, a number of projects have been implemented on [developing] nano-coatings resistant to corrosion,” she told Iran Petroleum.
Shariat Panahi added that these coatings could be optimized to be used in industrial facilities.
“Recently, a research group voiced its readiness to offer the necessary consultations regarding selection, quality control and supervision on the preparation of coatings to different sectors of petroleum industry,” she said.
According to official data, corrosion in refining structures inflicts the highest amount of damage to petroleum industry facilities.
To that effect, Ali Qanbarzadeh, director of atmospheric corrosion project in Bandar Abbas Refinery, said: “Corrosion costs equal up to five percent of gross national product in developed countries. But in developing countries like Iran, these costs are much higher.”
“In addition to damaging installations, corrosion will also result in horrible environmental and life damage,” he said.
Qanbarzadeh referred to the 1986 Chernobyl nuclear disaster which resulted from corrosion due to weak inspection standards.
An official report mentioned the possibility that the repaired part of the turbine-building added a larger strain on the total structure than expected, and the braces in the roof were damaged by corrosion and sloppy welding.
Touching on methods of preventing corrosion in facilities, Qanbarzadeh said: “Statistically, more than 80 percent of spendings on corrosion prevention is related to coating systems (alloys not included). It is indicative of the high sensitivity of this sector.”
An atmospheric corrosion project is currently under implementation at Bandar Abbas oil refinery.
“This project, whose main objective is to determine the rate of atmospheric corrosion and sketching out the corrosion map for the refinery, was conducted for two years,” said Qanbarzadeh. “Given its location near the sea, the corrosion rate in a refinery-dotted region was measured and the atmospheric corrosion map was sketched. In this project 14 corrosion sites were installed in Bandar Abbas for the first time in the world, the corrosion rate in a small refining region was determined based on the location of equipment in the refinery and the corrosion map was drawn. A comparison of figures achieved from measurements showed that the corrosion rate may change eight to nine times depending on the location of equipment in the refinery. Therefore, it was specified that in studying oil facility corrosion, the location of equipment, besides their use, must be taken into account.”
He said the first step in lengthening the life cycle of coating systems will be to choose the proper coating system, adding that other factors like the quality of color and process of painting are also important.
“Under these circumstances, in order to increase resistance to the corrosion of petroleum industry facilities, the RIPI is required to supervise the projects from the very beginning. Moreover, oil companies can benefit from the RIPI proposals regarding preparation of surfaces, optimization of painting and endorsement of the quality of paints. The RIPI will offer assistance in selecting coating systems and is also a reference for the endorsement of private manufacturers of paints,” said Qanbarzadeh. “For example, in some spots in the country like in Assaluyeh and Mahshahr in southern Iran, corrosion on the metals is higher due to climatic conditions and high humidity, but in central regions of ran and in desert regions like Yazd, the rate of destruction of paints is higher. In some industrial regions, the category of corrosion is different due to the existence of different pollutants.”
Gholam-Reza Shadbakhti, director of a project for systematizing paints and coating systems on atmospheric surfaces in Iran’s gas refineries, said surveys show that the life of some paints used in oil facilities is even lower than two years.
“This issue requires repetition of painting operations which will impose heavy costs on the system and will also increase environmental pollution due to the existence of carcinogenic solvents like xylene, toluene and other cyclic hydrocarbons. The next problem will halt in the operations. Industrial operations will stop and industrial structures will be damaged,” said Shadbakhti, a senior RIPI researcher.
Painting of a one-million-barrel storage facility is estimated to cost 10 billion rials. Choosing the proper coating system with regards to the environmental conditions and damaged surfaces, presenting the proper formulation and optimal production, making the necessary preparations and full painting, inspection and maintenance are among the most important factors in protection of paints. Moreover, indigenization of technology for producing industrial paints is a task assigned to the research group of RIPI.
In oil projects, after the infrastructures are installed, coating research experts are consulted, but they cannot do anything then. These experts need to be consulted before installation of infrastructures.
The RIPI has already identified refineries diagnosed with damaged coating systems and paintings. The research institute has also classified information about coating systems of atmospheric surfaces. Severe microbial corrosions have been widely observed in the gas refineries.
RIPI has currently the possibility to cooperate with contractors for upgrading coatings and holding training courses in view of increasing the life of coatings and reducing costs.
The most common use of industrial coatings is for corrosion control of steel structures such as offshore platforms, bridges and underground pipelines. Other functions include intumescent coatings for fire resistance. The most common polymers used in industrial coatings are polyurethane, epoxy and moisture-cure urethane. Another highly common polymer used in industrial coating is a fluoropolymer. There are many types of industrial coatings including inorganic zinc, phosphate, and Xylan and PVD coatings.
Iran Joins Aromatization Catalyst Producers
Iran will start mass producing by March 2014 when Iran’s calendar year end, the head of Catalyst and Nanotechnology Research Center of the Research Institute of Petroleum Industry (RIPI) says.
Mehdi Rashidzadeh said RIPI has invested nearly 20 million dollars in catalyst production, adding that development of knowledge for aromatization catalyst and assigning the private sector for its mass production have saved the country millions of dollars.
He put the value of catalyst market in the world at more than 20 billion dollars which includes refining processes (30 percent), environment (39 percent) as well as processing of polymer and other chemicals (31 percent).
“Since Iran sits on huge oil and gas reserves, production of this strategic material in the country enjoys special position,” said Rashidzadeh.
He underlined the significance of catalytic processes in the petroleum industry, saying: “These processes are among the most important and the most instrumental operations in the oil, gas, petrochemical and chemical industries in the developed or developing countries because by using catalysts it will be possible to produce different types of fuel and a wide spectrum of middle and final products which the society vitally needs.”
“In Iran, all oil and gas refineries, petrochemical plants, most chemical factories, steel plants and some food products factories use catalysts in their production, and every year huge amounts of hard currency are spent on buying catalysts,” said Rashidzadeh.
Catalyst Perspective
Rashidzadeh said consumption of catalysts and absorbents in petrochemical and refining processes will exceed 5,000 tons a year with the inauguration of new plants and development projects.
“The [catalyst and nanotechnology] research center felt this need and put research and technology projects on catalysts and absorbents on its agenda. Since new catalysts hit the market every year, more attention is needed to be paid to the identification and assessment of these catalysts,” he said.
Rashidzadeh said indigenization of catalysts is a priority, adding: “By identifying and assessing catalysts, the industry will be able to products of higher quality by optimal use of raw materials. In the meantime, by identifying and introducing different resources as well as catalysts produced by domestic companies, some problems stemming from the monopoly of catalyst supply will be resolved.”
He said 40 experienced specialists are currently working in the Catalyst and Nanotechnology Research Center of RIPI, adding that nearly 20 million dollars have been invested in this research center in the past years to equip laboratories and quality control pilots and produce catalysts widely used in the oil, gas and petrochemical refining industries. He said appropriate infrastructures exist for the development of catalysts.
Rashidzadeh said catalyst has been produced based on the developed formulation and technical knowledge in this center. He added that the products have been used in refining and petrochemical industries after undergoing the necessary studies.
He said the main objective pursued by this research center is to develop technical knowledge required by Iran’s petroleum industry in the field of catalysts, absorbents, nanomaterials and nanocatalysts.
Rashidzadeh said 17 cases of technical knowledge have been developed at RIPI for catalyst production. “So far, eight cases have been given to the private sector for mass production, including six in recent years. There has been a jump.”
Catalyst Bylaw
Rashidzadeh said Iran’s Petroleum Ministry is drawing up a bylaw for catalyst production, adding that more than 100 types of catalysts and absorbents used in the oil, gas and petrochemical sectors must be developed. He said the bylaw will set guidelines for RIPI in catalyst production.
“After development of technical knowledge for aromatization catalyst by RIPI, its technical knowledge was given to a company last month for mass production,” he said, adding that mass production is expected to start in March.
Rashidzadeh said the activities of the research center include development of catalytic-based materials.” Good job has been done to that effect so far and a mine has been identified in Iran for alumina bases manufacturing through powders. Implementation of this project will complete the catalyst production chain in the country.”
He said the research center is active in using Zeolites for removing oil pollution in surface and underground waters, adding that it has also a project for storing ANG.
“For removing acid gases from flares, we use nanomaterials and proposals have been submitted to National Iranian Oil Refining and Distribution Company (NIORDC) for isomerization, alkylation and hydrocracking.
Privatization of Savvy
Given the high level of consumption of catalysts and the significance of production of catalysts in the country, the Catalyst and Nanotechnology Research Center of RIPI defined a plan for producing 360 kilograms a day of aromatization catalyst. The plan has been assigned to the private sector.
Masoumeh Aqa-Babaei, director of aromatization catalyst project, said aromatization is a key process sin the petrochemical industry for producing aromatics.
She said that physical and chemical tests on aromatization catalysts show that Iranian catalysts can rival foreign products, adding that their mass production in the country will be a significant step for self-sufficiency and independency of foreign manufacturers.
Iran Broadens Scientific Oil Cooperation
Iranian Petroleum Ministry’s Institute for International Energy Studies (IIES) has signed a memorandum of cooperation with the Middle East Economic Studies (MEES) which is an affiliate of the Institute of Energy Economics of Japan (IEEJ).
Conducting research projects, training specialized manpower, holding reciprocal seminars as well as specialized courses and short-term workshops and compiling reports and books in a bid to upgrade the scientific knowledge of researchers and experts, conducting feasibility studies, exchanging data through website, reciprocal use o libraries and films as well as mutual scientific visits are among the points mentioned by Iranian Petroleum Ministry officials and Japanese experts.
Nobuo Tanaka, who is IEEJ’s global associate for energy security and sustainability, said the projects the two institutes are to start are important in the light of growing need for energy.
He said a joint research project conducted by the International Energy Agency (IEA) and IEEJ found that the demand for energy would rise up to 2050, mainly from Asian countries.
In the meantime, due to the emergence of a revolution in the non-conventional sources of energy, new technologies will be required for energy production to meet growing needs. The Japanese expert noted that the current technologies will not be able to meet energy needs beyond 2030.
Tanaka said shale gas discovery in the United States and China have given rise to a major development in the energy supply in the world, adding that oil and gas prices are forecasted not to undergo major changes due to the supply of new oil and gas resources, although they might be unconventional.
It is also predicted that non-conventional gas sources will be the only source of energy supply in the world by 2040. Gas prices are much more cost-effective than coal and therefore structural changes are expected in the energy supply system.
Crude and Asian Products Markets, December 2013
*Eyes Focused on 2014
During December, crude prices rose. WTI price rose more than Brent and Dubai prices on the back of stronger macroeconomic data and drop in US crude inventories (see graph).
Over the last two months, Asian crude market performance was strong to the extent that Dubai crude price on November was very close to Brent price. But, during December Dubai prices performed weaker than WTI and Brent as Dubai crude demand for Q1 2014 is expected to be lower. Plentiful supplies made the consumers to diminish their heavy buying for the next period.
As the current year comes to an end, market participants are looking ahead to the market situation in 2014. The followings are some key factors shaping the market in 2014. However it is difficult to draw an exact outlook and the market will be inevitably facing ups and downs.
Optimistic economic data in OECD countries may increase petrochemical feedstock demand in the next year. According to OPEC Monthly Oil Market Report, a continued recovery is forecasted for the major OECD economies and higher economic growth in 2014 compared to 2013 is expected.
In Asia, it is expected to see strong Dubai crude market in 2014 as expected oil demand growth in Asian non- OECD is notable. Developing Asia will need more energy to consume, and increasing refining capacity in the region will absorb more crude oil.
Fuel prices in key Asian consuming countries are below international prices. A change of fuel pricing system in these countries will change oil demand growth in 2014.
The positive outcome of Iran- 5+1 negotiations will impact on the country’s crude exports. In this regard, Asian customers will likely receive most of Iranian returning barrels because of their growing demand.
Political factors in MENA countries may affect crude supplies in the region. Insecure situation in Iraq makes difficulties in investing crude operations and productions. Therefore, it is not expected that Iraqi government could reach to its production targets. Another country with unreliable supply is Libya. Meanwhile, total OPEC supply is expected to keep its share of global crude oil supply in 2014.
Asian Product Markets
In Singapore product market- leader product market in Asia- the mean of prices for all products rose in tandem with the rise in crude prices during December (see graph). Some of the changes in product prices are because of crude price changes. Hence, in order to investigate product market fundamental, it is necessary to look at product price changes in comparison with crude price changes. Market fundamentals for most products were strong. However, fuel oil market performance was weak (see table).
Products market fundamental in brief
|
Light Distillates Products |
Middle Distillates Products |
Heavy Products |
|||
|
gasoline |
Naphtha |
Gasoil |
Jet Fuel |
Fuel Oil 180 |
Fuel Oil 180 |
October |
↑ |
↑ |
↑ |
↑ |
↓ |
↓ |
(Upward arrow: strength, downward arrow: weakness)
Light Distillates
At the top of the barrel, gasoline stock in Singapore and Japan fell sharply but inflows from Taiwan and India to Singapore eased concerns about tightness of the market. On the demand side, China, Indonesia and Vietnam supported the market. For instance Petrolimex of Vietnam which is Asia’s second largest gasoline importer and owns a 140,000 b/d refinery bought more barrels of gasoline. Additionally Sri Lanka‘s Ceypetco supported the market by its buying interests. In particular these recent demands for low octane gasoline pressured the octane differential and reduced it. Additionally Saudi Arabia increased its imports. On the other hand, supply was seen from two main Taiwanese refiners, CPC and Formosa selling five spot cargoes during January. Also PetroChina concluded a term contract for supplying 6.5 million barrels of gasoline over next year although it is expected for Chinese export to decrease by coming of Lunar New Year and it can support the market in short term. Looking ahead, it is expected for Asian gasoline demand to increase during 2014, mainly driven by China. Meanwhile, by coming in to operation of Satrop refinery in Jubail which is a joint venture between Saudi Aramco and Total, gasoline shortfalls in Middle East will be decreased by 400,000 b/d. Moreover, the risk for cutting gasoline subsidies in Asian countries will likely impact on gasoline market in the region.
In general, Global naphtha demand is growing in next five years because of increase in petrochemical uses in Asia, Middle East and Europe. While, USA is going to be net exporter because of domestic weak demand. Asian naphtha market is supported by demand from China, Taiwan and Japan. So the market strengthened and the premiums improved. A continued recovery is expected for Asian naphtha during 2014 and European naphtha arbitrage to Asia will be continued. Sinopec of China asked for more naphtha cargoes because of pipeline explosion at one of its refineries. On the supply side, India reduced its export and there are arbitrage inflows from the West to the East because of price differential between these two markets and increase of demand in Asia pacific because of high cracking margins there. According to estimations 570,000 b/d naphtha will arrive in Asia-Pacific during January. However, bad weather conditions caused some problems and some cargoes may be delayed. Also it is expected that inflows weigh on the market and weaken it during first months of next year.
Middle Distillates (jet fuel, gasoil)
During December, mean of Singapore gasoil prices rose on the back of raise in crude prices. The market was fundamentally strong. Key Asian importers supported the market from demand side. Vietnam, china and Indonesia bought more barrels of gasoil. On the supply side, India continued to export its cargoes to East Africa and western countries.
Looking ahead to 2014, ADNOC’s export is expected to reduce in the next year due to more domestic consumption. In China, India and Saudi Arabia gasoil balances will change. India is going to export more gasoil amid higher refining capacity. Saudi Arabia will produce more gasoil from new Jubail refinery. The Singapore jet fuel crack trended up mostly due to air traffic and cold season. Asia pacific air traffic rose, emphasizing strong demand. Ahead of Lunar New Year holidays in China, the country purchased more barrels to build up its stock. On the other hand, a reduction in northeast Asia’s jet fuel production caused the market to be stronger. Fall in jet fuel production was due to more kerosene production in cold season. Some Asian countries use kerosene for heating during winter. Japan is an example for this matter.
Fuel Oil
Over the reporting month, Asian fuel oil prices increased in tandem with crude price raise. However, fuel oil market was fundamentally weak. More Iranian cargoes were offered in the market. Iran’s exportable fuel oil is of low viscosity (180 and 280 cst). It is expected to have more Iranian fuel oil in the market, affecting the market fundamental obviously after mid-Q1 2014, when winter ends and demand for power generation starts to wane. Japanese consumption for coal, LPG and hydropower rose, signaling a reduction of Japanese fuel oil demand. Moreover, fuel oil bunker demand increased. During the year 2014, it is probable to have lower European arbitrage arrivals in Singapore. Refining capacity in Europe is going to decrease, mostly of simpler ones. Meanwhile, more cargoes from Middle East- Iran and Saudi Arabia- is likely to be seen in the market.
NISOC Implementing EOR Projects
National Iranian South Oil Company (NISOC) is the largest oil development/production in Iran. It supplies nearly 3 mb/d, or 80 percent of Iran’s daily crude oil production.
Tasked with development of 45 small and large oil and gas fields in southwestern Iran, the company has so far recovered more than 61 billion barrels of crude from the fields it operates. It includes 26 billion barrels before the 1979 Islamic Revolution. This volume of production is indicative of a cohesive expert system for planning and following up on affairs related to production in oil-rich regions in Iran. Such output will be impossible without executing a production system. NISOC Evaluation Office monitors all activities related to oil and gas reservoirs run by this company. Conducting comprehensive studies on the reservoirs with the most sophisticated software and offering oil and gas production plans under natural depletion and enhanced recovery scenarios, introducing proper opportunities for new well drillings, well completion methods, supervising downhole logs and their interpretation are among the main tasks assigned to NISOC Evaluation Office.
Ramin Roghanian, head of the office, has provided Petroleum Ministry’s Persian-language magazine Mash’al with the latest conditions of NISOC-run reservoirs as well as the Evaluation Office’s technical and expert potentials.
Q: Would you please tell us about production management and planning regarding NISOC-run reservoirs?
A: Production management and planning are done in the NISOC Evaluation Office, which comprises four specialized sections. The section for reservoir engineering studies is tasked with offering long-term production plans. It conducts comprehensive studies and simulates reservoirs by using the state-of-the-art software in order to determine the volume of oil in place, recoverable oil and the reservoir’s production capacity based on scientific and engineering principles. It is known as master development plan (MDP). The reservoir engineering operations section, which closely cooperates with the reservoir engineering studies section, wells to be drilled are located. The petrophysical engineering section monitors logging from hydrocarbon wells as well as evaluating and interpreting petrophysical data. And finally, the reservoir engineering systems section provides technical logistics and develops necessary software.
If we divide the production process into three sections, namely; reservoir, well and structures, all activities related to reservoir management and planning are done in the engineering evaluation and geology offices, activities related to planning, designing and supervising well drilling are done in the production engineering and drilling offices, and all activities related to the design of structures are done in the processing and gas injection office. All these offices are run by the Technical Directorate.
Q: Every reservoir will enter the second half of its life one day and will experience decline in flow. How could it be distinguished?
A: Before I answer this question, I have to mention several points. The first point is that production companies do not create hydrocarbon substances and they extract them. In other words, production operations drive oil and gas in place, which have been formed throughout millions of years, from underground to the surface. This production mechanism differs from car manufacturing. In carmaking industries, it is possible to raise production by adding to spare parts, but it is not like this in oil production. The amount of hydrocarbon substance extraction from a reservoir depends on a variety of factors like oil reserve, the number of drilled wells and other structures.
The second point is that although a huge volume of hydrocarbon substances are accumulated in the reservoir rock, it is a specific amount and not infinite. It means that naturally, a day will arrive when production from reservoirs will come to a halt and even future technologies will not be able to extract oil anew. But it does not happen out suddenly and will take place gradually. Scientifically speaking, it is known as decline period.
Q: So oil flow decline is defined within the same framework, isn’t it?
A: Decline in the oil flow or decline in production from a reservoir stems from two important factors. The first one is lack of preparation of the necessary facilities and the other one is 55-60 percent decline in the recoverable oil from reservoirs. Regarding the first factor, allocation of sufficient facilities and removal of production bottlenecks will help stabilize and even increase the flow. These methods are scientifically known as improved oil recovery (IOR). But in the second case, production enhancement or even flow stabilization are impossible with the current technologies and technical savvies because the volume of recoverable oil from reservoirs is on the decline. Given the multiplicity of unknown factors in the reservoir, it would be difficult to mark the border between these two and that would require more data and expert work. It is necessary to note that the volume of recoverable oil depends on different factors like the rock and fluid properties as well s production mechanisms including primary, secondary and tertiary recovery, which have so far been known. If mankind masters the necessary technology in the future to for example raise the recovery rate to 100 percent then the conditions of production from reservoirs will differ when recoverable oil rises. However, it must be noted again that the volume of reserves is limited and they will be over one day and naturally reservoirs will experience production decline. The phenomenon of reservoirs entering the second half of their life and the ensuing decline in their oil flow are not limited to Iran’s reservoirs and they have already occurred and will occur in even the so-called developed countries like Norway, the United States and Canada.
Q: Have production bottlenecks in NISOC-run reservoirs been distinguished? What practical measures have been undertaken to remove these bottlenecks?
A: The production problems and bottlenecks in NISOC-run reservoirs are clear. Implementation of mid-term and long-term plans for the development of reservoirs is instrumental in continued production. That along with NISOC daily production plans are among the tasks assigned to this development/production company and have always been paid special attention.
Definition and implementation of thousands of IOR projects on the reservoirs, wells and facilities are the best indication of what we mentioned above. At present, as some projects have been finished, the natural production decline from the reservoirs has been compensated for and the rest will be made up for with the implementation of under-way projects. Meanwhile, in order to compensate for production decline from reservoirs, the bottlenecks of production are regularly examined and the necessary projects for resolving production problems are defined and implemented with the cooperation of scientific and research centers inside and outside of the country. To that effect, the technical section is open to any scientific, research and executive activity in cooperation with domestic and foreign centers.
Q: Which IOR projects does NIOC have on the agenda?
A: Before I answer this question, I have to make some points about enhanced recovery from reservoirs. IOR have generally become synonymous with enhanced oil recovery (EOR), but that is not so. Scientifically, all activities carried out for production from reservoirs is known under the title of enhanced recovery. Production from reservoirs requires the existence of recoverable hydrocarbon substances, well drilling and facilitating hydrocarbon flow from the bottom to the top of the well and finally the provision of necessary facilities for hydrocarbon substances processing which is known as production process. Emergence of any kind of problem in different stages of production will decrease the production flow and IOR projects, based on reservoirs, wells and structures, will be needed to remove obstacles. Reservoir-based methods include water and gas injection to maintain the reservoir pressure as well as EOR. Well-based methods include well repair and stimulation and fracking. Structure-based methods include construction of desalting units to produce oil with high water percentage along with optimization of processing system at any stage of the reservoir life.
A very significant point in the reservoir management will be to distinguish the production bottlenecks and their prioritization with IOR methods based on economic parameters. In order to choose the most proper IOR method for a specific reservoir, a number of points must be taken into account, six of which are as follows:
Q: Now, would you please tell us what has been done in NISOC regarding EOR methods?
A: NISOC-run reservoirs are divided into five groups in terms of production mechanisms. The first group includes fractured carbonated reservoirs from which enhanced recovery is done through gas injection. These reservoirs make up more than 53 percent of NISOC oil in place. I mean that in more than 53 percent of the reservoirs, gas injection EOR is used. Initial estimates are indicative of enhanced recovery factor by seven percent in these reservoirs following gas injection. Of course, as data inc increases about these reservoirs, recovery enhancement rate is reexamined and more precise figures are announced. The second group comprises reservoirs with powerful water injector and therefore the inflowing water can move oil. These reservoirs, which hold nearly nine percent of NISOC oil in place, have the average recovery rate above 55 percent. The second group are oversaturated reservoirs, most of which are located in Bangestan Formation and contain nearly 25 percent of NISOC oil in place. Since the main production mechanism in these reservoirs is rock and fluid expansion, the average enhanced recovery rate is estimated at 10 percent. In the EOR category, this group is the most challenging. So far, numerous projects have been defined under this group to find the proper method for enhanced recovery. Some of them are gas injection into Qale-Nar reservoir, research project for EOR in Ab Teimour reservoir by our colleagues in the Research Institute of Petroleum Industry (RIPI), research project on EOR methods in Bangestan reservoir with the participation of the enhanced recovery research center and studying carbon dioxide injection with the participation of the enhanced recovery center, Energy Ministry Research Institute and the private sector.
The fourth group is comprised of saturated reservoirs which have the potential for gas injection due to their gas cap. However, implementation of gas injection projects in them requires more studies and economic justification. These reservoirs make up around 10 percent of NISOC oil in place.
The rest of NISOC oil in place is accumulated in underdeveloped or recently-developed reservoirs and decisions will be made about how to enhance recovery from them after gathering the necessary data.
Q: What has been done with regards to well-based and structure-based EOR?
A: Good activities have already been done or under way to that effect. Some of them are drilling vertical, horizontal and directional wells, repair and recompletion of existing wells, underbalanced drilling to prevent damage to formation, installation of sand containment systems, removal of asphaltine obstacles in the well column, creation of hydraulic fracture, artificial lifting including lifting with gas, nitrogen and downhole pumps.
Structure-based activities include establishment and equipment of desalting units, sweetening projects, oil and gas quality projects, pipeline projects and safety projects. For instance, desalting units are instrumental in production from some reservoirs and following the completion of under-way projects, pre-salt oil production capacity will rise by 1 mb/d.
NISOC Implementing EOR Projects
National Iranian South Oil Company (NISOC) is the largest oil development/production in Iran. It supplies nearly 3 mb/d, or 80 percent of Iran’s daily crude oil production.
Tasked with development of 45 small and large oil and gas fields in southwestern Iran, the company has so far recovered more than 61 billion barrels of crude from the fields it operates. It includes 26 billion barrels before the 1979 Islamic Revolution. This volume of production is indicative of a cohesive expert system for planning and following up on affairs related to production in oil-rich regions in Iran. Such output will be impossible without executing a production system. NISOC Evaluation Office monitors all activities related to oil and gas reservoirs run by this company. Conducting comprehensive studies on the reservoirs with the most sophisticated software and offering oil and gas production plans under natural depletion and enhanced recovery scenarios, introducing proper opportunities for new well drillings, well completion methods, supervising downhole logs and their interpretation are among the main tasks assigned to NISOC Evaluation Office.
Ramin Roghanian, head of the office, has provided Petroleum Ministry’s Persian-language magazine Mash’al with the latest conditions of NISOC-run reservoirs as well as the Evaluation Office’s technical and expert potentials.
Q: Would you please tell us about production management and planning regarding NISOC-run reservoirs?
A: Production management and planning are done in the NISOC Evaluation Office, which comprises four specialized sections. The section for reservoir engineering studies is tasked with offering long-term production plans. It conducts comprehensive studies and simulates reservoirs by using the state-of-the-art software in order to determine the volume of oil in place, recoverable oil and the reservoir’s production capacity based on scientific and engineering principles. It is known as master development plan (MDP). The reservoir engineering operations section, which closely cooperates with the reservoir engineering studies section, wells to be drilled are located. The petrophysical engineering section monitors logging from hydrocarbon wells as well as evaluating and interpreting petrophysical data. And finally, the reservoir engineering systems section provides technical logistics and develops necessary software.
If we divide the production process into three sections, namely; reservoir, well and structures, all activities related to reservoir management and planning are done in the engineering evaluation and geology offices, activities related to planning, designing and supervising well drilling are done in the production engineering and drilling offices, and all activities related to the design of structures are done in the processing and gas injection office. All these offices are run by the Technical Directorate.
Q: Every reservoir will enter the second half of its life one day and will experience decline in flow. How could it be distinguished?
A: Before I answer this question, I have to mention several points. The first point is that production companies do not create hydrocarbon substances and they extract them. In other words, production operations drive oil and gas in place, which have been formed throughout millions of years, from underground to the surface. This production mechanism differs from car manufacturing. In carmaking industries, it is possible to raise production by adding to spare parts, but it is not like this in oil production. The amount of hydrocarbon substance extraction from a reservoir depends on a variety of factors like oil reserve, the number of drilled wells and other structures.
The second point is that although a huge volume of hydrocarbon substances are accumulated in the reservoir rock, it is a specific amount and not infinite. It means that naturally, a day will arrive when production from reservoirs will come to a halt and even future technologies will not be able to extract oil anew. But it does not happen out suddenly and will take place gradually. Scientifically speaking, it is known as decline period.
Q: So oil flow decline is defined within the same framework, isn’t it?
A: Decline in the oil flow or decline in production from a reservoir stems from two important factors. The first one is lack of preparation of the necessary facilities and the other one is 55-60 percent decline in the recoverable oil from reservoirs. Regarding the first factor, allocation of sufficient facilities and removal of production bottlenecks will help stabilize and even increase the flow. These methods are scientifically known as improved oil recovery (IOR). But in the second case, production enhancement or even flow stabilization are impossible with the current technologies and technical savvies because the volume of recoverable oil from reservoirs is on the decline. Given the multiplicity of unknown factors in the reservoir, it would be difficult to mark the border between these two and that would require more data and expert work. It is necessary to note that the volume of recoverable oil depends on different factors like the rock and fluid properties as well s production mechanisms including primary, secondary and tertiary recovery, which have so far been known. If mankind masters the necessary technology in the future to for example raise the recovery rate to 100 percent then the conditions of production from reservoirs will differ when recoverable oil rises. However, it must be noted again that the volume of reserves is limited and they will be over one day and naturally reservoirs will experience production decline. The phenomenon of reservoirs entering the second half of their life and the ensuing decline in their oil flow are not limited to Iran’s reservoirs and they have already occurred and will occur in even the so-called developed countries like Norway, the United States and Canada.
Q: Have production bottlenecks in NISOC-run reservoirs been distinguished? What practical measures have been undertaken to remove these bottlenecks?
A: The production problems and bottlenecks in NISOC-run reservoirs are clear. Implementation of mid-term and long-term plans for the development of reservoirs is instrumental in continued production. That along with NISOC daily production plans are among the tasks assigned to this development/production company and have always been paid special attention.
Definition and implementation of thousands of IOR projects on the reservoirs, wells and facilities are the best indication of what we mentioned above. At present, as some projects have been finished, the natural production decline from the reservoirs has been compensated for and the rest will be made up for with the implementation of under-way projects. Meanwhile, in order to compensate for production decline from reservoirs, the bottlenecks of production are regularly examined and the necessary projects for resolving production problems are defined and implemented with the cooperation of scientific and research centers inside and outside of the country. To that effect, the technical section is open to any scientific, research and executive activity in cooperation with domestic and foreign centers.
Q: Which IOR projects does NIOC have on the agenda?
A: Before I answer this question, I have to make some points about enhanced recovery from reservoirs. IOR have generally become synonymous with enhanced oil recovery (EOR), but that is not so. Scientifically, all activities carried out for production from reservoirs is known under the title of enhanced recovery. Production from reservoirs requires the existence of recoverable hydrocarbon substances, well drilling and facilitating hydrocarbon flow from the bottom to the top of the well and finally the provision of necessary facilities for hydrocarbon substances processing which is known as production process. Emergence of any kind of problem in different stages of production will decrease the production flow and IOR projects, based on reservoirs, wells and structures, will be needed to remove obstacles. Reservoir-based methods include water and gas injection to maintain the reservoir pressure as well as EOR. Well-based methods include well repair and stimulation and fracking. Structure-based methods include construction of desalting units to produce oil with high water percentage along with optimization of processing system at any stage of the reservoir life.
A very significant point in the reservoir management will be to distinguish the production bottlenecks and their prioritization with IOR methods based on economic parameters. In order to choose the most proper IOR method for a specific reservoir, a number of points must be taken into account, six of which are as follows:
Q: Now, would you please tell us what has been done in NISOC regarding EOR methods?
A: NISOC-run reservoirs are divided into five groups in terms of production mechanisms. The first group includes fractured carbonated reservoirs from which enhanced recovery is done through gas injection. These reservoirs make up more than 53 percent of NISOC oil in place. I mean that in more than 53 percent of the reservoirs, gas injection EOR is used. Initial estimates are indicative of enhanced recovery factor by seven percent in these reservoirs following gas injection. Of course, as data inc increases about these reservoirs, recovery enhancement rate is reexamined and more precise figures are announced. The second group comprises reservoirs with powerful water injector and therefore the inflowing water can move oil. These reservoirs, which hold nearly nine percent of NISOC oil in place, have the average recovery rate above 55 percent. The second group are oversaturated reservoirs, most of which are located in Bangestan Formation and contain nearly 25 percent of NISOC oil in place. Since the main production mechanism in these reservoirs is rock and fluid expansion, the average enhanced recovery rate is estimated at 10 percent. In the EOR category, this group is the most challenging. So far, numerous projects have been defined under this group to find the proper method for enhanced recovery. Some of them are gas injection into Qale-Nar reservoir, research project for EOR in Ab Teimour reservoir by our colleagues in the Research Institute of Petroleum Industry (RIPI), research project on EOR methods in Bangestan reservoir with the participation of the enhanced recovery research center and studying carbon dioxide injection with the participation of the enhanced recovery center, Energy Ministry Research Institute and the private sector.
The fourth group is comprised of saturated reservoirs which have the potential for gas injection due to their gas cap. However, implementation of gas injection projects in them requires more studies and economic justification. These reservoirs make up around 10 percent of NISOC oil in place.
The rest of NISOC oil in place is accumulated in underdeveloped or recently-developed reservoirs and decisions will be made about how to enhance recovery from them after gathering the necessary data.
Q: What has been done with regards to well-based and structure-based EOR?
A: Good activities have already been done or under way to that effect. Some of them are drilling vertical, horizontal and directional wells, repair and recompletion of existing wells, underbalanced drilling to prevent damage to formation, installation of sand containment systems, removal of asphaltine obstacles in the well column, creation of hydraulic fracture, artificial lifting including lifting with gas, nitrogen and downhole pumps.
Structure-based activities include establishment and equipment of desalting units, sweetening projects, oil and gas quality projects, pipeline projects and safety projects. For instance, desalting units are instrumental in production from some reservoirs and following the completion of under-way projects, pre-salt oil production capacity will rise by 1 mb/d.
Iran Seeks Revival of Gas Sector
Iran is working full throttle to develop its South Pars natural gas field, the world's largest, amid hopes of sanctions relief and the return of Western oil majors.
"We would welcome foreign companies and investors if they want to come back," said Hamid Reza Massoudi, chief engineer at an unfinished South Pars refinery near the town of Assaluyeh, 920 kilometres (570 miles) south of Tehran.
"They would definitely speed up the progress," Massoudi said, as work proceeded on the refinery's structure.
Development at the mammoth offshore field has been hobbled for years by sanctions imposed by the United States and the European Union, a lack of foreign and domestic investment and technical challenges.
Iran struggled to fill the vacuum after the departure of France's Total, Spain's Repson and the Royal Dutch Shell, and efforts to continue development through state-owned and quasi-private companies had mixed success.
But President Hassan Rouhani's stated ambition to resolve the dispute with the West over Iran's nuclear drive has raised hopes of relief from financial sanctions and embargoes that have drastically curtailed oil production and vital exports.
The diplomatic rapprochement could also spark foreign investment and lead to a return of oil majors to revive ageing oilfields and to South Pars.
Oil ministry officials say four plants in the field are near completion.
Among them is Phase 12, one of the largest in South Pars, that once fully operational could produce 81 million cubic meters of gas daily.
Its supervisor Ali-Reza Ebadi said the $7.8-billion refinery would begin pre-production at 10 percent "within months", but the lifting of sanctions would speed up the project.
He said vital equipment, including "compressors that have been built in Germany on Iranian orders and are being tested right now", were still awaited.
"They are subject to EU sanctions and cannot be delivered."
Ebadi spoke to reporters during an organized visit by international media to Assaluyeh.
Once fully operational, the four plants under development would almost double current gas production of 290 million cubic meters, mostly used for domestic consumption, oil ministry officials said.
Ten refineries are fully functional in the 24-phase South Pars project Iran has devised to exploit the huge gas resource it shares with Qatar and that has secured it a place among leading global gas exporters.
Oil Minister Bijan Zangeneh, whose previous term from 1997 to 2005 saw massive foreign investment, has promised to fast-track the field's development.
Massoudi said more government funding has been secured since Zangeneh took office.
In addition to sitting on the world's fourth-largest oil reserves, Iran boasts the second-biggest global gas reserves, behind Russia.
But compared to oil its gas exports are minor and it lacks the installations and technology to produce LNG, super-cooled liquefied natural gas, for export.
Zangeneh is also undertaking another tough task in seeking to raise oil production of 2.7 million barrels per day to the pre-sanctions figure of 4.2 million bpd.
In order to achieve this, he is relying on Iran's new image under Rouhani to attract investors and contractors.
On the sidelines of the World Economic Forum in Davos, Rouhani and Zangeneh on Thursday met executives of major oil companies including Total, Italy's ENI and British Petroleum, Iranian media reported.
At the closed-door meeting, Rouhani said the oil ministry was working on new contracts that would suit international companies taking on new projects, including in South Pars.
"Opportunities in Iran are plenty while the risks and costs are low," Rouhani said in remarks reported by the presidency website.
"Everything is set for a new era of energy cooperation with the world's major oil companies."
CDM Flare Gas Project
The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change, which commits its Parties by setting internationally binding emission reduction targets. Iran has signed the treaty which targets greenhouse gas emission.
An approach envisaged by Kyoto Protocol is clean development mechanism (CDM), defined in Article 12. The mechanism allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol (Annex B Party) to implement an emission-reduction project in developing countries. Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one ton of CO2, which can be counted towards meeting Kyoto targets.
Sarkhoun and Qeshm Gas Refining Company, which is one of the most prestigious gas refineries in Iran, has managed to have its methodology for implementing CDM projects with the United Nations.
Ahmad Zamani, managing-director of Sarkhoun and Qeshm Gas Refining Company, said this methodology has been defined under the title of flare gas gathering. The UN Meth Panel gave its approval to the draft methodology in October 2013 and the final draft was sent to the Executive Board for CDM projects.
The executive board has endorsed the methodology under the title of “AMS-III.BI: Flare gas recovery in gas treating facilities” which has been effective on October 3, 2013.
This methodology is used in projects whose objective is gathering extra gases sent to flares. The condition for using this methodology is that necessary historical data must be available about flare gases or a period of three years before implementation of the project. Historical data about flare gases are put to mass balance analysis.
A mass balance, also called a material balance, is an application of conservation of mass to the analysis of physical systems. By accounting for material entering and leaving a system, mass flows can be identified which might have been unknown, or difficult to measure without this technique. The exact conservation law used in the analysis of the system depends on the context of the problem, but all revolve around mass conservation, i.e. that matter cannot disappear or be created spontaneously.
The flare gases could be also used to feed the gas refinery. They might be used in the complex or be transferred to the gas distribution network.
Moreover, there must be no gas injection into the pipeline on the route between gas gathering installations and the entry to dehydration unit.
This methodology is used mainly in projects in which emission reduction following the implementation of the project is less than 60,000 tons of carbon dioxide equivalent.
Mohsen Miandehi, director of research and technology in Sarkhoun and Qeshm Gas Refining Company, said under a CDM project defined for flare gases, extra low-pressure gases are sent to the refining units. In this way, 14.3 mcm per year of gas will not be flared and 48,000 carbon certificates could be obtained from the UN.
The economic analysis of this project indicates that selling carbon certificates will raise the rate of return for domestic investment in the project from 5.2 percent to 11.4 percent. That will have numerous environmental and economic advantages for the refinery and its surroundings. The environmental advantages include higher gas production and more revenues, optimization of resources, avoiding clean gas fuel waste, reduction of air pollution from gas flaring, replacement of fuel liquids with recovered gas, secure gas supply in cold seasons and removal of environmental pollution.
Flare gas gathering in Sarkhoun and Qeshm gas refinery is the 14th CDM project in Iran and the first NIGC project registered at UN.
Registration of the project still requires project design document (PDD), Designated Operational Entity (DOE) validation, Designated National Authorities (DNA) Approval, registration by the Executive Board, monitoring report, DOE verification and Certified Emission Reduction (CER) issuance.
The methodology of the flare gas project has been drawn up with the contribution of the Research Institute of Petroleum Industry (RIPI) and Mehr Renewable Energies Company.
A gas flare, alternatively known as a flare stack, is a gas combustion device used in industrial plants such as petroleum refineries, chemical plants, natural gas processing plants as well as at oil or gas production sites having oil wells, gas wells, offshore oil and gas rigs and landfills.
In industrial plants, flare stacks are primarily used for burning off flammable gas released by pressure relief valves during unplanned over-pressuring of plant equipment.
During plant or partial plant startups and shutdowns, flare stacks are also often used for the planned combustion of gases over relatively short periods.
A great deal of gas flaring at many oil and gas production sites has nothing to do with protection against the dangers of over-pressuring industrial plant equipment. When petroleum crude oil is extracted and produced from onshore or offshore oil wells, raw natural gas associated with the oil is produced to the surface as well. Especially in areas of the world lacking pipelines and other gas transportation infrastructure, vast amounts of such associated gas are commonly flared as waste or unusable gas. The flaring of associated gas may occur at the top of a vertical flare stack (as in the adjacent photo) or it may occur in a ground-level flare in an earthen pit.
Flaring is a contributor to the worldwide anthropogenic emissions of carbon dioxide. Improperly operated flares may emit methane and other volatile organic compounds as well as sulfur dioxide and other sulfur compounds, which are known to exacerbate asthma and other respiratory problems. Other emissions from improperly operated flares may include, aromatic hydrocarbons (benzene, toluene, xylenes) and benzapyrene, which are known to be carcinogenic.
Chemical Park in Free Zone
The significance of petrochemical industry in national economy is no secret to anyone. Domestic procurement of raw materials is a big advantage of this industry.
In Iran, petrochemical industry is among industries of relative advantage. Improvement of petrochemical industries will meet many domestic needs, return raw material costs and boost national economy.
The significant development of oil-related industries including petrochemicals in recent years and the growth of this industry with the implementation of new petrochemical projects have created appropriate grounds for the development of downstream industries which deal with petrochemical products.
The diversity of petrochemical products can complete missing links in many industries and doubtlessly development of industries related to petrochemicals will largely contribute to the procurement of commodities and supply of domestic industries’ needs.
Arvand Free Zone, which is located in the oil and gas-rich Khuzestan province where Abadan Oil Refinery and Abadan Petrochemical Plant are located, has the potential to focus on the development of downstream oil, gas and petrochemical industries.
Esmaeil Zamani, managing-director of Arvand Free Zone Organization, said: “Given the existing conditions in the region as well as its natural and infrastructural capacities, feasibility studies have been conducted for the establishment of specialized parks in the zone and relevant factories will be erected in a specialized park under the title of Chemical Park.”
“Although 30-year-old economic sanctions have toughened in cent years, benefiting from the country’s entire oil, gas and petrochemical potentials and meeting domestic needs as well as developing downstream industries and formation of industrial chain and clusters in the country are of high significance. Given these potentials and existence of upstream industries, downstream industries are needed in each province for optimal use of these capacities,” said Zamani.
Iran’s petrochemical industry has achieved great success in producing conventional and basic petrochemical products recent years. To that effect, the private sector and financiers can handle many petrochemical activities. Furthermore, the attractions and positive advantages of petrochemical industry will bolster this sector.
In the meantime, free zone facilities like tax and customs exemption for importing machinery and raw materials give a specific status to this envisaged chemical park.
Establishment of a chemical park requires feasibility studies and therefore a consulting company is needed for that purpose. Given the significance and necessity of this issue, the necessary measure have been undertaken for picking an experienced and well-known company specializing in the oil, gas and petrochemical industries. The second phase will be to meet infrastructural needs.
These projects have been submitted to the Planning and Budgeting Directorate of Arvand Free Zone Organization within the framework of next calendar year’s budget bill.
Given the location of Abadan Oil Refinery, Abadan Petrochemical Plant and Bandar Imam Petrochemical plant, energy-exhausting downstream chemical and petrochemical industries could be operated in Khorramshahr and Abadan industrial site. For that purpose, 178 ha of land has been allotted.
Zamani said: “Different objectives are envisaged for the establishment of industrial and specialized parks. Some of them are related to the country’s major objectives like sustainable development and following up on the Vision Plan, increasing the share of the industrial sector in the gross domestic product (GDP), job creation and improving the business environment.”
“Other objective could be also expected from the implementation of Chemical Park project in the region, like attraction of investor for infrastructures and providing the necessary finance for the development of the region, production and creation of petrochemical and chemical export opportunities for countries close to exports terminals like Iraq and creating the necessary conditions for investment security in the downstream and chemical industries with a view to helping the growth and blossoming of the zone,” the official stated.
Zamani said procurement of raw materials is a major cause of concern for investors, adding: “Therefore, in order to win the trust of investors, Abadan Petrochemical Plant has agreed to supply the raw materials we need for the factories under construction in this Chemical Park for a period of ten years.”
He said more than 70 industrial units involved in exports are forecasted to be launched on this 178 ha of land, given ports, railway and road connections.
Zamani said 15-year tax exemption has been extended for as long as the unit is operating, adding that 25-percent discount in the price of allotment is also granted. He noted that these facilities provide a very good opportunity for potential investors in the free zone.
Drilling Rig Assembly in Arvand
Ali Mousavi, deputy head of Arvand Free Zone Organization for economic and investment affairs, said the Chemical Park project is under way on 270,000 square meters of land in Arvand Free Zone.
He said the project is being operated by Atlas Oil and Gas Company and Royal Oyster Shipping Company. The latter has already operated more than 40 big engineering, drilling, shipping and marine industries projects in the United Arab Emirates, Qatar and Kuwait.
“The first phase of the big project for manufacturing and assembly of drilling rigs and reparation of vessels has already started with a credit estimated at 310 billion rials,” he said
Iran Eyes 85 New Petchem Plants
Iran’s breakthrough nuclear deal with world powers in November last year resulted in the reversal of sanctions imposed on Iran’s export of petrochemical and polymer products. Resumption of exports is forecasted to earn Iran between 2 and 2.5 billion dollars in revenues a year.
Analysts believe that Iran’s petrochemical sector will experience better conditions in terms of investment and technical knowledge as the Islamic Republic is facing political overtures at the international level.
To know further about the effect of Iran-West nuclear accord on Iran’s petrochemical industry, Iran Petroleum has talked to Hassan Peyvandi, who is deputy head of Iran’s National Petrochemical Company (NPC).
Peyvandi, who has been active in Iran’s state-run and private petrochemical sectors, said: “Renewed presence of foreign companies in Iran’s petrochemical industry will not be without positive effects as it has already been instrumental in the growth of this industry.”
“Before sanctions [were imposed] and during the past years, NPC which enjoyed a good prestige in the global markets managed to benefit from foreign finance and technical knowledge without making the country dependent,” he said.
“Therefore, if the P5+1 [group of world powers] respects its commitments with retards to Iran’s petrochemical industry in the coming six months, Iran’s petrochemical plants will positively view the presence of foreign companies due to economic attractions.”
Peyvandi said Iran has never used foreign manpower to develop its petrochemical industry, adding that the country has only sough to benefit from foreign technology and finance.
Remarks by Iranian officials and international petrochemical companies are indicative of the positive outcome of Iran-West nuclear deal and the ensuing sanctions relief for Iran’s petrochemical sector.
Foreign companies have produced huge losses over losing their main supplier Iran.
“Thanks to NPC staff’s efforts during the period of sanctions, Iran managed to win foothold in markets in Eastern countries after losing markets in the Western countries. It was the Western countries, and not Iran, suffered losses. Therefore, the Western governments and Iran’s traditional customers are ready to participate in Iran’s development plans as sanctions against petrochemical industry are eased,” said Peyvandi.
Sanctions imposed on Iran’s oil sector over the past years have led to more domestic manufacturing of equipment used in the petrochemical industry. But it does not mean that Iran no longer needs foreign companies’ technology.
“The incentives Iran’s petrochemical industry is supposed to offer with a view to attracting foreign investors and companies are much more sensitive than those offered 10 years ago because in the past all decisions for investment and construction of new plants were made by the government and there was never such a challenge as feedstock price. In other words, the presence of foreign companies generated value-added and the money was deposited into Treasury. But now, financial resources for petrochemical plants are up to the private sector which will have no motivation for work if it is supposed to follow in the footsteps of the government in terms of investment and development,” Peyvandi said.
“Under the present circumstances, we are trying to elucidate the advantages of investment in the petrochemical industry to the private sector and foreigners,” he said.
Peyvandi said 85 new petrochemical plants are planned to be constructed in Iran, adding that foreign investors will have a good opportunity for investment in one of the world’s petrochemical hubs, i.e. Iran.
The official said Iran nuclear deal will also affect finance of projects. “The US and Europe focused their attention further on the petrochemical sector following the agreement. Sanctions relief pertains to petrochemical exports and relevant services like finance. In the meantime, implementation of petrochemical projects will accelerate and we will take advantage of this opportunity...for easier work,” said Peyvandi.
NISOC Forms FDI Committee
Managing-Director of National Iranian South Oil Company (NISOC) Hamid Bovard has said that a specialized committee has been established in the company to attract foreign investment for funding projects.
He said the main objective of the Specialized Investment Committee is to attract foreign finance for oil projects.
He referred to the extent of activity of NISOC, as the largest oil producer in Iran, saying: “Attraction of investment and carrying out joint activities with investors in different oil and gas production sectors are among the priorities of this company.”
Bovard said NISOC has the capacity of investing up to five billion dollars a year in oil production projects. “Given these conditions, we intend to meet this need by attracting investment,” he said.
Petroleum Ministry Backs Investment in Petchem Hub
Iranian Petroleum Ministry and National Petrochemical Company (NPC) are offering incentives to potential financiers willing to invest in Iran’s petrochemical industry.
The incentives are aimed at development of the country’s petrochemical industry and financing under-construction projects.
Senior NPC managers are inviting Iranian and foreign investors willing to fund different petrochemical projects. They have noted that they are ready for any kind of cooperation with a view to developing and completing the value chain of this lucrative industry.
The important point which must be taken into account is that Iran’s targeted petrochemical output of 100 million tons by 2015 will be met if the projects are financed the banks provide financial assistance.
In addition to Chabahar, Lavan and Sarakhs hubs, 20 new petrochemical projects have been defined. They will become operational after they receive the necessary investment.
There are downstream petrochemical projects which will reduce Iran’s sale of raw materials if the private sector finances them.
Offshore Projects Attract Foreign Firms
Some Southeast Asian and European oil companies have expressed willingness to contribute to the development of fields run by Iran’s Offshore Oil Company (IOOC).
They are willing to offer EPC services for refineries, big reservoirs and production units.
Saeed Hafezi, managing-director of IOOC, said Iran prefers companies with better financial conditions to develop offshore projects in Iran.
He also said the Kharg NGL gas gathering project is under way, noting that the offshore section of the project has been completed.
Hafezi said more than 400 million euros have so far been invested in the Kharg NGL project.
Weaning Economy off Oil
Iran’s Deputy Petroleum Minister for Research and Technology Mohammad-Reza Moqaddamfar has underlined the need for the supply of products with high value-added.
He told an economic seminar that research and technology are trying to modify the cycle of oil-dependent economy.
“Oil is a non-renewable hydrocarbon source and it must be considered an asset and not a product to rake in revenues,” he said. “We have to reach the optimal energy intensity by benefiting from science, knowledge and state-of-the-art technology, and gradually replace non-renewable energies with renewable energies like solar energy, wind energy and geothermal energy.”
He referred to Iran’s eight-trillion dollar revenues from oil, gas and gas condensate so far (100 dollars a barrel), saying: “At present, the existing hydrocarbon sources are valued more than 30 trillion dollars which could be brought up to more than 100 trillion dollars through up-to-date knowledge.”
He said that modern technologies can help production of higher value-added with a view to providing welfare and justice for future generations.
“Our country has no problem with capital and a correct management of resources can bring about productivity and more revenues,” he said.
Oil-Independent Economy Guarantees Independence
Vice-Speaker of Majlis Mohammad Hassan Abutorabifard said oil-rich countries are always struggling with challenges and restrictions.
“When the economy depends on oil, the only cause of concern for the country is oil revenues and therefore nobody will seriously think about other economic sources,” he said.
Abutorabifard said the country’s current spendings have spectacularly increased from 250 trillion rials in 2005 to 1,200 trillion rials in 2013.
He said that the “resistance economy”, promoted by Supreme Leader Ayatollah Ali Khamenei, will require full political independence, security and huge human resources.
“Our country which enjoys numerous potentials will be able to reach economic blossoming and experience the highest level of economic growth while narrowing gaps between social classes,” he added.
Scientific Move
The head of the Research Institute of Petroleum Industry said all aspects of the economy must be directed towards science, knowledge and self-belief.
“By benefiting from 700 prominent researchers and scientific figures, RIPI has so far taken effective steps towards development of science and technology and supply of products to the oil and gas industries with a view to preserve the independence of these industries,” Hamid-Reza Katouzian said.
He added that valuable steps have so far been taken towards the realization of the “resistance economy”, noting that long-term planning is needed for that purpose.
Katouzian said efforts undertaken by prominent figures before the 1979 revolution for the country’s independence did not succeed entirely.
“But after the victory of the Islamic Revolution in Iran in 1979, due to the country’s focus on independence of non-Islamic currents, the country’s economy experienced a big turn and now we are recognized as an independent country in the world,” he said.
Weaning Economy off Oil
Mostafa Mir-Salim, who is a member of the Expediency Council, told the seminar that implementation of resistance economy in the country requires changes in some policies mainly in the public culture.
“Defining the necessary policies, drawing up laws for the implementation of these policies, planning and design are among other necessities which must be taken into consideration for resistance economy,” he said.
Mir-Salim said another point which must be taken into account in the implementation of resistance economy is to wean the country’s economy off crude oil revenues.
“Our rivals at the international level are fully aware of our dependence and that is why they imposed oil embargos in recent years in order to inflict irreparable damage on the country.”
“Doubtlessly, oil is an advantage for the country, but I think that two wrong attitudes have taken shape with regards to this valuable substance in our country and we need to remove them,” he said, adding: “The first erroneous attitude was to view oil as a fuel and the second one is that we imagine that we will be loser if we do not sell our oil as quickly as possible.”
Mir-Salim said oil should serve as fuel in emergency conditions; otherwise, it must be transformed into other products for value generation.
“If we transform 10 percent of the current [oil] production into commodities and sell them we will gain several times higher than selling oil,” he said.
Mir-Salim said transportation and automaking industries should also implement their policies with regards to the resistance economy.
“At present, 28 percent of the country’s oil and gas resources go up in smoke in the transportation sector and they also raise pollution besides inflicting economic damage,” he said, calling for the reconsideration of transportation policies and constructing more railroads.
Why Was Abadan Chosen for Refinery?
After the discovery of oil in Iran, a zone was needed to be located in the south of the country for refining this black gold before being supplied on the market. The city of Abadan was decided to be the proper place for the construction of a refinery. A team from Anglo-Persian Oil Company (APOC) went to Abadan to build a refinery there and achieve their objectives. Here, we review the main reasons for this choice and the way the project proceeded.
Before oil was discovered in Iran, Abadan, which is currently an active and industrial city, was a clam island with palm trees and a river where fishing was everyday business. Abadan was assessed as a proper place for the construction of refinery because on the one hand water could be easily supplied to the facility and on the other hand this city could become a harbor for oil tankers and cargo ships. However, construction of this refinery had its own challenges. This island was located 220 kilometers away from oil fields and all technical and welfare facilities had to be provided from nearby cities. After nearly two years, 220 kilometers of pipeline was laid out from Masjed Soleyman to Abadan. However, the oil was of such low quality that the APOC could not meet its obligations. The company faced financial shortages and it had to enter a deal with Winston Churchill and hire the land for the refinery from Sheikh Khazal. Then, engineers, technicians and workers came to the refinery and the construction of the treatment facility started.
At that time, the city of Abadan was a densely-populated peninsula. But buildings and stores were constructed gradually and Abadan turned into an industrial city. Its population grew too.
Refinery Launched
Since the quality of oil in all parts of the country was not the same, many tests had to be conducted on Iran’s oil so that the refinery could process crude oil to provide sufficient oil products. One of engineers took a sample of Iran’s crude oil to Burma for refining. Its sulfur content was determined there. Then, the treatment plant of Abadan Refinery was designed. The necessary machinery was ordered then. The refinery was divided into two main sections. One section was for refining and distillation of oil substances and the other section was for second retreatment and building washer for acid and soda.
The refinery construction ended in 1912 and the facility came on-stream in 1913. Then, oil could be carried in pipeline from this refinery. The refinery was initially planned to be completed in 1911, but a variety of reasons including shortage of equipment following strikes in England, shortage of specialized forces, insufficient pumps and pipeline leak delayed the operation of the refinery.
Overproduction
As business grew in Abadan, residents of Zagros mountains moved to this island. Every day, the number of people on Abadan Refinery payroll increased.
In March 1914, production from Masjed Soleyman’s Well No. 7 – the first active oil well of that time – increased from 33,000 gallons a day to 600,000 gallons. This volume of production was beyond the refinery’s need and exceeded the capacity of Masjed Soleyman-Abadan pipeline. Therefore, in a bid to reduce the pressure of this pipeline, 100,000 gallons a day of oil had to be burnt.
Supply of equipment required in the refinery as well as administrative affairs were initially handled by Strick Scot company which was based in Abadan. Managers of this company were mainly members of Board of Directors of APOC. Strick Scot used to charge APOC every year for administrative affairs.
Everything for Britons
When Abadan Refinery started processing crude oil, all employees of technical, administrative and commercial sections of the company were British. Housing and welfare facilities had been provided for them. the Indian and Pakistani staff lived in rooms which were reminiscent of military barracks. But, Iranians who worked in the refinery had no housing and they had to live in tents.
Royal Dutch Shell Enters the Game
The quality of refined oil in Abadan had to be taken into account. The main reason behind the low quality of the refinery’s products was lack of precise information about the composition of Iran’s crude oil at that time. Due to this low quality, Iran’s crude oil could not find good markets. The output of the refinery was much lower than its rated capacity and its kerosene was yellowish.
APOC won foothold in the oil markets through Royal Dutch Sell. Besides meeting domestic needs for crude oil and kerosene, the refinery’s gasoline was sold on foreign markets through Asia Oil Company. However, APOC kept the monopoly on crude oil sale.
Construction of Abadan Refinery was of special significance for the Britons and the reason was that transferring crude oil from Masjed Soleyman to Persian Gulf waters before being sent to Britain for refining was not economical. That is why the Britons chose Abadan for the facility so that they can refine oil on the spot and sell products to other countries.
Historic Deal for Abadan Refinery Allotment
Southern Iran was proven to sit atop oil reserves in December 1908, after years of efforts by veteran geologist George Bernard Reynolds and his colleagues. Explorers of black gold were convinced that they will have enough oil to make future plans. That was when oil refining was added to agenda which was until then filled with crude oil export plans.
Reynolds was looking for a place in the Persian Gulf to complete his oil production and exports project. Abadan was chosen due to its proximity to Khorramshahr. Abadan was controlled by Sheikh Khazal, who was governor of Khorramshahr which was known with its Arabic name. Oil explorers had to negotiate with Sheikh Khazal as they did with Bakhtiari tribal chiefs in Masjed Soleyman earlier. The central government had no control on these oil-rich regions and Sheikh Khazal was dreaming of autonomy.
Britons were well familiar with Sheikh Khazal. British diplomats in Iran, including Sir Arthur Henry Hardinge had earlier made the preparations for negotiations with Khazal with a view to facilitating a deal with the governor. These negotiations started on April 23, 1909 between Reynols and Haj Raeis, who was senior advisor to Sheikh Khazal. The British Council also mediated and Khazal finally gave the nod for the construction of a refinery in Abadan.
Primarily, Sheikh Khazal was reluctant to sell the land for the refinery, but a final deal was reached on May 15, 1909 following a meeting between Major-General Sir Percy Zachariah Cox and Sheikh Khazal for the allotment of 140 ha of land in Abadan.
Abadan Refinery Construction Starts
When R. R. Davidson (who supervised the construction of Abadan Refinery) arrived in Abadan, Abadan was filled with sand and mud except for parcels of land which the Anglo-Persian Oil Company had selected for residential compounds. There was no stone there. In a letter to his family, Davidson described Abadan as the land of sun, mud and mosquito. When flash floods were triggered, Davidson had to stay on the barge. It was when the first Middle East refinery was to be constructed.
Davidson first set up a brick factory which was not successful because he had to carry bricks from Basra and Karachi to Abadan for construction purposes. After that, he designed and built a jetty. Several months after, a number of technically and administratively experienced staff from Burma Oil Company were transferred to Anglo-Persian Oil Company in Abadan to accelerate work.
Due to efforts by Davidson and his colleagues, the first oil treatment facility in Iran started work in Iran in 1912 in Arvandroud River (known then as Shatt al-Arab) bank. The initial capacity of the facility was 2,500 b/d, which soared to 500,000 b/d in 1951 when the movement for nationalization of Iran oil industry started. This refining capacity increased to 600,000 b/d after the signature of contract with foreign companies. That was the way Abadan Refinery became the largest refinery in the world and the hub of oil products’ export in the Eastern Hemisphere.
Abadan Shoots to Prominence
Abadan Refinery gained international fame during the World War II by supplying 25,000 b/d of jet fuel. The treatment facility then could meet all needs of Allied forces in the Mediterranean region, Middle East, Indian Ocean, Far East and to some extent in Russia.
Abadan Refinery received 500,000 b/d of crude oil from southern oil-rich regions through two pipeline networks. It converted crude oil to more than 120 products up to international standards. The facility treated 460,000 b/d of crude oil, or 23 million tons a year, in 1976.
Abadan Refinery supplied its products to world markets through Abadan and Khorramshahr ports. Until three decades ago, nearly 40 percent of refined oil in Abadan Refinery was used for domestic purposes and the rest was being exported.
According to 1975 figures, Abadan Refinery could supply 50 percent of the country’s oil product needs.
Official reports from National Iranian Oil Company (NIOC) show that Abadan Oil Refinery received between 433,000 and 574,000 b/d of crude oil and oared 428,000 to 538,000 b/d of products.
During eight years of Iraqi imposed war (1980-1988), this refinery was a main target of Saddam Hussein’s bombings which reduced the facility’s processing to some extent.
Now, different sections of the refinery have been reconstructed and Iranian engineers and technicians are operating this big refining facility. The Western governments imagined that Iranians could never run their oil facilities following the nationalization of oil industry. But now, Iranians are developing the century-old refinery.
In 1977, only 12 foreigners were working in Abadan Refinery and they were also teaching at Abadan Petroleum University.
Golestan Palace; From Royal Fortress to Human Heritage
Tehran might be considered the most modern city in Iran, but it is home to a large number of historical monuments because it has been the capital of Iran for more than two centuries. Among its monuments, one connects the city to the entire world because the United Nations Educational, Scientific and Cultural Organization (UNESC) registered it on its list of human heritage. Golestan Palace is a wonder in Tehran. We offer a brief history and description of this ancient monument.
Since Shah Tamasb Safavid erected a fortress around Tehran, the city became a place of rest for the Savafid kings who often went on pilgrimage to the mausoleum of Abdol-Azim, a descendant of the household of the Prophet Muhammad (PBUH). The Golestan garden became the center of kingdom in Tehran. The garden shot to prominence under Zandieh. Aqa Mohammad Khan Qajar declared Tehran as the capital in April 1795 when he organized crowning ceremony in the garden.
Marble Throne
The Marble Throne, now 250 years old, is a royal throne in Golestan Palace. It is the first thing coming to view when visitors enter the palace. In front of the throne stand two towering columns. Doors adorned with marquetry open behind the throne. These doors were taken to Tehran from Karim Khan Citadel in the southern city of Shiraz. Decorations dating back to the Qajar Dynasty with their attractive yellow color, Safavid-era glassworks and an entry to an ancient harem give an attractive perspective to the marble throne. Karim Khan backyard comes next to the marble throne. The most ancient spot in Golestan Palace, which was destroyed in the beginning of the ascension to the throne of the Qajar Dynasty, has never been restored. This backyard is where the Qajar ruler buried the exhumed body of Karim Khan to be a symbol of his triumph over Zandieh. The body remained buried there and all Qajar kings remained there until their rule ended. When the Pahlavi came to power, Karim Khan was exhumed again and interred in the Pars Museum of Shiraz.
Describing all attractive parts of Goletan Palace and recounting stories about it will take ages.
Here we are seeking to find the outstanding feature of the palace, which has led to its recognition as human heritage.
Cultural Understanding and Historic Durability
When we compare Golestan Palace with similar historical palaces in the world we see that the Palace of Versailles in France, Schonbrunn Palace in Vienna, the Kremlin in Moscow and China’s Royal Palace have been emptied from any artifacts because these palaces have been plundered throughout revolutions and structural changes in these countries. If we see that Britain’s royal sites and Japan’s Nara have remained intact it is because these two countries have not seen any changes in recent centuries. However, Golestan Palace puts on exhibit history dating back to the Qajar Dynasty. It is indicative of the high level of cultural understanding of Iranians despite numerous revolutions in Iran.
The first revolution was the Constitutional Revolution and the subsequent conquest of Tehran by constitutionalist forces. At that time, Golestan Palace was known as the headquarters of the Qajar dictatorship led by Mohammad Ali Shah. But this palace was never pillaged by constitutionalist combatants.
After Qajar dynasty was unseated in a coup led by Reza Shah in late February 1921, Tehran was seized by Kazakhs. But these Kazakhs never plundered the palaces including Goletan and it was transferred to the Pahlavi without any destruction.
Golestan Palace was used by the Pahlavi regime until the end of its rule in Iran. The palace remained safe even when Tehran was occupied by Allied forces at the end of the World War II, throughout struggles for the nationalization of oil industry and above all the Iranians’ revolt against the Pahlavi, leading to the victory in 1979 of the Islamic Revolution.
Today, 190,000 objects belonging to those who have lived in this palace are still there. They include tents decorated with paintings by Kamal al-Molk and great chandelier.
Library
Golestan Palace is home to a precious library where valuable books of arts are held. This royal library was set up under Safavid and Shah Abbas. It was preserved by different generations until it reached its highest quantitative and qualitative development under Nasser ad-Din Shah Qajar. Very valuable books are held in this library. One of precious books there is One Thousand and One Nights manuscript authored by a great calligrapher. Koran and Shahnameh manuscripts held there are as valuable as a museum. There is also a collection of artworks and calligraphy from the Indian and Iranian schools, dating back to the Mughal Empire which extended over large parts of the Indian subcontinent and ruled by a dynasty of Chagatai-Turkic origin in the 16th century.
World’s 2nd Photo Gallery
The second largest photo archive in the world is in Golestan Palace. The first one is Windsor in London. Ten thousand glass negatives and twice that figure photos are held there. This precious treasury is a reference for researchers studying the Qajar era in terms of anthropology, archeology, ruling system and religious rituals.
The photo albums preserved there had been presented to Nasser ad-Din Shah and Muzaffar ad-Din Shah during their visits overseas. Old photos of Warsaw, Petersburg, Baku, Vienna, Paris and London are available. These cities experienced great changes following the World War I and World War II. These photos offer important documents regarding quantitative and qualitative development of the cities.
Cinema History
Cinema came to Iran five years after filming camera was invented. The first filmmaking studio was set up in Golestan Palace. The most ancient films of the world’s movie industry were produced in this studio. This center, which was recently restored by French specialists, still holds valuable movies.
Art’s Beating Heart
From the viewpoint of arts, Golestan Palace enjoys another important characteristic which makes it unique in the world. Throughout history, rulers, kings and artists were encouraged to put their works on exhibit. Golestan Palace, which had been held by Nasser ad-Din shah for five decades and the king was known to love arts, had become a workshop for producing artworks.
Photograph and filmmaking workshops, painting workshop, calligraphy workshop and filmmaking studio are there. Famous painters like Kamal al-Molk and Sani al-Molk and renowned calligrapher Mirza Gholam-Reza Isfahani have put their works on exhibit there. Golestan Palace is the only palace which regenerates the art of its own era. The Qajar School and Tehran School are rooted in Golestan Palace.
Golestan Gallery is a sight-seeing site here. It was opened in 1999 and it mainly puts on display paintings from the famous painters of the Qajar era.
Edifice of the Sun
Shams-ol-Emareh (Edifice of the Sun) is the most stunning structures of the Golestan Palace.
The idea of building a tall structure came to Nasser-ol-Din Shah before his first European and from pictorial images of European buildings. The monarch wanted a structure from which he could have panoramic views of the city.
Designed by Moayer-ol-Mamalek, construction on the Shams-ol-Emareh began in 1865 and was completed two years later. The architect was Master Ali Mohammad Kashi.
The building has two identical towers. The exterior views have multiple arches, intricate tile work and ornate windows. This building is a fusion of Persian and European architecture.
Before this building was constructed, Iranian royal palaces were mainly restricted inside walls, but after Nasser ad-Din Shah visited Europe, this edifice was built and was observed by people. This event was so important for people that Shams-ol-Emareh Clock enters the folkloric culture. People used to go to bed as this clock struck midnight and wake up in the morning.
This edifice had no administrative use and was mainly for recreation. Nasser ad-Din Shah used to do photography on the top floor where he could view the entire city. Many photos available from old districts and from around the palace were taken from the top floor of this edifice.
Iran White Palace
When someone leaves Shams-ol-Emareh and continues straight ahead he will reach the White Palace. Qajar kings used to hold their Cabinet sessions there. Even the first Pahlavi government was headquartered there. Important pages of Iran’s history have been written in this edifice which is currently a museum of anthropology. It was from the same place where artillery fires announced the end of the Qajar dynasty and the beginning of Pahlavi rule.
History always repeats itself. In September 1941, Reza Shah Pahlavi left this building and got into a car to leave for exile. It was an end to dictatorship and his departure brought smiles to people fed up with occupation by foreign troops.
Oil in Golestan Palace
Golestan Palace was the center of governance in Iran for 146 years. Iran’s oil history dates back to more than 110 years. All oil contracts with foreign governments since Muzaffar ad-Din Shah to the end of first Pahlavi were signed in this building. Here, we review the famous controversial D’Arcy oil deal which is Iran’s first oil deal.
On May 28, 1901, Muzaffar ad-Din Shah Qajar, Amin as-Sultan, Mirza Nasrollah Moshir ad-Dowleh and Mohandes al-Mamalek from Iran and Alfred Marriot, representative of Knox D’Arcy signed a concession based on which D’Arcy was awarded the exclusive right to explore, extract and refine oil across Iran, except for five northern states bordering Russia, for sixty years. Under this concession, D’Arcy was committed to paying 16 percent of net profits to the Iranian government and after the expiration of the contract, the company was to come under authority of the Iranian government.
When Reza Shah came to power, the issue of Anglo-Persian Oil Company posed a serious challenge to the Iranian government and the shah was facing growing pressure from public opinion. On November 26, 1932, Reza Shah threw the contract into a heater during a Cabinet session at the White Palace. Several days after, Iran’s then minister of finance notified the company chief of the annulment of the contract by the Iranian government.
Sir Reginald Hervey Hoare, who was Britain’s Envoy Extraordinary and Minister plenipotentiary to Persia, asked Iran to reconsider its decision. The British diplomat asked his government to tackle the crisis and the British Army reported to the government that its navy fleet was ready to be deployed. But the Iranian government did not back down although the British government threatened to take the issue to international arbitration in The Hague.
On December 12, 1932, then Iranian foreign minister expressed regret over the British government’s policy of intimidation and reiterated that The Hague court of justice was not competent to handle this case.
Britain took legal action against Iran and the League of Nations started studying the case in January 1933. An arbiter was named by the Council of the League of Nations. He persuaded both parties to negotiate and agree on a new concession. The 1933 contract, which was not much different from the D’Arcy concession, was signed in the end.
Golestan Palace; From Royal Fortress to Human Heritage
Tehran might be considered the most modern city in Iran, but it is home to a large number of historical monuments because it has been the capital of Iran for more than two centuries. Among its monuments, one connects the city to the entire world because the United Nations Educational, Scientific and Cultural Organization (UNESC) registered it on its list of human heritage. Golestan Palace is a wonder in Tehran. We offer a brief history and description of this ancient monument.
Since Shah Tamasb Safavid erected a fortress around Tehran, the city became a place of rest for the Savafid kings who often went on pilgrimage to the mausoleum of Abdol-Azim, a descendant of the household of the Prophet Muhammad (PBUH). The Golestan garden became the center of kingdom in Tehran. The garden shot to prominence under Zandieh. Aqa Mohammad Khan Qajar declared Tehran as the capital in April 1795 when he organized crowning ceremony in the garden.
Marble Throne
The Marble Throne, now 250 years old, is a royal throne in Golestan Palace. It is the first thing coming to view when visitors enter the palace. In front of the throne stand two towering columns. Doors adorned with marquetry open behind the throne. These doors were taken to Tehran from Karim Khan Citadel in the southern city of Shiraz. Decorations dating back to the Qajar Dynasty with their attractive yellow color, Safavid-era glassworks and an entry to an ancient harem give an attractive perspective to the marble throne. Karim Khan backyard comes next to the marble throne. The most ancient spot in Golestan Palace, which was destroyed in the beginning of the ascension to the throne of the Qajar Dynasty, has never been restored. This backyard is where the Qajar ruler buried the exhumed body of Karim Khan to be a symbol of his triumph over Zandieh. The body remained buried there and all Qajar kings remained there until their rule ended. When the Pahlavi came to power, Karim Khan was exhumed again and interred in the Pars Museum of Shiraz.
Describing all attractive parts of Goletan Palace and recounting stories about it will take ages.
Here we are seeking to find the outstanding feature of the palace, which has led to its recognition as human heritage.
Cultural Understanding and Historic Durability
When we compare Golestan Palace with similar historical palaces in the world we see that the Palace of Versailles in France, Schonbrunn Palace in Vienna, the Kremlin in Moscow and China’s Royal Palace have been emptied from any artifacts because these palaces have been plundered throughout revolutions and structural changes in these countries. If we see that Britain’s royal sites and Japan’s Nara have remained intact it is because these two countries have not seen any changes in recent centuries. However, Golestan Palace puts on exhibit history dating back to the Qajar Dynasty. It is indicative of the high level of cultural understanding of Iranians despite numerous revolutions in Iran.
The first revolution was the Constitutional Revolution and the subsequent conquest of Tehran by constitutionalist forces. At that time, Golestan Palace was known as the headquarters of the Qajar dictatorship led by Mohammad Ali Shah. But this palace was never pillaged by constitutionalist combatants.
After Qajar dynasty was unseated in a coup led by Reza Shah in late February 1921, Tehran was seized by Kazakhs. But these Kazakhs never plundered the palaces including Goletan and it was transferred to the Pahlavi without any destruction.
Golestan Palace was used by the Pahlavi regime until the end of its rule in Iran. The palace remained safe even when Tehran was occupied by Allied forces at the end of the World War II, throughout struggles for the nationalization of oil industry and above all the Iranians’ revolt against the Pahlavi, leading to the victory in 1979 of the Islamic Revolution.
Today, 190,000 objects belonging to those who have lived in this palace are still there. They include tents decorated with paintings by Kamal al-Molk and great chandelier.
Library
Golestan Palace is home to a precious library where valuable books of arts are held. This royal library was set up under Safavid and Shah Abbas. It was preserved by different generations until it reached its highest quantitative and qualitative development under Nasser ad-Din Shah Qajar. Very valuable books are held in this library. One of precious books there is One Thousand and One Nights manuscript authored by a great calligrapher. Koran and Shahnameh manuscripts held there are as valuable as a museum. There is also a collection of artworks and calligraphy from the Indian and Iranian schools, dating back to the Mughal Empire which extended over large parts of the Indian subcontinent and ruled by a dynasty of Chagatai-Turkic origin in the 16th century.
World’s 2nd Photo Gallery
The second largest photo archive in the world is in Golestan Palace. The first one is Windsor in London. Ten thousand glass negatives and twice that figure photos are held there. This precious treasury is a reference for researchers studying the Qajar era in terms of anthropology, archeology, ruling system and religious rituals.
The photo albums preserved there had been presented to Nasser ad-Din Shah and Muzaffar ad-Din Shah during their visits overseas. Old photos of Warsaw, Petersburg, Baku, Vienna, Paris and London are available. These cities experienced great changes following the World War I and World War II. These photos offer important documents regarding quantitative and qualitative development of the cities.
Cinema History
Cinema came to Iran five years after filming camera was invented. The first filmmaking studio was set up in Golestan Palace. The most ancient films of the world’s movie industry were produced in this studio. This center, which was recently restored by French specialists, still holds valuable movies.
Art’s Beating Heart
From the viewpoint of arts, Golestan Palace enjoys another important characteristic which makes it unique in the world. Throughout history, rulers, kings and artists were encouraged to put their works on exhibit. Golestan Palace, which had been held by Nasser ad-Din shah for five decades and the king was known to love arts, had become a workshop for producing artworks.
Photograph and filmmaking workshops, painting workshop, calligraphy workshop and filmmaking studio are there. Famous painters like Kamal al-Molk and Sani al-Molk and renowned calligrapher Mirza Gholam-Reza Isfahani have put their works on exhibit there. Golestan Palace is the only palace which regenerates the art of its own era. The Qajar School and Tehran School are rooted in Golestan Palace.
Golestan Gallery is a sight-seeing site here. It was opened in 1999 and it mainly puts on display paintings from the famous painters of the Qajar era.
Edifice of the Sun
Shams-ol-Emareh (Edifice of the Sun) is the most stunning structures of the Golestan Palace.
The idea of building a tall structure came to Nasser-ol-Din Shah before his first European and from pictorial images of European buildings. The monarch wanted a structure from which he could have panoramic views of the city.
Designed by Moayer-ol-Mamalek, construction on the Shams-ol-Emareh began in 1865 and was completed two years later. The architect was Master Ali Mohammad Kashi.
The building has two identical towers. The exterior views have multiple arches, intricate tile work and ornate windows. This building is a fusion of Persian and European architecture.
Before this building was constructed, Iranian royal palaces were mainly restricted inside walls, but after Nasser ad-Din Shah visited Europe, this edifice was built and was observed by people. This event was so important for people that Shams-ol-Emareh Clock enters the folkloric culture. People used to go to bed as this clock struck midnight and wake up in the morning.
This edifice had no administrative use and was mainly for recreation. Nasser ad-Din Shah used to do photography on the top floor where he could view the entire city. Many photos available from old districts and from around the palace were taken from the top floor of this edifice.
Iran White Palace
When someone leaves Shams-ol-Emareh and continues straight ahead he will reach the White Palace. Qajar kings used to hold their Cabinet sessions there. Even the first Pahlavi government was headquartered there. Important pages of Iran’s history have been written in this edifice which is currently a museum of anthropology. It was from the same place where artillery fires announced the end of the Qajar dynasty and the beginning of Pahlavi rule.
History always repeats itself. In September 1941, Reza Shah Pahlavi left this building and got into a car to leave for exile. It was an end to dictatorship and his departure brought smiles to people fed up with occupation by foreign troops.
Oil in Golestan Palace
Golestan Palace was the center of governance in Iran for 146 years. Iran’s oil history dates back to more than 110 years. All oil contracts with foreign governments since Muzaffar ad-Din Shah to the end of first Pahlavi were signed in this building. Here, we review the famous controversial D’Arcy oil deal which is Iran’s first oil deal.
On May 28, 1901, Muzaffar ad-Din Shah Qajar, Amin as-Sultan, Mirza Nasrollah Moshir ad-Dowleh and Mohandes al-Mamalek from Iran and Alfred Marriot, representative of Knox D’Arcy signed a concession based on which D’Arcy was awarded the exclusive right to explore, extract and refine oil across Iran, except for five northern states bordering Russia, for sixty years. Under this concession, D’Arcy was committed to paying 16 percent of net profits to the Iranian government and after the expiration of the contract, the company was to come under authority of the Iranian government.
When Reza Shah came to power, the issue of Anglo-Persian Oil Company posed a serious challenge to the Iranian government and the shah was facing growing pressure from public opinion. On November 26, 1932, Reza Shah threw the contract into a heater during a Cabinet session at the White Palace. Several days after, Iran’s then minister of finance notified the company chief of the annulment of the contract by the Iranian government.
Sir Reginald Hervey Hoare, who was Britain’s Envoy Extraordinary and Minister plenipotentiary to Persia, asked Iran to reconsider its decision. The British diplomat asked his government to tackle the crisis and the British Army reported to the government that its navy fleet was ready to be deployed. But the Iranian government did not back down although the British government threatened to take the issue to international arbitration in The Hague.
On December 12, 1932, then Iranian foreign minister expressed regret over the British government’s policy of intimidation and reiterated that The Hague court of justice was not competent to handle this case.
Britain took legal action against Iran and the League of Nations started studying the case in January 1933. An arbiter was named by the Council of the League of Nations. He persuaded both parties to negotiate and agree on a new concession. The 1933 contract, which was not much different from the D’Arcy concession, was signed in the end.
Golestan Palace; From Royal Fortress to Human Heritage
Tehran might be considered the most modern city in Iran, but it is home to a large number of historical monuments because it has been the capital of Iran for more than two centuries. Among its monuments, one connects the city to the entire world because the United Nations Educational, Scientific and Cultural Organization (UNESC) registered it on its list of human heritage. Golestan Palace is a wonder in Tehran. We offer a brief history and description of this ancient monument.
Since Shah Tamasb Safavid erected a fortress around Tehran, the city became a place of rest for the Savafid kings who often went on pilgrimage to the mausoleum of Abdol-Azim, a descendant of the household of the Prophet Muhammad (PBUH). The Golestan garden became the center of kingdom in Tehran. The garden shot to prominence under Zandieh. Aqa Mohammad Khan Qajar declared Tehran as the capital in April 1795 when he organized crowning ceremony in the garden.
Marble Throne
The Marble Throne, now 250 years old, is a royal throne in Golestan Palace. It is the first thing coming to view when visitors enter the palace. In front of the throne stand two towering columns. Doors adorned with marquetry open behind the throne. These doors were taken to Tehran from Karim Khan Citadel in the southern city of Shiraz. Decorations dating back to the Qajar Dynasty with their attractive yellow color, Safavid-era glassworks and an entry to an ancient harem give an attractive perspective to the marble throne. Karim Khan backyard comes next to the marble throne. The most ancient spot in Golestan Palace, which was destroyed in the beginning of the ascension to the throne of the Qajar Dynasty, has never been restored. This backyard is where the Qajar ruler buried the exhumed body of Karim Khan to be a symbol of his triumph over Zandieh. The body remained buried there and all Qajar kings remained there until their rule ended. When the Pahlavi came to power, Karim Khan was exhumed again and interred in the Pars Museum of Shiraz.
Describing all attractive parts of Goletan Palace and recounting stories about it will take ages.
Here we are seeking to find the outstanding feature of the palace, which has led to its recognition as human heritage.
Cultural Understanding and Historic Durability
When we compare Golestan Palace with similar historical palaces in the world we see that the Palace of Versailles in France, Schonbrunn Palace in Vienna, the Kremlin in Moscow and China’s Royal Palace have been emptied from any artifacts because these palaces have been plundered throughout revolutions and structural changes in these countries. If we see that Britain’s royal sites and Japan’s Nara have remained intact it is because these two countries have not seen any changes in recent centuries. However, Golestan Palace puts on exhibit history dating back to the Qajar Dynasty. It is indicative of the high level of cultural understanding of Iranians despite numerous revolutions in Iran.
The first revolution was the Constitutional Revolution and the subsequent conquest of Tehran by constitutionalist forces. At that time, Golestan Palace was known as the headquarters of the Qajar dictatorship led by Mohammad Ali Shah. But this palace was never pillaged by constitutionalist combatants.
After Qajar dynasty was unseated in a coup led by Reza Shah in late February 1921, Tehran was seized by Kazakhs. But these Kazakhs never plundered the palaces including Goletan and it was transferred to the Pahlavi without any destruction.
Golestan Palace was used by the Pahlavi regime until the end of its rule in Iran. The palace remained safe even when Tehran was occupied by Allied forces at the end of the World War II, throughout struggles for the nationalization of oil industry and above all the Iranians’ revolt against the Pahlavi, leading to the victory in 1979 of the Islamic Revolution.
Today, 190,000 objects belonging to those who have lived in this palace are still there. They include tents decorated with paintings by Kamal al-Molk and great chandelier.
Library
Golestan Palace is home to a precious library where valuable books of arts are held. This royal library was set up under Safavid and Shah Abbas. It was preserved by different generations until it reached its highest quantitative and qualitative development under Nasser ad-Din Shah Qajar. Very valuable books are held in this library. One of precious books there is One Thousand and One Nights manuscript authored by a great calligrapher. Koran and Shahnameh manuscripts held there are as valuable as a museum. There is also a collection of artworks and calligraphy from the Indian and Iranian schools, dating back to the Mughal Empire which extended over large parts of the Indian subcontinent and ruled by a dynasty of Chagatai-Turkic origin in the 16th century.
World’s 2nd Photo Gallery
The second largest photo archive in the world is in Golestan Palace. The first one is Windsor in London. Ten thousand glass negatives and twice that figure photos are held there. This precious treasury is a reference for researchers studying the Qajar era in terms of anthropology, archeology, ruling system and religious rituals.
The photo albums preserved there had been presented to Nasser ad-Din Shah and Muzaffar ad-Din Shah during their visits overseas. Old photos of Warsaw, Petersburg, Baku, Vienna, Paris and London are available. These cities experienced great changes following the World War I and World War II. These photos offer important documents regarding quantitative and qualitative development of the cities.
Cinema History
Cinema came to Iran five years after filming camera was invented. The first filmmaking studio was set up in Golestan Palace. The most ancient films of the world’s movie industry were produced in this studio. This center, which was recently restored by French specialists, still holds valuable movies.
Art’s Beating Heart
From the viewpoint of arts, Golestan Palace enjoys another important characteristic which makes it unique in the world. Throughout history, rulers, kings and artists were encouraged to put their works on exhibit. Golestan Palace, which had been held by Nasser ad-Din shah for five decades and the king was known to love arts, had become a workshop for producing artworks.
Photograph and filmmaking workshops, painting workshop, calligraphy workshop and filmmaking studio are there. Famous painters like Kamal al-Molk and Sani al-Molk and renowned calligrapher Mirza Gholam-Reza Isfahani have put their works on exhibit there. Golestan Palace is the only palace which regenerates the art of its own era. The Qajar School and Tehran School are rooted in Golestan Palace.
Golestan Gallery is a sight-seeing site here. It was opened in 1999 and it mainly puts on display paintings from the famous painters of the Qajar era.
Edifice of the Sun
Shams-ol-Emareh (Edifice of the Sun) is the most stunning structures of the Golestan Palace.
The idea of building a tall structure came to Nasser-ol-Din Shah before his first European and from pictorial images of European buildings. The monarch wanted a structure from which he could have panoramic views of the city.
Designed by Moayer-ol-Mamalek, construction on the Shams-ol-Emareh began in 1865 and was completed two years later. The architect was Master Ali Mohammad Kashi.
The building has two identical towers. The exterior views have multiple arches, intricate tile work and ornate windows. This building is a fusion of Persian and European architecture.
Before this building was constructed, Iranian royal palaces were mainly restricted inside walls, but after Nasser ad-Din Shah visited Europe, this edifice was built and was observed by people. This event was so important for people that Shams-ol-Emareh Clock enters the folkloric culture. People used to go to bed as this clock struck midnight and wake up in the morning.
This edifice had no administrative use and was mainly for recreation. Nasser ad-Din Shah used to do photography on the top floor where he could view the entire city. Many photos available from old districts and from around the palace were taken from the top floor of this edifice.
Iran White Palace
When someone leaves Shams-ol-Emareh and continues straight ahead he will reach the White Palace. Qajar kings used to hold their Cabinet sessions there. Even the first Pahlavi government was headquartered there. Important pages of Iran’s history have been written in this edifice which is currently a museum of anthropology. It was from the same place where artillery fires announced the end of the Qajar dynasty and the beginning of Pahlavi rule.
History always repeats itself. In September 1941, Reza Shah Pahlavi left this building and got into a car to leave for exile. It was an end to dictatorship and his departure brought smiles to people fed up with occupation by foreign troops.
Oil in Golestan Palace
Golestan Palace was the center of governance in Iran for 146 years. Iran’s oil history dates back to more than 110 years. All oil contracts with foreign governments since Muzaffar ad-Din Shah to the end of first Pahlavi were signed in this building. Here, we review the famous controversial D’Arcy oil deal which is Iran’s first oil deal.
On May 28, 1901, Muzaffar ad-Din Shah Qajar, Amin as-Sultan, Mirza Nasrollah Moshir ad-Dowleh and Mohandes al-Mamalek from Iran and Alfred Marriot, representative of Knox D’Arcy signed a concession based on which D’Arcy was awarded the exclusive right to explore, extract and refine oil across Iran, except for five northern states bordering Russia, for sixty years. Under this concession, D’Arcy was committed to paying 16 percent of net profits to the Iranian government and after the expiration of the contract, the company was to come under authority of the Iranian government.
When Reza Shah came to power, the issue of Anglo-Persian Oil Company posed a serious challenge to the Iranian government and the shah was facing growing pressure from public opinion. On November 26, 1932, Reza Shah threw the contract into a heater during a Cabinet session at the White Palace. Several days after, Iran’s then minister of finance notified the company chief of the annulment of the contract by the Iranian government.
Sir Reginald Hervey Hoare, who was Britain’s Envoy Extraordinary and Minister plenipotentiary to Persia, asked Iran to reconsider its decision. The British diplomat asked his government to tackle the crisis and the British Army reported to the government that its navy fleet was ready to be deployed. But the Iranian government did not back down although the British government threatened to take the issue to international arbitration in The Hague.
On December 12, 1932, then Iranian foreign minister expressed regret over the British government’s policy of intimidation and reiterated that The Hague court of justice was not competent to handle this case.
Britain took legal action against Iran and the League of Nations started studying the case in January 1933. An arbiter was named by the Council of the League of Nations. He persuaded both parties to negotiate and agree on a new concession. The 1933 contract, which was not much different from the D’Arcy concession, was signed in the end.
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