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Over the past declares, Iran’s approach to the oil market has been based on pursuing the interests of oil producing countries, particularly OPEC member states, and guaranteeing secure oil supply on the world markets.
In certain periods of history, certain events like the 1979 Islamic Revolution, the ensuing Iraqi war and US-led embargos overshadowed Iran’s approach for a short period of time, but the country regained its position very quickly. The reasons are summarized as below:
Iran set the precedent for petroleum industry development in the Middle East more than a century ago. More than half a century ago, it was a founding member of OPEC. That is why Iran has traditionally a key position in the oil market.
Iran’s huge oil and gas reserves, which constitute the world’s biggest conventional hydrocarbon reserves, have always attracted the oil markets and buyers.
Iran has long been OPEC’s second largest oil producer, not to mention its potentials for effective presence in the market.
Iran’s oil and gas production will continue in the coming decades and that would supply part of the world’s future energy needs.
Focus on gas as a clean source of energy in recent years and Iran’s huge gas reserves have pushed the country into bold relief.
Iranians technicians’ management of petroleum industry guarantees production under any circumstances.
Due to Iran’s political and economic stability, the country’s oil supply on the world markets did not stop during Iraqi war and under the force of sanctions.
Iran’s geopolitical position in the strategic Middle East region lets the country play an influential role in containing crises in the world’s oil artery and the East-West transit route.
Iran’s oil projects are lucrative for potential investors. Even if Iran’s already discovered reserves are ignored, international companies are still tempted to explore new hydrocarbon reserves in Iran.
These undeniable facts along with Iran’s industrial and economic burgeoning place the Islamic Republic of Iran at the center of regional stability and security for the coming decades.
Iran’s Petroleum Minister Bijan Namdar Zangeneh said after the end of the 164th Conference of the Organization of Petroleum Exporting Countries (OPEC) in Vienna on 4 December 2013 that OPEC MCs have welcomed Iran’s return to world crude oil markets.
Zangeneh also told reporters that Iran is planning to bring its oil production back to 4 mb/d after international sanctions are lifted.
“I noted in a statement that we return to the market in the shortest possible time, and naturally, we expect OPEC MCs to cooperate with us. OPEC welcomed our return at its highest level, which was exactly what I expected them to do. OPEC’s historic background also shows that when a member exits the market due to problems and makes a second coming, member states have always shown their maximum cooperation for that member to take back its share,” he said.
Regarding the 164th meeting, Zangeneh said: “We had a very good meeting. OPEC oil ministers made decisions about administrative issues, the secretariat’s budget, the OPEC’s rotating presidency for next year, the date of the next meeting and choosing auditor.”
“The secretariat presented reports about demand for oil and the conditions of shale oil. OPEC members also decided to maintain the current OPEC production level of 30 mb/d for the first half of the year.”
“Regarding the issue of OPEC secretary general, as I had predicted, it was clear that we would not reach consensus. Therefore, it was not discussed and the secretary general term of Abdalla Salem El -Badri was extended for one more year,” said Zangeneh.
The 164th Conference of OPEC was held in Vienna, Austria to study the oil market and make decisions about OPEC production ceiling.
Libya’s Minister of Oil and Gas HE Abdel Bari Ali Al-Arousi was elected as President of the Conference for one year, with effect from 2014,and HE Mrs. Oil Diezani Alison-Madueke CON, Minister of Petroleum Resources of Nigeria and head of its delegation was elected as Alternate President for the same period.
Ali Obaid Al Yabhouni, the United Arab Emirates’ OPEC governor, was appointed as Chairman of the Board of Governors for the year 2014, and Bernard Mommer, Venezuela’s OPEC governor, was appointed as Alternate Chairman for the same period, with effect from 1January 2014.
OPEC decided to keep its production ceiling unchanged at 30mb/d in order to maintain the market balance, and declared its readiness for reacting to any event causing market imbalance.
Oil Giants Invited to Iran
Zangeneh named seven oil giants which Tehran would like to make investment in the Islamic Republic’s energy sector once US-led sanctions are lifted.
Zangeneh, who was speaking to reporters in Vienna, named France’s Total, Royal Dutch Shell, Norway’s Statoil, Italy’s Eni, British Petroleum as well as US Exxon Mobil and Conoco Philips.
“Conditions for investment in Iran’s oil sector will be announced in April 2014,” the minister said on the sidelines of OPEC Conference.
Zangeneh said he has already started talks with some of those companies, but Americans were not among them.
“We had no limitations for US companies. Twenty years ago there were limitations against them from their own administration; however, on our side there would not be any limitations for American companies,” he said.
Chief Executive Officer of Italy’s multinational oil and gas company Eni Paolo Scaroni was the first Western oil giant chief to meet with Zangeneh a day after OPEC Conference in Vienna.
The meeting, in the minister’s Vienna hotel suite following OPEC talks, came after Zangeneh named Eni as one of seven Western companies he wanted to invest in Iran’s energy sector if international sanctions are lifted.
“We had a fairly long and very warm meeting with the minister, who is a person we know very well,” Scaroni said.
“We discussed potential new activities of Eni in Iran - of course all this is subject to lifting of the sanctions,” Scaroni said.
“We plan to continue to be in Iran and possibly increase our activity as soon as the sanctions regime is lifted,” he said. “There are so many opportunities in Iran both in oil and gas that we will certainly find a common area of interest.”
Other Western oil executives also visited Zanganeh’s suite, including CEO Gerhard Roiss of Austrian energy group OMV AG.
Officials from Royal Dutch
Iran’s President Hassan Rouhani made a one-day visit to Bushehr province where a magnitude-5.3 quake left seven people dead and damaged buildings.
Rouhani then visited the Pars Special Economic Energy Zone (PSEEZ) where the giant offshore South Pars gas field is located.
He highlighted the influential role of South Pars gas field in the country’s economic and energy development, saying: “Revenues from South Pars phases in Assaluyeh alone can run the country. Currently, 10 gas phases have become operational in Assaluyeh with approximate revenues at $ 40 billion.”
“If all phases of this zone became fully operational, the revenues will reach $ 100 billion,” said the president.
Rouhani said Iran’s conditions are now conducive to economic development, adding: “Under the aegis of political measures taken internationally, currently the conditions have improved for economic developments.”
The president was briefed about progress in phases 12, 17&18, as well as 1&2 of South Pars.
“The achievements made in Assaluyeh indicate that all petroleum industry activists are completely ready to contribute to the development of the zone and they have come to accomplish their tasks,” said the president.
Noting that gas and petrochemical industries are highly significant for the country’s development, he said Iranians hope for maximum production from this oil-rich region.
Rouhani Stresses
South Pars Development
Monthly No.19Iran Petroleum
7
Rouhani predicted that Iran will surpass its partner in recovery from South Pars which they share.
“To that end, the government is ready to help the petroleum industry for the development of South Pars,” said the president.
He said the government will significantly contribute to South Pars development by making the preparations for the private sector to get involved in South Pars.
Rouhani said appointment of Bijan Namdar Zangeneh as petroleum minister will push development programs in the energy sector.
Ali Akbar Shabanpour, managing director of Pars Oil and Gas Company, and Abbas Sheri-Moqaddam managing director of National Petrochemical Company, submitted reports to the president.
In a meeting with contractors, Zangeneh has underlined the need for the acceleration of work in Phase 12 of South Pars gas field.
He said gas production from the offshore section of Phase 12 must be prioritized.
Zangeneh said two desalting units in Phase 12 are expected to come online in March 2014, adding that these units are of great importance for fuel supply in the winter.
The minister said contractors must always think that international sanctions on the oil industry are not being lifted. “Important petroleum industry projects must not be delayed due to waiting for the lifting of sanctions. The necessary commodities must be supplied in whatsoever manner and be installed in the project,” he added.
Phase 17&18
Zangeneh told contractors of phases 17&18 of South Pars that the main and satellite platforms of this phase must be installed next year.
“In the onshore section, we have to shorten the construction process. For example we can purchase electricity panel and install it in 20 days in order to accelerate the project. An electricity panel does not need five months time,” he said.
“After the onshore and offshore sections become operational, we hope to feed gas from this phase into IGAT in winter 2015,” said Zangeneh.
The minister added that the problems in the turbocompressors of phases 17&18 will be resolved through cooperation with the foreign manufacturer.
Phases 15&16
In a meeting with contractors of phases 15&16 of South Pars, Zangeneh said production from this phase must exceed 10 mcm/d, versus the current output of 6 mcm/d.
“The terrain of these two phases is in the final stage of steam test and it must come on-stream before the cold snap,” said the minister.
National Iranian Gas Exports Company (NIGEC) and India’s big energy companies like GSPC, IOC and Gail sat together in December and managed to reach a basic agreement for Iran’s gas delivery to India through a subsea pipeline. This basic accord is a watershed because it was achieved after five years of talks.
In the meantime, talks are under way with India to join Iran’s under-construction pipeline to Pakistan. Indian and Iranian parties are both optimistic that India will be included in the project.
Iran has agreed to supply 31 mcm/d of gas to India through a subsea pipeline cutting through the Sea of Oman.
India’s power plants are facing fuel shortage and they mainly use coal to generate electricity. India will be able to resolve this problem by using Iran’s huge gas reserves.
Ali Amirani, director of marketing and sales at NIGEC, says: “The Heads of Agreement for cooperation between NIGEC and the [Indian] companies about [Iran’s] gas exports to India has been finalized. After its signature in the coming one month, we will enter talks with the Indian sides about selling gas and its pricing.”
He said NIGEC and India’s Sage recently signed a memorandum for the construction of a subsea pipeline deep in the Sea of Oman. This Indian company has concluded preliminary studies for this project.
Amirani said Iran-India pipeline would cost $ 4 to 5 billion and will have an initial capacity of 31 mcm/d. But given India’s extensive market, it would be possible to lay out another pipeline near the first one, if feasibility studies lead to positive results. Indian buyers, Sage and NIGEC form the three sides of triangle of Iran’s gas exports to India. This is the first time that Indian gas buyers are showing inclination for such a project.
India is facing growing gas demand; therefore, Iran’s gas export through a subsea pipeline is not in contradiction with the Iran-Pakistan pipeline.
The representative of India’s Sage, which has proposed the subsea pipeline, said the pipeline will pass from Chabahar Port in southeastern Iran to end in Gujarat province. Noting that India faces severe energy shortage, the Indian official said his country desperately needs to import gas from friendly Iran.
Referring to the 3,400-meter depth of such a pipeline which would be 1,400 kilometers long, the Indian official said the project will be technologically sophisticated and unique in the world. Construction of the pipeline with 31 mcm/d capacity will last two to three years.
If this project is finalized it could be the first achievement in Iran’s energy diplomacy following its interim deal with world powers on the nuclear issue.
Moreover, India’s growing energy needs has persuaded this country to reach agreement with Iran as soon as possible. The subsea project is economically viable and less costly than other ways of energy transportation such as LNG, and delay in
Pakistani Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said feasibility studies for an under-construction pipeline projected to carry natural gas from Iran to Pakistan has been completed.
After a meeting with Iranian Petroleum Minister Bijan Namdar Zangeneh in Tehran, Abbasi said the two ministers had discussed how to push ahead with the Iran-Pakistan (IP) gas pipeline project, as well as restrictions and impediments ahead of the project. Abbasi and Zangeneh also discussed future conditions of the project after sanctions against Iran are lifted.
While negotiating about various aspects of the project, the two parties agreed that their technical teams and relevant working groups regularly follow up and monitor the timely progress of the project.He said Tehran and Islamabad ought to define parameters for the pipeline project to go ahead.
Abbasi said the project will come on-stream in the due time, provided that the necessary credit for the Pakistani section of the project is supplied and the necessary equipment including “compression equipment” is installed.
Abbasi said the Pakistani section of the project is facing financial restrictions, adding that the project is unlikely to go ahead as planned.
He noted that the finance of the Pakistani section of the pipeline will become easier if sanctions against Iran are lifted.
Abbasi said the sanctions have dissuaded potential investors from financing this project, which he described as economically viable.
He added that some private Iranian companies are currently involved in the construction of the Pakistani section of the pipeline and Iranian officials have welcomed the presence of third parties in the project.
The Pakistani minister said in his meeting with Zangeneh he discussed various issues: importing liquefied petroleum gas (LPG) from Iran, construction of refinery, crude oil and oil products import from Iran.
Abbasi said Islamabad welcomes both Iran-Pakistan project and Trans-Afghanistan Pipeline (TAPI) to meet its growing energy needs.
He added that his country is also looking for a third alternative to import gas and resolve its gas shortage crisis.
The Pakistani minister said his country is currently producing 4 bcf/d of gas, still needing the same volume to meet its domestic demand; hence, Islamabad welcomes such projects.
Abbasi said the imported gas through TAPI is cheaper than that of IP.
He; however, expressed optimism that the Iran-Pakistan gas pipeline will be completed soon.
Abbasi said severe gas shortage in Pakistan has triggered massive protests urging the Pakistani government to look for solutions to this challenge, and construction of IP pipeline is among them.
Norway has amassed big wealth mainly due to its huge oil and gas discoveries since the late 1960s. However, Norway does not owe its technology and wealth exclusively to its rich hydrocarbon reserves. Its management of these reserves mainly over the past two decades has largely affected economic and industrial indicators of the country. Norway used to depend on foreign companies for exploration and development of oil and gas reserves, but now it owns state-of-the-art technology which serves different spots in the world.
Iran greatly values Norway’s petroleum industry because of its self-acquired technology and years of cooperation in the past. Norway’s Statoil was among foreign companies which pulled out of Iran’s projects due to international sanctions targeting the Islamic Republic’s energy sector. But the recently-sealed nuclear deal between Iran and world powers – thanks to the administration of President Hassan Rouhani – is expected to attract foreign oil companies back into Iran.
In order to get familiar with Norway’s future energy cooperation with Iran under the new circumstances, Iran Petroleum has conducted an interview with Norwegian Ambassador to Tehran
Jens-Petter Kjemprud.
As the first question, could you please tell us your assessment of the influence of Iran’s nuclear deal with P5+1 on Tehran-Oslo relations?
The P 5+1 nuclear deal is a historic breakthrough in Iran’s relations with the international community in general and the US and Western countries in particular. It is an important basis for further normalizing relations and developing political, economic and cultural ties bilaterally and through multilateral arenas. Both parties (Iran and the P5+1) must now carefully consider why earlier attempts of reaching a permanent deal, like in 2003, did not succeed. Both parties must also deliver dutifully on the agreed measures to be taken in the 6 month interim period. Learning from past experiences and delivering on the intermediary deal will create the necessary trust and thus facilitate a permanent deal which in the end will provide Iran the opportunity to deal with the rest of the world free of any sanctions.
How do you evaluate the current level of cooperation between Norway and Iran? How will this cooperation change, once sanctions against Iran are eased?
The current level of cooperation between Iran and Norway is seriously hampered by the multilateral as well as US and EU unilateral sanctions hitting third parties. Economic cooperation, trade, business relations and investment has “dried” up because of the sanctions, in particular since the imposition of heavier sanctions during the last 2-3 years. There is a huge untapped potential in Iranian-Norwegian cooperation and we know that Norwegian and Iranian companies are following the nuclear talks closely to be ready to tap the potential when sanctions relief allows.
Quite obviously, if you look at Iranian-Norwegian [relations], especially in oil sector before the latest sanctions were imposed; there was a quite comprehensive cooperation in the oil sector. Oil companies [like] Statoil had quite an important role in the South Pars [gas] field and in a few other fields, as well. So although Statoil has not decided to come back, they are obviously following the situation.
Iran’s new administration is widely expected to broaden its ties with the West and Western oil companies, including France’s Total and Royal Dutch Shell, showed interest in Iran’s energy sector, but we did not hear anything from Statoil. Why?
If I knew I would not be able to reveal business secrets. But I feel quite certain and I presume that they both are looking into what is happening now in Geneva, in the new agreement and after they are doing whatever they think is right to be able to take advantage of the possibilities which will be open if you have a final agreement. The temporary agreement for the sanctions allows certain development and then you go into new negotiations and then for the eventually lifting of all sanctions.
What are the potentials for the expansion of cooperation of the two countries? In case sanctions are fully lifted in the coming months, which sector will Norway prefer to cooperate with Iran in?
There is a wide range of areas of cooperation which would be of mutual benefit. This includes of course the petroleum sector including the supply services, but also a number of other sectors like in particular specialized fertilizers, quality and certification services to name a few. Other areas could be identified.
I think definitely the petroleum sector will be important. We have experience there from the past, [experience of] working in Iran. I think in addition to sanctions, also the revision of the framework [of the contracts] and the agreements which are now revised could give further impetus to international oil companies coming back. Of course the petrochemical sector as such is also quite interesting. And if sanctions are lifted I guess they will also be very interested in the Iranian market. It will be in the interest of Iran not only as an oil producer but also a huge market. And so many countries have been active before but their operations have been restricted by the sanctions.
So the fact that Iran’s a big market, it’s good for Iran and good for other countries to have common mutual benefits which I think should serve as an encouragement for both parties to finalize a deal. So these mutual benefits for having a deal I think is an important push factor for reaching a deal. If you see some of the sanctions [are] lifted now for example for the airline, civil aviation, car industry, it’s not only a good deal for Iran but also for other countries cooperating with Iranian companies in these businesses. So I think the future benefit issue is quite important.
Given Iran’s massive hydrocarbon recourses, what role can Iran play in the global energy scene, especially in Europe?
On the global energy scene Iran, with its abundant reserves in oil and gas, is among the most important players even today under sanctions. If the continuation of the nuclear talks succeeds Iran could increasingly expand its stature and role. As for Europe both oil and gas supplies could beneficial.
As Norway is one of the biggest gas suppliers to the European market today, future coordination and cooperation between the two countries would be beneficial. Norway is an observer member of the GECF and participated in the recent ministerial meeting in Tehran. Through this organization, now under a very capable Iranian chair, I forecast desirable horizons for future cooperation.
Norway’s Statoil has already operated development projects in Iran. Are Statoil and other Norwegian companies willing to return to Iran’s oil and gas projects?
Statoil and Hydro have now merged their petroleum activities under the Statoil umbrella. As you know Statoil had very good experiences in Iran, especially through their role in the South Pars field but are currently not active in Iran due to the sanctions. Given the current developments, most oil companies are following closely the developments in Iran and I presume this includes Statoil and possibly other Norwegian companies.
Norway has in the past trained Iranian experts. Do you think that these training programs will continue in the short, medium or long term?
Transfer of knowledge and technology has been severely hit by sanctions. There is a solid basis for resuming cooperation in this field. There are also many Iranian experts working in the Norwegian oil industry, today. Therefore, when the situation allows we should carefully look into future cooperation in this field.
What task has been assigned to the Norwegian Embassy in Tehran with regards to oil and gas cooperation between the two countries? Have you held talks with Iranian oil officials?
Our predominant role is to secure Norwegian interests in Iran and continuously look for opportunities of mutual interests and common benefits for the two countries. The oil and gas sector is probably the most important, but not the only sector the Embassy is trying to follow. However, the real experts work for the companies and our role is the facilitator’s role, if and when it is needed. I; however, hope to meet your new Minister soon to discuss the overall framework for the oil sector in Iran as a basis for facilitating possible future cooperation.
Norway has progressed significantly in oil and gas technology and development projects. Do you have any plans to provide other countries including Iran with this technology?
As I said above, technology transfer is one important aspect of cooperation. Norway has through research and developing of the oil and gas sectors acquired technologies that give us some of the highest recovery rates in the international oil and gas environment. This includes also the ability to stop flaring of gas and utilize the resources efficiently. Research and investment is required, and I believe this is where Iran could benefit substantially in the future.
Given Iranian oil industry’s potentials for investment and Petroleum Minister Bijan Namdar Zangeneh’s policy of reviewing oil contracts in order to make them more attractive, are your government and Norwegian oil companies willing to invest in Iran’s projects?
We are following closely the revision of policies and contracts announced by the Minister and believe that such a development could further increase the interest of multinational oil companies in Iran as the possibilities for investment will reemerge on the back of the Geneva talks.
You mentioned you are waiting to see how Iran’s Petroleum Ministry will define the terms of new oil contracts. Statoil and Hydro have already struck buy-back contracts with Iran. What points do you think should be taken into consideration in the new contracts to attract Norwegian companies?
Well although I am a lawyer by profession and I am not an expert in the contracts, I understand from talking to the Iranian [Petroleum] Ministry and the Norwegian companies that the current contracts are less attractive to foreign companies and now the ministry is looking into revising the contracts to be more attractive for investors. So that seems to be an incredibly important move to get the companies, when sanctions are lifted, into the countries as fast as possible.
What do you think of future oil and gas cooperation between Iran and Norway?
I am an eternal optimist and what is happening just now with the interim deal and new round of negotiations, brings hope and expectations. Before coming to Iran I told a Norwegian newspaper that changes would come. Now I urge everyone to stay optimistic and constructive at the same time emphasizing the need to manage expectations in the short term.
We should allow ourselves to be carried away a little by the breakthrough agreement, but also shoulder the responsibility to carry through the remaining issues of contention. The small steps will only alleviate and remove some impediments of cooperation and suspend some sanctions. There is need to rebuild trust and identify and solidify the convergence of common interests which I think must be the basis for a solid understanding for rebuilding solid relation. The convergence of interests is there, let us treasure and develop it for a lasting deal to be achieved.
Given the present political circumstances about Iran, does the Norwegian government have any plans regarding broader ties with Iran?
I usually answer that by saying that before I came here, I was interviewed by a Norwegian newspaper on Iranian-Norwegian relations, and I said that I believe there would be changes in Iran’s relations with the international community, during my duty there. Not because of me, but because circumstances was ripe.
I predict that much will change, what we are seeing these days in Geneva accords and new negotiations coming up, it is changing the whole relationship with the international community.
Norway has amassed big wealth mainly due to its huge oil and gas discoveries since the late 1960s. However, Norway does not owe its technology and wealth exclusively to its rich hydrocarbon reserves. Its management of these reserves mainly over the past two decades has largely affected economic and industrial indicators of the country. Norway used to depend on foreign companies for exploration and development of oil and gas reserves, but now it owns state-of-the-art technology which serves different spots in the world.
Iran greatly values Norway’s petroleum industry because of its self-acquired technology and years of cooperation in the past. Norway’s Statoil was among foreign companies which pulled out of Iran’s projects due to international sanctions targeting the Islamic Republic’s energy sector. But the recently-sealed nuclear deal between Iran and world powers – thanks to the administration of President Hassan Rouhani – is expected to attract foreign oil companies back into Iran.
In order to get familiar with Norway’s future energy cooperation with Iran under the new circumstances, Iran Petroleum has conducted an interview with Norwegian Ambassador to Tehran
Jens-Petter Kjemprud.
As the first question, could you please tell us your assessment of the influence of Iran’s nuclear deal with P5+1 on Tehran-Oslo relations?
The P 5+1 nuclear deal is a historic breakthrough in Iran’s relations with the international community in general and the US and Western countries in particular. It is an important basis for further normalizing relations and developing political, economic and cultural ties bilaterally and through multilateral arenas. Both parties (Iran and the P5+1) must now carefully consider why earlier attempts of reaching a permanent deal, like in 2003, did not succeed. Both parties must also deliver dutifully on the agreed measures to be taken in the 6 month interim period. Learning from past experiences and delivering on the intermediary deal will create the necessary trust and thus facilitate a permanent deal which in the end will provide Iran the opportunity to deal with the rest of the world free of any sanctions.
How do you evaluate the current level of cooperation between Norway and Iran? How will this cooperation change, once sanctions against Iran are eased?
The current level of cooperation between Iran and Norway is seriously hampered by the multilateral as well as US and EU unilateral sanctions hitting third parties. Economic cooperation, trade, business relations and investment has “dried” up because of the sanctions, in particular since the imposition of heavier sanctions during the last 2-3 years. There is a huge untapped potential in Iranian-Norwegian cooperation and we know that Norwegian and Iranian companies are following the nuclear talks closely to be ready to tap the potential when sanctions relief allows.
Quite obviously, if you look at Iranian-Norwegian [relations], especially in oil sector before the latest sanctions were imposed; there was a quite comprehensive cooperation in the oil sector. Oil companies [like] Statoil had quite an important role in the South Pars [gas] field and in a few other fields, as well. So although Statoil has not decided to come back, they are obviously following the situation.
Iran’s new administration is widely expected to broaden its ties with the West and Western oil companies, including France’s Total and Royal Dutch Shell, showed interest in Iran’s energy sector, but we did not hear anything from Statoil. Why?
If I knew I would not be able to reveal business secrets. But I feel quite certain and I presume that they both are looking into what is happening now in Geneva, in the new agreement and after they are doing whatever they think is right to be able to take advantage of the possibilities which will be open if you have a final agreement. The temporary agreement for the sanctions allows certain development and then you go into new negotiations and then for the eventually lifting of all sanctions.
What are the potentials for the expansion of cooperation of the two countries? In case sanctions are fully lifted in the coming months, which sector will Norway prefer to cooperate with Iran in?
There is a wide range of areas of cooperation which would be of mutual benefit. This includes of course the petroleum sector including the supply services, but also a number of other sectors like in particular specialized fertilizers, quality and certification services to name a few. Other areas could be identified.
I think definitely the petroleum sector will be important. We have experience there from the past, [experience of] working in Iran. I think in addition to sanctions, also the revision of the framework [of the contracts] and the agreements which are now revised could give further impetus to international oil companies coming back. Of course the petrochemical sector as such is also quite interesting. And if sanctions are lifted I guess they will also be very interested in the Iranian market. It will be in the interest of Iran not only as an oil producer but also a huge market. And so many countries have been active before but their operations have been restricted by the sanctions.
So the fact that Iran’s a big market, it’s good for Iran and good for other countries to have common mutual benefits which I think should serve as an encouragement for both parties to finalize a deal. So these mutual benefits for having a deal I think is an important push factor for reaching a deal. If you see some of the sanctions [are] lifted now for example for the airline, civil aviation, car industry, it’s not only a good deal for Iran but also for other countries cooperating with Iranian companies in these businesses. So I think the future benefit issue is quite important.
Given Iran’s massive hydrocarbon recourses, what role can Iran play in the global energy scene, especially in Europe?
On the global energy scene Iran, with its abundant reserves in oil and gas, is among the most important players even today under sanctions. If the continuation of the nuclear talks succeeds Iran could increasingly expand its stature and role. As for Europe both oil and gas supplies could beneficial.
As Norway is one of the biggest gas suppliers to the European market today, future coordination and cooperation between the two countries would be beneficial. Norway is an observer member of the GECF and participated in the recent ministerial meeting in Tehran. Through this organization, now under a very capable Iranian chair, I forecast desirable horizons for future cooperation.
Norway’s Statoil has already operated development projects in Iran. Are Statoil and other Norwegian companies willing to return to Iran’s oil and gas projects?
Statoil and Hydro have now merged their petroleum activities under the Statoil umbrella. As you know Statoil had very good experiences in Iran, especially through their role in the South Pars field but are currently not active in Iran due to the sanctions. Given the current developments, most oil companies are following closely the developments in Iran and I presume this includes Statoil and possibly other Norwegian companies.
Norway has in the past trained Iranian experts. Do you think that these training programs will continue in the short, medium or long term?
Transfer of knowledge and technology has been severely hit by sanctions. There is a solid basis for resuming cooperation in this field. There are also many Iranian experts working in the Norwegian oil industry, today. Therefore, when the situation allows we should carefully look into future cooperation in this field.
What task has been assigned to the Norwegian Embassy in Tehran with regards to oil and gas cooperation between the two countries? Have you held talks with Iranian oil officials?
Our predominant role is to secure Norwegian interests in Iran and continuously look for opportunities of mutual interests and common benefits for the two countries. The oil and gas sector is probably the most important, but not the only sector the Embassy is trying to follow. However, the real experts work for the companies and our role is the facilitator’s role, if and when it is needed. I; however, hope to meet your new Minister soon to discuss the overall framework for the oil sector in Iran as a basis for facilitating possible future cooperation.
Norway has progressed significantly in oil and gas technology and development projects. Do you have any plans to provide other countries including Iran with this technology?
As I said above, technology transfer is one important aspect of cooperation. Norway has through research and developing of the oil and gas sectors acquired technologies that give us some of the highest recovery rates in the international oil and gas environment. This includes also the ability to stop flaring of gas and utilize the resources efficiently. Research and investment is required, and I believe this is where Iran could benefit substantially in the future.
Given Iranian oil industry’s potentials for investment and Petroleum Minister Bijan Namdar Zangeneh’s policy of reviewing oil contracts in order to make them more attractive, are your government and Norwegian oil companies willing to invest in Iran’s projects?
We are following closely the revision of policies and contracts announced by the Minister and believe that such a development could further increase the interest of multinational oil companies in Iran as the possibilities for investment will reemerge on the back of the Geneva talks.
You mentioned you are waiting to see how Iran’s Petroleum Ministry will define the terms of new oil contracts. Statoil and Hydro have already struck buy-back contracts with Iran. What points do you think should be taken into consideration in the new contracts to attract Norwegian companies?
Well although I am a lawyer by profession and I am not an expert in the contracts, I understand from talking to the Iranian [Petroleum] Ministry and the Norwegian companies that the current contracts are less attractive to foreign companies and now the ministry is looking into revising the contracts to be more attractive for investors. So that seems to be an incredibly important move to get the companies, when sanctions are lifted, into the countries as fast as possible.
What do you think of future oil and gas cooperation between Iran and Norway?
I am an eternal optimist and what is happening just now with the interim deal and new round of negotiations, brings hope and expectations. Before coming to Iran I told a Norwegian newspaper that changes would come. Now I urge everyone to stay optimistic and constructive at the same time emphasizing the need to manage expectations in the short term.
We should allow ourselves to be carried away a little by the breakthrough agreement, but also shoulder the responsibility to carry through the remaining issues of contention. The small steps will only alleviate and remove some impediments of cooperation and suspend some sanctions. There is need to rebuild trust and identify and solidify the convergence of common interests which I think must be the basis for a solid understanding for rebuilding solid relation. The convergence of interests is there, let us treasure and develop it for a lasting deal to be achieved.
Given the present political circumstances about Iran, does the Norwegian government have any plans regarding broader ties with Iran?
I usually answer that by saying that before I came here, I was interviewed by a Norwegian newspaper on Iranian-Norwegian relations, and I said that I believe there would be changes in Iran’s relations with the international community, during my duty there. Not because of me, but because circumstances was ripe.
I predict that much will change, what we are seeing these days in Geneva accords and new negotiations coming up, it is changing the whole relationship with the international community.
Construction of upstream oil and gas industry facilities in the southern coast of the Caspian Sea started in the early 1990s. Until that time, most infrastructures and facilities in the northern provinces of Guilan, Mazandaran and Golestan included non-integrated pipelines used for distribution of oil products or national network for natural gas distribution. Following the commencement of Central Asian crude oil swap through Iran in early 1990s, Neka in Mazandaran province was chosen as the first center for the establishment of upstream oil industry infrastructures.
Nearly 20 years on, besides an offshore jetty used for offloading the crude oil imported from Kazakhstan, tanks have been constructed to store nearly 900,000 barrels of crude oil and more than 400,000 barrels of miscible oil. However, extensive plans are under way to increase oil storage capacity in Neka.
Mousavi, managing director of Iran Oil Terminals Company, says three crude oil storage tanks, each with a capacity of 150,000 barrels, are under construction in this terminal. He said the storage facilities being constructed will significantly raise storage capacity in Neka.
Mousavi said Neka is the only terminal for oil swap in Iran. Neka Oil Termianl was constructed near the old commercial port Amir-Abad so that Iran could win a share in Caspian oil and energy trade.
As Iran accelerated its efforts to join Caspian oil and gas producers, other facilities like shipyards were mounted while drilling rigs as well as jetties were set up in this region for supporting exploration and drilling services.
In the meantime, widespread efforts are under way by National Iranian Oil Company for enhancing the capacity of infrastructures in the Neka oil region. Neka Oil Pool can accommodate more oil tankers entering this region. That is one of the most significant strategies followed by Iran in the southern coast of the Caspian Sea.
Regarding the significance of construction of the Neka pool, Mousavi said: “With the completion of the oil pool in the North Oil Terminal, this oil pool remains the only completed pool in the Caspian Sea, and is unique [compared with other ones] in Central Asia and even in Russia.”
In the short term, this project is expected to increase the capacity of crude oil delivery to IOTC from 200,000 b/d to 500,000 b/d and meet the procurement needs of the oil industry. In the long term, it will be a strong support for Iran’s exploration in Caspian Sea.
After Central Asia oil swap operations started, a pipeline was laid out stretching from Neka to Tehran Refinery. This pipeline is known as Neka-Rey pipeline. Neka is the key element of this pipeline because it is the only terminal for oil swap in northern Iran.
But the issue of expansion of Iran’s upstream and even mid-stream oil industry in the north of the country heavily depends on one of the most daring energy transmission projects in the Caspian Sea.
The important project for laying out a pipeline to carry oil from Neka to Jask Port in the Sea of Oman is very strategic for Iran in terms of energy transfer. This project, first proposed by current Minister of Industry, Trade and Mine Mohammad-Reza Nematzadeh, would create major political and economic capacities for Iran once it is completed.
Different parts of Neka-Jask Pipeline, which is 1,640 kilometers long, will measure 36, 42 and 48 inches in diameter throughout its extension. Six pumping facilities and two pressure regulators are planned to be built throughout the strategic pipeline which will start from Neka and cut through Mazandaran, Semnan, Yazd and Kerman provinces to reach Jask Port in the southern Hormuzgan province.
This pipeline will have the capacity to carry 1 mb/d of crude oil from Caspian Sea littoral states to the Sea of Oman coasts.
Construction of crude oil pipeline and relevant facilities from Neka to Jask will promote Iran’sgeopolitical status, increase Iran’s national security and serve the country’s national interests. The pipeline is also important as Kazakhstan’s Kashgan oil field is producing 1.5 mb/d of crude oil.
Mousavi said: “Construction of Jask Exports Terminal with the capacity of 20 million barrels is under way. As the capacity of Neka is increasing and Neka-Jask pipeline ,as well as Jask’s new oil terminal are under construction, it will be possible to carry 1 mb/d of oil from Neka to Jask as part of Caspian Sea oil swap operations.”
There are other important and advantageous regions in Guilan and Golestan provinces for the construction of oil and gas infrastructures. Turkmen and Anzali ports in Golestan and Guilan provinces are capable of playing
an instrumental role in
the expansion of Iran’s energy exchanges with Turkmenistan and the Republic of Azerbaijan.
Caspian Sea is one of the most significant places for future energy power balance in the world. The most optimistic estimates indicate that Caspian Sea makes up only around five percent of the world’s proven oil and gas reserves, which is not comparable with the 60 percent share of Persian Gulf. But the geopolitics of the Caspian Sea and its energy reserves will turn the land-locked lake into a major energy supply center up by 2050 and even beyond.
Estimates show that the Caspian Sea, measuring 436,000 square kilometers, holds 50 billion barrels of oil and 300 tcf of gas.
Until the 1991 collapse of the Former Soviet Union, Iran and the Soviet Union were the only two countries sharing the Caspian Sea. But Turkmenistan, Kazakhstan and Azerbaijan have since become Caspian Sea littoral states. Kazakhstan holds the largest oil reserves among the breakaway republics of Former Soviet Union, and is likely to be one of the most important producers of oil in the Caspian Sea in the coming years.
Kazakhstan holds nearly two percent of the world’s proven oil reserves. It is currently consuming less than 200,000 b/d of oil domestically and supplying nearly 1 mb/d to world markets. Kazakhstan plans to attract $ 100 billion in foreign investment by 2025. It hopes to gain some $ 120 billion from oil through 2021 to 2035.
Turkmenistan, which is Iran’s northeastern neighbor, is a gas-rich country and holds the least amount of oil among the five Caspian Sea littoral states. Gas is the main driving force in Turkmen economy and more than half of its budget depends on revenues from gas exports. Gas makes 60 percent of Turkmenistan’s exports which also include crude oil (15 percent) and oil products (14 percent). These exports make nearly 90 percent of Turkmenistan’s total revenues. Nearly 75 percent of investment made in Turkmenistan’s economy is in its oil and gas sectors. Under its 10-year strategy for economic and social development, the share of foreign investment in Turkmenistan’s oil and gas industries is forecasted at 3. 75percent.
Iran, which has more than a century of experience in oil and gas production, conducted its first successful drilling in its sector of the Caspian Sea just three years ago. Initial estimates indicate that Iran’s share of the Caspian Sea oil stands at around 20 billion barrels.
Sardar-e-Jangal gas field, explored in recent years, was Iran’s first gas exploration in the Caspian Sea. However, supplementary surveys show that oil and gas are much likely to exist in other layers and formations located in Iran’s sector of the Caspian Sea.
Ali Osouli, managing director of Khazar Exploration and Production Company, says 46 small and big oil and gas formations have so far been identified in Iran’s section of the Caspian Sea. Sardar-e-Jangal is just one of them.
Located in the extremity of Iran’s border in the Guilan province, Sardar-e-Jangal gas field is Iran’s only energy project in the Caspian Sea. Comprised of different layers, the field is 24 kilometers long and 16 kilometers wide.
The field was discovered in 2001 at the depth of 700 meters. Ten years later, an oil layer was explored at the depth of 728 meters following exploration studies on Amir-Kabir semisubmersible Platform.
Sardar-e-Jangal holds 50,000 bcf of gas in place. This figure shows that the reserves in this field are ten times Shah Deniz gas field in Azerbaijan. Sardar-e-Jangal also contains two billion barrels of oil in place, nearly 500 million barrels of which are recoverable.
The drilling of the second exploration well in this field is under way. Oil and gas has yet to be produced from this field. Production requires other facilities including pipelines, storage facilities and desalting plants.
In addition to Sardar-e-Jangal, there are other attractive exploration layers in Iran’s section of Caspian Sea. Chalous oil and gas field with probably three billion barrels of oil reserves, Nour and Royan fields, Ramsar hydrocarbon layer and Roudsar hydrocarbon layer are among hydrocarbon reserves in Iran’s section of Caspian Sea.
Russia is also an active country in the Caspian Sea’s energy and is one of the most influential states on energy geopolitics in this region. Russia’s oil industry is one of the most advanced industries in the world. In 2005, Russia exported more than 151 bcm of natural gas to Europe to become the largest gas exporter in the world. A recent report from the British Petroleum showed that Russia was the top oil producer in the world in 2010.
Azerbaijan claims to be the oldest player in the Caspian oil reserves. Oil is an important element in the Republic of Azerbaijan’s foreign policy. Azerbaijan’s oil revenues reached $ 5.1 billion in 2006, and have stood at $ 8.5 billion since 2008.
The manager of State Oil Company of Azerbaijan Republic (SOCAR) has said that Azerbaijan will gain $100 billion in revenues from 2005 to 2025 if oil sells at $35 per barrel.
In order to have a better understating of Caspian geopolitics, one has to take into account the fact that the strategic routes of energy transfer cutting through the Caspian Sea to world markets could not be ignored. In addition to the capacities of the Caspian Sea littoral states in energy production, the advantages of energy transport as well as developments related to oil and gas transmission from this region to world markets have made this region geopolitically strong.
“All Caspian Sea littoral states naturally want to take advantage of energy sources to meet their domestic needs. Many of these countries like the Republic of Azerbaijan, Kazakhstan or even Turkmenistan which have significant oil and gas reserves are land-locked. Therefore, routes for transmission of energy from these countries are highly significant,” a prominent expert in Caspian affairs says.
Therefore, it is necessary to take into account the strategic importance of energy transmission routes. To that effect, Iran has access to the Persian Gulf, which is one of the most important routes for transfer of oil and energy carriers. There are five energy transmission routes in the Caspian Sea. Except for the southern route, which crosses Iran, other routes have undergone serious development projects for energy transfer.
On the western route which carries oil and gas from Caspian Sea states to Europe via Georgia and Turkey, several important pipelines have been laid out[ Baku-Novorossiysk pipeline: a 1,500-kilometre long oil pipeline, Baku-Supsa Pipeline: an 920-kilometre long oil pipeline, Baku-Tbilisi-Ceyhan pipeline: a 1,730 kilometer long crude oil pipeline, Tengiz-Novorossiysk oil pipeline: a 1,600 kilometer pipeline, and
Baku-Erzurum pipeline and the pipeline known as Khazar Consortium] which are among the most important energy transmission projects.
In the northern section, there are important energy transmission projects. Pipelines laid out on this route carry oil and gas from Kazakhstan to the Black Sea while cutting through Russia. This route is a symbol of strength for Russia in Caspian Sea’s energy transmission geopolitics.
The main pipeline on this route is Atyrau-Samara pipeline (695 km). The pipeline is one of the major existing export routes for Kazakhstan oil further transporting by the system “Transneft” to the ports of Primorsk, Novorossiysk and the system “Friendship” to the markets of North-West, Central and Eastern Europe.
The eastern route for transmission of energy from the Caspian Sea has been designed and established to meet China’s energy needs. Kazakh and Turkmen oil and gas are carried to Asia’s energy-thirsty economic giant through this route. The 3,000-kilometer Kazakhstan-Xinxiang pipeline carries energy to China.
In the southeast of the Caspian Sea, Turkmenistan has developed several projects to raise its share of gas-thirsty markets. This route starts from Turkmenistan, and cutting through Afghanistan extends into Pakistan to reach its ports. The MOU for this pipeline was signed in 1997 by Turkmenistan, Afghanistan, Pakistan and Uzbekistan, but the 1,673-kilometer project has not been implemented due to security concerns.
On the same route is located the 1,735-kilometer TAPI. The Trans-Afghanistan is a proposed natural gas pipeline being developed by the Asian Development Bank. Expected to be completed around 2017, the pipeline will transport 33bcm of Caspian Sea natural gas from Turkmenistan through Afghanistan into Pakistan and then to India.
A review of realities about Caspian Sea’s energy reserves and its geopolitics will make it more than necessary for Iran to strengthen its position in this region. Iranian Petroleum Minister Bijan Namdar Zangeneh’s energy diplomacy will enable Iran to provide the most secure and the most economical route for the transfer of energy carriers from Caspian Sea.
The western coasts of the Caspian Sea are among the first regions in the world to have witnessed the emergence of modern oil industry in the 19th century. The first crude oil recovery facilities in Caucasus and even in Asia were constructed in Baku’s famous oil basins in the 1870s.
There were estimates of oil reserves in the Iranian-held section of the Caspian Sea, but no effective measures were taken for oil recovery until a century later. Iran’s first attempts for oil and gas exploration and extraction in the southern coasts of the Caspian Sea date back to before the 1979 Islamic Revolution. Alas, all drilling efforts undertaken before and after the revolution ended in failure. However, Iran did not get disappointed in its attempt to extract oil and gas from this strategic region.
Despite delays and failures, oil and gas explorations continued in the Caspian Sea.
In the meantime, problems and risks were much more serious for exploration and production in Iranian-held waters of the Caspian Sea. Technically speaking, beyond 300-meter depths, drilling and laying out subsea pipelines for carrying hydrocarbon require sophisticated technologies. Iran’s section of Caspian Sea is the deepest and these properties could not be changed with any technology.
Carrying out drilling operations for exploration, appraisal and development purposes in such depths is not possible by using fixed drilling platforms and semi-submersible platform technology is needed. The problems pertaining to oil and gas exploration and development in the southern part of the Caspian Sea are not limited to this issue. Caspian Sea is land-locked and is deprived of easy access to high seas and offshore corridors for moving drilling platforms. That is why none of Caspian Sea littoral states, even those with low-depth waters, cannot purchase a ready drilling rig and move it there.
They need to bring in components and assemble them in onshore shipyards.
Until years ago, nobody could imagine oil recovery from the Caspian Sea and drilling in deep waters by using modern technology and equipment and employing local and specialized forces. But today, this imagination has come true and use of this technology has earned Iran a special status in the region. This status is strategic in terms of power and economy.
Hedayatollah Khademi, managing director of North Drilling Company which carried out the first successful drilling of oil well in the Caspian Sea, says: “For Iran and many other countries, drilling beyond 1,000 meters deep into the sea and reaching hydrocarbon reserves there, was a legend until several years ago. But under the aegis of efforts undertaken by Petroleum Ministry and Iranian companies, Amir-Kabir Semisubmersible Platform managed to take its drilling bit to Sardar-e-Jangal reservoir and realize the legend of Iran oil and gas production.”
Khademi said Amir-Kabir Semisubmersible Platform, operated by Iranian specialists in NDCO, was a historic step in Iran’s century-old petroleum industry.
“ n,” he said.
“In the end, Iranian staff, relying on their knowledge and expertise, managed to operate this platform, and after its installation in the drilling position, they carried out drilling operations in deep waters without any problem,” he added.
One year after Amir-Kabir Semisubmersible Platform was launched; young Iranian petroleum engineers managed to manufacture one of the most sensitive intelligent equipment installed on semi-submersible drilling platforms, and installed it on Amir-Kabir Platform.
A necessary equipment for drilling was HMI which was operated for some time by Norway’s Aker MH company. Amir-Kabir Semisubmersible Platform depended on non-Iranian technology for drilling and when sanctions were imposed on Iran, drilling operations hit snags. That led the engineering team of NDCO to move to design and manufacture HMI which is currently installed on Amir-Kabir Platform and operating.
Indigenization of this system allayed concerns over any halt in the operation of HMI installed on the rig and blunted the impact of sanctions on the operation of this platform. It also opened a window of modern science and technology for Iran.
This system has been designed to be installed on Amir-Kabir Platform; however, Iranian engineers have learnt to design and manufacture HMI for drilling operations.
Due to the complexity of technology for oil and gas well deep-water drilling, this technology was monopolized by several big oil companies. But Iran has recently joined those companies.
Caspian Sea is the biggest lake in the world and is one of the best regions for economic development in the Northern Hemisphere. This big lake and its economic benefits inevitably affect the economy of more than 350 million people living close to or from this land-locked lake. These people live in the member states of the Economic Cooperation Organization (ECO) which regroups Iran, Pakistan, Turkey, Afghanistan, Azerbaijan, Kazakhstan, Turkmenistan, Kyrgyzstan, Uzbekistan and Tajikistan. These countries share longtime cultural and historical commonalities, but the fact is that at least over the coming 50 years, energy will be the most influential factor in the development of relationship between Caspian Sea region countries.
Among ECO member states, Caspian Sea littoral states are all producers of energy and those farther from the Caspian Sea are potential consumers or profitable routes to major consumers. Therefore, all of them will become important players in energy supply to the world. But all of them are needed to reach a common understanding of the golden opportunity given to them. To that effect, the issue of Caspian Sea oil and gas reserves and the potentials and capabilities of the surrounding states has become the most important advantage of ECO member states for cooperation and convergence.
A look at the geography of ECO member states reveals interesting facts. ECO founder members – Iran, Pakistan and Turkey – are the most important pillars of the strategy of ECO convergence with focus on energy reserves. Iran is the largest energy producer among ECO member states, while Turkey and Pakistan are both entry gates to the world’s largest energy markets (Pakistan gives access to energy-thirsty India and Turkey opens way to Europe). The trio can set up an ECO convergence system in terms of energy supply structure.
Over the past decade, some littoral states of the Caspian Sea have conducted scattered activities in order to form a single power in energy supply. But in most of these projects, due to lack of attitude of convergence and unity among main players,
bright perspective could be imagined. A clear example to that effect is the construction of a pipeline to carry oil from the Caspian Sea to Europe market. This project is not as profitable as it must be due to absence of unity and convergence among Caspian states. However, in order to reach the big objective, that is developing a new power in world energy supply by relying on Caspian Sea’s energy reserves; ECO’s potentials could be effectively used.
Established nearly 30 years ago, ECO has focused its efforts on development of trade among its members. Its achievements indicate that a key and important objective in the economic bloc has been improving trade among its member states. However, the realities of future world show that if this organization and its members intend to realize their important ideals of economic development, they have to exercise interaction and convergence with focus on oil and gas reserves in the Caspian Sea.
Islamic Republic of Iran took the rotating presidency of ECO in December 2013. Addressing the ECO meeting in Tehran, Iranian President Hassan Rouhani called for changes in the ECO policies.
It seems that it is right time for suggesting the idea of more cooperation within ECO with focus on the Caspian Sea energy issue. To that end, it is necessary for ECO to set up a secretariat for energy cooperation within its framework. This secretariat can function as a platform for interaction and convergence between oil and energy ministers of ECO member states. The secretariat can then grow into an active regional organization with the objective of operating major oil, gas, oil products and petrochemicals exploration, production, refining and transmission projects in the Caspian Sea.
Since the collapse of the Soviet Union and the ensuing formation of independent republics, Caspian Sea oil and gas has always been a sticking point among littoral states. That is why the pipeline projects defined in this region do not take into account collective interests.
Baku-Novorossiysk, Atyrau-Samara, Baku-Tbilisi-Ceyhan and Trans-Anatoli pipelines were designed while it was possible to engage a larger number of Caspian Sea littoral states and ECO member states by pursuing a win-win approach. The projects could have become profitable by making changes in the transmission route with a view to win a larger foothold in the world energy markets. In this way, it would be possible to reach a higher level of influence on the global energy security.
If such a thing happens, it would be possible to consider establishment of a big multinational company for oil and gas exploration and recovery in this energy-rich region of the world. Such a company would take into account the interests of all Caspian Sea littoral states and follow a win-win strategy in a final bid to become profitable and influential. In such a project, Iran would be instrumental in convergence of ECO member1states. Iran is the only ECO member state with easy access to Persian Gulf and the Indian Ocean. Iran also sits atop the world’s largest oil and gas reserves and is one of the strongest players in the Middle East policies.
Iran’s effective role within the framework of ECO convergence with focus on energy could bring about important changes in the world’s energy geography. Designing corridors to carry energy (particularly natural gas) after crossing Iran will be the most profitable energy transmission operation from Caspian Sea to energy markets. Moreover, designing and creating a chain of downstream oil and gas industries involving refineries and petrochemical plants between the ECO-Caspian Union member states and feeding these plants through the multi-national ECO-Caspian Oil and Gas Exploration and Production Company will boost the economic development index in the countries located in this region and help to create a new economic power known as ECO-Caspian Energy Union.
South Pars is the gas field which gives Iran an outstanding position among gas-rich countries in the world. The Iranian section of the offshore South Pars gas field, shared with Qatar, holds 14 tcm of gas and 17 billion barrels of gas condensate. It accounts for 50 percent of Iran’s and 8 percent of world’s gas reserves.
Iran is currently recovering more than 250 mcm/d of gas from South Pars which is located 120 kilometers from Assaluyeh. Iran’s Petroleum Ministry plans to raise natural gas production from South Pars to 800 mcm/d in two years. Ten out of 24 phases defined for the development of South Pas have so far come on-stream and work has been accelerated in the remaining phases. Phases 12, 13, 14, 15, 16, 17 and 18 are top priority phases due to their nearly 95 percent progress.
Every two phases of South Pars (except for Phase 12 which includes three phases) form a refinery expected to produce 2 bcf/d of standard gas and 50 mcm/d of natural gas to be fed into national gas distribution network, produce 77,000 b/d of gas condensate, 1 million tons per day of liquefied gas and 400 tons/d of sulfur for exports as well as to produce 1 million tons a day of ethane to feed petrochemical industries. These products are estimated to earn the country $ 23 million a day and $ 8.5 billion a year. Therefore, the entire 24 phases of South Pars are estimated to generate nearly $ 100 billion in revenues a year.
Phase 12 of South Pars, now 95 percent complete, is ready to come on-stream. It is now in the pre-commissioning stage. Pars Oil and Gas Company (POGC), which is operating this project, says this phase will feed at least 500 mcf/d of gas to IGAT before the start of winter.
A single-point mooring (SPM) was recently installed in Phase 12 and it will soon start work. Platform A (offshore) of this phase is being installed. Twelve wells are to be drilled to pump more than 1 bcf/d (27 mcm/d) of sour gas. Gas production will start at 13 mcm/d and will reach maximum level in two months.
Gas production is expected to start soon in Phase 12. Offshore and onshore facilities and subsea pipeline are being tested and commissioned.
Platforms B and C are completed 95 and 94 percent, respectively and will be installed within three months. These two platforms will raise production from Phase 12 to 70 mcm/d.
Precise mechanisms have been worked out for production from phases 15&16. The first terrain of these phases as well as sour gas from phases 6, 7 and 8 are in the stage of pre-commissioning. At present, 6 mcm/d of gas is being produced from phases 15&16 which will produce 50 mcm/d of natural gas, 1 mt/d of ethane, 75,000 b/d of gas condensate, 400 t/d of sulfur and 1.05 mt/d of liquefied petroleum gas (LPG) for exports.
Phase
12
Biggest Phase Ready for Operation
Phase
15&16
Phases 15&16 in Pre- Commissioning Stage
Phase
17&18
work has picked up speed in phase 17&18
Development of phases 17&18 of South Pars is among the priorities highlighted by Petroleum Minister Bijan Namdar Zangeneh during his visit to Pars Special Economic Energy Zone (PSEEZ). They are now 94 percent complete and work has picked up speed there over recent months. Platforms have been installed in Phase 17, but they cannot operate because the necessary wells have not been drilled by National Iranian Drilling Company (NIDC). Iran’s Offshore Engineering and Construction Company (IOEC), which is operating the project, has announced that the platform of Phase 17 will be launched in 150 working days once the wells have been completed. At present, the preparatory operations for operating the platform of Phase 17 are under way. The platform of phase 18 is more than 98 percent completed.
A 230-kilometer subsea pipeline has been laid out for the transfer of sour gas to refineries. The onshore section of the pipeline is nearing completion. Moreover, spools need to be installed in the offshore section.
Once South Pars gas field starts pumping gas from all its phases, Iran will be able to meet domestic consumption and offer gas to its foreign customers. At present Iran exports more than 35 mcm/d of gas to Turkey, and Iran’s exports rate will be multifold once gas export is commenced to Pakistan and Iraq. National Iranian Gas Exports Company (NIGEC) officials announced that negotiations are under way with tens of neighboring and European countries in view of acquiring a 10 to 15 percent share in the global gas trade.
It is noteworthy that Iran is currently producing around 700 mcm/d of rich gas, 300 mcm/d of which provided by Iran’s Central Oil Fields Company (ICOFC) which is the major gas producer in the country and around 250 mcm/d of which is supplied by South Pars Gas Complex (SPGC) with the rest coming from associated gas gathered in National Iranian South Oil Company (NISOC).
Iran’s West Ethylene Pipeline (WEP) has been constructed in compliance with the state-of-the-art technology. The pipeline is up to the highest standards in terms of security and technique. The 2,660-kilometer pipeline of 24-inch diameter is the longest pipeline project fully designed, constructed and commissioned by Iranian engineers under the conditions of sanctions. An important feature of this pipeline is that it passes through treacherous mountainous regions. In order to boost the safety of WEP, a safety station is installed on every 25 kilometers and isolation valves are fitted. There is also a pig running station on every 200 kilometers regularly used to monitor the pipeline. At the same time, an electronic leak detection system is also operating
Masoud Meysami, director of WEP project, says the preliminary studies for the construction of this pipelineproject started in 2002 with a view to feed 12 petrochemical plants in southwest, west and northwest of Iran. Construction work started in 2004 in order to improve economic conditions in the western cities of Kermanshah, Mahabad and Sanandaj, as well as Gachsaran in the south.
In 2005, the government adopted a motion for the pipeline to cover four more cities – Dehdasht, Andimeshk, Mamesani and Miandoab.
But the extension of the pipeline did not stop here and in 2007, a petrochemical plant was planned to be constructed in the western province of Hamedan and to be fed by WEP. In 2009, the surplus production from this pipeline was decided to feed a petrochemical plant in the northwestern city of Tabriz. Kazeroun Petrochemical Plant in southern Iran, which used to receive its feedstock from a central pipeline, is now supposed to receive its feedstock from WEP.
WEP has the capacity to carry 3.5 million tons of ethylene, 2.5 million tons of which will be delivered to Kavian and Morvarid petrochemical plants in Assaluyeh and the rest will go to Gachsaran Petrochemical Plant.
Supplying feedstock to Lorestan, Mahabad and Kurdestan petrochemical plants are the three top priorities in accelerating the construction of WEP whose completion will make great contribution to industrial development in the west of the country, as well as job creation. Construction of the Hamedan, Dehdasht, Mamesani, Boroujen and Kazeroun sections have not yet started and based on the negotiations, Tabriz Petrochemical Plant, like Ilam Petrochemical Plant, will build a branch itself to receive feedstock from WEP.
WEP includes three phases, the first of which extends from Assaluyeh to Kermanshah and is to feed Mahshahr, Khorramabad, Ilam and Kermanshah petrochemical plants. Gas was injected into the pipeline in October 2012, but as far as all consumers could not receive the gas, gas was pumped to Kermanshah without any increasing the pressure. Kermanshah Petrochemical Plant started production in January 2013 after being fed by gas from Assaluyeh. Meanwhile, a 74-kilometer pipeline of 12-inch diameter was extended from Shakriat region of Ramshir to Mahshahr to feed Alvand Petrochemical Plant.
The second phase of the pipeline starts from Kermanshah to reach Mahabad. This section is 540 kilometers and passes by the cities of Sanandaj through a 14-inch diameter pipeline, and stretches from Sanandaj to Saqez through a 12-inch diameter pipeline and stretches from Saqez to Miandoab through an 8-inch diameter pipeline. The second phase has so far progressed more than 90 percent and its construction and completion operation is picking up speed. This national project is expected to come on-stream in winter 2013.
The Kermanshah-Sanandaj section is ready for full operation and its hydrostatic tests have been conducted successfully. Land acquisition for segments of the Sanandaj section had some problems which were resolved following talks with local officials. The construction of the remaining 46 kilometers is finishing.
According to plans, this project is forecasted to become fully operational in the winter2013 and with the injection of feedstock to the rest of the pipeline, petrochemical plants will be fed and their production will rise.
The third phase of the pipeline includes Dena and Hamedan.
WEP is 2,660 kilometers long with the first and second phases measuring 1,600 kilometers long. In total, 115 pressure booster, pressure regulation and measurement as well as cathodic protection stations are fitted on the pipeline.
Meysami said the budget foreseen for the project is 12.58 trillion rials, 52 percent of which will come from public budget and the rest will be financed by domestic resources based on the government’s permit.
More than 21 oil products are tradable in Iran’s Energy Exchange, the managing director of Energy Exchange Ali Hosseini said.
“The necessary conditions have been provided for different categories of crude oil, kerosene, fuel oil, variety of jet fuel and natural gas in the Energy Exchange,” he said.
Hosseini added: “In the beginning, these transactions were done in small volumes; however, after sufficient finance and presence of more stockholders and vendors, this volume will increase in the future, and different refineries have requested energy products derived from oil products to be accepted in the Energy Exchange and they will be accepted.”
“Crude oil could be traded in the capital market at any time and the primary conditions have been prepared at a limited level for selling crude oil. The necessary finance has been provided for the crude oil needed in the refineries and in the following phases, we will move towards internationalizing it,” Hosseini said.
“Due to coordination with Petroleum Ministry, grounds have been paved for the supply of 5,000 barrels of crude oil and 10,000 barrels of gas condensate on the Energy Exchange. With respect to the high potentials in the country in the oil and gas sectors, our final objective will be to launch international transactions in the Energy Exchange,” he added.Hosseini, a veteran oil official, said Iran Energy Exchange is attractive due to transparent pricing system and liquidity regulations. “By offering products on the Energy Exchange several months before consumption, we will be able to trade crude oil several times. Therefore, it will facilitate meeting our future requirements without being under pressure.”
Hosseini said a law adopted in 2009 envisages tax exemptions for transactions in the exchange markets. “With the financial instruments designed in the Energy Exchange transactions, it will be possible to take liquidity into [petroleum] industry and these instruments make it possible for the genuine buyers and sellers of oil to invest in this sector.
“The policy pursued by Iran Energy Exchange has been to facilitate the flow of investment between Iran and world markets and its perspective has been to become the reference for energy carriers’ prices in the Middle East,” said Hosseini.
Software-Based Management
Hosseini said two pieces of software are used by the Energy Exchange for the management of transactions.
“In order to boost the speed and precision in the performance of Energy Exchange, this organ, assisted by Tehran Stock Exchange Technology Management Company, is using software in oil products transactions guaranteeing the health and precision of transactions in the Energy Exchange,” he added.“Another software used in the Energy Exchange pertains to electricity transactions. Since electricity transactions are among the most complicated ones and purchasing this software from abroad was impossible, this company, assisted by Iran Power Network Management Company and TSETMC, managed to develop this software,” said Hosseini.
“The software for electricity transactions is being used for the first time in the Middle East,” he said.
Air Pollution Right Certificate
Hosseini referred to air pollution right certificate in the Energy Exchange, saying: “Carbon certificate is known as a tool indicating the price of air pollution in the world and all companies which are active produce carbon dioxide.”
“By 2020, all countries will be bound to respect the carbon production ceiling. The issues of carbon certificate and carbon production restrictions have been enshrined in the Fifth [Five-Year Economic Development] Plan (2010-2015),” said Hosseini.
He added that the European Energy Exchange (EEX) is also involved in carbon certificate transactions which have been recognized in the Kyoto Protocol.
Kish Gas Field in southern Iran will start production
in the near future under an early production
plan to feed a power plant in the Kish Island,
an official of the Iranian Offshore Oil Company
(IOOC) said.
“Given the Kish Free Zone power plant’s need [for gas],
preliminary surveys, technical and economic studies have
been conducted for early recovery from this field and the gas
required for the Kish Island power plant will be supplied from
two wells in this field,” Ali-Reza Qanei said.
Since 2006, more than 44 bcm of gas has been delivered
to Kish Power Plant. For the rest of its needs, the power
station has been fed with gasoil. After Kish gas field starts
production, no gasoil will be needed.
“At present, Kish power plant depends on gas and this gas is
supplied in a 12-inch-diameter pipeline from Siri Island. Once
this field becomes operational, it will be possible to supply
gas from this field to Siri’s NGL facility,” Qanei said.
He said Kish Free Zone officials are sensitive to pollution and
the impact of this field on the environment of this coral island.
“Since gas fields generate a small amount of pollution and this
gas will be an alternative to gasoil in the Kish power plant,
pollution in this island will decline,” he said.
“Given the quality of gas produced in Kish field, there will be
the possibility of using it directly in a pressure loss process.
Thirteen wells have already been drilled in this field and its
gas will be fed into Iran Gas Trunk-line (IGAT),” said Qanei.
He said that drilling activities, besides geophysical operations,
can be instrumental in measuring the dimensions of the field.
All drilling operations in the east, south and west of the Kish
Island have been accomplished and in case of intention for
drilling in the north of the field, it will be possible to raise the
capacity of the field, which currently stands at 66 tcf.
The project for development of Kish gas field is under way in
three phases with a view to transferring gas through subsea
pipeline to a refinery under construction on 400 ha of land
in Gorzeh village. In the first phase, over 3 bcf of gas will be
pumped to the refinery.
After gas condensate is extracted from this field, dry gas will
be fed into the seventh section of IGAT and the bulk of gas
expected to be pumped to Pakistan will be supplied by this
pipeline. However, talks are also under way for exporting gas
from this field to other countries.
Kish gas field, in the Persian Gulf waters, is 60 kilometers
east of Lavan Island. It sits atop 66 tcf of gas and more than
514 million barrels of gas condensate, found in the depth of
4,400 meters.
Development of the field includes three phases and involves
wellhead installations in Kish Island, as well as offshore gas
production platforms and refining facilities in the mainland in
the Hormuzgan province in southern Iran. In order to respect
all environmental obligations in the Kish island, all refining
facilities are under construction in the mainland and adjacent
to Aftab port.
Kish coral island is one of the most attractive islands in the Persian Gulf. This island enjoys a beautiful, green and unique nature with calm beaches, coral sands, fresh water and colorful fishes.
Other attractions in Kish Island include tourism and sight-seeing centers, water sports, underwater diving, shopping centers, international markets, resorts and residential facilities.
Add to this the strategically important geographical position of Iran as the artery connecting East and West in the Persian Gulf.
It is noteworthy that free zones are established in the world to attract investment, particularly foreign investment, in order to make their significant and key contribution to their countries’ economic development.
The laws and regulations governing free zones are fully transparent without any ambiguities. Therefore, potential investors will have the chance to carry out their economic activities easily in these zones.
Administrative red tape in free zones is negligible and authorities try to streamline bureaucracy in these zones in order to boost efficiency. The free zones also facilitate investment regulations in order to become more attractive to investors.
The most attractive points in free zones are 20-year tax exemption, as well as discounts granted to raw materials in the customs offices.
Kish, Qeshm, Chabahar, Aras, Makou, Anzali and Arvand are among Iran’s free trade zones. Each zone has been tasked with a main and strategic mission. In Kish Island, the pivotal mission pertains to tourism and trade. However, it does not mean that free zones are not allowed to be active in the other sectors.
Besides its unique sceneries, Kish is one of the largest independent gas reserves in Iran offer a special chance for investment in the island.
Kish, Gas Trade Center
Managing director of Kish Free Zone Organization Ali-Asghar Mounesan stresses the need for using the capacities of this island to become the center of oil and gas trade. “Kish can become the center of oil and gas trade in the region,” he said.
Mounesan said Iranian Petroleum Ministry officials have always viewed Kish Island as the best choice for oil and gas trading.
He said Kish has a huge gas reserve containing 66 trillion cubic feet (tcf) of gas and more than 514 million barrels of gas condensate.
“By benefiting from existing capacities and strengthening infrastructures in the port and jetty facilities, we will try to reach sustainable development in the energy sector,” said Mounesan.
Given the fact that any development in the oil and gas sector will be a significant step in the all-out development of Kish Island and considering huge gas reserves in this region, planning to benefit from these valuable resources will occupy a special status in the objectives of the Kish Free Zone Organization.
Experience has shown that the volume of investment will increase in the regions with oil and gas reserves, and the grounds will be prepared for creating job opportunities.
Kish Hosts Energy Show
This coral island hosts numerous exhibitions, including international energy exhibitions. Kish is to host the 10th International Energy Exhibition in January 13-16, 2014 on the premises of Center for International Exhibitions.
The tenth International Energy Exhibition, one of the most important and the biggest events in southern Iran, is aimed at introducing Iran’s potential and practical capacities and capabilities in the energy sector mainly in the fields of exploration, production and distribution of oil, gas, electricity as well as new and renewable energies, laying the groundwork for persuading domestic and foreign investors to benefit from existing capacitiesthrough transfer of technology and involvement in investment projects.
More than 150 domestic and foreign companies have confirmed their participation in the exhibition, which will be held on 16,000 square meters.
This massive presence of companies as well as planed presence of the Society of Iranian Petroleum Industries Equipment Manufacturers (SIPIEM) and the Association of Iran Industry Equipment Manufacturers provides a proper chance for interaction and studying maximum use of domestic potentials.
A number of specialized seminars and conferences are planned to be held on the sidelines of the exhibition. Public relations managers of petrochemical companies from across the country will also hold a gathering at the same time as the exhibition will be under way.
Whereas Kish has no visa requirements, foreigners can travel to this island easily. Therefore, it can become a good center for holding scientific, cultural and sports seminars.
Kish Island can also become the hub of cultural events to regularly host exhibitions, galleries as well as domestic and international seminars.
Kish Air, an Iranian airliner, is also making efforts to expand its fleet in order to provide better services to travelers.
Kish Free Zone Organization is set to organize more foreign flights to this island in order to facilitate the entry of foreign tourists.
IME Export Trading Floor
Iran Mercantile Exchange is Iran’s sole commodity exchange that started operation in 2007 in order to address the need for a transparent market for trading petrochemical, chemical and petroleum products, as well as other commodities like metals and minerals. Following the commencement of the operation, the international trading venue of the exchange was inaugurated in the Kish Island in Persian Gulf in order to boost the export of the petroleum and petrochemical products through a streamlined trading mechanism based on electronic platforms and technology infrastructure.
A wide range of tradable commodities from downstream oil products like bitumen, base oil and solvents to polymers, aromatics, plastics and many others are traded on a regular basis.
Located in a free trade zone, the IME export trading ring provides unparalleled advantages to the foreign and international traders of petrochemicals like tax exemption, no-visa requirements, direct flights from UAE especially Dubai, , proximity to delivery hubs and refineries and also high seas.
The Kish Export trading floor of IME has managed to establish itself as a benchmark trading venue for salient products like bitumen which is exported to nearly 15 countries in Asia and Africa. The IME traded bitumen prices are quoted and referred to as benchmark in renowned news sites, magazines and pricing data centers like Argus, ICIS and Polymer update. IME is expanding operation by listing new products and accepting new players to this world class market.
New Chapter in Kish
Economic Boom
Investment activities in Kish Island lie within the framework of the Islamic Republic of Iran’s 2015 Vision Plan. Development of Kish Island is one of plans.
The website www.kish.ir offers packages of investment in Kish Island. Potential investors can refer to the Department for Investment of Kish Free Zone Organization to see the investment packages for possible investment.
The investment opportunities introduced in this website are available in two languages: Persian and English. The website will be available in Spanish and Arabic in the near future. Besides investment packages, proposals by investors will be considered.
The investment packages apply to infrastructures, economic activities, tourism, sports, medical tourism and education tourism activities.
Village of Knowledge, Village of Health and Village of Sports are three comprehensive projects envisaged to be implemented in Kish Island.
Non-homogenous development in any economic activity leads to losses, and changes the atmosphere and approaches. Therefore, there must be approaches in tourism and infrastructural sectors so that steps would be taken towards sustainable development.
Kish Free Zone Organization has defined its development plans so that tourism complexes will be built. These complexes include shopping centers, as well as recreational, tourism and sports spaces. Such complexes will make investment profitable for financiers, while Kish Free Zone Organization will realize its objectives for development of cultural and tourism spaces.
As far as foreign investment is concerned, transparency of policies is of significance, and customer relationship management is an important issue for this organization. Kish Free Zone Organization considers financiers as its partners contributing to the development of the island.
Investment opportunities in Kish Island include artificial islands, hydrotherapy and traditional medicine, specialized hostel, Greek ship restaurant, Baghou tourism complex, winter sports and air restaurant.
Activities are also under way in the cultural sector. They involve mainly rules and regulations so that cultural issues would be also taken into account. When a license is to be issued for a commercial project, for each square meter of commercial space, a space will be also defined for cultural, tourism and sports activities.
Another issue being focused upon by Kish Free Zone Organization is to provide vertical visibility for tourists despite high-rise buildings. No matter the building is residential or commercial; the visitor’s horizontal and vertical visibilities are restricted.
To resolve this problem, green roof could be used so that the visitor would regain his horiz ontal visibility.
Kish Attraction for Tourists
The mission assigned to Kish Island revolves mainly on tourism and trade. In the first half of the current Iranian calendar year which started on 21March 2013, 700,000 tourists, including 60,000 foreigners, visited the island. This figure is expected to rise sharply due to the policies of President Hassan Rouhani and increased international interactions.
Mounesan said besides tourism, trade and industry are also two strategic pivots in Kish Island. “In addition to tourism, Kish Island has invested in industries that produce no pollution. They are known as soft industries. The grounds are paved for the activity of industries that produce low level of pollution and do not harm the environment,” he said.
Besides public attractions which exist in most free zones, the most important advantage of Kish Island is the existence of natural perspectives. That is why the main mission defined for this island is tourism,” said Mounesan.
Kish has an attractive nature and 18 kilometers of coral beach separates it from other islands in the Persian Gulf.
Appropriate infrastructures have been also prepared in this island and potential investors in tourism and trade would have the chance to expand their activities.
International airport in Kish Island is another significant advantage of this island. The airport has facilitated access to the farthest spots in the world. Foreigners can travel to this island without any visa requirements, and enjoy natural beauties there.Charak Port and Aftab Port are located not far from Kish Island and they give access to this island. Passengers and commodities are transported to Kish from these two ports.
Aftab Port project has been implemented by private investors and with the cooperation of Kish Free Zone Organization and Charak Port is being directly developed by Kish Free Zone Organization. Another golden chance provided in Kish Island is its proximity to Hendourabi, Farvar and Farvargan islands.
Aftab, a Strategic Port
Mounesan said Aftab Port is the first private port in the country, saying it can make great contribution to development of tourism in Kish Island.
He added that the expansion of activities of oil companies pushes Aftab Port to bold relief. This port has played a decisive role in the transfer of passengers and transport of commodities to Kish Island. Aftab Port is in Hormuzgan province and is located 18 kilometers from Kish Island. The private sector has constructed this port with more than 400 billion rials of investment.
Hendourabi Island is one of islands whose tourism development plan has been drawn up with the cooperation of foreign advisors.
Sea and air tourism between Kish and Hendourabi islands will be launched by 21 March 2014. Construction of health, sports and knowledge villages is also on the agenda for the development of tourism in the island. Kish Free Zone Organization has laid the groundwork for investment in different sectors of these villages, including construction of hotels and other tourism facilities.
Advantages of
Investment in Kish
- Access to high seas
- 20-year tax exemption for any economic activity
- Preferential land prices for constructing hotels and recreational facilities
- Legal guarantee and support for foreign investment
- No-visa entry for foreigners
- Registration of company with full foreign ownership
- Exemption from customs duties for importing raw materials ,as well as industrial machinery
- International Petroleum Commodity Exchange for trading oil and petrochemical products
- Possibility of exporting products manufactured in Kish Island to the mainland within the framework of value-added regime
- Easy formalities for re-exporting and transit of commodities
- Possibility for vessels of up to 10,000 tons of capacity to berth
- Strategic position and proximity to oil-rich Assaluyeh
- Export of products to other countries without paying customs and port fees
- Transit of commodity to Central Asian countries and Iran’s neighboring states
- 15-percent discount in commercial profits for the import of commodities to the mainland through Kish Island
- Independent customs checkpoint in free zones at their connection to international markets
- Rapidity in administrative affairs and minimum bureaucracy through integration and coordination of decision-making bodies and integration of all affairs under authority of Kish Free Zone Organization.
The uncontrolled release of crude oil and/or
natural gas from an oil well or gas well after
pressure control systems have failed, gives rise
to blowout.
This release may occur in an unprotected and
underground formation. In this case, it is referred to as
underground blowout, or it may occur on the surface
causing irreparable damage. Regardless of the type of
blowout, containment operation is often costly. In most
cases, containment is very difficult and no success is
guaranteed.
Today, Iran’s petroleum industry enjoys the necessary
potentials, and possesses the necessary tools for the
containment of possible blowouts in oil and gas wells
with lowest cost. Iranian engineers have so far managed
to contain a number of blowouts in oil and gas wells.
Blowout prevention potential is an indication of Iran’s
petroleum industry. Containment of blowout in Well No.
120 of Rag Sefid oil field is a case in point. The operation
was conducted successfully and in the shortest possible
time by experts from National Iranian South Oil Company
(NISOC) and National Iranian Drilling Company (NIDC).
Located in southwest Iran, Rag Sefid is one of the most
complicated and prone to accident oil fields. Due to the
field’s extremely strong gas cap, experts make errors
during drilling. Before the 1979 Islamic Revolution,
blowout from wells No. 1, 2, and 33 had resulted in the
full destruction of drilling rig and blaze. Therefore, it was
difficult to repair wells in this field. Blowout containment
costs too much in Rag Sefid field and the outcome of operations may not be successful every time.
On April 14, 2013, Well No. 120 of Rag Sefid oil field
experienced a blowout. Gas started blowing out of the
well after a work over rig (Fath 51) installed on this
well experienced a technical problem during directional
drilling in Asmari Formation 2,403 meters deep
underground. The incident happened due to drilling mud
overbalance.
Should the balance of the drilling mud pressure be
incorrect then formation fluids begin to flow into the
wellbore and up the annulus, and/or inside the drill pipe.
An underground blowout is a special situation where
fluids from high pressure zones flow uncontrolled to
lower pressure zones within the wellbore. Usually this
is from deeper higher pressure zones to shallower lower
pressure formations. There may be no escaping fluid flow
at the wellhead.
The accidental spark during a blowout was likely to lead
to a catastrophic oil or gas fire. Firefighters realized that
gas was leaking from a hole between two valves fitted on
the tubing head spool which is designed for the popular
split hanger suspensions for dual completions. Due to this
flow of gas, the Christmas tree had frozen.
Gas with high pressure was running out quickly and the
surroundings were filled with gas smell. A large swath
of land was engulfed in gas. High concentration of gas
and its spread on a radius of 10 kilometers had made any
operation difficult.
Two options were on the table: “setting fire to the well
and the rig”, or “starting containment operation by
containment group with high risks”. Finally, after taking
into consideration all the aspects, the second option was
chosen. It was a very difficult task. A three-member team
approached the well carefully in a bid to detect the leak
spot. Further investigation showed that the source of
leakage was valve joints.
In order to prevent a gusher, the drilling pipes were cut
and abandoned in the well. It had two advantages: firstly,
the well exit became wider and the gas was flowing at
a slower pace; secondly, the blowout inside the drilling
pipes was halted.
Although all these operations had been done, a big blast
was expected at any moment. A blast could happen if one
stone struck another one. Such a blast could have been
more destructive than thousands of bombs. Had such
an explosion occurred, nobody and nothing would have
survived. Even thinking about such a scenario is horrible.
However, brave Iranian firefighters turned off the valves
in less than two hours. The well came finally under
control and the gas leak stopped under critical and
unsecure conditions.
On April 15, everyone was basking in joy as the blowout
had been fully contained. Even the most optimist people
imagined that the drilling rig would be destroyed, but a
big catastrophe was prevented. Nevertheless, the highrisk
operation implemented by dedicated experts of the
containment team, and resulted in halting the gas leakage.
Gushers were an icon of oil exploration during the late
19th and early 20th centuries. During that era, the simple
drilling techniques such as cable-tool drilling and the lack
of blowout preventers meant that drillers could not control
high-pressure reservoirs. When these high pressure zones
were breached, the hydrocarbon fluids would travel
up the well at a high rate, forcing out the drill string
and creating a gusher. Despite being symbols of newfound
wealth, gushers were dangerous and wasteful.
They killed workmen involved in drilling, destroyed
equipment, and coated the landscape with thousands
of barrels of oil; additionally, the explosive concussion
released by the well when it pierces an oil/gas reservoir
has been responsible for a number of oilmen losing their
hearing entirely; standing too near to the drilling rig at
the moment it drills into the oil reservoir is extremely
hazardous
Kish coral island is one of the most attractive islands in the Persian Gulf. This island enjoys a beautiful, green and unique nature with calm beaches, coral sands, fresh water and colorful fishes.
Other attractions in Kish Island include tourism and sight-seeing centers, water sports, underwater diving, shopping centers, international markets, resorts and residential facilities.
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