New Gas Hub in Northwest of Iran

Plans are under way to turn East Azarbaijan Province into a hub for production of gas industry equipment and parts, a local gas official says.

Valiollah Dini, managing director of the East Azarbaijan province gas company, said the self-sufficiency instilled in the province has raised hopes for turning East Azarbaijan into a hub for gas industry equipment and parts. 

Speaking at a ceremony to spontaneously launch several major gas distribution projects in northwestern Iran, Dini said East Azerbaijan is the second province in Iran where a committee for development of oil and gas technologies has been formed at the company, and is seriously pursuing its goals. 

"Efforts have been made to turn the province into an industrial hub for gas distribution equipment and parts so that self-sufficiency is obtained in the sector and more value-added is generated as a result," he said. 

He said the East Azarbaijan province gas company is in close contact with the local universities and research centers, saying the company is currently supplying natural gas to 100% of the province's urban population and 88% of the population in rural areas.

Zanganeh: Gas Extraction from South Pars to Equal Qatar’s

Minister of Petroleum Bijan Zanganeh says late this year or early next year Iran’s gas extractions from South Pars gas field will be equal that of State of Qatar.

Addressing senior directors of Pars Oil and Gas Company on Thursday, Zanganeh said despite harsh financial problems emanated from sanctions over recent years, development of South Pars gas field was not stopped.

He recalled cabinet meeting with Supreme Leader of Islamic Revolution Ayatollah Ali Khamenei, where he had provided His Excellency with a report on enhancement of gas production in South Parts. 

He said he had informed the Supreme Leader that gas production from the joint field had risen by 150 million cubic meters a day in the 11th government and it is estimated that more than 85 million cubic meters will be added to the amount.

The minister said efforts should be made to bring the desulfurization and ethane production units of the phases of South Pars into production cycle.

He also underlined observation of environmental standards in various water, soil and air sectors.

NIDC Drills 551 Wells in 3 Years

Managing Director of National Iranian Drilling Company (NIDC) Heidar Bahmani said  551 wells being more than 1,080,000 meters long were drilled in three years since 1392 (2013-14), when the 11th government took office.

Bahmani said the NIDC had utilized all its efforts to address major portion of the needs of the National Iranian Oil Company (NIOC).

He said thus far, his company has been able to drill and complete drilling of 268 delineation and development wells, six exploration wells and 277 work-over wells.

He went on to say that presently, his company has about 70 percent of the market under its control, using 75 offshore and onshore rigs.

He said over the past three years, five onshore heavy rigs had joined its rig fleet.

 From a limited fleet of six drilling rigs in early 80' to one of the Middle East most trusted companies in the field of oil & gas wells drilling, NIDC has a good history of technical innovation and development. 

At present, NIDC has a workforce of 16,000 employees, working in 10 provinces.  

Presenting all the required technical services and enjoying the benefits of its state of the art equipment and skilled man power and expertise gives NIDC a unique position among drilling contractors, and made it a qualified candidate for International projects. 

Norwegian Companies are Eager to Come Back to Iranian Oil Industry

Minister of Petroleum Bijan Zanganeh and Norwegian Foreign Minister Borge Brende met in Tehran and discussed Iran-Norway cooperation potentials in oil sector.

Zanganeh said, “We have always had good relations with Norway in the oil sector; in 2010s major Norwegian companies were active in Iran. Statoil was active in phases six, seven and eight of South Pars joint gas field and Norsk Hydro was active in several Iranian exploration blocks at that juncture.”

Norwegian Foreign Minister Borge Brende said Norwegian companies are so eager to come back to Iranian oil industry.

He added ground is prepared for dialogue between representatives of Iranian and Norwegian oil industry to expand cooperation.

Brende said Iranian representatives have welcomed participating at an exhibition in Norway and said Deputy Minister of Petroleum for International Affairs and Commerce Amir-Hossein Zamaninia will travel to Norway to take part in an international oil and gas seminar.

Tehran Keen on Boosting Energy Ties with Kuala Lumpur

Iranian Minister of Petroleum Bijan Zangeneh voiced Tehran's willingness to improve ties with Kuala Lumpur in different areas.

Speaking in a meeting with Malaysian Parliament Speaker Tan Sri Datuk Seri Panglima Pandikar Amin bin Haji Mulia in his Tehran office, Zangeneh said, "We are interested in enhancing level of our ties with Malaysia in different areas."

Zanganeh said since Malaysia lacks any oil, the two sides should launch cooperation in short-term trade.

He noted, "Now Malaysian companies have announced readiness for presence in Iran as soon as possible. In the meantime, talks will soon start between companies of the two countries for the deals already in place."

Iran Crude Oil Exports Hit Fresh Highs

The managing director of Iran Oil Terminals Company (IOTC) has announced a new record in the country's crude oil exports.

"Simultaneous loading of 10 oil tankers at Kharg Island's oil terminal is unprecedented," Pirouz Mousavi said.

He said the event was marked during Iran's Government Week in August.

"The berths in the eastern and western jetties simultaneously welcomed 10 ships; six ships in the eastern jetty, three ships in the western jetty and one was loaded ship-to-ship," he added.

Mousavi said: "These loadings and exports were the result of efforts made by a group of senior managers, department chiefs and staff who have turned threats into opportunities over recent years ,and have renovated and repaired the decrepit parts of loading jetties."

Trade, crude and oil products, development of the oil and gas fields, and investment in the downstream sectors figured prominently in talks in the meeting. 

Crude exports and sales constituted major portion of oil cooperation between National Iranian Oil Company and Malaysia prior to sanctions, to the extent that Iran on average sold 50,000 to 60,000 barrels of oil to the country.

New Gas Hub in Northwest of Iran

Plans are under way to turn East Azarbaijan Province into a hub for production of gas industry equipment and parts, a local gas official says.

Valiollah Dini, managing director of the East Azarbaijan province gas company, said the self-sufficiency instilled in the province has raised hopes for turning East Azarbaijan into a hub for gas industry equipment and parts. 

Speaking at a ceremony to spontaneously launch several major gas distribution projects in northwestern Iran, Dini said East Azerbaijan is the second province in Iran where a committee for development of oil and gas technologies has been formed at the company, and is seriously pursuing its goals. 

"Efforts have been made to turn the province into an industrial hub for gas distribution equipment and parts so that self-sufficiency is obtained in the sector and more value-added is generated as a result," he said. 

He said the East Azarbaijan province gas company is in close contact with the local universities and research centers, saying the company is currently supplying natural gas to 100% of the province's urban population and 88% of the population in rural areas.

PEDEC to See Joint Fields' Output Rise

Recovery from jointly owned oil fields run by Petroleum Engineering and Development Company (PEDEC) is expected to increase by 120,000 b/d by March 2017, CEO of PEDEC has said.

Nouroddin Shahnazizadeh said 225,000 b/d oil was being recovered from oil fields located in West Karoun area along the border with Iraq.

"It is forecast that the recovery from the jointly owned fields of this company would increase by 120,000 b/d by the end of Iranian current calendar year (21 March 2017)," he said.

Referring to increased production capacity of the West Karoun fields, he added that South Azadegan oil field would see its output hit 60,000 b/d. He put the figure for North Yaran and Azar field at 30,000 b/d.

Shahnazizadeh said PEDEC targets 1.15 mb/d of recovery from six fields located in Azadegan Plain.

He said that South Azadegan's output would reach 320,000 b/d by March 2020. By that time, he added, the first phase of North Azadegan oil field would be producing 75,000 b/d of oil; the second phase of Yadavaran oil field would be supplying 180,000 b/d, Azar field 65,000 b/d, North Yaran 30,000b b/d and South Yaran 25,000 b/d.

He also said that negotiations were under way between National Iranian Oil Company (NIOC) and China National Petroleum Corporation International (CNPCI) for the second phase development of North Azadegan. Talks are also under way between NIOC and China's Sinopec for the second phase development of Yadavaran oil field.

Iran Supports Oil Market Stability

Minister of Petroleum Bijan Zanganeh says Iran supports any measure aimed at reestablishing stability in the world crude markets.

Zanganeh made the remark in a press conference at Pars Energy Special Economic Zone and prior to his presence in the informal meeting of OPEC Ministers on the sidelines of the International Energy Forum Ministerial Meeting due to be held in Algeria.

Zanganeh said Iran has had no role in current situation in the oil market, so after sanctions we intend to reach production share in the world crude markets to the level of pre-sanctions.

While confirming that he will take part in the IEF Ministerial Meeting during 28-29 September, Zanganeh said when market turned unstable, Iran’s oil production was hardly 2,700,000 bpd and oil exports was less than one million bpd.

He noted, “We expect those countries who led the market to instability, assume the highest and main responsibility to restore stability in the market.”

He added that Iran will continue cooperation with the OPEC to improve prices and crude market conditions. “However, we expect our right to revive our lost share in the oil market will be taken into consideration.”

Zanganeh announced, “Revival of Iran’s lost share in the oil market is the national demand of Iranian nation.”

On final status of new model of oil contracts dubbed as IPC, Zanganeh said the Majlis commission in charge of checking conforming approvals, has demanded amendments in the contract model and the corrections will be made and after approval in the cabinet, the model will be sent to the parliament.

He said the new model of oil contracts envisages general conditions of the contracts and they are in fact a type of new version of buy-back contracts. 

He recalled his meeting with the MPs and said he had convinced them on the issue and the proponents categorically had voiced their agreement, so favorable support was raised for the new scheme of contracts.

The minister said the new model of oil contracts contains general conditions and it should be approved by the cabinet and once the framework is finalized, sometime will be spent on preparing the draft and once the contracts are signed, a copy will be sent to Majlis in a classified form.

Zanganeh said development of joint fields and enhancing oil recovery factor from old fields are among priorities in conclusion of the new oil contracts.

Iran Supports Oil Market Stability

Minister of Petroleum Bijan Zanganeh says Iran supports any measure aimed at reestablishing stability in the world crude markets.

Zanganeh made the remark in a press conference at Pars Energy Special Economic Zone and prior to his presence in the informal meeting of OPEC Ministers on the sidelines of the International Energy Forum Ministerial Meeting due to be held in Algeria.

Zanganeh said Iran has had no role in current situation in the oil market, so after sanctions we intend to reach production share in the world crude markets to the level of pre-sanctions.

While confirming that he will take part in the IEF Ministerial Meeting during 28-29 September, Zanganeh said when market turned unstable, Iran’s oil production was hardly 2,700,000 bpd and oil exports was less than one million bpd.

He noted, “We expect those countries who led the market to instability, assume the highest and main responsibility to restore stability in the market.”

He added that Iran will continue cooperation with the OPEC to improve prices and crude market conditions. “However, we expect our right to revive our lost share in the oil market will be taken into consideration.”

Zanganeh announced, “Revival of Iran’s lost share in the oil market is the national demand of Iranian nation.”

On final status of new model of oil contracts dubbed as IPC, Zanganeh said the Majlis commission in charge of checking conforming approvals, has demanded amendments in the contract model and the corrections will be made and after approval in the cabinet, the model will be sent to the parliament.

He said the new model of oil contracts envisages general conditions of the contracts and they are in fact a type of new version of buy-back contracts. 

He recalled his meeting with the MPs and said he had convinced them on the issue and the proponents categorically had voiced their agreement, so favorable support was raised for the new scheme of contracts.

The minister said the new model of oil contracts contains general conditions and it should be approved by the cabinet and once the framework is finalized, sometime will be spent on preparing the draft and once the contracts are signed, a copy will be sent to Majlis in a classified form.

Zanganeh said development of joint fields and enhancing oil recovery factor from old fields are among priorities in conclusion of the new oil contracts.

Border Market to Earn Iran Income

Director of the Kermanshah zone of National Iranian Oil Products Distribution Company (NIOPDC) Ramezan Hashemi has said that more than 11.5 million liters of fuel has been sold at two gas stations located at Parvizkhan border post, earning the country IRR 139 billion in revenue in more than two years.

“The difference in the price of fuel in Iran and Iraq, particularly in the Kurdistan region, encourages smuggling. When Daesh’s activities were in full swing, gasoline sold up to IRR 200,000 per liter at borders,” he said. “But we acted so as to curb smuggling in this region,” he added.

Hashemi noted that two gas stations were built in Parvizkhan border post in 2014 in order to supply fuel to trucks crossing the border and prevent fuel smuggling.

“The fuel price at these two stations is balanced. In other words, it is almost the same as the price charged in the closest border city of Iraq, just 5% lower,” he said.

Since the launch of the two filling stations up to June this year, IRR 139 billion has been earned from selling gasoline.

He said that gasoline currently sells IRR 11,000 at borders.

Hashemi said Iraqi trucks have voiced interest in getting euro-4 gasoil at this terminal.

“We have proposed the delivery of 30,000 liters of euro-4 gasoil to the borders. We have the record of selling gasoil at Parvizkhan border market,” he said, adding that between 60,000 and 65,000 liters of fuel was sold last calendar year to March 2016.

Parvizkhan border market is developing and gas stations are mobile. They are likely to receive warm welcome as euro-4 gasoline is expected to be distributed.

All Iranian or Iraqi drivers crossing Parvizkhan border post are required to fill up their tanks so that smuggling would be curtailed.

This project earned the Iranian government more than IRR 766 billion in revenue by selling 82.7 million liters of fuel in more than two years.

Iran, Russia to Jointly Construct Rigs

The managing director of Russia’s Krasnye Barrikady said on Saturday that his company has won a contract worth $1 billion to construct five offshore drilling rigs for Iran.

The deal was signed between Barrikady and Iran's Tasdid Offshore Development Co. back in January.

Alexander S. Ilyichev said this will be the first Iran-Russia cooperation for construction of drilling rigs. 

The rigs are planned to be used in Iran’s section of the Persian Gulf shelf.  Krasnye Barrikady is the first Soviet company which built offshore drilling rigs in the 70s and is currently busy will fulfillment of dozens of projects, said the Russian company official. 

The official added that discussions over the project had been going on for almost two years. 

The terms of the contract dictate that the project will also make use of Russian funds.

Iran is set to make a 15 percent down payment on the $200 million price of the first rig it has ordered.

The rigs will be constructed in Russia as modules and will be assembled in Iran by domestic companies.

The construction of a total of 10 rigs through the same scheme is on the agenda. 

Under the agreement, the two sides will jointly build rigs for exploration and production of hydrocarbons in the Persian Gulf waters; it was reported at the time.

New drilling rigs are expected to improve Iran’s ability to enhance its crude oil production. 

Gas, Rising Star of World Energy

Mohammad-Hossein Adeli, Secretary General of Gas Exporting Countries Forum (GECF), recently offered an analysis about the future of gas in a ceremony  held on the occasion of the 50th anniversary of establishment of National Iranian Gas Company (NIGC).

The main point in his words was that oil, gas and coal constitute today’s world energy mix. Over the coming 25 years, he said, the world is forecast to move towards curbing oil and coal consumption; therefore, gas will be the rising star of world energy. Excerpts from his speech are cited below:

It is often said in international fora that the current period is the period of transition of energy. One may ask why. Pundits maintain such a view from several aspects. First of all, energy and gas market parameters have changed drastically. The primary change has been the change in price. Prices have now become normal. In the past, gas traded $20 in Asia and $12 in Europe. Now they have fallen respectively to $6 and $4. Therefore, the prices are normal now. Meantime, something else has also happened, that is the emergence of new suppliers like the US. Until 2005, the US was a leading importer of energy, but now it has become an exporter. US gas cargoes have arrived even in the Persian Gulf. Australia is another case in point. It was a small producer and now it has become a big one. According to projections, Australia is set to become the world’s first producer of liquefied natural gas (LNG), a position currently held by Qatar.

These new players have not only brought about changes in exports, but also transformed the important sector. For instance, Japan is the largest importer in the world now, but within years it will become be surpassed by China and India in imports.

A new atmosphere of competition has emerged in the gas market now. Gas contracts in Europe have significantly changed because Europe is attracting all exporters of LNG. GECF members can no longer stick with traditions if they want to survive in this global market.

Environmental issues and energy security supply in countries are among other factors affecting global gas market. At present, it is said that the market transition does not stem from the aforesaid reasons, but it depends on the fact that we intend to switch from a high-carbon society or economy to a carbon-free society.

I recently attended gatherings in which speakers insisted that the value of all huge hydrocarbon reserves will fall to zero soon because the world is moving towards a carbon-free society.

Growth in Energy Demand

All important relevant bodies in the world have reviewed the global economy growth three times over the past six months and they have all revised down their forecasts three times. It has fallen from 3.4 to 3.1 percent. The global economic growth forecasts have declined for the 2015 to 2017 period. There are three scenarios for the decline in these years. The two 2.8% and 3.1% scenarios respectively apply to developed, developing and emerging countries. Over the past two to three years we have not had good economic conditions; therefore, we will not witness a high economic growth rate over the coming years. Furthermore, economic growth rate in China has declined. But over the coming 25 years, the overall economic growth rate will be equal to the overall economic growth rate of the past 25 years. Therefore, we hope that this growth will lead to an acceptable growth in energy demand. Growth in population and urbanization always enhances demand. Over the coming 25 years, 1.7 billion people will be added to the world population and urbanization in the world will increase from 54% to 64%.

Energy consumption has experienced an annual 1.9% annual growth over the past 25 years, and it will grow 0.09% a year for 25 years. It does not mean that we will not have any economic growth; rather it means that a new relationship has defined itself between energy demand and economic growth. Since energy saving, productivity and energy intensity affect consumption; many countries have managed to cut their consumption by enhancing energy productivity.

Oil, gas and coal currently constitute the world energy. Over the coming 25 years, oil and coal consumption is set to decline; therefore, gas will be the rising star of the energy world.

Balanced supply and demand will benefit supply because over the past years when gas prices have been high, many countries have invested in this sector. By applying cutting edge technology, the US has managed to extract 50% of its gas from shale rocks and it will become a net exporter of gas next year.

Gas Demand Set to Grow

In 2015, due to political reasons demand for gas grew in Europe because countries in this continent are willing to diversity gas imports. The gas market will witness better conditions in the long term and the output of gas exporting countries will increase from 3,400 bcm to 5,400 bcm. Furthermore, gas penetration rate will increase in the energy mix of most countries in the world over the coming 25 years. For instance, the share of coal will decline in China and will be substituted with gas. Therefore, the demand for gas and LNG is set to increase. Four countries will experience the highest level of demand: China, the US, India and Iran. Of some 1,900 bcm that would be added to demand, 900 bcm will be from these four countries.

There is roughly 485 tcf of gas in the world. According to BP annual reports, Iran sits atop the world’s largest gas reserves. The recoverable gas reserves in the world amount to only 191 tcf. That indicates investment in gas extraction sector in gas producing countries.

long term and the output of gas exporting countries will increase from 3,400 bcm to 5,400 bcm. Furthermore, gas penetration rate will increase in the energy mix of most countries in the world over the coming 25 years. For instance, the share of coal will decline in China and will be substituted with gas. Therefore, the demand for gas and LNG is set to increase. Four countries will experience the highest level of demand: China, the US, India and Iran. Of some 1,900 bcm that would be added to demand, 900 bcm will be from these four countries.

There is roughly 485 tcf of gas in the world. According to BP annual reports, Iran sits atop the world’s largest gas reserves. The recoverable gas reserves in the world amount to only 191 tcf. That indicates investment in gas extraction sector in gas producing countries.

Higher LNG Trade Share

Currently, the volume of natural gas traded via pipeline, and in the form of LNG amounts to one billion tcf, and in 25 years will reach 1.7 billion tcf. That would be a big increase. During the past years, we have mainly seen growth in pipeline gas trade rather than LNG trade. But now, the ratio of pipeline gas exports to LNG trade is 70 to 30. Within 25 years, that ratio will change to 45-55. In other words, LNG will show a strong presence in global markets soon, and a very important point with regard to LNG trade is that over the coming 25 years at least 30% of LNG trade in the world will take place under no contract. As you know, there is a big difference between oil and gas. Oil must be first produced and then a contract is signed for its sale. But in gas business, a contract must be first signed and then production begins. Meantime, long-term oil contracts are signed for three years, while gas contracts are signed for at least 25 years. Therefore, in a business where long-term contracts are signed we are moving in a direction where normal demand is being created. Within 25 years, 30% of LNG will be sold under spot cargo tender, which would boost competition in the market.

Present and Future of Iran Gas

Demand for energy will treble over 25 years and the world will witness an annual 2.5% growth in demand. Our country’s energy is currently limited to oil and gas and that will continue for 25 years. The ratio of oil to gas currently stands at 40 to 58, which will change to 32-66 in 25 years. However, that does not mean ignorance of modern energies in Iran. Of course, the country’s development plans envisage up to 10% share for renewable energies. At present, demand for gas comes respectively from household, industrial and power generation sectors. In the coming years, power plants will come at the top.

Iran is a potential major player in the world gas market. Iran is pursuing its LNG projects and "Iran LNG" project is the most important among them. The startup of this project requires a contract.

Gas, Cleanest Fossil Fuel

Some energy experts believe that the era of gas is nearing its end and we are entering the carbon-free era. We saw at COP21 that all world countries pledged to cap carbon emission to 40 giga tons a year. But for the time being, carbon emissions will reach 55 giga tons a year. If you look at greenhouse gas emissions we will see growth of other sources of energy, too.

Another issue pertains to pollution and related problems that have recently been highlighted by the World Health Organization (WHO) and the World Club of Consumers. Every year, 8 million people are dying from pollution inside and outside home. According to studies conducted on this issue, the best way to prevent such fatalities will be using renewables. Gas is the cleanest fossil fuel and produces 40% less pollution than oil. That is why we introduce this fuel as a clean source of fuel to the world, because this fuel is accessible and more affordable than other fuels. For instance last year, Europe spent 4106 billion in subsidies for encouraging people to use renewable energies.

To resolve environment-related problems, we cannot go ahead based on merely renewable energy development plans. In addition to this policy, we have to use cleaner fossil energies like gas.

The point raised During the Third GECF summit in Tehran, was to coordinate with COP21 in Paris in a bid to prevent global warming.

Fossil fuels will have a big share in the global energy mix over the coming 25 years. At present, fossil fuels constitute 80% of energy mix all over the world. In the most pessimistic scenario, fossil fuels will have a 68% share over the coming 25 years.

In the current period of transition, we have to use more gas than coal in order to combat pollution and reduce temperature. A tough road lies ahead.

Oil Contracts Effective Notwithstanding Sanctions

Senior Iranian oil managers have said that sanctions or change of government in Iran will not terminate oil contracts.

In their view, the Iranian Ministry of Petroleum plans to use different types of contracts for different oil and gas fields based on their degree of priority.

Three contracts are expected to be signed under newly-developed Iran Petroleum Contract (IPC) terms over the coming six months.

Gholam-Reza Manouchehri, deputy CEO of National Iranian Oil Company (NIOC) for development and engineering affairs, said: “Due to time restrictions, we cannot sign more than three contracts under the new model by the end of the [current calendar] year (in March 2017).”

He said more than 20 buy-back contracts have been signed, noting that IPC did not differ too much from buy-back in terms of legal aspects.

“The duration of the contract, maintenance of production and its variation and integrated production have been incorporated into the new version of petroleum industry contract. That is the advantage of this contract and its remuneration will depend on the level of production,” said Manouchehri.

Priority-Based Contracts

Ali-Akbar Mahrokhzad, director for international affairs of (NIOC), said: “When two parties sign a contract it will be notwithstanding the government in power. They accept obligations of the contract; therefore, any change in the government will not have any impact on the enforcement of the contract.”

He said that the main subject of the contract, which is production, is the objective of the signature of the contract. The contract, he said, would be remunerated if the contract objectives are realized.

“In other words, if the contractor abandons the project at any stage before the objectives mentioned in the contract are realized, there will be no recoupment and production in the main guarantee for reimbursement to the investor,” he said.

Asked what would happen to contracts in case international sanctions are back in force or Iran’s nuclear agreement with world powers is annulled, Mahrokhzad said: “Article 14 of the Resolution of Board of Ministers specifies the conditions of contract under different conditions like termination, force majeure; sanction is one of these conditions.”

In response to "Iran Petroleum’s" question about the Ministry of Petroleum’s plan to apply different types of contracts based on the priority of oil and gas fields, he said: “At present, the Iranian petroleum ministry’s approach is to use the new format of oil contracts with the objective of accelerating development and attraction of investment based on the significance of development of jointly owned fields.”

“The Iranian Ministry of Petroleum does not insist on using the new format of oil contracts about other oil and gas fields which are less prioritized and are mostly independent fields. It can use other formats like buy-back for therm. Article 15 of the Resolution of the Board of Ministers gives such authority to the Iranian Ministry of Petroleum,” he said.

$100b Investment Needed

Abdol-Hamid Delparish, director of incorporated planning at NIOC, stressed the need for NIOC to attract $100 billion in “net investment” for realizing its objectives under the 6th Five-Year Economic Development Plan.

“Net investment means that this figure is envisaged regardless of NIOC’s financial needs for financing current costs and is calculated solely for the aforesaid development objectives,” he said.

Countdown for Iran New Oil Contract Model Bids

IOCs to Hedge Project Risk

In the aftermath of the lifting of international sanctions on Iran and the ensuing improvement in conditions for foreign transactions, particularly in the oil sector, one important issue was the revision of terms and conditions of oil contracts in Iran. The significance of this issue stemmed from the fact that Iran had to come up with investment attraction and crude oil exports in the world and find a way to make up for losses and recoup its lost markets and customers. Moreover, the country had also to find new markets.

Therefore, the Iranian Ministry of Petroleum decided to restructure oil contracts which were no longer attractive to foreign companies in an attempt to make up for losses and attract new investors into this sector.

The contractual framework of the newly drafted contracts, was planned to be unveiled last September. But it was delayed and now the head of National Iranian Oil Company (NIOC), Ali Kardor, has said that foreign companies would be invited to bid for IPC projects in October.

Iran New Oil Contract Model was finalized after several rounds of amendments, and NIOC plans to offer a mix of Iran New Oil Contract Model ,buyback and EPCF (engineering, procurement, construction, finance) contracts.

The important point in the new oil contracts is the use of domestic capabilities along with the necessity for applying cutting edge technology and state-of-the-art techniques.

In a recent press conference, Kardor said that steering of small and medium sized oil and gas fields would be up to Iranian companies that would partner foreign companies. But big oil fields are planned to be awarded to foreign companies provided that they choose a qualified Iranian partner.

Kardor said big oil fields would be put out to tender under IPC deals, while small and medium sized ones would undergo development under Iran New Oil Contract Model and buy-back deals.

He said the first IPC tender bid for South Azadegan oil field, which Iran shares with neighboring Iraq, would be held in October.

Kardor said a list of small and medium sized fields, prioritized to be put out to tender, has been drawn up for domestic bidders.

“The tender bid for small and medium sized fields is likely to be held for three fields located in western Iran before Iran New Oil Contract Model -based bids,” he added.

“Small and medium sized fields whose enhanced recovery is spoken about, will undoubtedly not be awarded under buy-back deals because this model of contract could no longer be responsive,” said Kardor.  

He said that ad hoc committees specializing in tender bids and commercial contracts have held meetings for the application of Iran New Oil Contract Model contracts.

“We forecast three contracts to be signed within the framework of new contracts by the end of [the calendar] year and these contracts would bring around $100 billion in investment into the country,” he added.

Technology Transfer in Iran New Oil Contract Model

Another issue discussed by Kardor pertained to changes within the framework of Iran New Oil Contract Model . Amendments to Iran New Oil Contract framework seem to be over.

Referring to amendments made to Iran New Oil Contract  structure, he said: “According to changes made [to IPC], in the new contracts, a 20-year deadline has been set for the application of enhanced recovery methods to prioritized reservoirs whose current recovery rate is below 20%. Furthermore, the non-disclosure agreement attached to every contract must be submitted to the Supreme National Security Council.”

An important point with the new deals has been transfer of new technologies enshrined in the Resilient Economy instructed by Supreme Leader Ayatollah Ali Khamenei.

Kardor said in the Iran New Oil Contract structure, three levels of technology transfer are envisaged. The first level is related to transfer of technology in exploration, production and reservoir engineering. The second level pertains to the transfer of technology to Iranian oil service companies, while the third level is related to the transfer of technology in the sector of equipment manufacturing.

“Transfer of technology in exploration and production and reservoir engineering was not envisaged in buy-back deals; therefore, this issue is the strong point of the new model of contracts,” said Kardor, noting that this issue could help Iranian companies improve their performance.

Risk Hedging

Kardor, who is also deputy minister of petroleum, said signature of every oil contract in Iran, either Iran New Oil Contract Model or buy-back, would give Iran big advantages.

“Creation of new risks and the possibility of flow of international resources beyond the ceiling covered by export credit agencies into the country are among them,” he said.

That is the case while since before the 1979 Islamic Revolution, except for buy-back deals, all contracts have enjoyed ECA coverage because this hedging ceiling specifies the ceiling of risks for countries and there is no authorization for the flow of international resources beyond this ceiling into countries.

Since under Iran New Oil Contract Model deals, international oil companies (IOC) book reservoirs and they accept the risks of projects without hiring any ECA, signature of contract with them would mean the flow of resources into the country beyond the risk defined for the country.

Another important point with the new oil contracts is that qualified Iranian companies would join a foreign company from the very beginning for exploration and production and the foreign contract will be present throughout all stages.

Kardor also said that Iran signed seven new initial agreements with foreign oil companies.

The contracts to study Iranian oilfields were signed with firms including Austria's OMV, France's Total, Germany's Wintershall, Indonesia's Pertamina, Russia's Lukoil and Zarubezhneft, he said.

South Pars, a Priority

Since the 1979 Revolution, NIOC has prioritized oil and gas production from jointly owned hydrocarbon fields and enhancing exports. This policy is still continuing.

Kardor said NIOC is currently concentrating its attention on the development of jointly owned fields in West Karoun area along the border with Iraq, South Pars gas field, which Iran shares with Qatar in the Persian Gulf, preservation of production in oil-rich areas and development of shared oil fields in the Persian Gulf.

“Working on other projects highly depends on financing,” he said.

Fitch Rating Restored

Kardor said some $134 billion in credit was needed for the financing of NIOC projects under the 6th Five-Year Economic Development Plan (2015-2020).

“In West Karoun and South Pars, financial concerns have been eased through compilation of specific financial packages, but for the implementation of other projects and even for preservation of production level in South Pars, we will need to attract investment in coming years,” he added.

Kardor said activities for preventing production fall in South Pars would need $25 billion in fresh investment, adding that the 6th Development Plan envisaged the reimbursement of these debts through NIOC surplus production.

“Following the negotiations we have had with relevant banks and financial institutes, in case of approval of this issue, the NIOC financial balance sheets will face no problem,” he said.

Kardor said NIOC would use different types of contracts for developing reservoirs and attracting investment.

“NIOC has signed the first forward participation contract in rials (Iran’s national currency) and given the experience of NIOC for financing from different ways, these methods are still on the agenda,” he added.

Kardor, however, said that due to the high amount of necessary capital, the issuance of bonds and similar methods would not attract enough investment; therefore, it would be necessary to benefit from foreign investment.

Therefore, NIOC intends to revive its ranking assigned by the international rating agency Fitch. After that, the issuance of international bonds would be added to financing methods of Iran’s petroleum industry.

LNG Exports

Crude oil production hike following the lifting of sanctions has been highlighted by the administration of President Hassan Rouhani, and Iran’s Minister of Petroleum Bijan Zangeneh in particular. A variety of plans including the new framework of oil contracts has been to that end.

NIOC also plans to add 150,000 b/d of oil to the country’s output by next March and bring Iran’s total oil production to 4 mb/d before the next  presidential elections is held  in May 2017.

Asked if entering the field of liquefied natural gas (LNG) trading would be economical at a time the prices of this supercooled gas stand low in world markets, Kardor said: “The market will change after 2021 and apart from this issue we announce our own prices and potential investors will cooperate, in case the determined prices would be cost effective.”

“We should take into account that due to the huge reserves of Iran’s gas and Iran’s potentialities in this sector we need to have gas export basket; therefore, gas exports in the form of LNG are pursued severely,” he added.

Russians Willing to Work with Iran

Kardor also referred to negotiations with neighboring countries for cooperation in oil and energy sector.

Regarding Iran-Iraq talks for the export of Iraqi oil to the Kurdistan Region via Iran, he said: “Iraq has voiced readiness in this regard and preliminary talks have been held to that effect, but details of this plan and its economic justification for Iran have yet to be examined.”

According to Kardor, negotiations are still under way for gas exports to Oman and since the amount of envisaged gas is much more than Oman’s LNG production capacity, gas would not be exported only in the form of LNG.

Meantime, the issue of partners for Iran’s post-sanctions petroleum industry is still on the agenda. One of these partners is Russia. Moscow has enhanced its activities in Iran following the implementation of Iran’s nuclear accord with world powers, dubbed the Joint Comprehensive Plan of Action (JCPOA).

“Iran has not set any restrictions to cooperation with foreign companies. Of course it seems that the Russians that operated many projects in Latin America, Iraq, etc. are now inclined further towards Iran,” said Kardor.

Iran has not had cooperation with Russia in the upstream sector and given the fact that Russian companies are qualified in the upstream oil industry, particularly in enhanced recovery, it would be possible for Iran to benefit from these potentialities.

New Industrial Civilization Jask

Kardor went on to discuss the development of Jask Port as one of strategic projects in Iran, saying: “With activities currently under way in this area, a new industrial civilization will take shape in Jask.”

“There are plans to export 1 mb/d of oil from Jask over the coming three years,” he said. “To that end, 1,000 kilometers of pipeline will be built through NIOC investment and 10 million barrels of crude oil storage capacity will be created in this area. Petrochemical industry will be developed and a 300,000-barrel refinery will be constructed,” he added.

Kardor expressed hope that this industrial civilization would take shape in Jask in three years.

Shale Investment Useless

Over recent years, oil and gas production from unconventional resources has picked up speed. Iran has also conducted studies in this regard. Of course these studies are not bound to Iran, but many oil-rich countries have been active in this regard.

But as oil prices fall in global markets, activities in this sector are also affected.

Kardor said: “We are conducting studies in this regard, but I personally trust that investment in this sector would be like sailing in uncharted waters.”

Oil on Way to Development

With over 65 years of experience in production and export in the region, National Iranian Oil Company (NIOC) has always sought to preserve its unique role in the regional and international markets by developing exploration and drilling activities, increasing oil and gas production, conducting research and development projects, refining and distributing oil, gas and petroleum products as well as their export.

As part of its efforts to maintain its standing in the region and the world, NIOC has focused its policies on developing jointly owned oil and gas fields (particularly West Karoun oil fields and South Pars gas field), enhancing oil recovery rate, injecting gas into oil fields and enhancing recovery from the fields that are in the second half of their operational lifespan.

In the meantime, development of cutting edge technology and further complication of political and economic ties have led NIOC to reconsider its national and regional policies with a view to boosting cooperation with top industrialized countries in the field of energy supply and helping stabilize oil market.

Oil, Condensate Output Up

After the administration of President Hassan Rouhani took office, NIOC gave priority to maximum production at the shortest time possible, maximum efficient recovery, extraction from jointly owned hydrocarbon fields and accelerating delayed overhaul of facilities. All these measures were aimed at countering the impact of international sanctions imposed against Iran’s energy sector.

After Iran and P 5+1 group started implementing in January a historic nuclear accord they had reached last year, NIOC benefited from the lifting of sanctions to enhance production from joint fields. NIOC has met its production and export targets.

During years of sanctions, Iran’s oil exports stood at 1 mb/d, but NIOC was determined to bring it up to pre-sanctions level of 2.2 mb/d. Iran’s oil exports exceeded 2 mb/d throughout April.

Production from oil fields operating in West Karoun area in western Iran is planned to reach 280,000 b/d before the Rouhani administration finishes its first round next year. West Karoun’s output will reach 720,000 b/d by the end of the 6th Five-Year Economic Development Plan in 2020.

In the gas condensate sector, NIOC managed to export 450,000 b/d, up from 250,000 b/d under sanctions.

During the first four months of the current calendar year ending July 21, Iran’s crude oil and gas condensate production topped 4.124 mb/d, while export of oil and condensate reached 2.382 mb/d.

Furthermore, according to official data, oil and gas condensate production during the Iranian month of Tir (21 June -21 July), reached 4.154 million barrels, 2.428 million barrels of which were exported.

Oil Delivery to Asia Up

Iran’s oil exports to all main buyers of Iran’s oil - China, Japan and South Korea- reached 1.72 mb/d in June, up 47% year-on-year. Iran’s oil exports to the Asia market, particularly emerging economies, are expected to keep rising in the coming months.

China, Japan and South Korea were among top buyers of Iran’s crude oil even during years of tightened sanctions on Iran.

The increase in crude oil deliveries to Asia from Iran shows that the country has managed to claw back its share in Asia that it had lost due to the sanctions.

Oil market analysts believe that Iran should, in addition to broadening relations with its longtime customers in the Asia market, work for establishing new ties with other importers of oil in this continent.

Big Jump in South Pars Gas Output

Regarding oil and gas production from fields Iran shares with neighboring countries, priority has been given to the fields located in the West Karoun area and the giant offshore South Pars gas field. They are currently the most prioritized petroleum industry development projects.

The startup of phases 12, 15 &16 and parts of phases 17&18 of South Pars over the past two years has added some 105 mcm/d of treated gas to the total of gas injected into national trunkline. Such an increase during this short period of time sets a precedent.

Other development phases of South Pars are under way with progress varying between 70 and 80 percent. After phases 17&18 become operational, the priority for development will be for phases 19, 20&21.

With full development of South Pars phases, gas production capacity of this field, jointly operated by Iran and Qatar, will cross 800 mcm/d with gas condensate output at 1 mb/d.

The operation of phases 15&16 of South Pars has brought recovery from the Iranian sector of South Pars to 420 mcm/d from a previous 370 mcm/d.

In the last Iranian calendar year, with the start of tests and launch of the first refining train of phases 20 & 21, the first step was taken for the operation of the refinery of these phases in treating sour gas supplied from phases 6 to 8.

Development of the remaining phases of South Pars is under way based on priorities which involve financing, budget allocation and drawing up a roadmap.

All Eyes on West Karoun

After President Rouhani took office, his administration concentrated on the

development of jointly oil and gas fields so that these shared fields would account for 7% of national output. Another objective has been to bring the country’s crude oil production to above 5.7 mb/d. In this regard, focus has been switched from independent fields to jointly owned fields over recent years. To this end, even drilling rigs operating in independent fields have been moved to the site of joint fields.

Halting development of oil and gas fields with low progress percentage and allocation of higher budget to jointly owned fields has been a tactic adopted by the Rouhani administration for accelerating the development of joint fields. Prioritization of West Karoun oil fields is a case in point.

According to the target set for the Iranian calendar year 1397 (starting on 21March 2019), crude oil production from the West Karoun fields – North Azadegan, South Azadegan, North Yaran, South Yaran and Yadavaran – will reach 700,000 b/d. The five oil fields hold a total known reserve of 64 billion barrels in place.

Oil production has started from the first phase of North Azadegan and Yadvaran since the start of the current calendar year. These two fields are supplying 80,000 b/d together. The second phase development is under review.

Oil production from the first phase of South Azadegan oil field is projected to reach 320,000 b/d by 1397(starting on 21 March 2019). South Azadegan’s output is forecast to reach 60,000 b/d by next September.

Development of North Yaran oil field, under a buy-back deal, is 80% complete now. The field will start producing 30,000 b/d by September, as 20 wells have been drilled there.

Iran’s Petroleum Engineering and Development Company (PEDEC) is committed to contributing to export of 90,000 b/d of oil. PEDEC has to extract 60,000 b/d from South Azadegan and 30,000 b/d from North Yaran. PEDEC will be meeting its commitments by October. In case of resolution of financing problems, South Azadegan is likely to be producing 80,000 b/d, which will be above the required 60,000 b/d.

Production from the West Karoun fields is assessed as satisfactory and is in line with the projections of the Rouhani administration.

NIOC has experienced progress in the jointly owned fields located in the Persian Gulf. All plans for the preservation and enhancement of crude oil production in the Persian Gulf will materialize through prioritizing joint oil fields.

ICOFC Contributing 300 mcm/d Gas

Iranian Central Oil Fields Company (ICOFC) which is supplying nearly 300 mcm/d of gas is the second largest gas producer in Iran behind Pars Oil and Gas Company (POGC).

ICOFC-run fields, located in more than 11 provinces, produced 700 million barrels of oil last calendar year. That has earned Iran $21 billion in revenue. Also last calendar year, ICOFC produced 90 bcm of gas.

ICOFC oil production is expected to double in the current calendar year, while its gas output is estimated to remain unchanged.

Naft Shahr, Aban, West Paydar, East Paydar and Dehloran are among prioritized ICOFC-run fields aimed at maximum production. Meantime, development activities are under way in independent fields like Danan, Dal Pari, Sarvestan, Saadat Abad and Serkan Maleh Kouh. Regarding Gonbadli jointly owned gas field, the necessary activities are under way for maximum recovery.

Sarvestan oil field has already been developed and is currently producing 7,000 b/d. Khesht field is forecast to start producing 20,000 b/d by next year.

Underground Gas Storage Top Rank

NIOC has been successful in underground gas storage. By launching Shourijeh storage site in northwestern Iran, NIOC managed to claim the top spot in gas storage capacity in the Middle East.

Currently, production is under way from Khangiran and Gonbadli reservoirs in northeast Iran. The bulk of natural gas produced from these reservoirs will meet the needs of northern and northeastern provinces, power plants and petrochemical plants.

Certain measures have been taken for minimizing the flaring of associated petroleum gas in a bid to generate value-added and reduce environmental pollution. Iranian Offshore Oil Company (IOOC), Arvandan Oil and Gas Production Company and National Iranian South Oil Company (NISOC) have finalized deals with three private companies for selling flare gas.

LNG 3100 and LNG 3200 projects are up for investment now. Once they become operational the entire flare gas produced at NIOC facilities would be gathered to generate value-added for the country and create jobs.

Oil Contracts Restructuring

Immediately after taking over, the Iranian Ministry of Petroleum started developing a new model of oil contracts in order to raise oil production capacity, preserve and boost Iran’s share in OPEC and world oil markets, encourage attraction of foreign investment in upstream oil and gas projects, enhance oil and gas production capacities particularly in jointly-owned fields, conducting exploration, development and production projects, and guarantee maximum efficient recovery from oil and gas reservoirs by boosting recovery rate.

Transfer of state-of-the-art technology for application and benefiting from new systems in exploration and development for production from oil and gas fields were among other philosophies behind the development of the new contractual frameworks, dubbed as Iran Petroleum Contract (IPC).

The general conditions, structure and model of upstream oil and gas contracts were recently approved by the Iranian board of ministers.

According to the latest amendments made to the IPC, in drawing up any contract, the rights, obligations and liabilities of parties to the contract in different sectors like the process of accounting and auditing, payment or recoupment, technical inspection, maintenance, methods of measuring production, training of human resources, health, safety and environment (HSE), imports and exports, insurance, confidentiality, terms and conditions for the discharge of contract, force majeure, abandonment of the contractual area, settlement of disputes and the language of the contract must be defined in clear terms in the IPC deals.

Domestic Manufacturing

During the second year of the administration of President Rouhani, Iran’s petroleum minister Bijan Zangeneh ordered the assignment of manufacturing of 10 widely consumed commodities needed by petroleum industry to domestic manufacturers and industrialists. That was a valuable step in line with the materialization of the policies of Resilient Economy, non-inflationary exit from stagnation and support for domestic manufacturing.

The ten items include wellhead equipment and downhole completion string equipment, downhole and wellhead pumps, drilling bits, pressure relief and safety valves, pipes, anti-combustion electromotors, rotary machinery, cryogenic alloy steels, drilling measurement tools and intelligent pigs.

Instructions have been drawn up for supporting commercialization of technologies needed by petroleum industry in line with high-level documents which include policies of the Resilient Economy for oil, gas and petrochemical sectors as instructed by Supreme Leader Ayatollah Seyed Ali Khamenei, the objectives of Iran’s Vision Plan for oil and gas, supporting knowledge-based companies, commercialization of innovations and inventions and also bylaws for research and development projects.

Furthermore, commercialization will be financed by Innovation and Blossoming Fund, Petroleum Development Fund, Fund for Supporting Manufacturers and Contractors and  other similar funds that have been established for the petroleum industry or supporting knowledge-based companies. More achievements are expected in the aforesaid sectors in the final year of the 11th administration in office.

Facilitating Iran to Join Gas Trade

Iran, which sits atop 34 tcm of gas, holds the largest gas reserves in the world. According to plans, the country’s gas production is projected to rise to 330 bcm a year from the current 220 bcm per year. Then, Iran must get a 10% share in international gas trade.

Given activities carried out over recent years for gas supply to villages of over 20 households, newly built towns and industrial plants, domestic gas market will be saturated within years and then Iran will have to take measures to find new ways for consumption.

Converting gas to products in the petrochemical industries, generating electricity from gas and presence in international gas trade are among plans envisaged for gas consumption.
 Turkey is currently receiving 30 mcm/d of gas and is the only gas buyer of Iran. Under a 25-year deal signed in August 1996, Iran is committed to pumping 10 bcm a year of gas to this country.

Given the activities carried out in recent years with regard to building new gas production capacities, there is now ground for doubling gas exports to Turkey. Increasing gas exports to Turkey requires the signature of a new contract between the two countries.

Meantime, due to the startup of new phases of the massive offshore South Pars gas field, Iran is looking for new customers mainly from neighboring countries.

Iraq, Next Destination

Gas exports to Iraq are among other plans pursued by the Iranian Ministry of Petroleum for enhancing its share of global gas trade. This plan is set to start with the delivery of 5mcm/d of gas to Iraq before being increased gradually.

Under an agreement signed with Iraq, Iran will start exporting 25 mcm/d of gas to its western neighbor before raising the volume to 35 mcm/d in hot seasons.

The infrastructure is currently ready for Iran to export gas to Iraq and the first batch of natural gas will flow towards power plants in Baghdad as soon as Iraq announces its readiness.

25 mcm/d to Basra

Negotiations have also started for Iran’s gas supply to Basra. Iran has agreed to start with 25 mcm/d of gas, which would reach 35 mcm/d.

Ali-Reza Kameli, CEO of National Iranian Gas Export Company (NIGEC), gas exports to Basra will start one year after the signature of its agreement planned for next year. It will start with 5 mcm/d to reach finally 35 mcm/d.

The agreement for gas delivery to Basra will be for six years. Iran has already built a pipeline as far as Khorramshahr. Iran Gas Trunkline 6 (IGAT6) would provide gas to Basra.

30 mcm/d to Oman

The Persian Gulf Arab state of Oman is also a potential buyer of Iran’s gas. Iran and Oman have so far held technical talks for gas delivery. Other Persian Gulf states involved in talks with Iran are the United Arab Emirates (UAE), Kuwait and Bahrain.    

There has also been close interaction between Iran and Turkmenistan, Armenia, Azerbaijan and Turkey for gas exports.

Iranian petroleum ministry officials have said that Iran’s neighbors are prioritized for gas exports. Over recent years, official and unofficial talks have been held for Iran’s gas supply to Europe.

Kameli has reiterated that Iran’s neighbors are prioritized for gas exports, adding: “Iran could export gas to the Persian Gulf littoral states by building maximum 200 kilometers of gas pipeline and naturally these countries are Iran’s top priority for gas exports due to lower costs and time and higher profits.”

Kameli said that Iran would need at least 4,000 kilometers of pipeline for entry into Europe’s gas market, noting that it would cost too much.

“Of course, it does not mean that we will not have an eye on the Europe market; rather, we maintain a long-term look at this market and we hope to win toehold in the Europe markets through LNG (liquefied natural gas),” he noted.

Kameli also referred to the issue of conversion of gas to electricity, saying several agreements have so far been signed to that effect.

“We hope that by constructing these power plants and converting gas to electricity and supplying power to neighboring countries the country will gain value-added created from gas-to-electricity conversion,” he said.

LNG Exports, Best Option for Global Trading

The LNG share of gas trade in the world currently stands at 31%, 70% of which is in Asia and the Middle East. Iran can make great contribution to this business.

Entry into the LNG industry and market would mean access to markets which are inaccessible through pipeline due to large distance.

At present, there are 60 LNG terminals in Asia and 40 more are to be added to them. It means that the world, particularly Asian countries, is preparing to supply a larger share of demand for gas through LNG. Iran must naturally prepare itself for its own contribution.

Iranian Ministry of Petroleum has concentrated its mind on LNG and three projects have been envisaged in this regard: Persian LNG, Iran LNG and Pars LNG.

50% Progress in Iran LNG

Pars LNG and Persian LNG had come to a halt due to international sanctions in recent years, but Iran LNG has progressed some 50% and is awaiting the full removal of sanctions in order to import necessary equipment and items.

In addition to Iran LNG, NIGEC is studying other options for gas exports. Gas export to Oman is one of them. Oman would use Iran gas for conversion into LNG. Engineering studies are set to begin for the construction of Iran-Oman gas pipeline.

Gas Trade Tops 6th Development Plan

Due to its significance, the issue of gas trade has been among the points highlighted in Iran’s 6th Five-Year Economic Development Plan (2015-2020).

In the light of growing demand for gas due to economic growth and changes in the energy mix in the world, the gas share of this mix would increase from the current 22% to 25-26% over 20 years. Iran, which is rich in gas, could become a major player in global gas trading.

In addition to gas delivery to Persian Gulf and neighboring states, Iran could also supply gas to Europe. As Iran’s gas production is expected to rise thanks to the development of South Pars gas field, which the country shares with Qatar, this increase in gas output could be directed to export terminals.

Eni Willing to Build Refinery in Iran

In the wake of the removal of Iran sanctions last January, the country re-entered oil market in the hope of clawing back its lost share. But Iran’s goals were not limited to this. Other plans envisaged by Iran, included entering gas market and converting its natural gas to valuable products. Upon instruction of Minister of Petroleum Bijan Zangeneh, Iran was required to export products of higher value-added, while the quality of petroleum products was required to improve.

Abbas Kazemi, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), said at a press conference that 400,000 b/d of petroleum products were planned to be exported on a regular basis.

“Until recently, we used to export some petroleum products in some seasons of the year, but that was not sustainable. This year exports have become sustainable,” he said.

Kazemi referred to the current capacity of Iran’s petroleum product exports, saying: “Our current capacity stands at 500,000 b/d. In some jetties and ports where crude oil is loaded we have faced problems regarding export of products. To resolve this problem, the number of jetties at Bandar Mahshahr will increase from the current 4 to 6 by the end of the Iranian calendar year [21 March 2017] and petroleum product exports will hit 500,000 b/d.”

“But we are facing restrictions at Lavan, Mahshahr, Assaluyeh and Bandar Abbas ports and we are making efforts to increase the number of jetties at Mahshahr Port from 4 to 6,” he added.

1.4 mb/d Capacity for Private Sector

Kazemi said there has been planning for boosting the refining capacity of refineries in the country by 2025.

“We are trying to bring the refining capacity from the current 1.8 mb/d to 3.2 mb/d. In this regard, permission has been given to the private sector for refining 1.4 mb/d,” he added.

In order to achieve the production capacity of 3.2 mb/d, Siraf refining park (480,000 b/d), Pars (120,000 b/d), Anahita refinery (150,000 b/d), Persian Gulf Star refinery (360,000 b/d) and Bahman Ganou (300,000 b/d) are needed to come online.

Kazemi said the 1.4 mb/d capacity envisaged for the private sector included Persian Gulf Star, Anahita, Siraf and Bahman Ganou refineries.

“Launching these projects will enable us to export petroleum products on a sustainable basis and fully supply domestic needs. To that end, reforming the quality of refined products is on the agenda,” he said.

“Currently, some refineries are producing fuel oil excessively; therefore, their production of light products and middle distillates has declined. We are trying to revise the production process in some of these refineries like Abadan refinery in order to make these refineries more profitable,” Kazemi said.

He said Iran is set to become a leading product exporter this year, adding that the startup of some refinery units like isomerization in Isfahan, Shiraz and Ahvaz would help boost the quality of refined products.

Kazemi said Persian Gulf Star refinery would become operational in March or April next year.

“The compressors of this refinery have been recently installed for producing gasoline. We expect this refinery to come on-stream” early next calendar year at the latest,” he added.

Talks with Foreign Firms on Quality

Kazemi went on to speak about the quality of petroleum products, saying Iran had managed to bring the number of big cities provided with euro-4 gasoline distribution from 8 to 20.He said that euro-4 gasoil was being distributed in 8 big cities.

According to Kazemi, Iran’s current euro-4 gasoline production capacity stands at 26 million liters a day, which will reach 30 million liters a day after Bandar Abbas refinery development project comes online by March 2017. After that, euro-4 gasoline and gasoil distribution will serve more cities.

Kazemi also said that talks were under way with some foreign companies for enhancing the quality of petroleum products at some refineries.

He announced talks with Italy’s Eni for the construction of Pars refinery, adding: “We deal with private sector refineries like Persian Gulf Star as if we were a customer and we enter talks with them for the purchase of their gasoline.”

Branding of gas stations was another issue raised by Kazemi. He said: “Currently we have 20 million customers who would be in contact with several companies owning gas stations instead of plentiful owners of gas stations. That would help boost the quality of fuel supply and services. At present, 17 gas stations of a single brand have been built in Isfahan; therefore, we hope to implement branding projects across the country soon.”

Kazemi said another measure taken in refining and distribution sector was the expansion of pipelines and maximum use of railroads.

“At present, studies on the construction of a reverse pipeline from Abadan to Tehran, from Bandar Abbas to Tehran and from Tehran to Ahvaz are over, so that we would use railroads and pipeline instead of tanker for the dispatch of products. That would help reduce environment pollution and road accidents,” he said.

Iran, Oil Products Exporter

Iran’s daily growing need for fuel in the household, industrial and transport sectors underscores the need for self-sufficiency in fuel production in the country which holds the title of top holder of crude oil and natural gas reserves. To that effect, refining industry has become a vital one at Iran’s Ministry of Petroleum, given its contribution to the distribution of petroleum products.

During years of international sanctions on Iran, the refining industry tried its best to take advantage of the sanctions for acquiring technical know-how. Construction and startup of advanced refining units in refinery development projects and the manufacturing refinery equipment and some catalysts required in the refining industry are examples of this success.

After Iran’s nuclear agreement with six world powers, dubbed the Joint Comprehensive Plan of Action (JCPOA), took effect for the sanctions to be lifted, Iran’s petroleum industry is waiting for investment under new contracts so that the country’s refining sector would experience prosperity.

Growth in Oil Products Exports

Imposition of sanctions on the trade of Iran’s oil products resulted in the loss of many opportunities for investment in Iran. Today, with the development of gas industry and replacement of gas with oil products in household and industrial sectors the freed-up capacities of oil products could be used for boosting exports.

Guaranteeing domestic energy supply security and sustainable presence in regional and international markets, increasing value-added through completing value chain and raising the level of oil products’ exports, diversifying methods of selling, achieving a standing at the same level of top refining companies in the world for the purpose of sustained presence in regional and international markets, participation of the private sector, development of bunkering industry and enforcing “quality” as a requirement in fuel supply to vessels and convergence with energy producers and consumers with a view to creating effective and constructive interaction for the resumption of swap of oil products (gasoil, fuel oil and liquefied petroleum gas) from northern neighbors to Iraq and Afghanistan, expansion of gas supply network for power plants and remote areas in Iran and the possibility of more export of liquid petroleum products are among plans pursued by Iran’s refining industry for enhancing oil products’ exports.

With an increase in the surplus capacity of fuel oil, liquefied petroleum gas and gasoil production, the volume of export of petroleum products has seen a significant increase since March. Iran has been exporting 400,000 b/d of oil products including gasoil, fuel oil, liquefied petroleum gas and other types of fuel oil to the world markets.

Since the start of the current Iranian calendar year (21 March 2016), the volume of Iran’s gasoil exports has increased from 3.5 ml/d last calendar year to 13 ml/d, showing more than 430% growth.

Given oil products consumption management plans in Iran and implementation of survey-based gasoil distribution scheme, the decline in consumption of this product is widely expected to continue. In case of materialization of plans under way, there is potential in Iran for exporting 20 ml/d of gasoil.

Iran has also turned into one of the leading exporters of fuel oil in the world. Official figures show that Iran is exporting some 50 ml/d of this product to regional and global markets.

Meantime, an increase in the surplus capacity of fuel oil production and allocation of the bulk of this fuel to bunkering centers in Iran, in the Persian Gulf region, can earn Iran big revenues in foreign currency and expand the market for supplying fuel to ships and vessels passing through the strategic shipment lane Strait of Hormuz which connects the Persian Gulf to the Sea of Oman. In addition to economic benefits, it would bring international and sovereignty advantages for the Islamic Republic of Iran.

Liquefied petroleum gas is another product exported from oil refineries in Iran. With the expansion of rural and urban gas distribution networks in Iran, a new capacity has been created for the export of this product which is highly demanded in the market.

Since the start of the current calendar year, 640 tons of liquefied petroleum gas a day has been exported to neighboring countries and world markets from Iran through both land and sea routes.

This big achievement has been made under the 11th administration and thanks to logical policies pursued by the Iranian petroleum ministry. After 110 years, Iran has become an exporter of oil products. Iran was importing petroleum products in 2014 and early 2015.

Gasoil Exports Record Smashed

Iran joined the exporters of petroleum products after starting to export diverse oil products including gasoil, liquefied petroleum gas and fuel oil.

A review of data on the consumption of oil products this year shows that the consumption of the main four oil products – gasoil, liquefied petroleum gas, kerosene and fuel oil – has been on the decline in the country. Liquefied petroleum gas consumption has on average declined 1.5% a day to reach 5,290 tons.

Gasoil average daily consumption has dropped more than 9% to 72.5 million liters, down 7 million liters a day year-on-year.

Over the same period of time, kerosene consumption fell 7.5% to 3.5 ml/d, while fuel oil has registered a 65.4% decline to 9.1 ml/d.

Iran used to import gasoil. But thanks to reasonable policies adopted by the petroleum ministry and changes in the fuel supply system like switching from liquid fuel to natural gas, Iran has become an exporter of oil products. That breakthrough has been registered under the administration of President Hassan Rouhani.

Countdown for Persian Gulf Star Refinery

A countdown has been launched for the startup of Persian Gulf Star Refinery, the largest gas condensate refinery under construction in the Middle East. This treatment facility would put an end Iran’s need for importing gasoline.

Persian Gulf Star Refinery has the capacity to produce 36 ml/d of gasoline and 14 ml/d of gasoline in compliance with euro-4 standards. Besides these two strategic oil products, the refinery would also produce 2,000 tons a day of liquefied petroleum gas, 3 ml/d of aviation fuel (ATK and JP4) and 13 tons a day of sulfur.

At present, the physical progress of construction of the refinery has reached 86%, while the first phase of this giant refining project in Iran is more than 90% complete.

According to timeframe set for this refinery, the distillation unit of this facility is expected to become operational this year. Other processing units are expected to come online next year. In the first phase, the refinery would be producing 12 ml/d of euro-4 gasoline.

Euro-4 Gasoline Trial Run in 7 Cities

Distribution of euro-4 gasoline has started in seven new cities. A total of 22 million liters of euro-4 gasoline is being distributed in eight big cities now.

Shahrokh Khosravani, a senior refining and distribution manager, says the Rouhani administration has made plans over the past three years for maximum distribution of euro-4 gasoline.

“On this basis, we are already distributing euro-4 gasoline in eight big cities,” he said.

Noting that Iran’s euro-4 gasoline production capacity has reached 26.3 ml/d, Khosravani said: “Currently, 22 ml/d of euro-4 gasoline is being distributed in eight big cities in the country.”

He announced plans for the distribution of euro-4 gasoline in seven other cities in Iran, saying: “At present, euro-4 gasoline is being distributed in several other cities on a trial basis. After stabilization, the possibility of distribution in these cities will be provided.”

Facilitating Investment in Iran Petchem

Iran’s petrochemical industry was privatized more than a decade ago. Today, the government is only paving the ground for the development of petrochemical sector. During years of international sanctions on Iran, the government was of great help to the private sector in its transactions.

The signature of a historic nuclear deal between Iran and six world powers in July 2015 led to the lifting of restrictions on investment and transfer of technology.

From 2008 to 2015, Iran’s petrochemical industry had not used finance and usance. But thanks to efforts by the administration of President Hassan Rouhani and the conclusion of the Joint Comprehensive Plan of Action (JCPOA) we have been witnessing achievements in the petrochemical industry. Finalization of an agreement between Kian Petrochemical Plant and Germany’s Linde is a case in point.

The most important and the most practical measure by the Iranian government in favor of the private sector has been its efforts to win guarantee for foreign investment in the petrochemical sector. In the past, foreign companies invested in Iran because the government guaranteed exports of petrochemical products, but today there is no such a guarantee. Therefore, the government is seriously looking for a solution to resolve this problem. Germany’s BASF and Linde, France’s Axens, South Korea’s Hyundai, Royal Dutch Shell and South Africa’s Sasol are among top companies engaged in negotiations with Iran. All of them have been speaking about the issue of guaranteeing investment in Iran’s petrochemical industry. They know quite well that the rate of return on deposits in the banks is about one percent, while the rate of return on investment in Iran’s petrochemical projects is at least 20 percent.

Petchem Plants Startup

Over the past several years, Iran has been stepping up construction of petrochemical plants. According to official data, the number of operating petrochemical plants has increased from 46 in 2013 to 53 today with an output of 54 million tons a year. Three more petrochemical plants are projected to become operational in one month. Therefore, the rated capacity of these petrochemical plants will cross 64 million tons.

Furthermore, more than 50 other petrochemical plants with a nominal capacity of 41.3 million tons are under construction. Experts see the startup of these 50 projects as the second jump in Iran’s petrochemical industry to bring the country to its real standing in this sector.

Over the past two years, 11 petrochemical projects have come on-stream in Iran. Some of these projects are unique as they have become operational while Iran was international restrictions.

Some of them are as follows: hydrogenation unit of Shazand Petrochemical Plant, Petrochemical Research and Technology Company’s the semi-industrial HDPE unit, Fajr-2 centralized utility, Ilam HDPE unit, PBR/SBR unit of Takht Jamshid Petrochemical Plant, West Ethylene Pipeline’s 8^th to 10^th tranches, Lorestan HDPE/LDPE unit, Urmia Petrochemical Plant’s sulfuric acid unit, Mahabad Petrochemical Plant’s HDPE/LDPE unit, Shohada ammoniac/urea unit in Marvdasht, Assaluyeh ethylene glycol (Morvarid Petrochemical Plant) and the second phase of 11^th olefin project (Kavian Petrochemical Plant).

The startup of petrochemical projects will continue in Iran. According to plans, 11 projects with a capacity of 6.2 million tons are to become operational this calendar year to March 2017. Furthermore, 6 other projects are forecast to come online next calendar year.

Petchem Sales Up in Iran

Conditions have improved for Iran’s petrochemical exports following the implementation of JCPOA last January. Iran’s petrochemical exports have grown 25% post-sanctions.

Over the past three years, Iran’s petrochemical sales has increased from 27.3 million tons to 39 million tons a year, earning the country $19.7 billion in revenue.

The value of Iran’s petrochemical exports is nearing its previous levels. In 2012, Iran gained $12 billion from petrochemical exports. Today, its revenue stands at $10 billion although oil prices have been almost halved.

Over these years, Iran’s petrochemical industry has always insisted on the completion of the value chain and downstream industries through proposing new development projects of high value-added and acceptable economic justification based on spatial planning studies with a

view to exporting products, completing value chain for presentation to qualified investors, helping value engineering in petrochemical projects for reducing costs and providing infrastructure and utility for meeting the needs of the private sector.

Target-Oriented Petchem Projects

A gap created in the research and technology of Iran’s petrochemical industry due to widespread privatization in this industry over the past two years has been healed. Private companies, in cooperation with Petrochemical Research and Technology Company (PRTC), are constantly looking for making research projects practical and boosting cooperation with this state-run company. At present, the research and development network in Iran’s petrochemical industry is one of the largest networks in Iran.

Leading research centers towards practical studies and resolving problems of petrochemical industries have been among the effective measures taken by the current administration.

Helping acquire technical know-how for producing chemicals and catalysts needed in the petrochemical industry in collaboration with Iranian elite and the National Foundation of Elites and domestic capabilities like universities and PRTC, indigenizing technical savvy and engineering services including issuance of license, basic design of petrochemical products, helping commercialization of indigenized technical savvies, supporting domestic manufacturing of equipment needed in projects, cooperation with legal bodies for improving business environment, helping remove red tape and streamline bureaucracy, examining bottlenecks in manufacturing companies and finding solutions to them have all been on the agenda of the government.

The first chemical park in Iran, which is based on the styrene and butane value chain, has been envisaged in Pars Special Economic Energy Zone. The project, which has been privatized, will use 600,000 tons of styrene produced by Pars Petrochemical Company. The construction activities of the chemical park are steered by National Petrochemical Company (NPC).

Over the past three years, all those involved in Iran’s petrochemical industry have constantly focused on endogenous and practical research programs. Over this time they have made great achievements, some of which are as follows:

Technical savvy for olefin furnace, technical know-how for rotating packed bed (RPB), technical savvy for UHMWHD production, technical savvy for biodegradable polyethylene films in LDPE and LLDPE grades, technical savvy for HDPE process, technical savvy for two grades of polyvinyl alcohol (PVA) production, technical savvy for producing epoxy vinyl ester, indigenization of technical knowledge for producing MMP high-density polyethylene, technical savvy for Netzer SB magnesium chloride and magnesium ethoxide, technical knowledge for producing Glycerol Monostearate (GMS), basic technical savvy for spherical gamma alumina, technical savvy for MEK catalyst, technical savvy for LTSC catalyst, basic technical design for ZnO Modified catalyst, technical savvy for isomerization catalyst for refineries, and technical savvy for alumina-based palladium for complete saturation process of olefins.

Over the past one and a half years, important contracts have been signed in petrochemical research and technology.

Awarding license for propylene-via-methanol (PVM) process to Sabzevar Petrochemical Plant, awarding license for methanol production process to Sabzevar Petrochemical Plant, awarding license for the production of two catalysts for polyethylene production (IRSAC 518 and IRSAC 3530)  to Lorestan Petrochemical Company, awarding license for dehydrogenation catalyst to Exir Farayand Novin company (used at Bandar Imam Petrochemical Plant), awarding license for methanol catalyst production (Sadr Shimi Company), awarding license of catalyst (EDC 6) to Gohar Saram Company, signing research contract for acquiring technical savvy for naphtha isomerization catalyst to be used at Isfahan refinery, contract for applying technical knowhow for polymer concrete with PRTC for repairing concrete structures at Mobin Petrochemical Plant, production and sale of 800 kilograms of MEK 9 catalyst to Shimi Tax Aria, production and loading of 1.5 tons of dry reforming catalyst for Khuzestan Petrochemical Plant and joint cooperation with Hampa Energy Hedco for mastering ammoniac technical know-how.

PRTC, as the research arm of Iran’s petrochemical industry, has achieved good results from the catalysts it has produced in industrial tests. These results include the production of 1.5 tons of dry reforming catalyst for Khuzestan Petrochemical Plant, production of 800 kilograms of catalyst for Shimi Tax Aria Company, production of 1.5 tons of IRSAC 510 (similar to THS) for Maroun, Amir-Kabir and Shazand petrochemical plants, production of 50 kilograms of PZ catalyst for Mitsui polyethylene for Bandar Imam Petrochemical Plant, production of 20 kilograms of dehydrogenation catalyst for Bandar Imam Petrochemical Plant, production of 60 kilograms of DLP peroxide for Bandar Imam Petrochemical Plant, production of 600 kilograms of methanol catalyst, production of 30 tons EDC catalyst with its own technology for Bandar Imam Petrochemical Plant, production of three batches of 50-kilogram MMP catalyst for HDPE demo consumption at the Arak center of the company, production of 20 kilograms of acetic acid catalyst for Fanavaran Petrochemical Company and successful replacement of catalyst at Jam Petrochemical Company.

New Technologies for Petchem Sector

Today the state-of-the-art oil and gas technologies could be seen at petrochemical plants across the globe. Due to its high value-added, this industry has always encouraged investors to benefit from cutting edge technologies. In Iran, in spite of restrictions, experts and researchers are in quest for new technologies. They try their best to apply new technologies to new projects. For instance, meticulous studies have been conducted to prevent sale of raw substances and complete the value chain and create new capacities for high-value products like propylene. Over the past two years, lots of activities have been done in this sector. For instance, 52 new projects have been introduced for implementation under the 6th Five-Year Economic Development Plan and afterwards with a view to completing the production chain, location of new petrochemical development projects, making new estimates and envisaging feedstock needed for new petrochemical projects.

Among other important activities of the 11th administration regarding petrochemicals are the formation of specialized working groups like the working group for removal of obstacles to production, settlement of disputes between companies, settlement of disputes between companies and the stock market in setting feedstock prices and clearing accounts of privatized companies.

Oil Swap with CIS

The hotel is not far from the installations. The bus carrying journalists arrives at the destination very fast. We got off the vehicle. On the Caspian coasts where land and sea meet stand the structures of a green terminal. Small and large fish are swimming beneath our feet and just very close to stone rocks.

North Oil Terminal is where oil tankers of all Caspian Sea littoral states have to cross in order to reach the Persian Gulf waters.

This terminal is located 20 kilometers north of the city of Neka and close to a power plant on a piece of land measuring 20,000 ha in area. Before Iran’s oil swap project was halted, crude oil from the Caspian Sea littoral states – Russia, Kazakhstan and Turkmenistan – was carried in oil tankers to this terminal before being offloaded by hydraulic arms and be stored in tankers.

Iran’s oil swap stopped in 2012, but Iran’s petroleum minister Bijan Zangeneh recently said he is seriously in talks for the resumption of these operations.

1 Month Left to Swap

Iran is seeking to resume swap operations in North Terminal. According to Pirouz Mousavi, CEO of Iran Oil Terminals Company (IOTC), these operations will start in one month.

“Throughout its talks with foreign companies, the Ministry of Petroleum is determined to remove impediments and remedy shortcomings that existed in the swap operations in the past. What is expected to be done soon is crude oil swap,” he told a press conference.

Noting that the oil imported from the Caspian states is used for feeding refineries in Tehran and Tabriz, he added: “During the period of halt to swap operations we tried our best to upgrade our equipment. In a month or so, crude oil swap will resume.”

Mousavi said delegates from Kazakhstan and Russia are expected to travel to Behshahr in northern Iran to visit Neka oil terminal.

“We will start swap operations with the volume of 50,000 to 100,000 b/d until we reach the pre-determined capacity,” he said.

Hamid-Reza Shahdoust, director of Neka oil terminal, said the terminal started work in 2003.

“It has currently three operating jetties. We have nine tanks of the same size, six of which are used for storage and three others for blending,” he said.

Shahdoust said the difference between Neka and Kharg is that in the latter, oil is delivered while in the former oil is received before being passed on to the Iranian Oil Pipelines and Telecommunication Company (IOPTC).

A cutting edge technology used in this terminal pertains to its offloading arms which are connected to oil tankers. This technology is undoubtedly one of the best in the world. This system which is very equipped and technically modern is best known as FMC offloading arm.

At North Terminal, arrangements have also been made for older oil tankers. There are also basins for offloading oil. These basins could not be connected to the arms and the offloading process is done through hoses.

Neka Ready to Boost Capacity

Four years have passed since oil cargoes were last delivered to this terminal. But Shahdoust believes that its equipment is fully ready for operation.

“Currently we have three jetties which handle offloading of oil. The three jetties are able to offload oil at the same time. During years swap operations were on hold, the equipment used in the jetties was rebuilt from A to Z and there is currently no problem in this regard,” he said.

He added that oil tankers navigating in the Caspian Sea have the capacity of up to 75,000 tons with their draft varying between 4 and 4.5 meters.

Neka oil terminal’s current capacity stands at 120,000 b/d, which is planned to increase in coming years.

“We will start with such a force when we resume swap operations,” said Shahdoust.

He added that the capacity of oil swap operations had been planned to increase from 120,000 b/d to 500,000 b/d and finally 1 mb/d and 1.5 mb/d.

He said that National Iranian Tanker Company (NITC) had also planned to establish 14 more jetties.

Regarding the technical specifications of the terminal, Shahdoust said the basin has a wave-breaker wall whose western side is 2,400 meters and whose eastern wall is 1,720 meters offshore.

It is the largest stone structure in northern Iran with an area of 300 ha. The first phase of the project is now complete at 90% and the rest will continue as soon as swap operations resume.

Shahdoust also said that the current three jetties have the capacity to offload 120,000 b/d of crude oil.

“Of course, in certain cases we have offloaded up to 250,000 b/d. Furthermore, the pipeline connected to this terminal has the capacity to transfer 500,000 b/d. This oil is transferred to Tehran refinery,” he said.

Pollution-Free Terminal

North Oil Terminal is equipped with sophisticated facilities. It would be no surprise to see that there is no pollution. North Oil Terminal is fitted with such systems as WWT which are used for the treatment of water and wastewater. In case any problem occurs in the storage tank, leading to the flow of oil and water in the terminal this system will soon gather oil waters.

This terminal is a fully green terminal in mining and industry sector in Mazandaran Province. The existing system is able to separate water and oil and direct water towards sea and drive oil into the storage tank.

The storage tanks in this terminal automatically extinguish fire. In other words in case any fire rips into any storage tank, the blaze is automatically extinguished before manpower arrives.

Another advantage with this terminal is its laboratory which has been awarded ISO 17025 certificate. Therefore, this laboratory does not need any other certification.

Except for North Oil Terminal, Research Institute of Petroleum Industry (RIPI) and the Kharg area of IOTC, no other Iranian institute has so far obtained this certificate which helps analyze the entire oil flowing into the terminal.

All kinds of quantitative and qualitative tests like water test and mercaptan test are carried out in this laboratory.

Iran Puts CRA Pipeline Project Out to Tender 

Domestic manufacturing and acquiring technical knowhow and cutting edge technologies have always been among the major concerns of the Iranian petroleum industry.

Over recent years, this issue has taken on renewed significance due to policies pursued by Iranian petroleum ministry managers for supplying domestic needs through domestic manufacturing.

Meantime, one should not ignore the significance and advantages of commercialization and revenue generation of domestic manufacturing. Over recent years, Iran has moved to remove obstacles to commercialization, and explore ways for guaranteeing investment and minimizing risks. As a result, several hundred billion dollars in investment is expected to be made in the petroleum sector, 50% to 70% of which will go to equipment purchase.

Commodity Manufacturing and Procurement Support Directorate of National Iranian Oil Company (NIOC) is tasked with policymaking for the purchase of commodities along with transfer of technology and technical savvy into Iran.

This Directorate has already identified ten groups of basic commodities required by Iran’s petroleum industry in order to win investment by Iranian and foreign companies.

To know more about domestic manufacturing, Iran Petroleum has interviewed Ramin Qalambor Dezfouli, who heads the NIOC Directorate of Commodity Manufacturing and Procurement Support.

Q: Some time has passed since Kala Naft Manufacturing Support and Procurement Company was restructured as an NIOC Directorate. Would you please tell us about the activities of this Directorate after the structural changes?

A: In March 2015, Tehran Kala Naft Company was turned into the Directorate of Commodity Procurement within the framework of structural changes at National Iranian Oil Company. Since then, commodity purchase has not been done directly by the Directorate which is tasked with policymaking about commodity procurement. Iran's Ministry of Petroleum plans to install an integrated system at this Directorate for commodity purchase. This integrated system will bring together demands for commodity at Iran’s petroleum industry in order to justify commodity manufacturing both technically and economically. Any subsidiary of Iran’s petroleum industry could register its request through this system. Despite the change in the name of Kala Naft company to Commodity Manufacturing and Procurement Support Directorate of National Iranian Oil Company, foreign manufacturers are still writing letters to us for cooperation.

Q: So we can conclude that purchase of commodity at Iran’s petroleum industry is currently being done in a scattered manner. Is that true?

A: Scattered purchase of commodity in this industry may have advantages. For instance, direct purchase will unveil protracted startup of projects under the pretext of commodity purchase; however this method has also many disadvantages. For example, companies will have to purchase exclusively from manufacturers named in the vendor list and they reject vendors of other companies. Sometimes, a commodity may be purchased at several different rates. We hope that these problems will be resolved to a great extent, after the launch of the integrated system for commodity purchase of Ministry of Petroleum.

Q: Would you please explain further about the latest developments regarding the launch of the petroleum ministry’s integrated commodity purchase system?

A: This system has been designed by the Department for Engineering, Research and Technology of Ministry of Petroleum to serve relevant organizations. It started trial-run work in June and since August all companies have had to register their purchases in this system. According to the latest data, more than 3,000 requests from different companies have been registered for commodity in this system.

Q: Have domestic manufacturers been briefed sufficiently about registration in this site?

A: Yes, a large number of domestic companies have already registered in this site. Furthermore, the largest vendor list of Iran’s petroleum industry with more than 27,000 members is held by the Commodity Manufacturing and Procurement Support Directorate of National Iranian Oil Company, and that would help upgrade the system.

Q: Can foreign companies register in this integrated system too?

A: Yes, all foreign companies can register in this system. According to plans, this system will be updated every year in order to register the latest data about the capabilities of domestic and foreign companies. I have to note that supply of commodities for projects to Engineering, Procurement, and Construction (EPC) contracts is up to contractor. But this contract contains a clause which requires the manufacturing or contractor company to be in compliance with specific standards. So far the contractors have not been required to make domestic manufacturing. But under the new model of oil and gas contracts, 60% to 70% of the purchases must be from domestic companies. To that effect, any foreign company with a higher percentage of purchase from domestic manufacturers will be prioritized by NIOC. After the new contracts become effective we will witness improvement in domestic manufacturing. Currently, Commodity Manufacturing and Procurement Support Directorate of National Iranian Oil Company is working effectively to prevent the purchase of domestically produced commodities from abroad. For instance last year, more than 66 items of commodities were reported to this ministry in order to stop their imports. Ministry of Industry, Mine and Trade has blocked their imports.

Q: Given the ban on the purchase of certain foreign commodities, how do you create a competitive atmosphere among domestic companies for improving the quality of these commodities?

A: We have dealt with domestic manufacturers in a way that they are required to comply with all quality standards and requirements pertaining to commodities and equipment they produce. Domestic manufacturing in Iran’s petroleum industry started in 1996 and now has reached its peak. We hold regular weekly meetings with the manufacturers of 10 items of basic petroleum industry commodities and we try in these meetings to exercise support-style supervision on their performance.

On the other hand, the cost price of commodities is of great significance to us. We are authorized by the law to purchase domestically manufactured products 10% to 20% costlier than its foreign-made prototype.

Q: More than one year has passed since Iran struck a nuclear deal with six world powers. To what extent has this issue affected Iran’s purchase of equipment from abroad?

A: Even before the signature of the Joint Comprehensive Plan of Action (JCPOA), foreign companies were in talks with us for the purchase of commodity. All foreign companies are willing to cooperate with Iran. We have told foreign companies in our meetings that cooperating with them in this sector hinged upon transfer of technology and maximum use of domestic manufacturing. In addition to developing new projects, Iran has to renovate its ageing equipment which has long been in operation. Therefore, it needs commodities of high quality, and foreign companies are well aware that Iran would be an intact market for them. According to estimates, Iran is currently spending around $20 billion on commodity purchase. (Therefore, foreign companies must take into account that Iran’s market is open to them in exchange for the transfer of technical savvy and technology and partnership with domestic manufacturing companies.)

Q: Would you please explain the latest status of manufacturing for the petroleum industry’s 10 major projects?

A: Of the ten projects, projects 1, 2, 3 and 9 have so far been finalized with Iranian companies for IRR 6,800 billion. These projects include wellhead and downhole equipment, wellhead pumps, drilling bits and drilling measurement instruments. We have signed contracts with 16 companies for the manufacturing of this equipment. Each project has its own sections. For instance, drilling pipes are divided into drill pipes, seamless pipes and corrosion-resistant alloy (CRA) pipes. Drill and seamless pipe projects have already been put out to tender in cooperation with top foreign companies and their agreements will be finalized in two months. The tender for CRA coiled tubing is also ready. Commodity Manufacturing and Procurement Support Directorate of National Iranian Oil Company has focused its support on domestic companies manufacturing equipment for export.

The documents for the tender of project number 10 (intelligent pig) was recently distributed among Iranian and foreign manufacturers and companies. We hope to reach the stage of agreement in two months. The projects 4, 6 and 7 which include control valve, anti-explosion electro-engines and rotary equipment have yet to be integrated. Cryogenic alloy steels are classified under project 8. Manufacturing of this product in Iran faces no problem because Iranian companies like Yazd Alloy Steel and Isfahan Steel Mill are able to handle it. These alloys are used in petrochemical industry at 80%. Since petrochemical plants in Iran have not given us any figures about their consumption, the integration of this product has not yet been finalized.

Regarding projects 4, 6 and 7, we are in talks with operating companies. We have suggested the start of work for projects whose design is done and their start is set for three years later.

Q: One of the most important oil industry projects in Iran in domestic manufacturing of basic commodities has been the manufacturing of CRA pipes. Do you have any specific plans?

A: Yes, Commodity Manufacturing and Procurement Support Directorate of National Iranian Oil Company is expected to put out to tender the CRA pipe manufacturing. These pipes are used in oil and gas wells and the esteemed minister of petroleum has been seriously pursuing the domestic manufacturing of these pipes. This tender involves 600 kilometers of CRA pipes. In other words, it is the largest purchase of these pipes in the world. This tender is being launched with the objective of integration of demand and motivating foreign manufacturers to transfer technical savvy and technology and finally manufacture domestically all commodities.

Q: Do you have any recommendations for foreign companies willing to enter Iran’s petroleum industry market?

A: Foreign companies should keep in mind that Iran’s market is very large, but domestic manufacturing of equipment would remain our top priority. Therefore, they had better win a foothold in Iran’s market through transfer of technology and partnership with domestic manufacturers. Iranian laws have been compiled such that foreign companies could fully manufacture their commodities in Iran.

South Zagros Supplies 30% of Iran Gas

South Zagros Oil and Gas Production Company (SZOGPC) is one of the three offshoots of Iranian Central Oil Fields Company (ICOFC). With a production capacity of over 225 mcm/d, South Zagros is supplying more than 30% of Iran’s gas needs. Its five operating areas are Naar & Kangan, Aghar & Dalan, Parsian, Sarkhoun & Gashouye Jonoubi, and Sarvestan & Saadatabad. A total of 9 gas fields – Aghar, Dalan, Naar, Kangan, Sarkhoun, Tabnak, Homa, Varavi and Shanoul – and two oil fields – Sarvestan and Saadatabad – are located in these areas.

In addition to these 11 operating fields, there are also 37 newly explored fields envisaged to be developed through domestic and foreign investment in the coming years.

Recently a group of oil and energy reporters visited some oil and gas areas run by SZOGPC. What follows has been compiled by Iran Petroleum’s correspondent.

The oil and gas fields administered by SZOGPC are situated in the southern provinces of Fars, Bushehr and Hormuzgan. The main mission assigned to this company is to recover oil and gas.

Gholam-Hossein Montazeri, CEO of SZOGPC, says this company can produce 225 mcm/d of gas, which is equivalent to total output from nine phases of the giant offshore South Pars gas field in southern Iran.

Naar & Kangan Operating Area

The bulk of SZOGPC oil and gas production comes from this operating area which incorporates Naar and Kangan oil fields. Gas production from these two fields, which stands at 90 mcm/d, is made from 73 wells. This gas is carried to Fajr Jam refinery for treatment.

Naar gas field which has 29 gas production wells with an output capacity of 32 mcm/d of gas and 4,500 b/d of condensate is located near the city of Jam in Bushehr Province.

Kangan gas field with production capacity of 85 mcm/d of gas and 18,000 b/d of condensate is located near the city of Kangan in the same province. So far, 44 wells have been dug in this field.

Aghar & Dalan Operating Area

This operating area is situated near the city of Farashband in the southern part of Fars Province. Aghar and Dalan are the two gas fields in this area.

Montazeri said a total of 26 wells are producing gas in this operating area with a production capacity of over 43 mcm/d.

“In Aghar field, there are 13 wells with a production capacity of 23 mmc/d of gas and 4,200 b/d of condensate. The gas produced in this field is pumped through an independent pipeline to Farashband refinery,” he said, adding that Dalan gas field, with 13 gas production wells, has the capacity to produce 20 mcm/d of gas and 5,600 b/d of condensate.

Montazeri said Farashband refinery, located near Dalan field, is equipped with slug catchers separating gas from liquid, two-phase and three-phase separators, six units of gas dehydration, one hydrocarbon dew regulation unit, gas condensate stabilization unit, storage tanks and gas condensate loading station.

The gas processed at this refinery is used for injection into oil fields in southern Iran or injection into National Iranian Gas Company (NIGC) trunkline.

Parsian Operating Area

Tabnak, Homa, Shanoul and Varavi fields are located in this operating area. They are adjacent to the cities of Lamerd, Khonj and Mohr in Fars Province. Montazeri put the number of wells in this operating area at 91 with an overall production capacity of 80 mcm/d.

Tabnak gas field, with 42 wells, is producing 39 mcm/d of gas and more than 19,000 b/d of condensate. Varavi’s 12 wells are producing 8.5 mcm/d of gas and 1,100 b/d of condensate. Shanoul and Homa with respectively 16 and 20 wells produce a total of 33 mcm/d of gas and 10,000 b/d of condensate in Parsian operating area.

Sarkhoun & Gashouye Jonoubi Area

This area incorporates Sarkhoun and Gashouye Jonoubi gas fields. Currently, only Sarkhoun is operating in this area. Sarkhoun’s 21 wells are producing 9 mcm/d of gas and 4,300 b/d of gas condensate.

According to Montazeri, development of Gashouye Jonoubi is among future plans of ICOFC.

Sarkhoun gas field is located 20 kilometers northeast of Bandar Abbas and its gas is delivered to Bandar Abbas refinery.

Sarvestan & Saadatabad Operating Area

Sarvestan and Saadatabad are the two oil fields run by SZOGPC. They are located near the city of Sarvestan in Fars Province.

Montazeri said these two fields, with a total of 6 wells, are producing more than 6,500 b/d of crude oil which goes to Shiraz refinery for processing.

Development of New Fields

Montazeri said Dey, Sepid Zakhour, Sefid Baghoun, Halgan, Gashouye Jonoubi and Khar Tang gas fields and Khesht oil field are among ICOFC development plans in the areas run by SZOGPC. Development of these fields is envisaged in Iran’s 6th Five-Year Economic Development Plan (2015-2020).

He said that during the first five months of Iran’s current calendar year which began on 20 March, 27 bcm of gas and 806 million barrels of condensate have been produced from SZOGPC-run fields.

Montazeri said most of gas condensate produced in these fields has been transmitted to Fajr Jam, Shiraz and Parsian refineries.

He also said that around 1 million barrels of oil was

produced from this company’s operating areas since the start of the current calendar year.

Montazeri said Khesht oil field development was at 80%, adding that its first development phase would become operational next calendar year with an approximate capacity of 20,000 b/d. The oil produced at this reservoir would be destined for exports.

He said that SZOGPC also planned to build several gas pressure booster stations in its operating areas.

“Materialization of this issue needs financing and it will become operational under Iran’s 6th Development Plan,” he added.

Montazeri also said an Iranian company has been assigned a plan to study Sarkhoun oil field, which is facing pressure falloff, for enhanced recovery. He said that a foreign partner would be cooperating with the Iranian company.

Production Achievements

Montazeri also referred to the activities of SZOGPC in different sectors like gas production capacity, environmental activities, and cost saving by benefiting from the potentialities of domestic manufacturing companies. “By spudding and operating 9 wells, the daily gas production capacity at South Zagros Oil and Gas Production Company has increased around 8 mcm from last winter,” he said.

Montazeri noted that drilling each gas well by this company would take 6 months and cost between $15 and $20 million. He said SZOGPC managed to carry out this job at a shorter period of time and at lower costs.

He also announced a 1.5 mcm increase in the production capacity of Varavi gas field, saying: “By changing the array of wells’ stream, this company’s experts managed to raise daily production capacity of this [field] from 7 mcm to 8.5 mcm.”

He said the work-over of a single field in Sarvestan & Saadatabad operating area raised production capacity in this zone by 300 b/d in the first half of the current calendar year.

Montazeri said SZOGPC carries out work-over activities during the first eight months of the year and works for maximum gas production for the rest of the year.

Capping Environment Pollution

Montazeri referred to the environmental activities of this company, adding that flare gases have been gathered at Farashband refinery to feed the treatment facility.

“This measure saved us more than $2 million a year and helped reduce environmental pollution,” he said.

Referring to another environment-related measure, he said: “Due to the harmfulness of gas water produced at Sarkhoun field with a salinity of 200,000 ppm for the environment, we facilitated injection of water into well number 8 of Sarkhoun.”

Indigenization of Equipment

Domestic manufacturing of widely used equipment in gas production wells including downhole safety valves and choke manifolds are among other achievements by South Zagros experts.

Abol-Hassan Mohammadi, director of operations at SZOGPC, said domestic needs for downhole seals and valves have been met, thanks to Iranian experts.

He referred to choke manifold manufacturing in Iran, saying: “This equipment is used in well testing after the abandonment of drilling rig. We needed IRR 2,500 to 3,000 million to purchase choke manifold. But after four of these devices were built by this company’s experts, choke manifolds with least costs for wellhead services became ready, and more than IRR 10 billion was saved for the company.”

Mohammadi referred to the reparation of SGT 400 turbocompressor by Iranian experts during years of sanctions, saying: “Commodity and oil equipment manufacturing companies in our country have become very powerful, and the Ministry of Petroleum plans to make maximum use of domestically manufactured commodities and such commodities as completion string or of wellhead equipment are being provided domestically. Experts at this company are now making many needed commodities and equipment by using components held in stores. That has saved money and increased productivity.”

Oil Impact; South America Economies in Ruins

The decline in global oil prices that started in the middle of summer 2014 has left serious impacts on the economy of oil producers all across the globe. Some South American countries like Colombia, Ecuador, Brazil, Argentina and Venezuela – all top exporters of crude oil – have faced numerous challenges.

Although the slump in oil prices caused headaches to exporters, the South American countries have faced more destructive economic challenges.

Petrodollar-dependent economic structures have given rise to political crises, as well as economic challenges, for these countries.

This article aims to review oil production status in South American countries, their strategy vis-à-vis the oil price slump and their economic outlook.

Oil in South America

South American countries enjoy a quite important position in oil production in the world. Some of them like Venezuela, Brazil, Ecuador, Argentina and Uruguay are among the top producers of crude oil. South American countries supply a total of 7.3 mb/d.         

Among countries in this region, Venezuela alone holds 72.1% of oil deposits in Latin America and accounts for 35.7% of the total oil production in this continent. According to official data from the Organization of the Petroleum Exporting Countries (OPEC), Venezuela’s crude oil output declined 9% to 2.364 mb/d during the one year leading to July 2016. Over recent years, Venezuela has seen the sharpest decline in oil production due to economic crisis, insufficient investment, delayed payment to oil service providers, difficult equipment procurement, weak planning for exploration and recovery from massive oil fields in the country.    

Brazil with 10.8% of Latin America’s oil reserves comes second with a 28.3% share in oil output from the region. Oil reserves in Brazil could make this country one of the biggest players of the oil market in the world in the future. Brazil is also one of the four countries equipped with technology to extract oil from deep waters. The fall in oil prices has dissuaded investment in oil fields and led to the shutdown of reservoirs. That has inflicted losses on the Brazilian petroleum industry. Brazil’s state-run giant Petrobras is among top 20 oil companies in the world. It posted a $10.4 billion loss in 2015, which was unprecedented. In a bid to reduce its debts, supply money and deal with the consequences of oil price slump, Petrobras plans to axe up to 12,000 jobs by 2020.   

Ecuador is the smallest OPEC member state. It holds 4.4% of South America’s oil reserves and accounts for some 6.9% of oil production in this region. In 2016, with an increase in the ITT oil field reserves estimate, Ecuador’s oil reserves total 4 billion barrels.

Ecuador currently produces some 540,000 b/d of oil. The fall in oil prices in global markets has inflicted heavy losses on Ecuador as an oil seller. Investment in this country has declined, while its debts have been inflated. 

Argentina, which holds 2.2% of Latin America’s oil reserves, produces 9.9% of this region’s oil. Argentina’s petroleum industry has experienced lower production due to lower investment over the past one decade. The global decline in oil prices adds to these negative impacts.

Argentina is currently facing an energy trade deficit and its energy reserves are under pressure. The Argentinean government plans to attract investment into untapped Vaca Muerta field which holds shale oil and shale gas in a bid to change its current conditions. But current low energy prices and uneconomical investment in shale oil have dissuaded big

oil companies from investing in Argentina. As long as oil prices remain below $47.5 a barrel the Argentina government has no option but to pay $7.5 in aid per barrel to exporting companies.     

Colombia is the fourth largest oil producer in South America. It accounts for 5.1% of oil reserves in this region. Its average oil production in 2015 reached 1.6 mb/d. Colombia heavily depends on oil revenue and the oil price slump has harmed it deeply. For instance, exploration activities as well as the level of crude oil reserves have declined due to the oil price fall. According to an official report, crude oil reserves in Colombia declined by 13.2% to 2 billion barrels in 2015 from the year before. 

Other South American countries like Uruguay, Bolivia, Cuba, Barbados, Chili, Peru, and Trinidad and Tobago either do not have any oil reserves or use their oil for domestic purposes only.

No Common Strategy

The standing and amount of oil exports from South American countries in 2015 indicate that except for Venezuela ranking 9th, other countries are considered small exporters of oil. However, oil exports from these countries largely affect their economies.

Oil Exports in South America, 2015

Country

Ranking Among Exporters

Exports ($bn)

Share of World Markets (%)

Venezuela

Therefore, the leading oil exporters in South America are willing to cooperate with top oil producers in the world in a bid to help bring stability back to oil market. But these countries lack any united strategy on this issue.

Although oil exporting countries in South America are in favor of action by OPEC and non-OPEC oil producers for the restoration of stability to crude oil markets in the world, they remain divided about supporting the idea of production freeze or other ideas bandied about in media for a balanced oil price.

For instance, while Venezuela was a firm supporter of oil production freeze, other countries in South America did not favor the plan because on one side crude oil production in these countries has significantly dropped due to decrepit equipment and mature oil reservoirs, while on the other side the sharp decline in oil prices has forced them to raise their production in a bid to make up for their economic losses. Therefore, most South American countries are unwilling to reduce their oil production. Any production hike will boost supply and reduce prices and it could not offer any effective solution for dealing with the economic crises of these countries either.

Future Prospects

According to credit rating firm Moody's Corp., Latin American national oil companies need crude prices to surpass $55 per barrel to break even, a level that would allow them to invest capital enough to start reverting declining output.

Moody's expects credit quality to remain weak for these oil companies through at least mid-2017, with persistent risks that include falling production, short-term debt maturities, asset sales and cost cuts.

The report, which included ratings for 14 companies operating in Latin America or related to national oil companies, says the recent oil price rally will offer "minimal relief" from the stress that the longer-term fall in prices has inflicted.

Crude output in Venezuela, Ecuador, Brazil, Mexico, Argentina and Colombia jointly fell 4.6 percent in the first quarter to 9.13 million barrels per day (bpd), according to official figures. State-run Ecopetrol from Colombia, Petrobras from Brazil and Pemex from Mexico are sharply cutting costs or selling assets, trying to adjust to a lower-price environment.

Generally speaking, the decline in oil price has not only left negative impacts on the operations of oil companies in South America but also it has inflicted irreparable damage on their economies due to much lower revenue from oil sales. This issue takes up added importance when one takes into account the fact that in South American countries oil is intertwined with domestic and foreign politics.

Petrodollars play an important role in survival of governments and politicians in power. The spillover of economic crises to politics in Brazil and Venezuela is a case in point.

Furthermore, the United States has been closely watching developments in Latin American countries and makes efforts to guarantee the survival of its favorable elite in power. That would help US oil companies pocket huge margins while governments in these countries will become further dependent. That is why leftist elite in South America has been at odds with the US, while rightists have been favored by Washington.

Therefore, crude oil plays an important role in relations between oil producing countries in Latin America and the United States. Oil is even instrumental in the survival of political leaders and governments in Latin America.

1-----Offshore Drilling Envisaged in Senegal

Cairn Energy says tendering for a rig to drill a next phase of wells offshore Senegal is progressing well, as the company and its partners look to build on its deepwater oil discoveries.

They are benefiting from the lower cost environment and significant availability of high-quality rigs, Cairn added.

The partners are assessing how best to phase the development of the large resource base, and how the changes in industry pricing will impact capex costs for the development, including the economic field size.

Cairn operates the Sangomar Deep, Sangomar Offshore, and Rufisque Offshore blocks. Last month ConocoPhillips agreed to sell its 35% interest to Woodside Petroleum.

Elsewhere, Cairn is a partner to Kosmos Energy in Morocco’s offshore Boujdour Maritime contract area. The duo has signed an agreement with ONHYM, on behalf of the government of Morocco, regarding a new petroleum agreement that includes a commitment to acquire 3D seismic by 2Q 2020.

Offshore Malta, Cairn is operator of an exploration study agreement for Area 03, which comprises around 6,000 sq km (2,317 sq mi) of acreage. In April 2014, the company completed a 1,715-km (1,066-mi) broadband 2D seismic survey and is currently evaluating the area.

The results could lead to a decision later this year to commit to a 3D seismic survey to be completed before the end of 2018.

Recently Cairn submitted an application for block 8 offshore Cyprus in a tender for oil and/or gas exploration rights with a consortium that includes Delek Drilling and Avner Oil.

In the Norwegian sector, the company expects to take a decision by 4Q on the best concept for the Skarfjell development, operated by Wintershall.

In the UK North Sea, operator Premier Oil is targeting first oil from the Catcher project in 2H 2017. Total project capex to first oil has decreased by 20% to $1.8 billion, helped by the release of contingencies as work scopes are finished and drilling activities are completed below budget.

The subsea installation campaign remains on schedule for completion by 4Q 2016: the flowline towheads and bundles, as well as the buoy and its mooring system are installed, and risers are currently undergoing installation.

Six wells have now been drilled in the Catcher area, the most recent being the first Burgman production well, with all meeting or exceeding pre-drill expectations for reservoir and fluid properties.

Well sequencing has been modified to avoid costly winter rig moves and work continues on reducing the overall well count without impacting production.

The FPSO hull has now been delivered to the Keppel yard in Singapore and fabrication of the topsides modules is progressing.

2----Mitra Negotiates Vietnam Farm-in

Mitra Energy has agreed to acquire a 30% interest from INPEX subsidiary Teikoku Oil (Con Son) in the production-sharing contract for blocks 05-1b and 05-1c offshore southern Vietnam.

The total cash consideration is $14.3 million, with further potential payments of $15.7 million linked to the project sanction and delivery of first sales gas from the project.

Both blocks are 350 km (217 mi) offshore in the Nam Con Son basin in water depths of around 120 m (393 ft), and include two fully appraised gas and condensate discoveries, Dai Nguyet and Sao Vang, close to the Nam Con Son gas transportation pipeline and existing production facilities.

The discoveries, Mitra adds, are strategically located to supply gas to operating power generating complexes in the industrial area of southeast Vietnam.

Partners in the blocks are Idemitsu Oil and Gas and JX Nippon Oil & Gas Exploration, each with a 35% interest.

Mitra says the acquisition will build on its existing U Minh and Nam Du gas discoveries in the Malay Tho Chu basin.

A. Paul Blakeley, executive chairman, said: “Block 05-1 holds significant appraised gas resource capable of being developed quickly and put onto production at high margins and with material value accretion within our portfolio.

“The sale of this gas into the power sector in Vietnam is a natural hedge in a low oil price world, and this project has a high likelihood of early approval being so well positioned, close to the Nam Con Son pipeline, to deliver gas to existing industrial consumers and for power generation.”

Consultant ERC Equipoise will prepare an independent resource assessment of the Dai Nguyet and Sao Vang fields to complement Mitra’s internal review and evaluation of the reserves.

The proposed acquisition remains subject to a pre-emption right held by the existing partners and a statutory pre-emption right held by Petrovietnam under Vietnamese law.

Last month Mitra Energy signed an agreement with Quadrant Northwest and Santos Offshore to acquire a 100% interest in the Stag oil field, 60 km (37 mi) offshore Western Australia in 47 m (154 ft) of water the Carnarvon basin, for $10 million, plus further contingent payments.

Mitra will operate the field which has remaining reserves of around 10 MMbbl. Stag has been in production since 1998 and is currently producing roughly 3,750 b/d from 10 active wells.

The company has identified various cost reduction measures to bring down operating costs, and plans to drill one appraisal pilot and three infill producer wells in the West area in 2017 and up to three further wells in the East area in 2018.

Mitra may extend appraisal to the undrilled low-risk exploration area of Hart and Stag South.

3----Australia Subsea Pipeline Upgraded

Hydratight has completed an upgrade project on the John Brookes subsea pipeline on the North West Shelf of Western Australia.

Contracted by Quadrant Energy Pty Ltd. on behalf of the John Brookes joint venture, Hydratight engineered, manufactured, delivered, and supported the installation of an 18-in. MORGRIP connector on the John Brookes subsea pipeline, located 54 km (34 mi) northeast of Quadrant’s Varanus Island facilities.

Hydratight engineers Mark Fisher and Bob Till were embedded in the offshore installation team.

“This was an exciting project to be part of due to strict safety and environmental expectations in place,” explained Fisher. “These included working closely with a DNV inspector who flew in from Singapore to witness all aspects of the upgrade.  It also meant an independent critique of our manufacturing procedures.

“The component parts were of extremely high specifications and we had strict rules on forging and manufacturing. These included the use of a compliant biodegradable mineral hydraulic fluid used for activating the tensioners and flushing and cleansing all tooling. We ensured no other unassessed hydraulic fluid was used.”

A representative from Quadrant Energy oversaw the factory acceptance test of the completed connector in the UK, before witnessing a second test and diver training on arrival in Australia.  

Bespoke features were included on the engineered product including corrosion resistant alloy cladding, composite graphite seals, the company’s ball and taper technology and its subsea tensioning equipment.

4----PEMEX Notice on Drilling Contract

PEMEX has issued a notice of termination of Seadrill’s contract for the drilling rig West Pegasus.

However, Seadrill disputes the grounds for termination and is reviewing its legal options.

During 2Q the contractor signed a provisional commitment for a two-year extension to the contract with PEMEX, with the day rate for the remaining term of the initial contract accordingly reduced. The contract extension was finalized during 1Q 2016.

As part of this agreement, Seadrill and Seamex, the company’s joint venture with Fintech, agreed to reduce the day rate on five other jackups for a period of 365 days, contingent on final confirmation of the two-year extension of the West Pegasus by PEMEX.

Seadrill says that in the event of a termination, it and Seamex are entitled to recover the day rate concessions as well as the demobilization costs for the West Pegasus. In addition, the contractor plans to seek reimbursement of certain costs incurred in anticipation of the extension.

5-----Statoil Eyes Discovery in North Sea

Statoil and its partners have submitted the plan for development and operation of the Byrding (previously Astero) oil and gas discovery in the North Sea to government authorities.

The development includes a duo-lateral well drilled from the existing Fram H-Nord subsea template through which oil and gas from Byrding will flow to Troll C. Oil and gas will be piped from there through existing pipelines to Mongstad and Kollsnes, respectively.

Production is expected to start in 3Q 2017 and remain onstream for eight-10 years. In the peak period in 2017/2018 Byrding is expected to produce almost 8,000 boe/d. Recoverable volumes are projected at 11 MMboe.

Torger Rød, Statoil’s senior vice president for project development, said: “Combined with the use of an available well slot in an existing subsea template this reduces the costs of the project substantially. The project is profitable also in the current oil price environment.”

Capex is estimated at NOK 1 billion ($122 million).

Discovered in 2005, Byrding is north of the Fram field in 360 m (1,181 ft) of water.

Gunnar Nakken, Statoil’s senior vice president for Operations West, said: “Byrding will add new profitable volumes from the Troll/Fram area, boosting the activity and production on the Troll C platform.”

Partners in the project are Statoil Petroleum AS (operator) 45%, Wintershall Norge AS 25%, Idemitsu Petroleum Norge AS 15%, and Engie E&P Norge 15%.

1-----China Eases Infrastructure Project Requirements

China's top economic planning agency said it would take measures to ensure private investors can compete fairly with state firms in infrastructure projects, traditionally the domain of government-backed enterprises.

The government has sought ways to increase private investment in infrastructure projects, leery of worsening the balance sheets of already indebted state-owned enterprises and local governments.

Big-ticket infrastructure projects have been a policy focus this year to help cushion a slowdown in the world's second-biggest economy. But with private investment growth easing to the single digits, the state has had to do much heavy lifting. Government spending soared 13 percent in January-to-July from a year earlier.

A two-year-long effort to guide private capital into projects such as metro systems and hospitals via public-private partnerships (PPP) has generated little interest. China is working on a draft law to govern PPPs, which the government says have been deterred by imperfect and inadequate legislation.

"We have to create a clear and predictable market environment for private investment," Hu Zucai, vice-director for the National Development and Reform Commission (NDRC), told a press conference.

He added that "innovative" forms of private investment such as PPPs should be encouraged if necessary.

Hu said the 165 key infrastructure projects specified in the government's current five-year plan provide clear direction on how "social capital" - a phrase China uses for private investment - can enter each industry.

"I heard some private investors say they have the capital but are not sure where to invest in. I think the plan provides very clear guidance," Hu said.

He said airports, telecom infrastructure and oil and gas extraction are areas that should be further opened to private investment.

So far, fewer than one-quarter of projects announced by the government as PPPs have found private investors, official data shows.

Investors had signed up for 619 of 2,531 projects with a total value of 1 trillion yuan ($150 billion) through the end of July, NDRC said.

In July, the cabinet said the government will implement reforms to attract more private investment into railway, petroleum, natural gas, power and telecommunications sectors, partly via PPPs.

To further lure investment, the cabinet said authorities plan to cut the annual tax burden for businesses by more than 500 billion yuan ($75 billion) within the next one to two years.

2-----Idemitsu Blocks Merger With Saudis

Idemitsu Kosan's founding family is treading on treacherous ground as it attempts to block a planned merger with Showa Shell Sekiyu.

The family's opposition to the deal, struck last November, has baffled the rest of the Japanese oil industry and apparently riled Saudi Arabia, the world's largest oil exporter. The future of Japan's second-largest oil distributor hangs in the balance.

Speculation about Saudi anger has swirled in the Japanese oil sector since the family's stance came to light in late June. Saudi Arabian Oil Co., better known as Saudi Aramco, the kingdom's state oil company, is Showa Shell's No. 2 shareholder, after Royal Dutch Shell. The Saudi company intends to retain a stake in the new entity created through the Idemitsu-Showa Shell merger. Under the proposal, Idemitsu would buy Showa Shell shares held by Royal Dutch Shell.

But in a document released on June 28, the founding family said it would be "inappropriate" for Idemitsu, which has close ties to Iran, to enhance its relations with Saudi Arabia and become affiliated with Aramco.

This struck many as bizarre, given that Idemitsu already gets 40% of its crude from Aramco. Iran, Saudi Arabia's archrival, accounts for just 1%.

Showa Shell, in fact, buys more oil from Iran because it has refining facilities suitable for treating that country's crude.

Daisuke Seki, an Idemitsu executive vice president, has denied rumors that the company received a protest letter from Aramco. But he nevertheless acknowledged the need to "offer an apology" to the Saudi company.

The founding family likely has other, more important concerns, such as Idemitsu's and Showa Shell's different corporate cultures and the expected decline in the family stake. It was unnecessary -- some might say downright reckless -- to declare, in effect, that Idemitsu is an ally of Iran.

3----Gazprom Sees Risks to Gas Transit to Europe

The Russian gas giant Gazprom warned there were risks to gas transit to the European Union via Ukraine this winter due to the low level of gas Ukraine is pumping into its underground storage facilities, the company's spokesperson said.

"Now there is a backlog of 2.1 billion cubic meters compared to the previous year. If this remains the same, Ukraine will pump about 15 billion cubic meters of gas into underground storage facilities. [While] last year, there were 17.1 billion cubic meters," the spokesperson said, citing Gazprom CEO Alexei Miller.

According to the spokesperson, the current daily level of pumping is insufficient for Ukraine to reach the necessary volume of 17 billion cubic meters. Therefore, Gazprom foresees potential problems with the transit of gas this winter, as not enough time is left before October, when the autumn-winter season begins.

On August 18, Andriy Kobolev, CEO of Ukraine's national energy company Naftogaz, said that the company planned to pump about 14.5 billion cubic meters of gas into underground storage facilities before the heating season begins. According to him, this will be enough for a comfortable winter passing.

7----Iraq Minister Wants Foreign Contracts Review

Iraq wants to review contracts with oil companies to cut the fees that the firms receive when crude prices are low, the OPEC nation's new oil minister said, standing by a demand made by his predecessor.

Oil Minister Jabar Ali Al-Luaibi conveyed his position at a meeting in Baghdad with BP's head in Iraq, Michael Townshend, the ministry said in a statement.

The minister also discussed increasing oil and gas output from BP's giant Rumaila field in southern Iraq.

Iraq was in talks with foreign oil companies to link the fees they charge for developing their fields to oil prices and have them share the burden when markets go down, former oil minister Adel Abdul Mahdi told Reuters in January.

Iraq generates 95 percent of its public budget from oil sales. It has service agreements with companies including CNPC, BP, Shell, Eni, Exxon Mobil and Lukoil, which get paid for the extra barrels produced at fields awarded to them through a bidding process.

Current service agreements with oil companies are straining Iraq's budget as the government pays them a fixed fee for increasing production at ageing fields. Its own revenue dropped as oil prices have more than halved compared to 2014.

10---Venezuela in Talks for Bond Swap

Venezuelan state oil company PDVSA has begun talks with Credit Suisse AG for a possible swap of bonds due in 2017, according to sources familiar with the conversations.

PDVSA has seen its income fall drastically due to the drop in oil prices and is seeking to alleviate the heavy debt payments required in 2016 and 2017.

The oil company is due to pay in November some $2.3 billion in amortization for bonds due in 2017, an amount representing more than half of what PDVSA owes in total payments by the end of the year, according to Thomson Reuters data.

PDVSA had begun conversations with the Swiss bank in order to make the offer to bondholders "as soon as possible," a Venezuelan government source told Reuters.

PDVSA is not interested in a similar swap for its October 2016 bond, according to the source, who is familiar with the talks though not authorized to discuss them.

"What's complicated is 2017," the source said.

Credit Suisse has not yet reached any agreement with PDVSA, and it may not be the only institution that is advising on a possible bond swap, said another source familiar with the talks.

Eulogio del Pino, president of PDVSA, announced in July that the firm was seeking a bond swap "soon."

Pakistan Prepares Its Second LNG Import Terminal

Pakistan is taking another step towards becoming a key buyer of liquefied natural gas (LNG), signing a deal to purchase a Floating Storage and Regasification Unit (FSRU) for its second import terminal.

Singapore's BW Group said in a statement that it would deliver the FSRU to Pakistan GasPort Limited (PGPL) in the fourth quarter, as well as providing the terminal at Port Qasim, Karachi with LNG regasification services in a 15-year agreement.

The South Asian country has been earmarked as an up-and-coming demand outlet for the oversupplied LNG market. Along with Egypt and Jordan, Pakistan was a newcomer to the LNG import market in 2015, helping drive up demand and absorb growing world supplies from a wave of new projects.

The new import terminal will be able to receive 600 million cubic feet of natural gas per day and is expected to be commissioned for operations by mid-2017.

The terminal will reduce Pakistan's gas deficit by 30 percent and ensure fuel for 3,600 megawatts of new power generation plants being constructed in the country, said PGPL chairman Iqbal Ahmed.

Pakistan started up the 3.5 million tonnes per year Engro Elengy LNG terminal, the country's first LNG import facility, in Port Qasim last March. Pakistan shipped in a total of 1.02 million tonnes of LNG in 2015, and has imported 1.78 millions tonnes in the first seven months of this year.

"We are seeing weaknesses more in the North Asian market, and (South) Korea ... and a lot of the strong (demand) growth in where you might expect," said Neil Beveridge, a Hong Kong-based analyst at AB Bernstein, referring to emerging economies such as Pakistan.

Qatar, which signed two term supply contracts with Pakistan this year, is the country's largest LNG supplier.

Thailand Oil Explorer to Sell Oman 44 Project

Thailand’s largest oil and gas explorer, PTT Exploration and Production Pcl said it will sell its Oman 44 natural gas project to ARA Petroleum LLC in a shift in investments in the Middle Eastern country.

PTTEP, the upstream flagship of state-controlled PTT Pcl, Thailand’s largest energy company, will sell its wholly-owned unit PTTEP Oman Co Ltd, which holds 100 per cent of the Oman 44 onshore project, to ARA Petroleum, the company said in a statement to the Stock Exchange of Thailand. The deal is expected to close in early fourth quarter of 2016.

The Oman 44 Project is an onshore natural gas and condensate field located west of the capital Muscat with area of 1,162 sq km (449 sq miles). It has been in commercial production since 2007 with an average output of 19 million cubic feet per day of natural gas and 904 barrels per day of condensate in the second quarter of 2016.

PTTEP gave no details about the value of the sale.

In order to find other opportunities in the country, PTTEP also signed a memorandum of understanding with Oman Oil Company Exploration and Production LLC, a subsidiary of national oil firm Oman Oil Co, to seek “co-investment opportunities in areas of mutual interest” in Oman, it said.

PTTEP operates 38 projects in 11 countries. Sales volume from projects in Thailand and other Southeast Asian countries accounted for a combined 94 per cent of total in the second quarter, according to the company’s data.

6-- Petronas Sees Gloomy Industry Outlook

Malaysian state-owned oil firm Petroliam Nasional Bhd (Petronas) said low oil prices dragged quarterly profit down 85 percent, and labelled the industry outlook "gloomy" well into 2017.

Petronas has seen a global slump in oil prices squeeze finances, which make up a third of Malaysia's oil and gas revenue. The benchmark Brent futures LCOc1 price, which hit a 12-year low earlier this year, rose 25 percent in the second quarter but remains lower than a year earlier.

"We should expect to see volatility continue and Petronas will not bank on optimistic oil prices to ease up on pressure," President and Chief Executive Wan Zulkiflee Wan Ariffin said at a news conference.

"The combined factors of oversupply, growing inventories and slower demand growth point to an ongoing gloomy outlook well into 2017."

Wan Zulkiflee said Petronas planned for an average price this year of $30 a barrel, unchanged from its February forecast. Brent crude, after a recent rally, traded at $49.50 at 1021 GMT.

For April-June, net profit hit 1.62 billion ringgit ($402.48 million) on revenue that fell 21 percent to 48.44 billion ringgit.

Petronas said highly volatile oil prices had led to impairment charges rising nearly 15 times from a year prior to 7.16 billion ringgit in the second quarter. It said it expects price volatility to lead to more charges, albeit to a lesser degree.

Petronas at the start of the year announced it would cut spending by up to 50 billion ringgit over the next four years in response to the oil price slump.

E&P from A to Z at RIPI

Most oil producing countries do not have upstream technology and they always depend on services and equipment provided by proprietors of upstream technology.

In Iran, the bulk of such needs has been covered thanks to the Research Institute of Petroleum Industry (RIPI).

Mohammad-Reza Kamali, head of the Upstream Department of RIPI, tells "Iran Petroleum" in an interview that Iran has made good progress in developing software required by the upstream sector.

Here is the full text of the interview:

Q: Would you please tell us about the evolution of activities of RIPI Upstream Department?

A: To answer this question, let’s have a flashback. This center was established in 1959 under the title of Petroleum Engineering Labs with the objective of conducting industrial projects and providing petroleum industry lab services, particularly in operational sectors. This center grew into Exploration and Production Research Center in 1989 after structural reforms.

At present, the RIPI Upstream Department comprises three independent research centers: Geology Research Center which includes three specialized groups of geochemical research, geophysical research and petroleum geology; Petroleum Engineering Research Center which includes rock and fluid groups providing all related lab services, as well as drilling technology, enhanced recovery and production research groups; Reservoir Study and Field Development Research Center which conducts reservoir study and simulation and presents different scenarios for the development of fields.

More precisely, the Upstream Department carries out all phases, from A to Z, of the exploration and production (E&P) value chain which involves research and lab services.

This value chain starts from exploration and ends in production after evaluation. Special unique capabilities have been developed in exploration.

Q: Which sectors are these capabilities related to?

A: They are defining petroleum systems and developing 3D models in order to more precisely evaluate and identify unexplored reservoirs. Another capability pertains to the study and assessment of unconventional reservoirs. In this regard, the technology to be used in nonconventional reservoirs as well as relevant studies has been institutionalized. The objective is to make recovery from unknown reserves where production is impossible with customary technology. These unknown deposits include shale gas, shale oil, gas hydrates, methane, coal seam, dense and tar sands. If we want to produce from these resources we have to look for new and sophisticated technologies in order to stimulate them. For instance, if a reservoir contains heavy crude oil we have to warm it up by thermal methods for production.

Q: Have any relevant projects become operational?

A: Projects like shale gas in Lorestan or gas hydrates in the Sea of Oman have already been done or under way. Good capability has also been achieved with regard to the study of carbonated reservoirs. Currently, an inclusive project under the title "Abadan Plain Reservoirs Study" is under way with exploration being one of the objectives.

Q: Would you please explain about fluid and rock, as well?

A: In the evaluation sector, the Upstream Department has updated and advanced lab equipment in the fluid and rock sector. It is one of a kind in the country. The rock and fluid of many Iranian fields, including onshore and offshore fields, are analyzed at RIPI; therefore, a databank containing coherent and complete data has been established. This database could be used for RIPI projects and is also available to National Iranian Oil Company (NIOC) and its operators.

In the geochemical sector, the labs at the Upstream Department are unique in the country and in the region. Quantitative and qualitative studies for potential onshore and offshore oil and gas recovery have been successfully carried out through benefiting from such facilities as experienced manpower and technologically sophisticated devices.

Q: Would you please explain in simple terms what activities are done at the lab?

A: After being extracted from source rock, oil starts migration and is trapped in porous or permeable rocks known as reservoir rocks. At these labs, all processes occurring in the source rock are analyzed to make clear when the rock has been mature to produce oil. The depth and geological period of oil production are also determined. The amount of produced oil, the amount of trapped oil and gas and also the amount of oil that has exited the system are analyzed quantitatively and qualitatively in the studies and surveys.

Quantitative and qualitative assessments are done on oil source rocks and the geological history of the rock is reconstructed by advanced software. It will become clear when the source rocks have become sedimentary, how much organic material has existed, how much organic material has been transformed into oil and gas. The routes of migration are also determined and it will become clear which oil traps or migration routes should be chosen as the exploration objectives.

Q: Has this project become operational? Where?

A: This technique has been applied to Persian Gulf Pearl Project in the Persian Gulf and the Sea of Oman. In this project, state-of-the-art technologies known as biomarkers have been used and the oil families have been identified. Then the oil source rocks have been linked together. Moreover, a number of oil families that have been active in the region and existed in oil traps, have been identified and studied in terms of the type of hydrocarbon.

Q: You referred to geophysics lab. What measures have been taken in this field?

A: The Upstream Department has had geophysical activities tool. In fact, this branch of science acts like geologists’ eye for studying different layers of Earth. By applying this technology, different layers of Earth are identified and

anticlines are marked. Furthermore, it would be possible to draw changes that have affected the properties of rock or draw fractured layers in order to assess the depth, magnitude and amount of deposits. In this regard, there are software, hardware and experienced people at the Geology Research Center.

Q: What measures have been taken with regard to field development?

A: At the Research Center for Reservoir Study and Field Development, integrated and cohesive work has been done based on data provided by geology, petrophysical, geophysical, petroleum engineering and lab groups. This data is used for integration and development of reservoir static model. In the following stage, by using data related to the history of production from the reservoir, pressure data, well testing data and other available data, the dynamic model of the reservoir is simulated. The output of these studies is used for designing a practical scenario for long-term exploitation of reservoirs and maximum oil production. In other words, by conducting these studies, the recovery rate could be enhanced to see which method would be the most applicable to enhanced recovery. In the secondary recovery, such methods as gas injection and water flooding are used in order to stabilize the reservoir pressure or raise it with a view to boosting production. Therefore, the result of these studies determines the method to be used for enhancing reservoir recovery rate.

Q: Would you please explain also about the activities of the production sector?

A: In the Upstream Department, there are units specializing in production. These units conduct research on water control and management. When the amount of water produced by the field is on the rise it has to be controlled in order to spare oil production any impact. Sometimes, it is necessary to carry out hydraulic fracturing or artificial lifting. Throughout production, there might be such problems as wax and asphaltene production. Therefore, certain devices have been designed to forecast wax or asphaltene production at the reservoir. In this way, the necessary forecasts could be made and preventive plans could be envisaged to resolve problems. Meantime, we may see the collapse of layers throughout drilling. If that happens the well will be damaged and production will be delayed. Identifying defective layers is part of the activities of the Upstream Department. The drilling mud has to be designed in consistence with the conditions of well reservoir and formation. There might be also problems with cementing. In case of inappropriate cementing the casing installed inside the well may leak or even move. RIPI is among few research centers specializing and experienced in designing ultra-light cement by using nanotechnology. The cement produced at RIPI is used in oil wells and is currently used on industrial scale.

Certain activities have been done with regard to elastic cement production. This cement could be used when the layers are affected due to the movement of salt and the casing collapses. Silicate mud has been also produced and it could replace oil-based mud.

Q: What are the advantages of silicate mud?

A: Oil-based mud spec does not meet environmental requirements and it damages the environment. Therefore, fluids, environmentally friendly cements and mud are developed. In most research studies, one consideration is related to the environment. Drilling and exploration must be such that the environment will be harmed at minimum level possible. In other words, chemicals that are less harmful are used. Furthermore, phytomaterials which are not harmful to the environment are used. All these studies have reached the stage of production and they can be used in projects.

Q: What strategy has the Upstream Department pursued with regard to these activities?

A: Over the past two years, we have tried to organize our affairs and work out a strategy consistent with the petroleum industry needs. There are currently six strategies which I do not want to go through in detail. The goal pursued by all our activities is to conduct practical and fundamental research for meeting petroleum industry needs and providing scientific and lab services in order to resolve the petroleum industry problems in E&P sectors.

In addition to these, there is an Upstream Software Research and Development Center where key petroleum industry software has been developed with existing technical knowledge and experience. Some of this software is being used in the petroleum industry.

Q: What projects has the Upstream Department been involved in over recent years?

A: One of these projects is the Persian Gulf Pearl in which the findings of research in different sectors including geology, geophysics, petrophysics, petroleum engineering, modeling and geochemistry have been used. As the geological part of this project, reservoir rocks on 183,000 sq km of land have been studied. Moreover, 900 oil and gas wells have been studied and samples have been taken from some of them. The findings have been analyzed by using cutting edge technology. The data obtained from these analyses have been used as input in 1D, 2D and 3D simulators and modelers. Moreover, for the first time in Iran, 1D to 3D modeling has been performed for all fields.

This modeling helps reconstruct oil reproduction, migration and trapping in order to conduct surveys and analyses. The output from modeling is the ranking of exploration objectives and examining the uncertainty of these reservoirs in order to precisely determine risks. This project will be finished in August and it is now more than 96% complete.

Q: What projects have been carried out with regard to unconventional resources?

A: That has been done for the first time in Lorestan region. Oil and gas shale have not been studied in Iran, and of course their recovery is not economical at the moment. Since over recent years, shale oil and gas recovery has become cost-effective due to technological progress in the US and there is such potential in Iran the preliminary studies have been conducted to prove that Iran enjoys such potential. It may be not economical now, but it is of high significance for us to know the amount of deposits we have. It is also important for the future generation. If in the future technology proves to be cost effective, the next generation will use it.

Petroleum Ministry Teams at Rio Games

The 2016 Olympics in Rio de Janeiro, Brazil, have ended, leaving behind both sweet and bitter memories for Iranians. The Iranian sports caravan failed to fare as well as it did in the London Olympic Games; however, the results were somewhat satisfactory.

For its part, Iran’s Ministry of Petroleum dispatched five teams to the Rio games. They did not bag any medals, but their results were not so bad. Here is a review of the athletes sponsored by the Iranian petroleum ministry.

Nima Alamian (table tennis)

Nima Alamian is undoubtedly the phenomenon of Iran’s table tennis. Over recent years, Nima Alamian has left behind his brother Noshad, himself a ping-pong seed, and has brilliant performance in different matches in Iran.

Iran’s table tennis has made significant progress in recent years. But it could not yet be compared with the status of tennis in leading countries.

Nima Alamian was recognized as the top seed in tennis pro league in Iran last year, when he was with Bandar Imam Petrochemical Plant’s club. He was internationally ranked the 111th when he joined the Rio matches and he was defeated by a Romanian tennis player who is ranked the 78th in the world.

Alamian was unlucky in the games and he was defeated by his rival. Despite having a good performance, he was ousted. However, he has still a good chance to make progress due to his low age. He can now make efforts to compete in future matches. Definitely, the Bandar Imam club’s support has been instrumental in helping Alamian win the top spot in Asia. During the days Iran’s ping-pong federation could not provide sufficient support to athletes due to economic problems, the Bandar Imam club offered to sponsor Nima Alamian and this helped him go to the Rio games.

Qader Mizbani (cycling)

Qader Mizbani is the most experienced cyclist in Iran. In the run-up to the Rio games, Mizbani was intent on giving his place to younger cyclists because of his humbleness, but at the request of the cycling federation he went to Brazil.

Mizbani is officially affiliated with Tabriz Petrochemical Plant’s team and has so far fared well. He was the best choice to represent Iran’s cycling at the Olympics, but it was clear from the very beginning that he could not win any medal at the Rio matches. Mizbani crossing the finish line was enough for Iran’s cycling federation. We should not forget that Mizbani was unlucky too in the matches. Barely had he cycled half of the 204-kilometer distance that his bicycle experienced a technical fault and veered off the road. Mizbani hit the rocks on the margins of the track and he could not continue the match. He had exercised a lot for this competition and results from his performance at the cycling league in Iran indicated the high level of his preparedness. He was one of Iran’s chances for cycling, but he failed. Mizbani, despite his injury, ran in the time trial matches and managed to cross the finish line. He was the first Iranian cyclist to have crossed the finish line at the Olympics matches.

He is unlikely to reach the next Olympics, but he has announced that he has no intention for the time being of bidding farewell to cycling and he plans to continue cycling at the club level with Tabriz Petrochemical Plant’s team.

Reza Qasemi (100 meters)

Iran’s track and field had the highest number of representatives at the 2016 Rio matches.

Reza Qasemi ran for 100-meter dash on behalf of Naft Tehran. A rival to Iran’s 100 meters record holder Hassan Taftian, Qasemi was highly hoped to bag medals.

Qasemi tried his best to find his way into the final of 100 meters, but his own inexperience and his rough rivals from Jamaica and Africa led to his elimination. Qasemi, 29, clocked 10.47 seconds, but his previous record was 10.14 seconds. Qasemi seemed to have had stress on the day of competition and he could not prove his capacity. But his representation of Iran at the 100 meters in Rio de Janeiro is enough for the time being. Qasemi owes his promotion to Naft Tehran.

The reigning 100 m Olympic champion is often named "the fastest runner in the world." The World Championships of 100 meter race has been contested since 1983.

Jamaicans Usain Bolt and Shelly-Ann Fraser-Pryce are the reigning world champions, Bolt and Elaine Thompson are the Olympic champions in the men's and women's 100 meters, respectively.

Hamid-Reza Zouravand (race walk)

Hamid-Reza Zouravand represented Iran in the 10-km race walk at the Olympics games. He found his way to the Rio games after registering a 15 minutes 56 seconds record in Iran.

He was Iran’s first ever representative to Olympics’ 10- kilometer race walk. He was unlucky, but he managed to cross the finish line. He finished 54 among 74 race walkers. He has improved his profile in Iran thanks to support by Naft Tehran. He is expected to improve his performance in coming years.

The 10-kilometer race walk, or 10-kilometer race-walk, is a race-walking event. The event is competed as a road race. Athletes must always keep in contact with the ground and the supporting leg must remain straight until the raised leg passes it. 10 kilometers is 6.21 miles.

It was introduced at the 1912 Summer Olympics in Stockholm for men, and the 1992 Summer Olympics in Barcelona for women. It is no longer an Olympic event for women, having been changed to 20 km in 1999, though it is run in some international competitions.

Pejman Qale-Noei (hammer throw)

Pejman Qale-Noei was another Olympics competitor from Naft Tehran. He ran for hammer throw. He finished second in Iran last year. He berthed a place in Brazil with a record of 77.18 meters. He joined the Rio matches with Kaveh Mousavi, but he was unlucky. On the first day, there was strong wind and Qale-Noei’s first hammer throw hit the net. The hammer was separated from the net several minutes later and this bad luck put him behind.

In his next throws, Qale-Noei could not even achieve his own records and most of his throws were declared faulty by the jury. At the end of the matches, Qale-Noei offered apology to his fans, saying he was to blame for his failure. Like others, he also complained about insufficient facilities and expressed hope for better conditions.

The hammer throw is one of the four throwing events in regular track and field competitions, along with the discus throw, shot put and javelin.

The men's hammer weighs 16 pounds (7.26 kg) and measures 3 feet 11 3⁄4 inches (121.3 cm) in length, and the women's hammer weighs 8.82 lb (4 kg) and 3 ft 11 in (119.4 cm) in length.

Like the other throwing events, the competition is decided by who can throw the implement the farthest.

Although commonly thought of as a strength event, technical advancements in the last 30 years have evolved hammer throw competition to a point where more focus is on speed in order to gain maximum distance.

The throwing motion involves about two swings from stationary position, then three, four or very rarely five rotations of the body in circular motion using a complicated heel-toe movement of the foot. The ball moves in a circular path, gradually increasing in velocity with each turn with the high point of the hammer ball toward the target sector and the low point at the back of the circle. The thrower releases the ball from the front of the circle.

Iran’s Ministry of Petroleum has always been active in helping sports in the country. By attracting sport talents in the country, the ministry has provided financial and moral support to them with a view to contributing to better sport performance in the country.

The Ministry of Petroleum would have sent more representatives to the Olympics had there been more matches.

Chaharmahal & Bakhtiari Province is one of the tourism richest provinces in Iran. There are more than 250 known historical and religious tourist attractions in this province. Due to the large number of tourist attractions, "Iran Petroleum" decided to introduce sightseeing sites of this province in its current issue, too.

Due to its high altitude, Chaharmahal & Bakhtiari Province is known as Iran’s rooftop.

Tang-e-Sayyad

Land subsidence, geological activities and melting ice caps have formed several wetlands in the area inhabited by rare fauna such as the wild cat (Felis Silvestris) and lebetine viper (Vipera lebetina). Research shows that 22 fish species, including the Pike barb (Esox niger) and mesopotamian catfish (Silurus triostegus) are found in the Karun River, which runs through the proposed area.

Karoun Headwaters

The headwaters of Karoun River run in Chaharmahal & Bakhtiari Province. They are Kouhrang, Bazaft, Kiar and Vanak streams plus Marbareh, Kharsan, Aqbalaq, Soulagan and Semirom rivers. They stretch from center to south and west.

Dozak Castle

Located 40 kilometers from Shahr-e-Kord, Dozak Castle used to house several generations of Bakhtiari tribe chieftains. The two-storey castle modeled on ancient European castles was built at the order of Lotf-Ali Khan Amir Mofakham, an influential Bakhtiari chieftain.

Energy Investment Opportunities

Chaharmahal & Bakhtiari Province is conducive to investment in energy sector particularly construction of petrochemical plants, refineries as well as hydroelectric power plants. The reason stems from rich water reserves, sun and crossing of oil and gas pipelines.

Qasem Soleymani, governor of Chaharmahal & Bakhtiari province, told "Iran Petroleum" that Boroujen and Lordegan petrochemical plants are among projects under development.

“Boroujen petrochemical project is among petrochemical plants on the route of West Ethylene Pipeline. Its progress has been slow due to various problems including sanctions and financial shortages,” he said, adding the project was expected to make faster progress due to budget allocation.

Soleymani said Lordegan petrochemical plant is under construction. He added that the project enjoyed appropriate location due to access to water and gas reserves (proximity to three main gas trunklines in the country) and the infrastructure.

He expressed hope that Lordegan petrochemical plant would become operational in one year with necessary machinery and equipment having been supplied.

“This plant will be producing urea and ammoniac. The bulk of ammoniac produced there will be spent on urea production and the rest is expected to be supplied on market directly,” he added.

Soleymani said construction of an oil refinery in Saman County was another important project envisaged in this province.

“We are currently looking for an investor to operate this project and we hope that the government, Ministry of Petroleum and its subsidiaries would contribute to this project,” he said.

Soleymani said the construction of this refinery would be an economical and valuable project as oil and gas pipelines cross this province.

He also said that small-sized hydroelectric power plants would be another good opportunity for investment in this province.

“Currently, more than 30 areas have been located for the construction of these power plants and construction operations have started for some of them. Given abundant water reserves in Chaharmahal & Bakhtiari Province, it is possible to build 100 small-sized hydroelectric power plants,” said the provincial governor.

Soleymani also said that solar energy and energy production from renewables were other opportunities for investment in the province.

He stressed the need for supporting construction of fuel storage tanks and a direct pipeline stretching from Isfahan refinery to Chaharmahal & Bakhtiari Province, adding: “in this regard I have had talks with the Iranian minister of petroleum and  his deputy petroleum minister for refining affairs. Given the existing potentialities in Chaharmahal & Bakhtiari Province and its proximity to Khuzestan Province, the oil storage site of this province could become an export hub for the country.”

Mojtaba Sardari, director of the Chaharmahal & Bakhtiari branch of National Iranian Oil Products Distribution Company, said two 20-million-liter storage tanks and a pipeline coming directly from Isfahan refinery were estimated to cost IRR 1,500 billion.

“This investment will return in five years. For financing, we may use domestic resources, as well as foreign investment,” he said.

Soleymani gave a positive assessment of the NIOPDC provincial zone’s performance, noting that there was no problem with fuel distribution in the province.