Designing Best Oil Contract Model

 

One of the most significant challenges oil-rich countries are facing in attracting foreign investment for the development of their hydrocarbon reservoirs is designing an appropriate legal structure for contracts. It would be of great importance to draft contracts which would be beneficial to both the host government and foreign investor and clarify their commitments.

Governments in the world are vying to attract investment and technology owned by multi-national and big oil companies in order to operate their megaprojects.

Since its emergence in the 19^th century, Iran’s petroleum industry has so far experienced different types of contracts including concessions and service contracts.

After the end of the Iraqi war (1980-1988) against Iran, the Iranian government was short of the necessary capital and technology to enhance its crude oil production.

The necessity of presence in international markets, daily growing need for fuel, the necessity of boosting the quality of domestically manufactured products and the necessity of bolstering Iran’s bargaining power in the Organization of the Petroleum Exporting Countries (OPEC) prompted Iran to sign “buy-back” contracts with foreign companies.

Two other factors are also important in choosing the model of contract for attracting foreign investment and developing the country’s economy.

Under a buyback deal, the host government agrees to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces. The first factor is restrictions and requirements enshrined in the Constitution of the Islamic Republic of Iran with regards to attraction of foreign investment for oil projects. The second factor pertains to economic requirements highlighted in the development plans or national budgets in every country.

The buy-back model became popular because of its compliance with Iran’s law as well as the country’s political and economic interests. Buy-backs were designed to transfer technology for exploration and development. Under these contracts, foreign companies were present in Iran’s oil and gas fields for a short period of time while every operation was strictly controlled by the National Iranian Oil Company (NIOC). Buy-backs did not give any ownership right to foreign investors on the oil and gas reservoirs and they were only recognizes as contractors hired to carry out all activities from exploration to development.

In the first generation of these contracts, the project details and the costs were mentioned in the contract. Any extra cost was paid by the contractor and the NIOC had no obligation for extra costs during development.

In the second generation of buy-backs which included exploration and development, the exploration risk had to be handled by the foreign contractor. Iran’s 2003 budget law developed the third generation of buy-backs in order to allow foreign companies remain in Iran for longer periods of time.

Under the third-generation buybacks, the contractor studies the reservoir before deciding about developing the next phases. Throughout production, the contractor is present as a technical logistician.

The third generation sought to assure foreign contracts that the ceiling of costs was not fixed and that it could change, but since the profits gained by the contractor did not increase while strict bureaucratic red tape dominated the terms of these contracts, foreign contractors become less interested in the buy-backs.

Over more than two decades, buy-back contracts ensured maximum national interests and national sovereignty on the oil and gas reserves.

But now since these contracts are no longer attractive to foreigners, the new model of oil contracts – Iran Petroleum Contract (IPC) – will provide fair conditions for both parties in order to contribute to the prosperity of Iran.

Energy, Key to Iran’s Interaction With World

 

President Hassan Rouhani said energy is an important issue in Iran’s interaction with the world, calling on Petroleum Ministry officials to train specialized forces for benefiting from the existing capacities in the country.

Rouhani, who was visiting the Petroleum Ministry, said the insistence on monocultural economy did not undermine the petroleum industry.

“Oil will continue to remain the major industry in the country,” he said.

Rouhani said major world powers are casting a covetous eye on the region mainly because of its energy sources.

He said the region will depend on the Middle East for its energy demand in the coming decades. “Powers will depend further on the region and therefore oil and gas-rich countries in the region including Iran and some neighbors in the Persian Gulf become very important,” said the president.

Rouhani said Iran will remain a regional power because of its geopolitical position.

“We have to increase the greatness of Iran because it is important to know how to speak with the world and how to interact with it,” he said.

“It would be wrong to say we have nothing to do with the world. We must interact with the world and the world has to interact with us,” he added.

Rouhani said Iran’s share of the world energy starts from its enhanced production capacity, adding that Iran has to raise its oil and gas output in a bid to upgrade its position in the world.

The president noted that besides economy, foreign policy and national security depend on oil.

Rouhani said further oil production and exports will boost Iran’s national power, adding that interaction with the world must be from a position of dignity.

He said Iran needs to optimize its technology in order to reduce its energy consumption.

Rouhani also said that foreign investment in Iran’s oil sector will bring in technology.

The president also said that Iran has to make its oil contracts attractive in order to win back more investors.

“Iran is not the only country with oil and gas. Therefore oil contracts must become attractive in order to serve national interests,” he said.

‘We have to study the contract terms of our neighbors,” he added.

Rouhani said Iran must attract investment and technology for its national interests, adding that investment will require incentives.

 

Focus on Exports

 

Petroleum Minister Bijan Namdar Zanganeh presented a report about his six-month activity to the president.

“During this period of time, [Iran’s] crude oil exports have climbed, and based on our policies, crude oil exports have been centralized in the National Iranian Oil Company (NIOC),” he said.

The minister added that the centralization of crude oil sale in the state-run company would be in the interest of the country.

Zanganeh said development of the giant offshore South Pars gas field in southern Iran is among programs of the Petroleum Ministry. 

He said development of Phase 17 of the field Iran shares with Qatar is under way, adding that contracts are to be signed for the development of two more phases later this year.

He said Phase 12 with six trains, Phase 14&15 with four trains and Phase 27&18 with four trains are the prioritized phases.

The minister said Iran is to raise its gas production by 120 mcm by March 2015.

Zanganeh also said that South Yaran, North Yaran, Yadavaran, North Azadegan and South Azadegan fields will also see their output rise. Iran shares these field with neighbors.

Iran, Oman Sign Gas Deal

 

As part of his plans to broaden interaction with the countries in the region, President Hassan Rouhani paid a state visit to the Persian Gulf Arab state of Oman on March 12 and 13.

Economic cooperation was high on the agenda during the Oman visit, on which Rouhani was accompanied by Petroleum Minister Bijan Namdar Zanganeh The gas deal will mean Iran supplying 10 bcm of gas annually via a 350km pipeline linking southern Iran to the port of Sohar, in northern Oman.

President Rouhani told a group of Iranian and Omani businessmen that Iran is open to Omani investors.

“Iran and Oman and you businessmen, entrepreneurs, industrialists and investors are instrumental in bringing nations and countries closer together,” he said.

“There are many capacities for cooperation and we should use them for developing bilateral ties,” Rouhani said.

He said his administration is determined to extend its oil and gas pipelines across the Persian Gulf coasts.

“Today, in Iran’s domestic market, we are seeing a sort of economic stability. Our capital market and stock market conditions in the past six months are indicative of this stability,” said Rouhani during his state visit to Oman. 

He said Iran is a safe place for Iranian and foreign investors.

“In order to have a safe, healthy and growing region, our economies must be complementary to one another. We have to settle our differences gradually and forever,” said Rouhani.

The president said Iran and Oman have had good relations for 40 years.

Rouhani said that businessmen and investors are messengers of economic profitability as well as peace, fraternity and security.

“The Islamic Republic of Iran extends hand of friendship and brotherhood to all countries in the region, particularly its southern neighbors off Persian Gulf and the Sea of Oman,” said Rouhani.

He said that his meeting with the businessmen was indicative of the fact that his administration will facilitate trade exchanges between Iranian and Omani companies.

 

Gas Deal

 

Zanganeh said no price has been agreed for the gas which Iran is to deliver to Oman.

“We are entering the Omani retail market for the first time and contrary to other contracts, we have not agreed on a price,” Zanganeh said.

“Today after seven months, finally the agreement to export Iranian gas to Oman was sealed,” he said.

He said the gas will be shipped through a 260 km (162 mile) pipeline that will be built through Iran's Hormuzgan Province to Oman's Sohar port on the other side of the Persian Gulf and that the project was expected to come on stream within three years.

Zanganeh said Oman will use some of the gas for its domestic consumption but some of the gas may be sold abroad through a joint marketing company to be set up at a later date.

He said Oman will pay for the entire cost of the pipeline and related infrastructure, estimated at around $1 billion, adding that Muscat will be compensated for its investment through revenues generated from the sale of the gas.

Zanganeh said the gas will come from the supergiant South Pars gas field in the Persian Gulf and would branch off an Iranian pipeline planned to export gas to Pakistan.

Iran and Oman share the Hangam oil field located 45 kilometers from the Qeshm Island. The field was discovered in 1975.

Hangam is estimated to hold more than 700 million barrels of oil and some two trillion cubic feet of gas in place.

In the meantime, Iran and India agreed to start constructing a deepwater pipeline crossing Oman for gas delivery from Iran to India.

Oman is an OPEC member in the Persian Gulf. Thirty percent of Oman’s total crude oil production is provided by international oil companies.

Moscow to Clinch Trade Deal with Tehran

 

Iran and Russia are set to finalize an agreement they have reached for broader economic and trade cooperation, Iran’s Petroleum Minister Bijan Namdar Zanganeh during his state visit to Russia.

“The memorandum of understanding for the development of Tehran-Moscow cooperation will be finalized early next [Iranian calendar] year [starting on March 21],” Zanganeh said.

He added that the Islamic Republic is determined to raise the volume of its “economic transactions” with Russia under long-term deals, underscoring the “unacceptably low level” of Iran-Russia trade.

Iran-Russia trade currently totals $5 billion a year, but economists say they can at least quadruple the volume of their trade exchanges.

“The government of the Islamic Republic of Iran is seriously determined to broaden its cooperation with Russia in the technical and technological sectors for the bilateral procurement of commodities and services,” said Zanganeh.

It was Zanganeh’s second official visit to Moscow since he took office last August.

In February, Russian Energy Minister Alexander Novak said Moscow is in talks with Iran for increasing energy cooperation with a view to raising trade exchanges.

Novak said Iran and Russia are looking for a “financial scheme” to facilitate the supply of “metallurgy, machine-building and energy equipment” by Russian companies to Iran.

Russia’s second largest oil producer Lukoil has voiced its willingness to return to Iran to develop a block of oil fields as international sanctions against Iran are shrinking.

 

China Seeks Energy Ties with Iran

 

Iran’s Petroleum Minister Bijan Namdar Zanganeh said Tehran-Beijing cooperation is expanding.

“Iran’s policy is based on broadening cooperation with all world countries,” he told the visiting Chinese Commerce Minister Gao Hucheng in Tehran on February 23.

The Chinese minister said Iran and China can upgrade their cooperation in the energy and infrastructural sectors.

 In a separate meeting, Iran’s First Vice President Es’haq Jahangiri underscored the importance of continuing trade ties between the Islamic Republic and China, inviting Chinese companies to carry out energy projects in Iran.

“We will not forget countries like China that stood with Iran in difficult days and we would like China to be one of Iran’s main trading partners,” Jahangiri told Gao.

Jahangiri said Chinese companies can have a “major role” in infrastructural projects, mainly in the energy and port sectors.

“Expansion of relations with China has always been one of top priorities of the Islamic Republic of Iran,” he added.

Gao said Iran and China have long had good cooperation in the oil and gas sectors, adding that the two countries can upgrade their energy cooperation.

The Chinese minister said Beijing continues to support Iran’s key and fundamental interests and favors broader economic cooperation regardless of US-led sanctions against Tehran.

The Chinese commerce minister headed a delegation of more than 20 top officials and business leaders, who took part in the 15th meeting of the Iran-China Joint Economic Cooperation Commission.

 

Trade Roadmap

 

Iran and China signed an agreement finalizing a roadmap to double bilateral trade over the course of three years. They agreed to increase the amount of non-oil trade to 20 billion dollars a year.

 

Iranian Finance and Economic Affairs Minister Ali Tayyebnia and Gao signed the agreement in Tehran.

 On the sidelines of the signing ceremony, the director of the Organization for Investment, Economic, and Technical Assistance of Iran said, “Facilitating the visa issuance procedure for traders and expanding cooperation in the field of e-commerce were among the main issues the two sides agreed upon.”

 Establishing an industrial park in Iran and creating a joint shipping line are also part of the roadmap, Behrouz Alishiri said.

The two countries expressed interest in boosting cooperation in a wide range of areas, such as the industrial, oil, gas, petrochemical, mining, banking, transportation, energy, communications, and information technology sectors.

Bilateral trade between Iran and China amounted to $36 billion in 2012.

 

Europe Can Trust in Iran Energy

 

Iranian Foreign Minister Mohammad Javad Zarif has said that Tehran can be a reliable supplier of energy resources for Spain and other European countries.

Speaking during a meeting with Spanish Foreign Minister Jose Manuel Garcia-Margallo in Tehran, Zarif said that there are numerous capacities for cooperation between Iran and the European Union (EU) countries in the current political atmosphere and the potentials should be utilized.

The Iranian foreign minister talked of efforts to set the stage for energy trade with Europe, saying that the broadening of economic relations could benefit both sides.

Highlighting that Tehran-Madrid relations are based on common interests, the top Iranian diplomat expressed hope that ties between the two countries would further expand in the future.

The two officials also discussed international developments and regional issues, particularly the crises in Syria and Ukraine.

The Spanish foreign minister, for his part, expressed his country’s readiness to bolster cooperation with Iran.

 

NIGEc Eyes More Gas Sales

 

Managing Director of the National Iranian Gas Exports Company (NIGEC) Alireza Kameli has said that Iran is in talks with different countries for selling more gas.

“Negotiations for Iran’s gas sale have never been halted and we are currently in talks with many countries,” he said.

He said Iran is currently talking with Armenia, Azerbaijan, Oman and Iraq for gas exports, adding that talks have also been held with Indian officials.

“Once new phases of the South Pars gas field starts pumping in the coming years, Iran’s gas production capacity would greatly increase,” Kameli added.

Aframax ready for delivery to venezuela

 

In the 1950s and 1960s, countries like Japan and South Korea based part of their industrial growth on shipbuilding industry. They are now among the top shipbuilders in the world. South Korea owns some 40 percent and Japan holds 30 percent of the world’s shipbuilding market.

Shipbuilding is therefore an attractive industry for developing nations. Japan used shipbuilding in the 1950s and 1960s to rebuild its industrial structure; South Korea started to make shipbuilding a strategic industry in the 1970s, and China is now in the process of repeating these models with large state-supported investments in this industry. Conversely, Croatia is privatizing its shipbuilding industry.

Iran is also making efforts to win a share in the marine heavy industries in the world. Shipbuilding is a job-creating sector and Iran, which has extensive costs in the north and south, can make good revenues from shipbuilding.   

After the Second World War, shipbuilding (which encompasses the shipyards, the marine equipment manufacturers, and many related service and knowledge providers) grew as an important and strategic industry in a number of countries around the world.

Today, Iranian shipbuilding companies are manufacturing very large crude carriers and Aframax after they succeeded in building commercial ships.

In July 2012, Iran’s Marine Industrial Company (Sadra) said the company had launched the first Aframax tanker it had made for Venezuela at the company's yard in the southern port city of Bushehr.

The tanker is 250 meters long, 44 meters wide and 21 meters high and has been launched in a draft depth of 14.8 meters.

Three more tankers are under construction at Sadra yard for delivery to Venezuela.

Aframax ships are oil tankers smaller than 120,000 metric tons deadweight (DWT) with a breadth of above 32.31 meters.

Qobad Choubdar, chairman of the Board of Directors of Sadra, told Iran Petroleum that Venezuela had initially ordered four 94,000-ton Aframax ships to Iran in 2007. Then, the order changed to the 113,000-ton Aframax.

According to him, Venezuela is to take delivery of the ship in one or two months.

He said that all equipment and the engine for the second vessel ordered by Venezuela are also ready, adding that it will be fully manufactured after the first one would become operational. 

 An Aframax ship is an oil tanker smaller than 120,000 metric tons and with a breadth above 32.31 m. The term is based on the AFRA - Average Freight Rate Assessment - a tanker rate system created in 1954 by Shell Oil to standardize shipping contract terms.

Due to their favorable size, Aframax tankers can serve most ports in the world. These vessels serve regions which do not have very large ports or offshore oil terminals to accommodate very large crude carriers and ultra large crude carriers. Aframax tankers are optimal for short to medium haul crude oil transportation. Aframax class tankers are largely used in the basins of the Black Sea, the North Sea, the Caribbean Sea, the South and East China Seas, and the Mediterranean. Non-OPEC exporting countries may require the use of tankers because the harbors and canals through which these countries export their oil are too small to accommodate very-large crude carriers and ultra-large crude carriers.

Significant Jump in Iran Oil Sales

 

Iran appears to have sharply increased its oil exports to China and India over the past few months, in what may be an early sign that oil sanctions have eased significantly since November, when Tehran signed an interim deal to freeze its nuclear program.

China’s average monthly imports of Iranian oil during the past three months were 29 percent above the monthly average for the previous six months, according to Foreign Reports, a Washington-based energy consulting firm. The firm said that average Indian imports from Iran were 53 percent higher during the past three months than the previous six-month period.

“The numbers should be a red flag for the administration,” said Nat Kern, who heads Foreign Reports. “What is the US going to do at the end of May if Iran has punched such a deep hole through the core sanctions on oil? The horse would be out of the barn.”

Under the interim agreement between Iran and the P5+1 countries, Iran’s oil customers were allowed, in theory, to purchase the same average amounts of Iranian crude as they had bought in the previous six-month period. The Foreign Reports estimates are based on data from China’s General Administration of Customs and on Indian government data cited by Reuters.

US officials so far haven’t seemed worried about any Iranian surge. During a Feb. 17 briefing in Vienna, a senior American official was asked about reports of increasing Iranian oil exports. The official answered that there are “always fluctuations” in the numbers and “we’re quite satisfied with where we are.”

Iranian oil exports soared in January, hitting new highs just months after the United States consented to billions of dollars in economic sanctions relief under the interim nuclear deal.

Exports of Iranian crude oil jumped to 1.32 million barrels, up from December’s high of 1.06 million barrels, according to data from the International Energy Agency.

The spike in exports—mainly to Japan, China, and India—has helped Iran’s once-ailing economy stabilize and decrease inflation.

 

Iranian oil exports have steadily risen since negotiations with the West restored confidence in Tehran’s economy. The increase runs counter to a promise by the Obama administration that “Iran’s oil exports will remain steady at their current level of around 1 million barrels per day.”

While the White House said Iran would receive no more than $7 billion in relief, these experts say that the rise in oil exports and other economic spikes will give Iran “well more than $20 billion,” wrote Washington Free Beacon.

Iran currently has some 30 million barrels of crude oil stored on tankers, “including 6 million barrels in vessels off China’s coast.”  It produced 30,000 more barrels in January, bringing its total to around 2.78 million, according to the report.

As international markets continue to open their arms for Tehran, South Korea is reportedly set to become Iran’s next oil customer.

 

Russia Negotiating More Energy Cooperation With Iran

 

Russia is holding talks with Iran to increase trade volume based on energy cooperation, Russian Energy Minister Alexander Novak told Itar-Tass.

“Last year, the 10th session of the intergovernmental commission was held in Moscow. The parties discussed different variants to increase trade turnover and search for a financial scheme, which would allow our companies to supply products to Iran — metallurgy, machine-building and energy equipment,” Novak said.

“Both parties considered Russia’s participation in constructing power plants on the territory of Iran and developing deposits. We seek to increase trade turnover and expand the presence of our companies on the Iranian market,” the minister said.

“This will give a possibility to develop and restore our trade at the level before sanctions were imposed. Thus, this issue is pressing,” he said.

At present, trade volume with Iran is decreasing. In 2013, it was reduced by 31.5% and reached $1.59 billion. Russia’s export dropped by 38.6% and amounted to $1.16 billion. The decrease was conditioned by tightening economic sanctions against Iran that the United States and the European Union had imposed in mid-2012. The EU banned import and trade of Iranian oil and oil products.

According to Itar-Tass reports, Russia is holding talks with Iran to supply oil (20 million tonnes per year) to the Asia Pacific Region in exchange for goods.

 

PSEEZ Gas Condensate Exports Up

 

 

Pars Special Energy Economic Zone (PSEEZ) exported 972,480 tons of gas condensates worth $852.02million during Jan. 21-Feb. 19, said the director general of the zone’s customs office.

Khodadad Rahimi added that the figures indicate a 23-percent and 22-percent growth compared with those of the corresponding figure of last year respectively.

Last year's figures amounted to 790,634 tons and $698.38 million.

Rahimi put total exports in the same period at 1.53 million tons valued at $1.38 billion. He listed the export items as light and heavy polyethylene, diethylene glycol, mono and triethylene glycol, urea, butane, propane, gas condensates, paraxylene and cement.

"In this period, exports were 24 percent and 31 percent higher year-on-year in terms of weight and value respectively," he said.

The figures for the same duration of last year were 1.24 million tons and $1.05 billion.

Export destinations included China, Japan, India, Turkey, Iraq, Taiwan, Thailand, Malaysia, Vietnam, Afghanistan, Pakistan, Armenia, Russia, Mozambique, Egypt, Syria, Turkmenistan, Tajikistan, Ukraine, Qatar, Tanzania, Ghana, Kenya, Georgia, South Korea and Mexico.

Rahimi also said that in the same time-span, 10,924 tons of goods worth $132 million have been imported through PSEEZ, down by 48 percent and 69 percent in terms of weight and value respectively.

The figures for the same period of last year amounted to 21,007 tons and $425.83 million respectively.

"The imports included refinery equipments and chemical materials," he said.

Rahimi said 565,731 worth of non-oil products of the zone valued at $530.02 million were exported during Jan.

21-Feb. 19, up by 26 percent and 50 percent in terms of weight and value respectively.

PSEEZ's non-oil exports amounted to 448,992 tons worth $353.34 million during the same period of last year.

Yadavaran Output Set to Rise

 

Yadavaran oil field is expected to be producing 85,000 b/d later this year, managing-director of Petroleum Engineering and Development Company (PEDEC) said.

Abdorreza Haji Hosseinnejad said the field’s production is forecasted to reach 50,000 b/d in the coming days.

He said that China’s Sinopec, the main contractor in the project, has delayed its development of the field. He added that the National Iranian Oil Company (NIOC) has turned down a request from Sinopec for more time to develop the project.

Hadi Nazarpour, the official in charge of the development of the project, said the production unit of the field, which includes separation, desalting and desulfurization units, will start operating late this year with a processing capacity of 135,000 barrels.

He said enhanced oil recovery as well as improved oil recovery methods are being applied for boosting the recovery rate of the field.

Yadavaran will raise its production to 180,000 b/d in the second and to 300,000 b/d in the third phase of development.

 

 

Euro-4 Gasoil Treatment Facility at Shazand Refinery

 

With the inauguration of gasoil dehydrogenization unit at Imam Khomeini Refinery in the central city of Shazand, production of Euro-4 compliant diesel fuel started in Iran.

The project was inaugurated on March 13, 2014 by Abbas Kazemi, who is head of the National Iranian Oil Refining and Distribution Company (NIORDC).

“This unit came on-stream with a 3.2-billion-euro investment for the production of more than 12 million liters a day of Euro-4 gasoil,” he said.

Kazemi said the inauguration of this project will lead 50 tons a day of sulfur to markets instead of entering the environment.

“The sulfur production in this refinery has been slashed from 10,000 part per million (ppm) to 30 ppm,” he added.

Kazemi said 35 percent of the refinery’s products is Euro-4 gasoil with 30-ppm sulfur, adding that this issue will be of help to the environment.

The official said Iran’s Euro-4 diesel fuel production is now exceeding 23 million liters a day as Tehran Refinery is also producing 11 ml/d of Euro-4 gasoil.

He said Imam Khomeini Refinery is one of the most advanced refineries in Iran and the world, adding that gasoline makes up 42 percent of the facility’s products. He said other refineries in Iran give a 20 percent share to gasoline production.

Kazemi said Iran’s Petroleum Ministry is following up on a plan to have Imam Khomeini Refinery’s gasoline index registered internationally due to its high quality.

He also said that Euro-4 gasoil is to be distributed in big cities and more than 50 thickly populated cities.

Kazemi said clean gasoline is currently being distributed in the cities of Arak, Karaj and Tehran, expressing hope that other cities will soon get this fuel after Isfahan and Bandar Abbas refineries start production.

He said the gasoline production units of Isfahan and Bandar Abbas refineries are expected to come online later this year or early next year.

European emission standards define the acceptable limits for exhaust emissions of new vehicles sold in EU member states. The emission standards are defined in a series of European Union directives staging the progressive introduction of increasingly stringent standards.

 

 

Japan Envoy Visits ME Biggest Oil Terminal

 

Japan’s Ambassador to Tehran Koji Haneda made a visit to Iran’s Kharg oil terminal, the largest oil terminal in the Middle East, on February 19.

He said Iran-Japan oil cooperation will improve in the near future, adding that Tokyo is willing to purchase more crude oil from Iran.

During his one-day visit to Kharg, Haneda said he was impressed by Iranian petroleum industry staff’s endeavors.

He said that Japanese oil companies have been cooperating with Iran since 1953 when the first Japanese oil tanker loaded crude oil in Iran for delivery to Japan.

He expressed hope that oil cooperation between Iran and Japan would improve in the near future.

Ali Majedi, Iran’s deputy petroleum minister for international affairs and trading, said Japanese companies are willing to invest in upstream megaprojects in Iran.

“The Japanese are now willing to invest in upstream projects, particularly development of oil fields and we hope that this important issue will be realized,” he said.

Majedi said relations between the two countries will improve as Japanese companies are planned to invest in Iran’s upstream oil sector.

He said that Kharg oil terminal makes up a large share of Iran’s hard currency revenues, adding that the island has contributed to Iran’s development since 45 years ago.

Pirouz Mousavi, managing-director of Iran Oil Terminals Company, said the IOTC is ready to broaden cooperation with Japanese companies in different technical fields as well as in the construction of loading facilities for crude oil exports.

Europe Petchem Market Targetted

 

Iran will be able to export petrochemical products to Europe once the international sanctions are lifted, National Petrochemical Company's production manager Ali Mohammad Bassaqzadeh said on March 5.

The products will be exported not only to Asian and African countries, but also to European countries, he added.

He added that by the end of the current Iranian calendar year (March 20), the country's petrochemical output will hit 40 million tons.

Under the sanctions, we used to export petrochemical products to Europe indirectly through intermediates, he said, adding that lifting the sanctions will facilitate the trend of exports to Europe.

Iran's petrochemical exports surpassed $9.19 billion during the first ten months of the current solar year (started on March 21,2013), the country's customs administration reported on Jan. 25.

The country's petrochemical exports stood at $8.116 billion during the first nine months of the current solar year, which indicates a 2.3 percent decrease compared to the same period of the preceding year.

The Western countries suspended certain sanctions against Iran as the Geneva nuclear deal entered into force on Jan. 20.

The prohibition on the import, purchase or transport of Iranian petrochemical products and related services was suspended as a result of the nuclear deal implementation.

The exports of Iran's gas condensates stood at $ 8.520 billion for the first ten months of the current Iranian calendar year, according to the country's custom administration's report.

 

Iraq Oil Staff Trained

 

A group of 53 employees of Iraq’s Oil Ministry attended specialized courses about safety and firefighting at Bandar Imam Petrochemical Plant.

These courses were held as part of Iran’s plans to share petrochemical technology with other countries.

The Iraqis underwent training for NFPA1081, apparatus driver and engine operation.

Bandar Imam Petrochemical Plant is one of the biggest petrochemical facilities in the Middle East.

 

Project Fund for Petchem Investment

 

The managing-director of National Petrochemical Company (NPC) has said that Iran Stock Exchange and Securities Organization’s project fund can be of help in attracting investment for the petrochemical sector.

“Iran’s petrochemical industry needs 500 million dollars in investment every year for its development. With the help of banks, Iran National Development Fund and private investors, this fund can clear the way for the development of the petrochemical industry,” Abbas Sheri-Moqaddam said.

 

Pakistan Prefers Iran Gas to LNG

 

Pakistani Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi has said that his country prefers to purchase natural gas from Iran rather than liquefied natural gas (LNG) from other countries due to its lower prices.

He dismissed speculation about the signing of an agreement for purchase of energy on high prices on the pressure of a friendly country.

Speaking on a motion in the Senate, the minister said, "No contract has been signed with anybody for the purchase of energy. Similarly, no issue of price fixation for energy has been discussed with anybody."

"We are going to procure LNG on the lowest price. Therefore, speculations for any other agreement or energy purchase are baseless," he informed the House in response to points raised by the members.

The members had claimed that Pakistan was under pressure by certain friendly countries to shelve Iran-Pakistan gas pipeline and purchase costly gas from others.

The minister said the country at present was facing gas shortage for domestic and industrial use as well as for production of electricity. "Our production is four billion cubic meter and demand is six billion cubic meter and we need vast quantity of gas to bridge this gap."

He further explained that all LNG (liquefied natural gas) contracts were linked to crude oil because there was no bench mark for gas pricing in international agreements. "Therefore, the cost of producing electricity will be almost the same either we produce it from crude oil or from LNG. All agreements will also be on the basis of 'take and pay'."

He clarified that cost of Iranian gas would be lesser a dollar or two because the agreement was signed a few years back. But, due to sanctions on Iran, no investor would invest in that project. "However, if the sanctions are lifted, the Iranian gas will be in our system within 30 months."

 

 

 

 

 

Iran Unveils Draft of New Oil Contracts

 

Iran’s Oil Ministry unveiled the draft model of its new oil contracts aimed at drawing more foreign companies to develop Iran’s hydrocarbon reservoirs.

The “Iran Petroleum Contract” (IPC) was unveiled in Tehran during a two-day forum.

The IPC is replacing “buy-back” contracts which are no longer attractive to foreign companies.

Under a buyback deal, the host government agrees to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces.

But under the IPC, National Iranian Oil Company (NIOC) will set up joint ventures for crude oil and gas production with international companies which will be paid with a share of the output.

Iran’s Petroleum Ministry plans to hold a conference in London in July to introduce the new contract terms to international companies.

World oil giants have shown interest in returning to Iran following the easing of sanctions against Iran in light of the implementation of Tehran’s nuclear deal with world powers.

 

Tempting Back Foreign Firms

 

Iran’s Petroleum Minister Bijan Namdar Zanganeh told the forum the new model of oil contracts will attract back international companies.

“Although the return of big companies depends on the full lifting of sanctions,... but more attractive oil contracts will greatly help to their return,” Zanganeh said.

He said Iran welcomes any foreign company. “We welcome the presence of all international oil companies, including American companies, to develop oil and gas fields and enhance [production] capacities.”

The minister said “we feel obliged to take action for safeguarding the oil fields and enhancing [production] capacities” although sanctions are close to being lifted.

He also said that Iran has to raise its oil and gas production.

“Iran, as the second holder of oil reserves and the first holder of gas reserves [in the world], has to gain consistent shares of the oil and gas markets in the world,” Zanganeh said.

 “At present, national determination has taken shape for that purpose with the modification of oil contracts.

The minister said that buy-back contracts managed to raise Iran’s oil and gas production capacities by attracting foreign investment over the past 18 years.

“But today, the conditions of the world markets with regards to petroleum industry have significantly changed since 1990. Therefore, we have to study the positive and negative points of buy-back contracts in order to attract capital and state-of-the-art technology,” he said.

Zanganeh said the reason for the attractiveness of buy-backs in the 1990s was that oil was supplied on the market at 15 to 20 dollars a barrel.

He said the oil price hikes, development of shale reserves and the creation of opportunities for investment in Iraq necessitate changes in Iran’s oil contracts.

“In the buy-backs, foreign companies could not be present in the stage of exploration and enhanced recovery from mature reservoirs. Therefore, these flaws have been removed in the new model of Iranian oil contracts,” the minister said.

Zanganeh said the new oil contracts must be so that they will encourage foreign companies to invest in different oil and gas-rich provinces and regions in the country. 

 

National Interests Prioritized

 

Vice-President for Legal Affairs Elham Aminzadeh told the frum that Iran must take into account its maximum benefits in the new type of oil contracts it is adopting.

“Unfortunately, the models presented so far for oil contracts have not guaranteed maximum profits for the country,” she said.

She said Iran’s century-old petroleum industry has experienced concessions, production sharing agreements and service contracts.

She said that concessions, which were in effect in Iran for nearly half a century, provide the contractor with special advantages. 

Aminzadeh said Iran banned concessions and production sharing contracts following the 1979 Islamic Revolution because of the losses they inflicted on Iran.

With regards to buy-back contracts, she said that his model does not give the foreign investor any ownership on oil resources.

“In this model, the necessary flexibilities have not been envisaged for the project. The basis of this type of contracts is transfer of technology and the government runs no risk,” she said.

Aminzadeh said the buy-backs are no longer attractive because they do not envision the necessary mechanisms for maintaining the production level.

“The expectations of domestic and foreign investors and contractors must be studied and shared fields must be more attractive than independent fields,” she said.

She called for the removal of bureaucratic obstacles to cooperation with Iranian and foreign investors.

“The flexibility of new contracts in the face of different international conditions is of great significance so that the execution of contracts could be managed under any circumstances,” said Aminzadeh.

 

Oil Output Hike Eyed

 

The head of National Iranian Oil Company (NIOC) said that Iran must make endeavors to make up for shortcomings of the past eight years.

Roknoddin Javadi said Iran’s petroleum industry would be of great help in bolstering national economy.

He said Iran eyes producing five million barrels of oil to win a seven-percent share in the world market as well as ten percent of the global gas trade.

“To that end, we have to produce and export 1.5 bcm/d of gas, 1.5 mb/d of gas liquids and 3 mb/d of oil. It means that our exports must be increased to 3.8 mb/d,” said Javadi, who is also managing-director of National Iranian Oil Company.

He highlighted an eight-percent decline in the normal production from the country’s oil and gas reservoirs, saying Iran has to raise its oil production capacity by 3 mb/d before 2025.

Javadi said Iran’s potential oil production stands at 3.85 mb/d, adding that Iran can raise its output by modifying oil contract terms in order to attract foreign investment.

He said changes to the buy-backs have so far failed to attract foreign companies for investment in Iran.

Javadi said Iran’s oil and gas projects have been delayed due to lack of finance.

He said the low rate of return on investment, high risks and lack of planning are among restrictions for investment in Iran.

He also said that the sweet gas produced from the main phase of the gigantic South Pars gas field will be fed into national pipeline next week.

Javadi said the first train of this phase is being launched with sour gas.

He added that NIOC owes money to no contractor, adding that the NIOC’s policy has been settling with all contractors in order to develop the projects as soon as possible.

Javadi said Iran will replace contractors who do not respect the deadlines set in the oil contracts.

He said NIOC feels obliged to remove obstacles in a bid to accelerate the implementation of projects, adding that oil contracts are being revised for that purpose.

“After finalization of new oil industry contract terms, all domestic and foreign contracts will be signed based on the new model,” said Javadi.

He said that the presence of foreign companies in Iran after the lifting of sanctions will help accelerate the projects.

 

Details of IPC

 

Mehdi Hosseini, who heads the committee to revise oil contracts, said: “In the new contracts, different stages of the petroleum industry (exploration, development and production) are commissioned in an integrated manner.”

Hosseni, however, said that “ownership of reservoirs is not transferrable.”

“Under new contracts, Iranian experts will work shoulder-to-shoulder with foreign investment companies in order to become familiar with the latest technologies of the world,” he said.

Hosseini said the new contracts seek to raise the recovery factor of Iranian oil fields, half of which are in their maturity period.

“We’ve analyzed all the contracts in the market right now, all available beneficial models, and this is what we’ve come up with,” he said. “This is a good model, with flexibility.”

"We must try to persuade foreign companies to enter high-risk zones of the petroleum industry because it is the rule of the game in the world that foreign companies account for the heavy costs of exploration. National funds should not be spent on exploration," said Hosseini, adding that "risk and reward" must match in the contracts.

Iran will extend the length of its oil and natural gas field development contracts with foreign companies to about 20 years, as part of efforts to ease the entry of foreign investment and get economic sanctions on the nation lifted.

In addition to extending development contracts with foreign firms to 20 years from their current maximum of about 10 years, which would bring them in line with the length of contracts in other oil-producing nations, the new system would also allow foreign firms a larger share of the profits.

The average contract period will be about 20 years, with the specific length depending on such factors as the scale of the oil or gas field involved. The government envisions a maximum period of 25 years.

 The amount of profits allowed to foreign firms—currently at a maximum of about 15 percent—will also be revised.

 Under the existing system, excess development costs are the responsibility of the developing firms, but Iran plans for the government to bear a certain amount of excess costs under the new system, thereby lowering the risk involved for foreign companies.

 

Good ROR

 

Iran’s new model of oil contracts takes into account the rate of return on investment, a member of Petroleum Ministry oil contracts revision committee said.

Mostafa Zeinoddin said the new contracts determine the rate of return based on progress in exploration, development and production.

Zeinoddin, who is a former legal director of National Iranian Oil Company, said the revision committee has studied the framework of contracts used in other countries.

He underscored the need for protecting national sovereignty on hydrocarbon reserves and safeguarding the environment.

Zeinoddin said the new type of contracts is expected to attract domestic and foreign investment.

Buy-back deals have fetched 94 billion dollars for Iran, a deputy head of National Iranian Oil Company said.

Abdol-Mohammad Delparish said only eight billion dollars out of the 94 billion dollars were recouped to contractors.

“In other words, the contractors in buy-back oil contracts were recouped less than 10 percent of the revenues from these contracts,” he said.

Delparish said buy-back contracts helped Iran raise its oil production by more than 600,000 b/d.

He said phases 1 to 8 of the giant South Pars gas field as well as two phases of Darkhoein field were developed under buy-back contracts.

Delparish said Iran earned 27 billion dollars from buy-back gas contracts.

He, however, said a major fault with the buy-back contracts is short-term view of the behavior of the reservoir. 

Delparish said even the Open Capex version of buy-back contracts hit snags.

 

Investment Risk Minimized

 

A senior legal expert from NIOC said the new contract model presented by Iran minimizes investment risks for contractors.

The director for legal affairs of National Iranian Oil Company Mahmoud Reza Firouzmand said that reducing investment risks for contractors is one of the major features of the new generation contracts.

He said the contracts prompt employers to operate shoulder to shoulder with contractors to throw more support to the latter during projects.

He added that the new contract model also takes into account emergency occasions and allows employers to open-handedly reimburse financial losses of contractors.

Firouzmand said by developing more attractive contracts, Iranian and foreign contractors will be better motivated to partake in the projects aimed at the development and flourishing of the petroleum industry.

 

 

Iran Unveils Draft of New Oil Contracts

 

Iran’s Oil Ministry unveiled the draft model of its new oil contracts aimed at drawing more foreign companies to develop Iran’s hydrocarbon reservoirs.

The “Iran Petroleum Contract” (IPC) was unveiled in Tehran during a two-day forum.

The IPC is replacing “buy-back” contracts which are no longer attractive to foreign companies.

Under a buyback deal, the host government agrees to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces.

But under the IPC, National Iranian Oil Company (NIOC) will set up joint ventures for crude oil and gas production with international companies which will be paid with a share of the output.

Iran’s Petroleum Ministry plans to hold a conference in London in July to introduce the new contract terms to international companies.

World oil giants have shown interest in returning to Iran following the easing of sanctions against Iran in light of the implementation of Tehran’s nuclear deal with world powers.

 

Tempting Back Foreign Firms

 

Iran’s Petroleum Minister Bijan Namdar Zanganeh told the forum the new model of oil contracts will attract back international companies.

“Although the return of big companies depends on the full lifting of sanctions,... but more attractive oil contracts will greatly help to their return,” Zanganeh said.

He said Iran welcomes any foreign company. “We welcome the presence of all international oil companies, including American companies, to develop oil and gas fields and enhance [production] capacities.”

The minister said “we feel obliged to take action for safeguarding the oil fields and enhancing [production] capacities” although sanctions are close to being lifted.

He also said that Iran has to raise its oil and gas production.

“Iran, as the second holder of oil reserves and the first holder of gas reserves [in the world], has to gain consistent shares of the oil and gas markets in the world,” Zanganeh said.

 “At present, national determination has taken shape for that purpose with the modification of oil contracts.

The minister said that buy-back contracts managed to raise Iran’s oil and gas production capacities by attracting foreign investment over the past 18 years.

“But today, the conditions of the world markets with regards to petroleum industry have significantly changed since 1990. Therefore, we have to study the positive and negative points of buy-back contracts in order to attract capital and state-of-the-art technology,” he said.

Zanganeh said the reason for the attractiveness of buy-backs in the 1990s was that oil was supplied on the market at 15 to 20 dollars a barrel.

He said the oil price hikes, development of shale reserves and the creation of opportunities for investment in Iraq necessitate changes in Iran’s oil contracts.

“In the buy-backs, foreign companies could not be present in the stage of exploration and enhanced recovery from mature reservoirs. Therefore, these flaws have been removed in the new model of Iranian oil contracts,” the minister said.

Zanganeh said the new oil contracts must be so that they will encourage foreign companies to invest in different oil and gas-rich provinces and regions in the country. 

 

National Interests Prioritized

 

Vice-President for Legal Affairs Elham Aminzadeh told the frum that Iran must take into account its maximum benefits in the new type of oil contracts it is adopting.

“Unfortunately, the models presented so far for oil contracts have not guaranteed maximum profits for the country,” she said.

She said Iran’s century-old petroleum industry has experienced concessions, production sharing agreements and service contracts.

She said that concessions, which were in effect in Iran for nearly half a century, provide the contractor with special advantages. 

Aminzadeh said Iran banned concessions and production sharing contracts following the 1979 Islamic Revolution because of the losses they inflicted on Iran.

With regards to buy-back contracts, she said that his model does not give the foreign investor any ownership on oil resources.

“In this model, the necessary flexibilities have not been envisaged for the project. The basis of this type of contracts is transfer of technology and the government runs no risk,” she said.

Aminzadeh said the buy-backs are no longer attractive because they do not envision the necessary mechanisms for maintaining the production level.

“The expectations of domestic and foreign investors and contractors must be studied and shared fields must be more attractive than independent fields,” she said.

She called for the removal of bureaucratic obstacles to cooperation with Iranian and foreign investors.

“The flexibility of new contracts in the face of different international conditions is of great significance so that the execution of contracts could be managed under any circumstances,” said Aminzadeh.

 

Oil Output Hike Eyed

 

The head of National Iranian Oil Company (NIOC) said that Iran must make endeavors to make up for shortcomings of the past eight years.

Roknoddin Javadi said Iran’s petroleum industry would be of great help in bolstering national economy.

He said Iran eyes producing five million barrels of oil to win a seven-percent share in the world market as well as ten percent of the global gas trade.

“To that end, we have to produce and export 1.5 bcm/d of gas, 1.5 mb/d of gas liquids and 3 mb/d of oil. It means that our exports must be increased to 3.8 mb/d,” said Javadi, who is also managing-director of National Iranian Oil Company.

He highlighted an eight-percent decline in the normal production from the country’s oil and gas reservoirs, saying Iran has to raise its oil production capacity by 3 mb/d before 2025.

Javadi said Iran’s potential oil production stands at 3.85 mb/d, adding that Iran can raise its output by modifying oil contract terms in order to attract foreign investment.

He said changes to the buy-backs have so far failed to attract foreign companies for investment in Iran.

Javadi said Iran’s oil and gas projects have been delayed due to lack of finance.

He said the low rate of return on investment, high risks and lack of planning are among restrictions for investment in Iran.

He also said that the sweet gas produced from the main phase of the gigantic South Pars gas field will be fed into national pipeline next week.

Javadi said the first train of this phase is being launched with sour gas.

He added that NIOC owes money to no contractor, adding that the NIOC’s policy has been settling with all contractors in order to develop the projects as soon as possible.

Javadi said Iran will replace contractors who do not respect the deadlines set in the oil contracts.

He said NIOC feels obliged to remove obstacles in a bid to accelerate the implementation of projects, adding that oil contracts are being revised for that purpose.

“After finalization of new oil industry contract terms, all domestic and foreign contracts will be signed based on the new model,” said Javadi.

He said that the presence of foreign companies in Iran after the lifting of sanctions will help accelerate the projects.

 

Details of IPC

 

Mehdi Hosseini, who heads the committee to revise oil contracts, said: “In the new contracts, different stages of the petroleum industry (exploration, development and production) are commissioned in an integrated manner.”

Hosseni, however, said that “ownership of reservoirs is not transferrable.”

“Under new contracts, Iranian experts will work shoulder-to-shoulder with foreign investment companies in order to become familiar with the latest technologies of the world,” he said.

Hosseini said the new contracts seek to raise the recovery factor of Iranian oil fields, half of which are in their maturity period.

“We’ve analyzed all the contracts in the market right now, all available beneficial models, and this is what we’ve come up with,” he said. “This is a good model, with flexibility.”

"We must try to persuade foreign companies to enter high-risk zones of the petroleum industry because it is the rule of the game in the world that foreign companies account for the heavy costs of exploration. National funds should not be spent on exploration," said Hosseini, adding that "risk and reward" must match in the contracts.

Iran will extend the length of its oil and natural gas field development contracts with foreign companies to about 20 years, as part of efforts to ease the entry of foreign investment and get economic sanctions on the nation lifted.

In addition to extending development contracts with foreign firms to 20 years from their current maximum of about 10 years, which would bring them in line with the length of contracts in other oil-producing nations, the new system would also allow foreign firms a larger share of the profits.

The average contract period will be about 20 years, with the specific length depending on such factors as the scale of the oil or gas field involved. The government envisions a maximum period of 25 years.

 The amount of profits allowed to foreign firms—currently at a maximum of about 15 percent—will also be revised.

 Under the existing system, excess development costs are the responsibility of the developing firms, but Iran plans for the government to bear a certain amount of excess costs under the new system, thereby lowering the risk involved for foreign companies.

 

Good ROR

 

Iran’s new model of oil contracts takes into account the rate of return on investment, a member of Petroleum Ministry oil contracts revision committee said.

Mostafa Zeinoddin said the new contracts determine the rate of return based on progress in exploration, development and production.

Zeinoddin, who is a former legal director of National Iranian Oil Company, said the revision committee has studied the framework of contracts used in other countries.

He underscored the need for protecting national sovereignty on hydrocarbon reserves and safeguarding the environment.

Zeinoddin said the new type of contracts is expected to attract domestic and foreign investment.

Buy-back deals have fetched 94 billion dollars for Iran, a deputy head of National Iranian Oil Company said.

Abdol-Mohammad Delparish said only eight billion dollars out of the 94 billion dollars were recouped to contractors.

“In other words, the contractors in buy-back oil contracts were recouped less than 10 percent of the revenues from these contracts,” he said.

Delparish said buy-back contracts helped Iran raise its oil production by more than 600,000 b/d.

He said phases 1 to 8 of the giant South Pars gas field as well as two phases of Darkhoein field were developed under buy-back contracts.

Delparish said Iran earned 27 billion dollars from buy-back gas contracts.

He, however, said a major fault with the buy-back contracts is short-term view of the behavior of the reservoir. 

Delparish said even the Open Capex version of buy-back contracts hit snags.

 

Investment Risk Minimized

 

A senior legal expert from NIOC said the new contract model presented by Iran minimizes investment risks for contractors.

The director for legal affairs of National Iranian Oil Company Mahmoud Reza Firouzmand said that reducing investment risks for contractors is one of the major features of the new generation contracts.

He said the contracts prompt employers to operate shoulder to shoulder with contractors to throw more support to the latter during projects.

He added that the new contract model also takes into account emergency occasions and allows employers to open-handedly reimburse financial losses of contractors.

Firouzmand said by developing more attractive contracts, Iranian and foreign contractors will be better motivated to partake in the projects aimed at the development and flourishing of the petroleum industry.

 

 

World Fixes Eyes on Iran New Contracts

 

As expected, Iran’s Petroleum Ministry’s introduction of a new framework for oil contracts was widely reflected in international media. The Iran Petroleum Contract (IPC) was unveiled at a two-day conference in Tehran on February 23 and 24. The new Iran Petroleum Contract will offer greater incentives to international oil and gas investors by offering higher potential profits and lower investment risks. The goal of contract is to attract investment and technology to the Iranian oil industry and to increase the industry’s overall crude oil and natural gas production.

After the Islamic Revolution in 1979, Iran revised its policies toward international investors in the energy sector. In the 1990s and early 2000s, Iran introduced buy-back contracts to international investors for the first time. At that time, buy-back contracts allowed investors to participate in developing old oil fields with the aim of increasing their recovery factors. Later on, Iran extended the terms of buy-back contracts to exploration projects. Similarly, this allowed investors to work on green fields and sign exploration projects.

Buy-back contracts were revised for a third time to reduce investment risks, by offering more flexibility in investment costs. But it was not successful at keeping international companies such as Total and Eni in the country. This was further compounded by Iraq’s situation in 2004 and 2005, since the country offered more flexible investment models, a new market and heightened competition in the region.

“The Iran Petroleum Contract seems to be an altogether different approach, which proposes a joint venture with international companies for exploration, development and production projects,” Al-Monitor wrote. “Marking a major change is the contract’s involvement of foreign companies in the actual production process, whereas previously, international companies were only involved in exploration and development. Under the contract, though, foreign investors will have an actual hand in production — something unseen since the 1979.”

This online journal said: “Yet, the global energy market is expected to face oversupply in the mid-term due mainly to the shale revolution in North America and new Iraqi supplies. Seen from this perspective, having international partners as joint producers and market conduits for its oil would be of immense help to Iran.”

 

The other major change in the Iran Petroleum Contract is with regard to exploration. Previously, under buy-back contracts, investors would not be paid if they failed to discover any usable fields. The new petroleum contract allows the investor to participate in other exploration projects if there are no results from the initial fields in which it invested.

“There’s a large potential for really increasing production,” Simon Wardell, a director at consultants IHS CERA in London, told Bloomberg. Iran is “keen to offer some kind of reasonable terms for new exploration projects. That may even provoke more competition in the region, though we are still a long way off from that.”

International companies seek access to hydrocarbons to book reserves, a form of reporting by which they can claim a share of oil and show they can replace barrels they produce.

Russia’s OAO Gazprom (GAZP), China National Petroleum Corp. and Malaysia’s Petroliam Nasional Bhd., or Petronas, were among a dozen foreign firms the organizers said attended the conference.

“International companies will act as the sole operator at oil and gas exploration blocks and will be responsible for the risks of those projects,” Bloomberg said.

The proposed terms in the new Iran Petroleum Contract are much more flexible and have greater incentives than buy-back contracts. Iranian officials are hoping to once again attract and motivate foreign investors to invest in their energy industry by changing their upstream investment model.

Yet, the new Iran Petroleum Contract has a cost-benefit. The new contracts’ duration is much longer, lasting up to 20 or 25 years, almost double the length of buy-back contracts. Previously, international investors had to leave the field within three to five years after completion of work. Iran hopes to increase the quality of its work and protect the reservoir by involving investors for longer periods of time and giving them a more vested stake in the field. This factor could have a political advantage for the Iranian side, as international partners would have shared profits and interests in Iran for longer.

 

 

 

 

Gradual Development of Oil/Gas Fields

 

Members of Petroleum Ministry-appointed oil contracts revision committee outlined details of the new type of oil contracts, known as Iran Petroleum Contract (IPC).

In the IPC, the terms for the development of oil fields are not fixed and they are on a gradual basis. The new contracts prepare the grounds for more activity of the private sector in the oil industry. Under these contracts, Iranian contractors and manufacturers will first work together with foreign companies before continuing their activities independently.

The oil and gas fields are not awarded for development at a pre-agreed price, and the contractors will be recouped based on the risks they run in different reservoirs. Moreover, the costs of development changes throughout work.

In the regions where oil and gas fields are high-risk, the contractors will be paid based on risks. In case foreign contractors save costs throughout development, they will be rewarded.

The timeframe required for the National Iranian Oil Company (NIOC) to decide on awarding the projects will also decline.

In case the contractor fails to reach successful exploration, the NIOC will continue its cooperation with this company and award other exploration projects to that company.

The NIOC will engage in long-term cooperation with foreign contractors and this cooperation will continue by the formation of joint venture companies.

In case ageing oil and gas fields require new technologies for enhanced recovery, the duration of the contract will become longer. Moreover, the terms of cooperation between foreign companies and Iran’s oil industry will be more flexible.

Based on the IPC, foreign companies will reserve oil and gas reservoirs based on FASB.

Financial Accounting Standards Board (FASB) is a seven-member independent board consisting of accounting professionals who establish and communicate standards of financial accounting and reporting in the United States. FASB standards, known as generally accepted accounting principles (GAAP), govern the preparation of corporate financial reports and are recognized as authoritative by the Securities and Exchange Commission.

Accounting standards are crucial in an efficient market, as information must be transparent, credible and understandable. The FASB sets out to improve corporate accounting practices by enhancing guidelines set out for accounting reports, identifying and resolving issues in a timely manner and creating a uniform standard across the financial markets.

An important point highlighted in the Constitution regarding enhanced recovery from oil and gas reservoirs in Iran has been not to give control of reservoirs to foreign companies.

Mehdi Hosseini, head of the revision committee, said foreign companies can now mention their revenues from Iran’s hydrocarbon reserves in their annual balance sheets.

 

Return of Investment

 

The period for the return of investment to foreign contractors will be seven years under the new contracts. Contractors should keep in mind that the NIOC can charge them for public benefit projects like construction of roads and hospitals in the areas of activity.

The new oil contracts can be implemented in all oil and gas fields in Iran and there is no limitation.

If we assume the cost for the development of low-risk fields in Iran as DF, the new contracts reimburse the contractors based on DF+1 formula in low-risk fields and base don DF+1+0.5 in high-risk fields. The repayment varies according to the type of the field.

Since prices are floating in the new oil contracts, the companies that offer the least price for oil and gas production will be winner.

The new contracts have no words on booking or the volume of oil and gas in the reservoirs, but foreign companies can mention their revenues from oil and gas production in Iran in their balance sheets in order to raise their stocks in international markets. Foreign companies can do so as long as they are cooperating with Iran.

Revenues from oil and gas production in Iran are among important points foreign companies take into account for presence in Iran. Iraq pays foreign companies an extra 2-5 dollars for each additional barrel from some of its reservoirs. If this framework is applied in Iran, the IPC will become more attractive.

Hosseini said Iran’s new oil contracts are competitive and they will soon become popular for big oil companies in the Middle East. The IPC has been drawn up based on the three generations of contracts that have already been effective in Iran and also the contracts used in the regional countries.

 

Lower Risk

 

Mahmoud-Reza Firouzmand, director for legal affairs of NIOC, said a major factor in the new contracts is that the contractors face lower risk.

He said that under the new model of contracts, risks will be shared. “By drawing up the new contracts, the originator will be along with the contractor and will support it.”

In force-majeure cases, the originator will be free to compensate for costs for which no party is to blame, said Firouzmand.

“In order to attract foreign investment, particularly in the upstream oil sector, contractual systems are the main element and framework for cooperation between governments owning oil reserves and international oil companies. The attractiveness and transparency of the contract frameworks are directly related to the volume of investment that could be attracted in the oil industry,” he said.

 

Transfer of Foreign Technologies

 

In the revised oil contracts, some points have been included in order to support domestic manufacturers and indigenize technologies needed in the petroleum industry. For instance, consortiums will take shape in order to transfer technologies from international companies into Iran.

Mohammad-Ali Emadi, a member of the revision committee, said the exploration-development-production chain in the oil contracts has not been integrated, adding that the new model integrates them. Moreover, exploration is also awarded to foreign contractor at its own costs.

“The structure of new contracts is such that technology must be received. Therefore, joint venture companies must be established in order to follow up on financial and operational issues and prepare the grounds for the transfer of technology. Iranian contractors could be of help due to their familiarity with the fields,” said Emadi.

 

Cost Price Factors

 

A key factor in the cost price for the development of oil and gas fields is the volume of production and saved costs.

Other factors include the period of production, oil and gas prices in the market and the type of the field.

Under the IPC, exploration, development and production are awarded in an integrated manner to the contractor. In case the exploration phase is successful, the contract will go into the development phase. The contractors will be repaid five to seven years after the field starts production.

Direct and indirect costs like drilling costs, taxes and duties, exploration, development and production costs will be paid after the start of production.

International companies seek access to hydrocarbons to book reserves, a form of reporting by which they can claim a share of oil and show they can replace barrels they produce. Under the new contract model, Iran refers to this as “supplementary reporting,” said Ali Kardor, head of finance at NIOC.

Iran Oil/Gas Industry and World Energy Security

 

In the first panel, the international and regional status of Iran’s oil and gas industries, world energy security, opportunities for investment in Iran’s gas industry, international developments, requirements for development as well as regional oil and gas developments were discussed.

Ali Majedi, Iran’s deputy petroleum minister for international affairs and trading, presided over the first panel. He underscored the coincidence of the forum on oil contracts and nuclear talks between Iran and world powers.

“We hope that the world would correctly receive Iran’s message and offer its views in forums in order to prepare the grounds for the development and growth of Iran’s petroleum industry,” he said.

“Over the past years, sanctions have restricted Iran’s oil and gas exports and subsequently, the buyers of Iran’s oil and gas in the world have faced restrictions and problems,” he added.

Majedi said the best routes for Iran’s gas exports are through pipeline, adding that designers of some projects like the Nabucco have made many mistakes in their attempts to drive Iran out of the world market.

“The sanctions blocked the presence of many foreign companies in Iran. For its part, Iran also lost chances to develop its oil and gas fields to some extent,” he said.

Majedi said the world should change its view of Iran, adding: “Iran has never attacked any country and it has always guaranteed the security of the Persian Gulf watercourse.”

He said the economy must be depoliticized, adding that politicization of the economy may prove destructive.

Majedi said Iran’s neighbors are looking for natural gas which has been slapped with sanctions.

He said Iran’s new model of oil contracts will bring about economic boom in the country and in the region. He added that international companies are waiting for the finalization of Iran’s new model of contracts.

Majedi said Iran seeks its share of the oil and gas market based on its resources. “Iran does not seek anything beyond its own share from the world market. It wants its share as the second largest holder of oil and the first holder of gas reserves in the world.”

He said the new contracts incorporate “long-term presence in the oil fields” and the profitability of projects.

 

Gas Investment Opportunities

 

Another panel was about the status of Iran’s gas industry and trade. It was presided over by Hamid-Reza Araqi, who is managing-director of National Iranian Gas Company (NIGC).

Araqi said Iran is open to foreign investment in the refining, pipeline and gas pressure booster station projects.

“A gas pipeline supposed to carry gas from the new phases of South Pars needs investment. It can be attractive for domestic and foreign investors,” he said.

“Currently, 9.8mcm/d of gas is being fed into national gas pipeline from Sarajeh storage facility in Qom. According to schedule, Shourijeh storage facility is to become operational next year,” he said.

Araqi said the NIGC is tasked with removing gas supply restrictions, restructuring itself and getting access to the world gas markets.

The official said foreign investors can finance such projects as the diversity of energy mix and development of gas infrastructure.

Araqi referred to the 24 percent growth in gas consumption in the world industries in the past ten years, saying: “Iran, which sits atop 33.6 tcm of gas, is the largest gas holder in the world and enjoys more potential for effectiveness in the gas trade.”  

 

Regional Oil Developments

 

Gholam-Reza Manouchehri, member of the Petroleum Ministry’s oil contracts revision committee, spoke about the regional developments regarding oil.

He said that the Iraqi government has been awarding its fields to foreign companies for development following the overthrow of former dictator Saddam Hussein.

Manouchehri said Iraq is planning to reach a position to meet 40 percent of the world energy needs in the future. “This country has offered attractive contracts particularly in its Kurdistan regions. Currently, a large number of international companies are active in this region for raising oil production in this country.”

He said oil fields in Iraq’s Kurdistan are forecasted to be producing 2 mb/d of oil in 10 years, up from the current 360,000 b/d.

Manouchehri said international companies like Spain’s Repsol, China’s Sinopec, Royal Dutch Shell and Exxon Mobil are rapidly developing oil fields in Iraq’s Kurdistan.

The Iranian official also referred to oil production in Kuwait, saying this Arab country has boosted its oil production by using the state-of-the-art technology. He said Kuwait will be able to bolster its position in the Organization of the Petroleum Exporting Countries (OPEC) in the near future.

He said Kuwait has defined new terms for its oil contracts to develop its fields.

Regarding Qatar which shares the giant South Pars gas field with Iran, Manouchehri said Qatar is recovering much more gas than Iran from this offshore field.

Qatar is also extracting 300,000 b/d of oil from the oil layers of South Pars, he said, adding that its output is forecasted to reach 600,000 b/d.

He said Iraq, Saudi Arabia and Qatar, the governments’ share in the contracts is above 90 percent.

Manouchehri said Iranian manufacturers will be taken into account in the signature of new contracts.

“Petroleum Ministry is willing that the required equipment would be manufactured by Iranians,” he said.

 

Policy of Interaction

 

Mahmoud Sariolqalam, an advisor to President Hassan Rouhani, presided over a panel about international developments and the necessities of development in Iran.

He said Iran’s foreign policy must be based on interaction with other countries. “Economic and technological indices are the yardstick for effectiveness in politics and culture, and interactive foreign policy is needed as a prelude to development,” he added.

Sariolqalam said transparency in regulations, full independence of the judiciary, outsourcing, attention to public needs and reviewing global developments are among other necessities for development in the world countries.

He highlighted convergence and interaction of world countries for getting more revenues from energy sources. “Norway, which has proven successful in oil revenues management, owns 2.5 percent share in the ownership of any company registered in the European Union. Despite its huge petrodollars, it spends only four percent of its oil revenues in its current budget. The remaining 96 percent is invested outside Norway.”

He said the middle class is growing in Asia and Latin America while declining in North America and Europe. “Under these circumstances, special attention to the Asian region is necessary due to the growth of consumerism. The Central Asian and Caucasian regions are growing rapidly now.”

“The developing countries that held only 19 multinational companies in 2003 own 127 multinational companies now. But the developed countries, which held 481 multinational companies in 2003, own 373 now,” he said.

Sariolqalam referred to the 10-nation Southeast Asian states, saying these countries have undertaken plans for further convergence.

 

Iran Share of OPEC

 

Mohammad Alipour was the next to address the forum. He made an assessment of Iran’s position in the OPEC by presenting figures about Iran’s oil production.

Alipour, who has long been in the OPEC Secretariat, said: “It seems that if we do not have quick oil production capacity growth some countries the region would overtake us in oil production and exports. Therefore, in order to maintain our 13.2-percent share of OPEC oil production, we have to produce more than four million barrels per day to reach six million barrels per day by 2035.”

He said: “If Iran’s economic growth rate doubles, we will first leave Turkey behind an in the second stage we will reach South Korea. No other sector can accelerate the country’s economic growth as much as the petroleum industry can.”

Oil/Gas Role in Iran Economic Development

 

On the sidelines of the forum held late February in Tehran to discuss the revision of oil contract terms, a number of panel discussions were held. One of them discussed the oil and gas role in the development of Iran’s economy. University professors and representatives from the Office of Vice-President for Planning and Strategic Supervision Affairs and National Development Fund attended exchanged views.

Here are excerpts:

 

Mohammad Mazarati, deputy head of NDF for investment and international affairs

 

Since 54.5 percent of oil revenues are to be paid to the government next calendar year (starting on March 21) and 31 percent will be paid into NDF, the National Iranian Oil Company (NIOC)’s share of these revenues must be increased from 14.5 percent. NDF is also ready to invest as much as 50 percent of the volume of financial resources estimated by foreign companies in the oil industry mutually in the country suggested by the investor.

Over the past decade, 50 percent of revenues from selling oil has been spent on the government’s public budget. Therefore, weaning the government off oil must be done gradually and within the framework of a political and managed procedure. In order to remove fluctuations from oil revenues, Iran established the NDF to save surplus oil revenues and invest in the domestic and foreign private sectors.

Currently, a portion of revenues from selling crude oil is fed into the NDF and in the near future the profits gained from investment by this fund’s resources will be invested in domestic and foreign private sectors.

Twenty percent of crude oil revenues were saved in the NSF in 2011 and this portion will rise to 31 percent in 2014.

Up to December 2013, the NDF’s balance stood at 58 billion dollars which has been invested in target markets. The fund granted 5, 16 and 22 billion dollars in facilities in 2011, 2012 and 2013 respectively. Currently, oil and gas make up 50 percent of NDF’s resources, upstream and petrochemical industries account for 15 percent and other income-generating industries make the remaining 35 percent.

Changing hard currency reserves into rials as late as possible, preventing economic turmoil, taking into account the attraction capacity of domestic economy and the operational capacity of private operating banks, directing resources to foreign investment in money and financial markets, diversifying hard currency sources and using the NDF for attracting foreign investment are among points to be taken into account in attraction of foreign investment.

In terms of balance, Iran’s NDF is ranked the 21^st by the International Forum of Sovereign Wealth Funds.

 

Ahmad Davoudi, director for energy affairs of the Office of Vice-President for Planning and Strategic Supervision Affairs

 

Iran’s oil revenues over the past 100 years exceed 1,078 billion dollars, 52 percent of which have been invested in industrial sectors and the rest have been allocated to current spendings.

Since 1995, 35 buy-back oil and gas deals have been approved by the Economic Council. Thirty of them have been activated and twenty have been implemented. Buy-back deals have added1.1 mb/d of oil, 317 mcm/d of gas nd 350,000 b/d of gas condensate to the country’s production capacity.

Exploration and development contracts are not signed for a specific block. So far, nine such contracts have been signed in the country with one of them have been halted due to lack of access to commercially important reserves.

According to Article 125 of the Fifth Five-Year Economic Development Plan (2010-2015), exploration, development and production methods are authorized following the approval of the Economic Council. Except for concessions, different types of contracts could be used in the petroleum industry.

 

Masoud Nili, professor at Sharif University of Technology

 

An important point which must be included in the new model of oil contracts is the preservation of the long-term interests of oil investors. To that effect, modifying the business model of the petroleum industry requires the contribution of investor in the profits from the reservoir in the long-term. Another point which must be taken into account in the oil contracts is to create conditions for appropriate production from a reservoir throughout its life and to revise contracts within the framework of “package of petroleum industry development”. Moreover, all influential factors must be taken into consideration.

Due to fluctuations in Iran’s oil production and exports from 2006 to 2011, the role of the petroleum industry in the economy comes to the limelight.

The petroleum industry is currently our main economic advantage, but some economic sectors which have not received resources have created more advantages for the country’s economy.

The oil sector is instrumental in financing projects in countries with oil-based economy. It has been already proven in Iraq and Russia with their fast oil production. There, we have to take more effective measures for Iran’s petroleum industry.

 

Farzad Mokhles ul-Aemeh, chief oil inspector at Iran’s State Inspectorate

 

Supporting domestic manufacturing and regulating the contracting and legal systems in the petroleum industry must be seriously taken into account in modifying the oil contracts.

Given the significance of recovery from fields Iran shares with other countries, development of independent fields could be the next priorities of Iran’s petroleum industry. The contracts are also required to be transparent in order to bring about competitiveness.

The world’s primary demand for energy will rise to 51 percent by 2035 while fossil energies make up 82 percent of the world’s energy. Iran is currently the first holder of natural gas reserves in the world with 18 percent of world total. Iran also holds 9.4 percent of the total’s oil reserves.

Given the above-said points and Iran’s potential in the oil and gas sectors, investment in Iran’s oil and gas industries is inevitably attractive for foreign companies. Therefore, the future of world energy security requires industrialized countries to focus more than ever on Iran’s petroleum industry.

              

Upstream Oil/Gas Sectors: Challenges and Opportunities

 

Over recent years, Iranian petroleum industry has been concerned with studying challenges to investment in the upstream oil sector and finding opportunities for investment. This issue was discussed on the sidelines of the forum on the revision of oil contract terms. Senior oil managers discussed the challenges and opportunities in the country’s upstream oil and gas sectors in a meeting held on the sidelines of the forum.

 

Gas Exports Capacity

 

Deputy Petroleum Minister for Planning and Supervision on Hydrocarbon Resources Mansour Moazzami said Iran will enjoy good capacities for gas exports in 2014, adding that the country can find new markets for exports.

He said that potential investors in Iran’s petroleum industry will be supported by Iran’s Petroleum Ministry.

He said that Iran’s nuclear agreement with world powers will be instrumental in Iran’s oil contracts.

Moazzami said the world economy is changing and new emerging economic powers have caused major changes in the world. “Today, BRICS member states have brought about changes in the world in terms of economic growth and economic equations.”

He said 3,700 billion dollars a year is forecasted to be invested every year in the world gas sector from 2013 to 2035 with the Middle East’s share at 500 billion dollars.  The figures for the oil sector will be 9,400 billion dollars with the Middle East share equaling 870 billion dollars, he said.

Moazzami said Iran has to make plans in order to attract more investment in its oil and gas sectors.

The official said Petroleum Ministry is focusing on increasing production, exports, refining and petrochemical capacities in the country.

 

Investment Attractiveness

 

Iran’s petroleum industry has been attractive to investors due to development projects, says energy expert Gholam-Hossein Hassantash.

Hassantash, who is a member of Iran’s Institute for International Energy Studies, said Iran can win new investors following after its new model of oil contracts takes effect.

Moazzami said new mechanisms can attract new investment, adding that interaction and understanding will be two instrumental elements.

“By diversifying oil contracts, we can be hopeful of attracting fresh investment whose results we will see in the growth and development of Iran’s petroleum industry,” he said.

 

Revenues From Buy-Backs

 

Buy-back deals have fetched 94 billion dollars for Iran, a deputy head of National Iranian Oil Company has said.

Abdol-Mohammad Delparish told a seminar on oil contracts revision in Tehran that only eight billion dollars out of the 94 billion dollars were recouped to contractors.

“In other words, the contractors in buy-back oil contracts were recouped less than 10 percent of the revenues from these contracts,” he said.

Delparish said buy-back contracts helped Iran raise its oil production by more than 600,000 b/d.

He said phases 1 to 8 of the giant South Pars gas field as well as two phases of Darkhoein field were developed under buy-back contracts.

Iran is set to start pumping natural gas from Phase 12 of South Pars soon. Phase 12 is the South Pars’ biggest phase in terms of volume of activities as well as investment and production levels.

When fully operational, Phase 12 will see some 75 million cubic meters (mcm) of sweet gas pumped into the national gas network per annum.

The South Pars gas field is estimated to contain 14 trillion cubic meters of gas and 18 billion barrels of gas condensate. It covers an area of 9,700 square kilometers, 3,700 square kilometers of which lie in Iran's territorial waters in the Persian Gulf.

Delparish said Iran earned 27 billion dollars from buy-back gas contracts.

He, however, said a major fault with the buy-back contracts is short-term view of the behavior of the reservoir. 

Delparish said even the Open Capex version of buy-back contracts hit snags.

Capex (capital expenditure) is funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory.

 

Development of Joint Fields

 

The countries in the Middle East have failed to develop their shared oil and gas fields in the best possible way due to political rivalries, a senior official of National Iranian Oil Company said.

Mohammad-Ali Emadi said development of joint fields is not done based on a logical mechanism.

He said accelerated development of and recovery from the oil and gas fields shared by Iran and neighboring countries have shortened the longevity of the reservoirs, adding that the Middle East countries have suffered losses in developing their joint fields.

Exchange of data about joint fields, settlement of political disputes and increasing joint investment are among options for increasing production and reducing costs in the joint fields.

Emadi said a number of mechanisms have already been worked out for the development of oil and gas fields, adding that the presence of companies active in fields owned jointly by Iran and Arab countries can reduce risks and costs.

 

Priorities for Development of Reservoirs

 

Mehdi Mir-Moezzi, managing-director of Pasargad Energy Development Company, said a main challenge to Iran’s petroleum industry is the budget’s dependence on oil and low energy prices.

“Every day, oil and gas are traded at two billion dollars, showing the unique role of this industry in interaction between nations. The role of oil in policies, international relations as well as socio-economic development of the country is inevitable,” he said.

Mir-Moezzi said the upstream oil and gas sectors are the main factor in the country’s growth and development.

“This sector always faces numerous challenges including the budget’s continued dependence on oil revenues and low energy prices. Therefore, the government has been forced to acquire short-term benefits,” he said.

Mir-Moezzi also referred to solutions for facing these challenges, saying: “Iran’s Petroleum Ministry must determine the priority of development of reservoirs. It should also take sufficient measures for issuing exploration and production licenses as well as supervising their execution.”

He also suggested setting timeframe for the private sector and defining a framework for oil contracts to attract capital and technology and supervise government earnings.

Mir-Moezzi said the National Development Fund (NDF) requires development of the petroleum industry.

Domestic Capacities Shouldn’t Be Neglected

 

Iran must revise the terms of oil contracts so as to tempt back foreign companies, but it should not ignore domestic capacities and the private sector.  The international sanctions against Iran’s oil industry caused challenges, but they also gave a boost to domestic manufacturing.

One of panel discussions held on the sidelines of the forum on the revision of the contracts was about the role of domestic companies in the development of oil and gas industries in Iran.

An important subject discussed in this forum was the necessity of the presence of Iranian contractors in the management of implementation of oil projects.

The managing-director of Dana Energy Group said Iranian contractors and manufacturers must be hired in the development of oil and gas fields.

Mostafa Khoei said employing Iranian entities will be instrumental in enabling the private sector to operate oil projects.  

He also said that success in the oil and gas development projects in Iran depend on the implementation of risk and reward policy in the projects, integration of contracts and using the state-of-the-art technology.

Khoei stressed the need for closer cooperation between contractor and outsourcer in the oil and gas projects for the acceleration of work.

He said Iranian companies have fared well in geology, drilling and drilling services in recent years, adding that North Yaran, Azar and Changouleh are being developed by Iranian companies.

Khoei said closer and friendlier ties between the contractor and the outsourcer would be necessary for the development of oil and gas fields in the country.

He, however, acknowledged that many projects operated by domestic companies have not been finished over the past eight years for a variety of reasons including inaccurate assessment of domestic capacities and oil contracts.

He said the government should release sums from the National Development Fund (NDF), facilitate the issuance of Islamic sukuk bonds and safeguard manpower in order to protect domestic manufacturers.

Under equal conditions, he said, it would not be logical to sign agreements with foreign companies while the foreign exchange rate is fluctuating largely.

 

Private Sector Capacities

 

Managing-Director of Bank Pasargad Majid Qasemi said formation of powerful holdings can bring in investment.

He said banks, insurance agencies and oil companies must team up to establish holdings companies.

Qasemi told a conference on the revision of oil contracts that the petroleum industry must reconsider laws in order to clear the way for investment mainly by the private sector.

"Development of upstream industries and using all capacities must be taken into account in the new generation of contracts," he said.

Qasemi said such financial instruments as bonds and forwards can attract investment for the development of the petroleum industry in order to stop selling crude oil.

The director for oil and gas affairs of MAPNA company said that domestic companies should not be neglected.

“Revision of Iran oil contracts is a must under the present circumstances, but more important is to trust big companies in the country,” Vahid Moayer said.

He said that MAPNA was established 18 years ago by Energy Ministry in order to build power plants in the country. He said MAPNA is now replacing companies like Siemens.

Moyaer said many Iranian companies have been set up when the country was under sanctions.

“Based on old oil contracts, contractors were not obliged to transfer in technology and this challenge was intensified when tougher international sanctions were imposed on our country,” he said.

Moayer said MAPNA, Petropars, PetroIran, ISOICO and IOEC are among companies that were established to blunt the impact of sanctions.

Iran’s Petroleum Ministry can offer incentives to international companies that would benefit from the help of Iran’s private entities in the development of oil fields, managing-director of Kayson said.

Mohammad-Reza Ansari said the government and the Petroleum Ministry must prepare the grounds for international companies to hire Iran’s private sector.

He said that the Iranian companies should also consider improving the quality of their management of projects.

“Creation of new capacities can bring about economic and human development and blossoming and oil should not be used only as source of income. It should be also used as a tool for development in the country,” said Ansari.

He said that Iran can follow the model of Sweden in oil projects.

 

Roadmap for Development

 

Petropars is a private contractor working with Iran’s oil sector. It has so far been instrumental in the country’s oil projects. Benefiting from the experiences of such powerful companies would help modify contract terms more effectively.

Mohammad-Hassan Mirzaeifard, deputy head of Petropars for engineering and development, said a roadmap is needed to be drawn up for the development of the oil industry in order to attract new investment.

“Establishment of upstream specialized companies must be taken into account. These companies can clear the way for the petroleum industry,” he said.

Mirzaeifard said the upstream oil sector can make progress if the government supports private contractors.

World Countries Must Welcome Back Iran

 

 

The Organization of the Petroleum Exporting Countries (OPEC) has to reconsider some of its decisions following the ongoing developments in the oil and gas industries particularly in the Middle East and Iran.

Over the past twenty years, Saudi Arabia and Iran, accounting for 26 and 14 percent of OPEC production, have been the most effective members of this influential body. The views of these two countries have always been necessary for the finalization of any agreement.

Over the past 35 years, six oil-rich countries including Russia, Iran, Iraq, Libya, Venezuela and Angola have been facing sanctions during different periods of time. It means that seven million barrels of OPEC production were targeted by the sanctions.

Following structural developments including the emergence of virtual markets, bonds and forwards, the effects of foreign exchange rate on the global market, the strong emergence of gas, geopolitical changes in the Middle East, major changes in China’s economy and tendency for high consumption in Southeast Asia have caught the attention of world oil supply and supply security managers.  That along with such issues as Iran’s presence in the world oil markets following the Geneva nuclear deal and the easing of some sanctions against Iran’s energy sector have been discussed in an interview with Fereydoun Berkashli, director of Energy Studies Group in Vienna.

Berkashli served as director for OPEC affairs and international relations at Iran’s Petroleum Ministry for 12 years. He was also foreign affairs’ advisor to petroleum minister, deputy head of the Institute for Energy Studies as well as Iran’s energy attaché in Vienna.

 

Q: Would you please tell us about the Geneva agreement and the ensuing relaxation of some sanctions against Iran’s petroleum industry?

A: The return of oil-rich countries to the market after a period of time is nothing new. In the past, Iraq, Libya and Venezuela experienced this phenomenon for political and non-political reasons and their production declined in certain periods of time and other countries supplied oil to fill the void.

When a country returns to the world market, other countries must choose to let a country which has lost its production ceiling for some time return or confront it by initiating a war of prices. But when a country like Iran is powerfully returning to the oil market with high production, it seems that other countries will retreat from confrontation and will let this OPEC member reach its previous status.

 

Q: Given developments in the past months, which steps must be taken for Iran to preserve its OPEC share?

A: Oil producers influence the market according to their production capacity and exports. In order to be able to retain our status in the OPEC decision-making club we have to raise our production capacity. We have to take serious and quick action. Tomorrow is too late. Any hesitation in returning to the previous production ceiling will lead to more losses and make it more difficult to retain the previous share.

Iran must raise its production capacity and make strong return to the market so as to exercise its influence in an effective manner. Definitely, returning to the previous production ceiling will require certain preparations like the presence of international companies and owners of technology to our country’s petroleum industry and changes in the international perspectives of National Iranian Oil Company (NIOC).

 

Q: So it is easy for Iran to reach 4-million-barrel production ceiling.

A: Iran can return to its previous 4-million-barrel ceiling. New oil contracts will improve conditions for enhancing recovery from wells which are closing maturity. Moreover, exploration projects and development of new fields with the objective of reaching the desired production level will become easier.

Despite restrictions in the past years, oil companies have not cut their relations with NIOC, which is the second largest oil company in the world. Some Western companies that left Iran in the early months of the [1979] Islamic Revolution due to US embargo on Iran’s oil may show inclination for return to our country’s petroleum industry. But they need to sketch out a proper roadmap.

 

Q: How do you assess Iran’s forum recently held on the revision of oil contracts?

A:  This conference which was held in late February has had positive feedback and many countries are trying to return to Iran market. Political officials are regularly encouraging the countries that have imposed sanctions to lift the sanctions and remind them of the fact that oil and the world market could not be administered by political methods.

 

Q: How different is the current oil market from previous years?

A: From the standpoint of the world oil market, Iran and other oil and gas-rich countries are on the same camp. The current energy conditions in the world have changed significantly from 1960s, 1970s or even 1980s when the main producers and consumers were regularly in confrontation with each other and sought win-lose game. At present everyone knows that the best formula is a win-win game and that loss for every party means loss for the other party too. Therefore, no country should seek confrontation and win-lose game. In other words, the imperialist attitude which dominated the oil market in the previous decades has given way to views based on maximizing profits from partnership.

The issue of energy plays a significant role in our international interactions and the influential return of oil and energy to international equations is the main cause of concern for the world politicians.

Certain events and emotional decision-making by certain countries and their direct effects on the international economy has caused serious concern for the world about energy supply security which is tied to the strong and well thought-out presence of players in the scene.

We are currently in conditions in which the market is very fragile in terms of supply security. Therefore, the signals we receive are indicative of the market’s determination to accept the strong presence of Iran in the world market. Each country has its outstanding features. Iran is the second largest holder of hydrocarbon reserves. Therefore, we have to move in a direction to put into practice this potential and use it as an effective instrument in our foreign diplomacy.

 

Q: How do you see our status in OPEC?

A: In spite of the restrictions of the past several years, we enjoy a quite strong presence in the OPEC. Given the location of oil and gas-rich countries around the Caspian Sea and major consumers in Central Asia and Caucasus, we can design a regional OPEC-style body with Iran at the center. Iran can define an integrated energy diplomacy in the north in order to boost our position in the region and in the OPEC. Given Iran’s role in OPEC, we will be able to play an influential role in oil supply to Central Asia.

As we are revising the oil contracts, we have to take into account all aspects of the petroleum industry. This international industry requires us to think internationally. Wisdom-oriented attitudes can bring us a dynamic diplomacy with the world.

 

Q: How do you assess the capabilities of NIOC in offering services to other oil-rich countries?

A: Given its 100 years of experience in the oil sector, the NIOC, as an international company, can offer oil services to other countries. We have to accept this fact that the oil horizon is much extended. We have to adopt international view. In that case, the NIOC will become an international company which will gain more revenues from oil exports. We have this capacity if we can make the necessary preparations.

 

Q: Do we have the necessary technical knowledge for this?

A: Yes, of course. Iran’s Research Institute of Petroleum Industry has registered as many inventions as a research institute in Canada. We have to prepare all conditions so that these researches will be commercialized at the international level. Our petroleum industry is enjoying valuable capabilities which must lead to the meaningful presence of our country in global trading. By boosting private entrepreneurs, we can present our capabilities to the world and establish profitable relationships with activists across the world.

 

Q: As the last question, what new horizons for investment and transactions between Iran and industrialized countries can Iran’s revised oil contracts open?

A: A look at economic developments in the world indicates that over the past three decades, the flow of trade has been towards developing countries which have been weak economically, technically and technologically. These countries are important because they mainly enjoy great potentials for development. We can refer to India and China which have attracted a huge volume of foreign investment in the past three decades. Foreign investment has improved their economy. Moreover, the markets in these countries have been significantly profitable for foreign investors.

Iran is attractive to foreign companies, mainly oil companies, for different reasons, two of which are as follows:

• Demand is high in Iran’s domestic market which is a potential market despite intelligent consumers and economic activists.
• Due to its geopolitical position, Iran is a country which potential for transit and re-export of commodities, services and particularly energy.

I believe that in the coming decade, technology will become the main tool for economic development in the world. When we take a look at the top twenty companies in the world, we conclude that a large number of these companies are active in technology or high-tech industries. The world will develop in the future by knowledge-based companies.

Iran, which enjoys the necessary potentials, has to revise its oil contracts so as to create the necessary motivation to persuade big oil companies to invest in our country’s petroleum industry. The presence of foreign companies will maximize oil revenues and transfer technical knowledge into the country for further development of Iran’s oil industry.

Petrobras Confirms Deepwater Oil Find

 

Petrobras has confirmed an oil discovery in the Piti structure in the deepwater Potiguar basin offshore Brazil.

Well 1-BRSA-1205-RNS (1-RNS-158) was drilled in 1,731 m (5,679 ft) of water, 55 km (34 mi) offshore Rio Grande do Norte state. It encountered a 188-m (617-ft) hydrocarbon column with 24º API oil.

A formation test confirmed the reservoir’s satisfactory permeability and porosity, Petrobras adds.

The company and Petrogral, its partner in the BM-POT-17 concession, will continue exploratory activities, with a view to propose a discovery evaluation plan to Brazil’s National Petroleum, Natural Gas and Biofuels Agency (ANP).

 

More Gas Offshore South Africa

 

Denver-based MHA Petroleum Consultants have completed an assessment of the Sunbird Energy operated block 2A offshore South Africa.

The best estimate is 7.8 tcf (221 bcm) of prospective gas resources.

The 5,000-sq km (1,930-sq mi) concession is currently in year five of a 30-year production right issued by South Africa’s Department of Mineral Resources.

Appraisal of Little John Offshore Denmark

 

PA Resources expects to close its North Sea farm-out transactions to Dana Petroleum this spring. These relate to Danish license 12/06 and German license B20008/73.

The company plans an appraisal well later this year on the Little John discovery offshore Denmark, having secured a rig.

It adds that select stage development studies are expected to be completed around mid-year for the Danish Broder Tuck field. Forward options include more appraisal drilling or progressing straight to development sanction.

Offshore Equatorial Guinea, where the company is in partnership with Noble Energy, a development plan should be submitted this year for the 30 MMbbl-plus Diega field.

Gas Development Priorities in Iran

 

Acceleration in the devilment of the gigantic offshore South Pars gas field has become the main point all Iranian officials agree upon. The development of South Pars is no longer a merely industrial project because full development of all phases of South Pars is instrumental in the improvement of national economy and the livelihood of Iranians.  

The meaningful relationship between the development of South Pars field and development of economic, political and social infrastructures is no secret. The significance of development of South Pars phases could be seen in the fact that the South Pars reserves are estimated to be valued at 8,800 billion dollars. Iran earns 80 billion dollars a year from crude oil exports.

Iran is currently recovering more than 300 mcm/d of gas from South Pars which is shared with Qatar. Iran’s Petroleum Ministry intends to raise its natural gas production from this supergiant reservoir to 800 mcm/d in two years. Divided into 24 phases, South Pars is located in Assaluyeh Port. So far, ten phases of this field have been developed. Economists say development of each phase of South Pars will add one percent to Iran’s gross domestic product (GDP).

South Pars is one of the world’s largest gas reservoirs. In recent years, the field has faced serious challenges due to mismanagement and shortage of finance stemming from international sanctions imposed against the Islamic Republic. After taking office last August, Petroleum Minister Bijan Namdara Zanganeh did not hesitate to lay the blame on mismanagement for delayed development of South Pars.

Zanganeh said phases 12 and 15-18 are priority phases in South Pars because of their 90-percent progress.

Currently, more than 60 percent of the Petroleum Ministry’s time is spend on completing the remaining phases of South Pars. The offshore section of South Pars is more important because Iran has to recover from its own share before Qatar does so. The gas recovered from the offshore sector will be then delivered to refineries in the onshore sector.

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, one million tons per day of liquefied gas and 400 tons/d of sulfur for exports as well as to produce one million tons a day of ethane to feed petrochemical industries. These products are estimated to earn the country 23 million dollars a day. Therefore, the entire 24 phases of South Pars are estimated to generate nearly 100 billion dollars in revenues a year.

 

Biggest Phase Ready for Operation

 

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 national gas pipeline 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 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.

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.

 

Phases 15&16 in Pre-Commissioning Stage

 

Precise mechanisms have been worked out for production from phases 15&16. The first train 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, 40 t/d of sulfur and 1.05 mt/d of liquefied petroleum gas (LPG) for exports.

 

Phases 17&18

 

Development of phases 17&18 of South Pars is among the priorities highlighted by Zanganeh during his visit to Pars Special Economic Energy Zone (PSEEZ). They are now 81 percent complete and work has picked up speed there in 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 said 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 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.

Iran is currently producing around 700 mcm/d of rich gas, 300 mcm of which provided by Iran’s Central Oil Fields Company (ICOFC) which is the main gas producer in the country and 250 mcm of which is supplied by South Pars Gas Complex (SPGC) with the rest coming from National Iranian South Oil Company (NISOC).

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. National Iranian Gas Exports Company (NIGEC) says 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.                     

New Contracts Benefit Upstream Sector

 

By Soleyman Qasemian

 

More than a century after its emergence, Iran’s petroleum industry is currently at the beginning of a new and decisive period of its life. This new period is very sensitive as it heralds a bright and prosperous future following several years of stagnation.

The outstanding feature of this specific period of time is special attention to collective wisdom and accumulated human resources in the oil and gas industries and using them for major decision-makings and long-term planning with focus on effective, constructive and sustainable interaction with key players in the world oil and gas markets including national oil companies and international oil companies within a win-win framework.

Under such circumstances, one of the most important strategies for the development of upstream oil sector is the need for technology and management of mega-projects. To that effect, oil contracts need to be revised in order to become more attractive for investment in the upstream sector.

 

Opportunities for Investment in Iran’s Upstream Sector

 

Iran has always been instrumental in global energy equations. Despite the imposition of tough sanctions against the Islamic Republic in recent years, international energy institutes have not ignored Iran’s role in the energy markets.

Oil and gas are predicted to remain the main energy carriers up to 2050. Therefore, given the high potential of oil and gas field development in Iran, acceleration of development projects would boost Iran’s position in international equations and bring the county major security and economic achievements.

The opportunities Iran’s petroleum industry is facing for constructive interaction with the world are as follows:

 

• The shift in the world economy’s center of gravity from West to East
• 200-percent increase in the world energy demand by 2040
• 51-percent share for oil and gas in the world energy supply by 2040
• 30-percent increase in the world crude oil demand by 2040
• Growing demand for oil due to higher refining capacities in Central and East Asia
• 65-percent increase in demand for gas by 2040
• Growing demand for gas due to energy-consuming industries in the Middle East and East Asia
• Progress in oil and gas technologies
• Utilization of international financial resources and foreign capitals by renowned international companies
• The possibility of using experiences of international companies in management of megaprojects

 

Iran’s outstanding features which attract foreign companies into the country’s oil and gas industries are as follows:

 

• Geopolitical position in the world’s energy heartland
• Sitting atop the world’s largest gas reserves with a 17 percent share of the world total
• Holding the world’s fourth largest oil reserves with an 11 percent share of the world total
• Low-risk investment in the oil and gas sectors due to rich hydrocarbon reserves
• High development and production capacity from oil and gas fields and trading
• Skilled and experienced manpower in all sectors of the petroleum industry
• Full security for professions in oil projects
• Physical safety for oil and gas equipment and facilities (particularly transmission lines, pumping facilities, pressure booster stations, storage tanks)
• Strategically important offshore position due to 1,800 kilometers of Persian Gulf and Sea of Oman coasts
• Strategically important onshore position due to the location of most oil fields and facilities in the south of Central Asia and Caucasus, north and east of Arab states of the Persian Gulf and the west of the Indian Subcontinent

 

The key point in the development of oil industry is to establish constructive and sustainable interaction with well-known international companies without ignoring domestic companies. The administration of President Hassan Rouhani favors cooperation with national and international companies in the oil sector with a win-win approach. To that effect, Iran’s Petroleum Ministry is determined to make the necessary preparations for the participation of qualified domestic and foreign companies in order to start a new period of prosperity in the history of Iran’s petroleum industry.

Iranian and foreign private sector activists can invest 155 billion dollars in the upstream oil sector up to March 2016. The bulk of investment made in the oil sector in recent years has been provided by domestic resources and only 20 percent of the investment objectives of the upstream oil sector have been met. With the growing interest of foreign investors and the signature of new contracts, the upstream oil sector’s potentials are hoped to be put into practice.

 

Long-Term Development Plans for Upstream Oil/Gas Sectors

 

According to studies conducted on long-term planning, the upstream sector needs to attract domestic and foreign investment in order to realize the objectives of the 2025 Perspective Plan. To that effect, the following points must be taken into consideration:

 

• Enhancing oil production from fields whose output has declined
• Developing crude oil fields shared with neighboring countries
• Developing undeveloped fields
• Completing the process of development of existing fields  

 

Iran’s main strategy is to enhance production from joint fields through their development. In the Fifth Five-Year Economic Development Plan (2010-2015), development of all shared fields has been prioritized. The plan obliges the National Iranian Oil Company (NIOC) to develop and enhance production from 20 joint fields in order to add 645,000 b/d of oil to production from the joint fields.

Besides fields, Iran shares some structures and exploration blocks for which no contract has been signed. Finalizing the case of these structures and blocks in the shortest possible time is a priority of the NIOC.

Production from some developed oil fields in the country could be enhanced by developing them anew. According to the NIOC estimates, some 271,000 b/d of crude oil could be added to the country’s output from development of fields.

The reservoirs identified in the country by March 2013 totaled 240, including 134 producing and 106 undeveloped reservoirs. After full development of these reservoirs, some 1 mb/d of oil could be added to the country’s production capacity.  The undeveloped fields which the NIOC plans to develop are forecasted to supply 210,000 b/d of oil in 2015.

The average recovery rate of oil reservoirs in the world was 20 percent in the late 1980s. The figure was raised to 35 percent with the development of new technologies in the beginning of the 3^rd millennium. The significant event is that recoverable reserves following enhanced recovery rate have been much more than crude oil exploration in these years. It means that boosting the recovery rate facilitates more oil supply. Currently, as the number of undeveloped crude oil reservoirs declines, international companies are focusing their attention on enhanced recovery projects.

A review of the conditions of oil-rich countries in the world, particularly those in the Middle East, shows that they are enhancing recovery from their crude oil reservoirs with the help of international companies. The recovery rate of Iran’s oil reservoirs was announced at 24.5 percent in March last year while Iran sits atop around 816 billion barrels of hydrocarbon reserves in place.

Enhanced recovery from oil reservoirs is one of the long-term priorities of the Iranian Petroleum Ministry. To that effect, Article 130 of the fifth Development Plan obliges the Petroleum Ministry to take action for a one-percent enhancement in recovery from the onshore and offshore hydrocarbon reservoirs before 2015.

According to a study conducted by Norway’s Statoil in 2002 about Iran’s oil reservoirs, the unrecoverable oil in the Ahvaz, Gachsaran and Maroun reservoirs is much more than the total oil accumulated in 26 big oil fields in the country.

One of the best methods for enhanced recovery from Iran’s carbonated reservoirs is gas injection. For each 60 cubic meters of gas injection into the oil reservoirs, one more barrel of crude would be recovered. Currently, gas is being injected into 14 oil fields in the country with ten of them run by the National Iranian South Oil Company (NISOC), one run by Arvandan Oil and Gas Production Company and one run by Iranian Offshore Oil Company (IOOC). These projects have prevented a decline in the pressure of reservoirs and avoided the waste of oil.

An important solution for enhanced recovery from hydrocarbon reservoirs will be to benefit from the capacities of Iran’s private sector and international companies.

The top priority of Iran’s Petroleum Ministry in the long-term is to maximize production from shared gas fields. South Pars gas field, which holds 50 percent of country’s total, is of great significance.

The main strategies followed up by the Iranian Petroleum Ministry are as follows:

 

• Completing the Process of Development of Existing Gas Fields

 

Production from some developed gas fields in the country could be raised by completing their development phases. According to estimates at the NIOC, some 50 mcm/d could be added to the country’s rich gas production throughout the fifth development plan.

 

• Development of Undeveloped Gas Fields

 

A total 112 gas reservoirs had been identified by March 2013. Out of them, 29 were producing gas and 83 were undeveloped. That means that a large part of Iran’s gas reservoirs have not been developed, but if different contributing factors like capital, technology, contractor and consumer market are prepared, the country’s rich gas production could rise significantly.

Iran Energy Management Strategies

 

Iran’s 2025 Perspective Plan is designed for Iran to see cultural, scientific, economic, political and social development by 2025. The plan, which was adopted by the Expediency Council in 2005, has been instructed to all state organs.

The document sets lines for defining strategies for the country’s economic development. To that effect, Iranian economic strategists are obligated to undertake macro-management.

The main focus of this document is on the oil and energy industries which continue to play vital roles in Iran’s economy.

The perspective plan envisages Iran to become the top producer of petrochemical products in the region, the second producer of oil in the Organization of the Petroleum Exporting Countries (OPEC), the third producer of natural gas in the world and the first owner of oil and gas technology in the region.

In the past years, Iran has been holding a convention to study developments about the perspective plan. Iran 2015 International Symposium was first held in 2007. Its third one was held on February 27, 2014 in Tehran to discuss strategic energy management.

 

Iran, Most Secure Route

 

Ayatollah Akbar Hashemi Rafsanjani, chairman of the Expediency Council, was the first to deliver his speech to the symposium.

He said Iran has lost many opportunities for the development of its oil and gas resources in the past eight years due to certain events.

“At present, energy supply is a major cause of concern in the world. Disputes and quarrel over energy issues are predicted to become more serious in the future,” said Rafsanjani, a former president.

He said Iran is the most strategically important country in the region, adding that it is the most secure source of energy supply in the world.

Rafsanjani stressed the need for the development of oil and gas fields Iran shares with neighboring countries.

“While Iraq is following specific plans for recovery from the joint fields, we have also to make serious efforts in this sector,” he said.

Rafsanjani said many Iranian oil reservoirs need to undergo development, noting that Iran needs to benefit from the state-of-the-art technologies for oil and gas recovery.

He said Iran offers the most secure route for the transfer of gas through pipeline. “In the past, many efforts were undertaken in this regard, including talks with Turkmenistan for gas swap. Iran was supposed to pump Turkmenistan’s gas to Turkey through pipeline. Now, we have to finalize these talks,” he said.

Rafsanjani gave a positive assessment of Iran’s progress in the petrochemical sector, saying Iran has distanced itself from selling crude oil. He added that more is to be done in the petrochemical sector which is a job-creating sector.

He said Iran holds a collection of fossil energy sources. “These oil resources must be recovered and consumed correctly so that we would become an energy-rich proprietor of production technology.”

 

Gas Exports

 

Mansour Moazzami, deputy petroleum minister for planning and supervision on hydrocarbon resources, addressed the symposium on behalf of the Petroleum Ministry.

He said the Petroleum Ministry is currently focusing its attention on enhancing gas recovery from the gigantic South Pars gas field.

“With the completion of the remaining phases up to the end of the next year [in March 2015], gas exports will become a specific strategy of the Petroleum Ministry. Given plans under way for further recovery from these phases, new contracts need to be signed,” he said.

Moazzami said Phases 12, 15, 16, 17 and 18 of South Pars are the priority phases of the offshore gas field.

The deputy minister said the Petroleum Ministry forecasts Iran’s gas production to be increased by at least 60 mcm/d this year. He said that this figure could even reach 110 mcm/d.

Moazzami added that power plants will be running on gas instead of liquid fuel next calendar year in order to minimize damage to the environment.

He said energy efficiency is another strategy in the petroleum industry, adding that compressed natural gas (CNG) and gasoline rationing are reasonable and appropriate policies which were adopted for the efficient use of energy.

Moazzami said Iran’s gasoline consumption could have reached 110 ml/d now had Iran not rationed fuel distribution in 2006 when the country’s fuel consumption stood at 70 ml/d. Now, Iran consumes 67 ml/d of gasoline.

He said Iran holds the first largest gas reserves in the world while sitting on the fourth largest oil reserves.

Moazzami said access to energy reserves requires investment and transfer of technology, adding that international interactions need to be broadened for that purpose.                

The official said the administration of President Hassan Rouhani is determined to increase its interactions with the world.

 

Strategic Energy Document

 

Hamid-Reza Katouzian, director of the Research Institute of Petroleum Industry, said the objectives defined for the energy sector need to be included in a strategic energy document.

Katouzian, who was secretary of the symposium said the energy document should be drawn up based on the 2025 Perspective Plan which he described as the first cohesive and integrated document in the country.

He said the Institute for International Energy Studies has been assigned the task of drafting the strategic energy document.

“In this energy plan, the present conditions, optimal conditions and ways of reaching objectives are taken into account. It can serve as a comprehensive package for the adoption of a strategic energy document for the country,” said Katouzian.

He said Iran is expected to become the top regional power in terms of economy by 2025, adding that energy is the priority issue due to its contribution to the economy.

“Oil and gas and new energies are important in the economic and technological sectors and they make great contribution to the realization of the objectives of the Perspective Plan,” he said.

“Lowering the energy intensity by reforming its consumption pattern and winning the top position in the region in production of refined and petrochemical products for the purpose of generating more value-added from hydrocarbon reserves are among other issues highlighted in the Perspective Plan,” said Katouzain.

 

Management of Oil Reserves

 

Mohsen Rezaei, secretary of the Expediency Council, said in the symposium that petrodollars and the incorrect management of energy revenues are behind the prevailing inflationary structure in the country.

“Incorrect spending of oil and gas resources has stoked up the country’s inflation,” he said.

Rezaei said a strategic energy document would be of great help in adopting policies for different sectors of energy.

He said energy is a significant pillar of development in Iran, adding that attention to supply and demand is necessary with regards to the strategic management of energy.

Rezaei said China and India will remain the largest energy consumers in the world in the coming years as Asia will be home to 75 percent of the world’s nine-billion-strong population in 2040.

“The demand for energy in the world will be on upward trend in 2040,” he said.

Referring to share of different energies in the world in 2040, he said: “In that year, the share of nuclear energy from this mix will be 7 percent, renewable energies at 15 percent, oil and condensates at 28 percent, coal at 27 percent and gas at 23 percent.”

Rezaei said three scenarios have been envisaged by economists for the energy sector. “In the first scenario, Saudi Arabia will continue to hold a 62 share of the OPEC oil production. Based on this scenario, this country’s oil production will reach 15.5 million barrels in 2040. Moreover, Iran’s share of OPEC oil production will remain 24 percent and Iraq’s share will remain at 15 percent.”

The second scenario, he said, will be the revival of Iran’s role in the oil market as sanctions imposed on the Islamic Republic are eased.

Rezaei said the third scenario is about oil pricing which predicts 237 dollars, 163 dollars and 75 dollars for each barrel in 2040.

 

Energy Carrier Prices

 

Minister of Energy Hamid Chitchian said low prices of energy carriers have resulted in the growing consumption of energy.

He said electricity consumption in Iran declined after Iran started scrapping subsidies, but two years after, it started growing again.

He said the prices of energy carriers must be increased so that energy use could become efficient.

“We don’t favor any shock in the society, but as long as the energy prices are not in conformity with the inflation rate, we will not be able to arrange the affairs in the country,” said the minister.

 

 

Internal Combustion Engines to Become Environment-Friendly

 

The transportation sector is normally the largest consumer of energy and fossil fuels in the world. That is why this sector is considered to b the main cause of emission of environmental pollutants. Application of advanced technologies could reduce air pollution as it can increase the efficiency of engines including internal combustion ones.

An internal combustion engine is any engine that operates by burning its fuel inside the engine. In contrast a steam engine burns its fuel outside the engine. The most common internal combustion engine type is gasoline powered. Others include those fueled by diesel, hydrogen, methane, propane, etc. Engines typically can only run on one type of fuel and require adaptations to adjust the air/fuel ratio or mix to use other fuels.

The advantages of these engines and the negative impacts of air pollution could not be ignored equally. Therefore, these engines must be modified so as to reduce the pollution. Internal combustion engines such as reciprocating internal combustion engines produce air pollution emissions, due to incomplete combustion of carbonaceous fuel. The main derivatives of the process are carbon dioxide CO2, water and some soot — also called particulate matter (PM). The effects of inhaling particulate matter have been studied in humans and animals and include asthma, lung cancer, cardiovascular issues, and premature death. There are, however, some additional products of the combustion process that include nitrogen oxides and sulfur and some uncombusted hydrocarbons, depending on the operating conditions and the fuel-air ratio.

Due to the significance of this issue, Iran holds every year an international conference on internal combustion engines with focus on the state-of-the-art technologies. This year, the eighth one was held during two days. Manufacturers from Austria, Germany and Italy attended the event which was hosted by the Research Institute of Petroleum Industry.

The eighth conference was held with the cooperation of RIPI and the Iranian Society of Engine in order to integrate strategies worked out for the petroleum and vehicle industries.

The event discussed Iran’s capabilities on development of knowledge about internal combustion engines with focus on oil.

Since Iran’s fuel mix prioritizes environment-friendly fuels, the eighth conference discussed mainly fuel mix.

Iran put on display its latest achievements about engines and energy efficiency, national achievements about environment-friendly diesel fuels and capabilities of Iranian auto part manufacturers. Moreover, the convergence of the ministries of petroleum and the industry, trade and mine were reviewed.

Since Iran is a leading producer of fuel and energy in the world and a major consumer of fuels in vehicles, experts specializing in designing and manufacturing internal combustion engines were invited to the eighth conference. Representatives from Germany’s Shrick Avl and FEV, Austria’s AVL and Italy’s MECAPROM attended.

Sustainable environment and energy efficiency were the main mottoes of the eighth conference on internal combustion engines.

 

Maroun Oil Firm Among MAKE Winners

 

Managing-Director of Maroun Oil and Gas Production Company (MOGPC) Abdollah Mousavi says the company has been among the top five winners of the Most Admired Knowledge Enterprises (MAKE) research program.

He told Iran Petroleum in an interview that MOGPC had made planning to be among MAKE winners.

Inaugurated in 1998, MAKE seeks to identify those organizations which are out-performing their peers by above average growth in intellectual capital and wealth creation.

This MAKE survey requires less than 5 minutes to complete. First, nominate up to three knowledge-driven organizations (profit, non-profit or public) which in your opinion are leaders in transforming individual and enterprise knowledge into shareholder value (or societal value for non-profits and public sector).

Then rate each nominated organization on their performance against the eight MAKE knowledge performance dimensions which are the visible drivers of intellectual capital growth.

Upon conclusion of this MAKE study, an Executive Summary listing the MAKE winners and key findings will be e-mailed to all survey participants.

Information and contact details contained on the individual completed nominations are confidential and will not be released in any form to third parties.

Mousavi said: “Besides success in the MAKE assessment, we are planning to establish knowledge management system in this company. To that effect, we have signed a memorandum with Sharif University of Technology.”

He said Sharif University hosted the MAKE research program assessment in Iran. “MOGPC competed for the first time and it managed to be among the winners among oil companies.”

Mousavi said that a 32-member knowledge management working committee has been set up in MOGPC in order to make the necessary plans for the establishment of knowledge management system in this company.

He said the committee is comprised of 11 groups specializing in production engineering, processing engineering, technical inspection and metal corrosion engineering, instrumentation, mechanical engineering, electrical engineering, HSE, human resources management, manufacturing management, IT and communications and energy efficiency.

Mousavi said serious attention to the creativity of MOGPC staff can make the country independent of importing equipment. He added that the “flow computer” software has been developed by Iranian engineers in this company.

He said MOPGC is defining education plans in order to establish knowledge management system in all sections of the organization.

Masoud Baghban, director for technical affairs of MOGPC, said the company managed to be among the top MAKE winners following months of endeavors. 

He said that joining the top five knowledge-based companies shows that MOGPC has progressed significantly.

Jafar Madani-Zadegan, director for human resources development of National Iranian Oil Company, said the MOGPC winning this position is the result of its efforts in benefiting from knowledge.

“We are persuading all NIOC subsidiaries to participate in this assessment,” he said.

Maroun produces 600,000 b/d of oil, 570 mcf/d of gas, 25,000 b/d of liquefied petroleum gas and 14,000 b/d of naphtha.

The MAKE assesses companies for their ability to create and sustain an enterprise knowledge-driven culture, ability to develop knowledge workers through senior management leadership, ability to develop and deliver knowledge-based products / services / solutions (innovation capability), ability to manage and maximize the value of enterprise intellectual capital, ability to create and sustain an enterprise-wide collaborative knowledge-sharing environment, ability to create and sustain a learning organization, ability to manage customer/stakeholder knowledge to create value and enterprise intellectual capital and ability to transform enterprise knowledge into shareholder/stakeholder value (or societal value for non-profits and public sector).

Zanganeh: Project Management, a Must

 

Petroleum Minister Bijan Namdar Zanganeh said implementation of megaprojects in the petroleum industry needs qualified project managers.

Addressing a festival of petroleum industry technology and research, Zanganeh expressed regret that most Iranian engineers are unfamiliar with project management.

He said universities have not seriously focused on project management, adding that universities should offer management courses.

Zanganeh said project management is a key factor in the petroleum industry megaprojects.

“The process of implementation of a project must be fully studied so that the reasons of its success or failure could be known for finding solutions,” he added.

Zanganeh said tens of billions of dollars have been spent on some projects in the past years without any concrete result having been achieved.

The minister stressed the need for research in the upstream oil sector, noting that it did not mean ignoring downstream industries.

Zanganeh said the upstream oil sector focuses on enhanced recovery from reservoirs. He added that focus on the upstream sector stems from its significant contribution to national economy.

The minister said 10-percent enhancement in the recovery rate will raise production by 7 to 8 billion barrels, which would earn the country 700 to 800 billion dollars.

“No other sector can have such an impact on the country’s economy,” he said.

Zanganeh said studies are now needed for boosting the recovery rate of Asmari, Ahvaz Asmari, Maroun Asmari and South Pars gas fields.

The minister said universities must take advantage of this opportunity and communicate further with top universities in the world with a view to helping develop the petroleum industry.

Zanganeh said Iran has to increase its refining capacity in order to stop selling crude oil. He said 100 billion dollars of investment is needed for boosting the country’s refining capacity.

Zanganeh said the 80 billion dollars distributed every year in the form of monthly cash handouts are not registered anywhere.

“If 10 billion dollars out of this sum is spent on productivity and reducing energy intensity, tens of job opportunities will be created,” he said.

Zanganeh said identifying key points in the oil and gas industries will help Iran preserve its share of oil production in the market.

The minister also said that serious determination of Iranian manufacturers will be instrumental in domestic manufacturing under conditions of “cruel sanctions” against Iran’s petroleum industry.

 

Petroleum Industry Needs Knowledge, Technology

 

A top aide to Minister of Science, Research and Technology Reza Faraji Dana said the petroleum industry largely needs knowledge and technology.

“The current policies of the Petroleum Industry show that demand for science and technology and embracing knowledge-based economy in the petroleum industry will reach its highest point,” Jaafar Towfiqi said.

He gave a positive assessment of the Research Institute of Petroleum Industry (RIPI), saying research institutes should play a role different from that of universities.

Towfiqi said the RIPI is a technology-oriented research institute which is developing technology for the petroleum industry.

He said that commercialization and development of technology and knowledge-based companies “have become more common than before in our literature.”

 

RIPI to Open Knowledge-Based Co.

 

The Research Institute of Petroleum Industry (RIPI) is poised to launch its first knowledge-based company, the RIPI head said.

Hamid Reza Katouzian said the company is being set up in line with the policy of commercializing domestically-developed technologies.

The company, which will engage in the fields of chemical solvents and catalysts and, is to officially start work in the near future, he said.

Katouzian said establishment of more knowledge-based heralds a progressive jump in the RIPI achievements.

He also stated that formation of knowledge-based satellite companies is one of the major plans pursued by RIPI in a bid to commercialize research, technological and scientific activities in the petroleum industry.

 

Substandard Drilling Rigs Banned

 

A deputy petroleum minister has said that Iran’s Petroleum Ministry does not authorize purchase of substandard drilling rigs from any country.

Emad Hosseini, deputy minister for engineering affairs, said substandard rigs are likely to cause tragic accidents.

“The construction of drilling rigs in the country, with the cooperation of local constructors is on the ministry's agenda,” said Hosseini.

“Negotiations with local builders of rigs has been commenced to appoint strategy to construct drilling rigs locally,” he added.

Iranian manufacturing companies can register in an electronic system which is to be launched for petroleum industry commodities.

 

 

 

Crude and Asian Products Markets, February & March

Market mood improves during February and to an extent, during March.

During February and March, three crude oil marker prices rose with different rates. Bullish and bearish factors in crude markets are mentioned below.

• In US, crude stocks fell as unprecedented weather in US pushed up demand for heating fuels.
• A new pipeline capacity in Persian Gulf coast caused WTI to be stronger compared to Brent and Dubai prices. As a result, WTI and Brent differential narrowed. For the rest of the year 2014, it is doubtful whether WTI and Brent spread would be narrower or wider. US may have cut term import requirements for 2014; therefore more North American output will be seen. It is not clear that WTI will be stronger or fragile.
• Starting March, there has been downward pressure on Asian market due to planned refinery maintenance in March and April. Maintenance season caused arbitrage opportunities from Europe to Asia to be cut. Weaker Brent was reflected in a stable Dubai and Brent differential. 

Iran Describes New Oil Project Contracts for Investors

Iran’s oil ministry news service told about new model for oil Field development contracts. Unlike the last generation of contracts, which required contractors to leave Iran within five years of developing new fields, foreign contractors will be allowed to work on them for 20-25 years. "In the new contracts, different stages of the petroleum industry (exploration, development and production) are awarded in an integrated manner,” top Petroleum Ministry advisor Mehdi Hosseini was quoted as saying by the Shana oil ministry news service.

Iran Crude Oil Purchases Start to Rise

Following the easiness of some sanctions against Iran, Asian buyers increased purchases of Iranian crude by 22 percent in January compared to January 2013. Meanwhile, western customers were interested and waiting to the end of disputed program. According to Reuters report, china, India, Japan and South Korea together bought 1.25 million b/d during January 2014 while they bought 1.03 million b/d in January 2013.

China purchases of Iranian crude went up 82 percent in January 2014 compared to January 2013. Indian imports of Iranian crude in January 2014 were at the highest level since February 2012. India’s oil purchase from Iran in January surged 44 percent higher than a year ago and was more than twice from December 2013.

Considering above mentioned facts, increased crude exports from Iran may cap oil prices. In addition, with the more easiness in European sanctions against Iran, Iran will be able to export more of its production and also increase its production.

Asian Product Markets

In Singapore product market- leader product market in Asia- the mean of prices for most products rose in tandem with the rise in crude prices during February and March (see graph). In case of naphtha and fuel oil, the market was feeble to the extent that outright prices fell. Some of the changes in product prices are because of crude price changes. Hence, in order to investigate product market fundamental, it is necessary to look at product price changes in comparison with crude price changes.

During February and March, gasoline market improved continuously. Asian naphtha fundamentals were fragile on the back of upcoming cracker maintenance and after extreme strength at the start of New Year of 2014. Fuel oil market continued to its weakness over the months of February and March amid subdued demand and high supplies. Middle distillate markets had upward movements in February and went down fundamentally during March.

 

Products market fundamentals in brief

	Light Distillates Products		Middle Distillates Products		Heavy Products
	gasoline	Naphtha	Gasoil	Jet Fuel	Fuel Oil 180	Fuel Oil 180
February 2014	↑	↓	↑	↑	↓	↓
March 2014	↑	↓	↓	↓	↓	↓

(Upward arrow: strength, downward arrow: weakness)

Light Distillates (gasoline, naphtha & LPG)

Regarding Liquefied Petroleum Gas, this product includes propane, butane and butadiene which are all by-products of the production of oil and natural gas. LPG has a variety of uses including as a cooking or heating fuel, refinery feedstock, automotive power, and numerous other plastics and chemicals applications. From LPG’s market point of view, Propane and butane prices were set to weaken seasonally as winter demand came to an end. The evidence of this matter has been already seen by Saudi Aramco’s cut in its benchmark prices. The Saudi Contract Price (CP) or the export price charged by Saudi Arabia is announced at the end of each month for application throughout the following month. As Saudi Arabia is the major supplier of LPG to term contract buyers in Asia, Saudi’s contract price is the major international price benchmark, expressed in US dollars per metric tonne. This benchmark is set and published on the first business day of each month. Saudi Aramco has announced recently its Contract Price for March at 855 $/mt for Propane and 870 $/mt for butane. Separately, LPG freight rates fell continuously during February. This product is shipped in liquid form to keep the volume small and facilitate handling, using either pressurized or refrigerated ships to keep the gas in liquid form. 

Moving to naphtha market, Major applications of this product apply it as a chemical feedstock for steam cracking to produce petrochemicals such as ethylene, propylene and pyrolysis. Moreover, naphtha is also used to produce gasoline and as a fuel input to catalytic reforming for gasoline blending stock and BTX (benzene, toluene and xylenes) extraction. Demand for this product remained strong over January and February due to healthy margins for petrochemical production but it was going to be under pressure and stay sluggish because of steam cracker turnarounds during February and March. For instance, around 4500 tone per year of Japanese cracking capacity will be off line during this period. On the other hand, while there were a large amount of arbitrage inflows from the west to the east during first two months of the year, premiums for April cargoes have been supported by a drop in arbitrage inflows in April because of narrowing the East-to-West spread and also growth of demand. Growth of demand was because of expected increase in activity of European gasoline blenders during April in Atlantic Basin. Looking ahead, with ample supply seen from Middle East and India which is over 3.8 million mt in April, it is expected for the Asian Naphtha market in the region to stay relatively unchanged.

During February, Asian gasoline crack- differential between Singapore gasoline and Dubai prices- increased because of strong demand ahead of Lunar Chinese New Year. The product crack also rose during March, due to seasonal increase in Indonesian imports. Likewise Indonesia’s presidential election on April 9 will increase demand for fuel there and will support the market. Also marginal support stemmed from Southeast Asia and East Africa for March deliveries. Usually there are some pressures in March and April because of seasonal demand that reaches its yearly low. On the supply side, maintenance at several crackers in Asia pressured the market. Taiwan’s exports are likely to fall heavily over the coming period as crackers of Formosa and CPC is expected to be taken offline. In particular announcement of three-month shutdown at 200,000 b/d Taoyuan refinery by Chinese Petroleum Corporation limited exports from Taiwan. Besides, the Moroccan firm Samir is going to have maintenance at its reformer in 220,000 b/d Mohammedia refinery during March. Traders said Singapore gasoline crack had also benefited from a change in Singapore's spot gasoline specifications starting January 1. The change, which comprises an increase in the T50 distillation temperature to 80 degrees Celsius and introduction of a new density requirement of at least 720 kg/cubic-meter, enhances the merchantability of Singapore cargoes within the region.

 

Middle Distillates (gasoil, jet fuel)

Gasoil and jet fuel oil market had strong performance during February. Abundant gasoil demand from Africa and Red Sea region supported the market in February. Therefore some arbitrage opportunity from Asia to West was opened. Moreover, demand from Asian buyers- Malaysia, Vietnam and Philippines- improved the market more.

In Asian jet fuel market, cold weather in Japan supported the market during February. Meanwhile, a fall in Japanese stock helped further upward movements in the market.

Starting March, both gasoil and jet fuel market weakened. Gasoil market lost some ground on the back of more gasoil exports from China.

Looking ahead, firm gasoil market is expected to have for the next period. Expectations of growing import requirements in OECD and non- OECD Asia may improve the market.

Fuel Oil

Fuel oil market in both grades- 180 & 380 cst weakened during two consecutive months, February and March. High stock levels in Europe provided some arbitrage opportunity from Europe to Asia. In addition, bunker fuel oil demand in Singapore was partly at the low seasonal level compared to the last year. Its reason was low activities in bunkering ahead of and during Chinese Lunar New Year. Starting march, bunker demand was reportedly elevated. On the other hand, a decline in Indian exports rarely supported the market.

Crude and Asian Products Markets, February & March

Market mood improves during February and to an extent, during March.

During February and March, three crude oil marker prices rose with different rates. Bullish and bearish factors in crude markets are mentioned below.

• In US, crude stocks fell as unprecedented weather in US pushed up demand for heating fuels.
• A new pipeline capacity in Persian Gulf coast caused WTI to be stronger compared to Brent and Dubai prices. As a result, WTI and Brent differential narrowed. For the rest of the year 2014, it is doubtful whether WTI and Brent spread would be narrower or wider. US may have cut term import requirements for 2014; therefore more North American output will be seen. It is not clear that WTI will be stronger or fragile.
• Starting March, there has been downward pressure on Asian market due to planned refinery maintenance in March and April. Maintenance season caused arbitrage opportunities from Europe to Asia to be cut. Weaker Brent was reflected in a stable Dubai and Brent differential. 

Iran Describes New Oil Project Contracts for Investors

Iran’s oil ministry news service told about new model for oil Field development contracts. Unlike the last generation of contracts, which required contractors to leave Iran within five years of developing new fields, foreign contractors will be allowed to work on them for 20-25 years. "In the new contracts, different stages of the petroleum industry (exploration, development and production) are awarded in an integrated manner,” top Petroleum Ministry advisor Mehdi Hosseini was quoted as saying by the Shana oil ministry news service.

Iran Crude Oil Purchases Start to Rise

Following the easiness of some sanctions against Iran, Asian buyers increased purchases of Iranian crude by 22 percent in January compared to January 2013. Meanwhile, western customers were interested and waiting to the end of disputed program. According to Reuters report, china, India, Japan and South Korea together bought 1.25 million b/d during January 2014 while they bought 1.03 million b/d in January 2013.

China purchases of Iranian crude went up 82 percent in January 2014 compared to January 2013. Indian imports of Iranian crude in January 2014 were at the highest level since February 2012. India’s oil purchase from Iran in January surged 44 percent higher than a year ago and was more than twice from December 2013.

Considering above mentioned facts, increased crude exports from Iran may cap oil prices. In addition, with the more easiness in European sanctions against Iran, Iran will be able to export more of its production and also increase its production.

Asian Product Markets

In Singapore product market- leader product market in Asia- the mean of prices for most products rose in tandem with the rise in crude prices during February and March (see graph). In case of naphtha and fuel oil, the market was feeble to the extent that outright prices fell. Some of the changes in product prices are because of crude price changes. Hence, in order to investigate product market fundamental, it is necessary to look at product price changes in comparison with crude price changes.

During February and March, gasoline market improved continuously. Asian naphtha fundamentals were fragile on the back of upcoming cracker maintenance and after extreme strength at the start of New Year of 2014. Fuel oil market continued to its weakness over the months of February and March amid subdued demand and high supplies. Middle distillate markets had upward movements in February and went down fundamentally during March.

 

Products market fundamentals in brief

	Light Distillates Products		Middle Distillates Products		Heavy Products
	gasoline	Naphtha	Gasoil	Jet Fuel	Fuel Oil 180	Fuel Oil 180
February 2014	↑	↓	↑	↑	↓	↓
March 2014	↑	↓	↓	↓	↓	↓

(Upward arrow: strength, downward arrow: weakness)

Light Distillates (gasoline, naphtha & LPG)

Regarding Liquefied Petroleum Gas, this product includes propane, butane and butadiene which are all by-products of the production of oil and natural gas. LPG has a variety of uses including as a cooking or heating fuel, refinery feedstock, automotive power, and numerous other plastics and chemicals applications. From LPG’s market point of view, Propane and butane prices were set to weaken seasonally as winter demand came to an end. The evidence of this matter has been already seen by Saudi Aramco’s cut in its benchmark prices. The Saudi Contract Price (CP) or the export price charged by Saudi Arabia is announced at the end of each month for application throughout the following month. As Saudi Arabia is the major supplier of LPG to term contract buyers in Asia, Saudi’s contract price is the major international price benchmark, expressed in US dollars per metric tonne. This benchmark is set and published on the first business day of each month. Saudi Aramco has announced recently its Contract Price for March at 855 $/mt for Propane and 870 $/mt for butane. Separately, LPG freight rates fell continuously during February. This product is shipped in liquid form to keep the volume small and facilitate handling, using either pressurized or refrigerated ships to keep the gas in liquid form. 

Moving to naphtha market, Major applications of this product apply it as a chemical feedstock for steam cracking to produce petrochemicals such as ethylene, propylene and pyrolysis. Moreover, naphtha is also used to produce gasoline and as a fuel input to catalytic reforming for gasoline blending stock and BTX (benzene, toluene and xylenes) extraction. Demand for this product remained strong over January and February due to healthy margins for petrochemical production but it was going to be under pressure and stay sluggish because of steam cracker turnarounds during February and March. For instance, around 4500 tone per year of Japanese cracking capacity will be off line during this period. On the other hand, while there were a large amount of arbitrage inflows from the west to the east during first two months of the year, premiums for April cargoes have been supported by a drop in arbitrage inflows in April because of narrowing the East-to-West spread and also growth of demand. Growth of demand was because of expected increase in activity of European gasoline blenders during April in Atlantic Basin. Looking ahead, with ample supply seen from Middle East and India which is over 3.8 million mt in April, it is expected for the Asian Naphtha market in the region to stay relatively unchanged.

During February, Asian gasoline crack- differential between Singapore gasoline and Dubai prices- increased because of strong demand ahead of Lunar Chinese New Year. The product crack also rose during March, due to seasonal increase in Indonesian imports. Likewise Indonesia’s presidential election on April 9 will increase demand for fuel there and will support the market. Also marginal support stemmed from Southeast Asia and East Africa for March deliveries. Usually there are some pressures in March and April because of seasonal demand that reaches its yearly low. On the supply side, maintenance at several crackers in Asia pressured the market. Taiwan’s exports are likely to fall heavily over the coming period as crackers of Formosa and CPC is expected to be taken offline. In particular announcement of three-month shutdown at 200,000 b/d Taoyuan refinery by Chinese Petroleum Corporation limited exports from Taiwan. Besides, the Moroccan firm Samir is going to have maintenance at its reformer in 220,000 b/d Mohammedia refinery during March. Traders said Singapore gasoline crack had also benefited from a change in Singapore's spot gasoline specifications starting January 1. The change, which comprises an increase in the T50 distillation temperature to 80 degrees Celsius and introduction of a new density requirement of at least 720 kg/cubic-meter, enhances the merchantability of Singapore cargoes within the region.

 

Middle Distillates (gasoil, jet fuel)

Gasoil and jet fuel oil market had strong performance during February. Abundant gasoil demand from Africa and Red Sea region supported the market in February. Therefore some arbitrage opportunity from Asia to West was opened. Moreover, demand from Asian buyers- Malaysia, Vietnam and Philippines- improved the market more.

In Asian jet fuel market, cold weather in Japan supported the market during February. Meanwhile, a fall in Japanese stock helped further upward movements in the market.

Starting March, both gasoil and jet fuel market weakened. Gasoil market lost some ground on the back of more gasoil exports from China.

Looking ahead, firm gasoil market is expected to have for the next period. Expectations of growing import requirements in OECD and non- OECD Asia may improve the market.

Fuel Oil

Fuel oil market in both grades- 180 & 380 cst weakened during two consecutive months, February and March. High stock levels in Europe provided some arbitrage opportunity from Europe to Asia. In addition, bunker fuel oil demand in Singapore was partly at the low seasonal level compared to the last year. Its reason was low activities in bunkering ahead of and during Chinese Lunar New Year. Starting march, bunker demand was reportedly elevated. On the other hand, a decline in Indian exports rarely supported the market.

Bright Future Awaits Iran Oil Fleet

 

One of Iran’s main policies is to increase its oil and gas production capacity. But international sanctions and restrictions had blocked the implementation of this policy. However, after Iran and world powers reached a breakthrough nuclear deal last November, this policy is hoped to be put into practice. Currently, the Iranian government is broadening its cooperation and interaction with other countries in order to implement its development policies in the oil and gas sectors.

Iran’s agreement with six world powers (the United States, France, Britain, Russia, China and Germany) could be interpreted as the Iranian government’s practical strategy with a view to interacting with the international community.

As an immediate result of the implementation of the nuclear deal on January 20, the world powers agreed to unfreeze more than four billion dollars of Iran’s money blocked in foreign bank accounts. Iran can also resume its petrochemical exports.  

Iran’s oil exports kept rising for the fourth consecutive month in February. International news wires attributed the increase in Iran’s oil exports to the easing of sanctions after the deal took effect. The Weekly Standard magazine reported that Iran’s oil sales reached 1.32 mb/d.

Managing-Director of National Iranian Oil Company Roknoddin Javadi said recently that Iran is currently exporting 1.5 b/d of oil and gas liquids.

Analysts do not rule out the possibility of a final agreement between Iran and world powers on Tehran’s nuclear issue and the return of Iran’s oil exports to its past ceiling.

That is why Iranian oil officials are working out the necessary mechanisms for a jump in the crude oil exports.

 

Iran’s Self-Sufficiency in Crude Oil Delivery

 

A major potential of Iran is its transportation fleet. That is a mechanism which will be of great help for raising crude oil exports. The capacity of oil delivery by Iranian tankers is expected to rise significantly after the lifting of international sanctions. National Iranian Tanker Company (NITC) can handle 16 million tons of oil now.   

The head of NITC said recently Iran currently does not need foreign tankers to carry its crude oil.

Ali Akbar Safaei said Iran does not need foreign tankers given the capacities of 67 Iranian tankers.

“Iran’s crude oil exports are done currently only with the country’s tankers,” he said.

Ship-tracking sources say in recent weeks at least three Iranian supertankers had made their first trips to Asia after months at Iranian anchorages where they were storing unsold oil. The tankers, known as Very Large Crude Carriers, can hold up to 2 million barrels of oil each.

“While all eyes will be on whether we see an extension in sanctions relief after July, Iran’s fleet is more visible and active now,” one shipping industry source told Reuters.

Last year, Iranian tankers could carry 11 million tons of crude oil, but their capacity has increased after new vessels joined the NITC fleet.

Given Iran’s plans for increasing its crude oil exports to 3 mb/d, the country is expected to be able to meet 70 percent of demand for its crude oil in the near future. 

“The enlarged NITC VLCC fleet will be able to go about its business without all of the subterfuge which has been apparent over the past few years. Initially, we are likely to see more VLCC cargoes heading East, freeing up the units which have formed the nucleus of the long-term Iranian floating storage fleet,” tanker broker EA Gibson said in a recent report.

“It is also likely that NITC will take the opportunity to undertake dry docking and repairs to many of the older tankers during the sanction suspension window.”

 

Diversity in Iran Energy Revenue Mix

 

A strategic policy pursued by Iran for the next year is to diversify its revenue mix in the energy transportation sector. This policy is being implemented as Iran has increased the capacity of its liquefied petroleum gas (LPG) transportation.

To that effect, Safaei said Iran plans to be able to export 44,000-ton consignments of LPG every month to international markets.

He said the NITC and European insurance agencies have teamed up to provide cover for Iranian oil cargoes.

“The objective behind the formation of a joint committee between NITC and European insurance agencies was to follow up on insuring Iran’s oil exports cargoes,” Safaei said.

He said NITC faces no obstacle for delivering crude oil to India, adding that in certain cases there might have been some delays.

Safaei said NITC is benefiting from a positive atmosphere created following the implementation of a nuclear deal between Iran and six major powers.

He added that with the full lifting of US and EU sanctions against Iran in the coming months, NITC will regain the markets it has lost in the past years.

Safaei said earlier that the sanctions relief will remove all obstacles about insurance coverage and banking services required for crude oil exports to China, India, Turkey, Taiwan, Japan and South Korea.

He said that P&I clubs are also expected to take the necessary measures in harmony with the US executive polices.

The official said the possible signature of a final deal between Iran and world powers in six months would facilitate the return of the NITC to international markets.

Ole-Rikard Hammer of Norway's RS Platou Economic Research said a return of Iranian exports was “no longer unrealistic.”

“Any return of Iranian flows would represent somewhat of a double-edged sword for the tanker market: more transportation volume, but also more vessels available due to reduced floating storage,” he said.

 

Oil Delivery to Asia

 

The NITC can carry crude oil to Asian buyers in its own vessels as sanctions ease following the implementation of Iran’s nuclear deal with world powers.

“The obstacles to NITC’s services in carrying Iran crude oil to China, India, Turkey, Taiwan, Japan and South Korea according to the [determined export] ceiling have been removed based on Iran’s agreement with the P5+1,” Safaei said.

On January 20, the EU Council suspended part of its sanctions against Iran according to the Geneva nuclear deal between Tehran and the Sextet of world powers – the United States, France, Britain, Russia, China and Germany - which was signed last November.

The decision was adopted in the course of the regular monthly meeting of EU Foreign Ministers in Brussels after the International Atomic Energy Agency (IAEA) confirmed earlier in the day that Iran had halted 20-percent enrichment of uranium under the Geneva agreement.

“Based on this [agreement], from now own, there will be no obstacles to insurance coverage, banking and other services related to international navigation for this company (NITC) with regards to crude oil delivery to the six destination countries (China, India, Turkey, Taiwan, Japan and South Korea) according to [the determined export] ceiling,” said Safaei.

The official added that NITC expects a “quick return” to the international oil market beyond the six Asian states.

Safaei acknowledged that the NITC suffered losses for the first time due to the international sanctions.

“The way NITC seems to be operating is as near to the pattern of a normal operator as possible - bearing in mind sanctions have prevented them having access to facilities in most other countries,” said Richard Hurley, a senior analyst at IHS Maritime.  

 

 

Review of Iran Oil Nationalization Movement

 

In the Name of Iranian Nation

 

Iran first awarded oil concession to foreign governments under the Qajar Dynasty. The most prominent one is the D'Arcy Concession which was signed in 1901 between William Knox D'Arcy and Mozzafar al-din Shah of Persia. The oil concession gave D’Arcy the exclusive rights to prospect for oil in Persia (now Iran).

Reza Shah, the founder of Pahlavi regime, scrapped the D’Arcy Concession and signed the 1933 contract with England.

After the fall of Reza Shah, the 1933 contract was declared illegal by a group of legislators in the national assembly. The British government then signed the Gass-Golshaian Agreement which was voted down by the assembly.

MPs affiliated with the National Front raised the idea of nationalization of petroleum industry.

Finally on March 20, 1951, the nationalization movement – led by Mohammad Mossadeq and Ayatollah Abol-Qasem Kashani – emerged victorious.

 

Oil for Iranians

 

In the aftermath of the downfall of Reza Shah in September 1942, anti-colonialism sentiments reached their peak in Iran. Based on a proposal by nationalist MP Mossadeq, the national assembly adopted a piece of legislation which barred the Iranian government from negotiating any oil concession to foreigners. The bill envisaged three to eight years of imprisonment besides job loss for government officials violating the law. Anti-Britain campaign gathered steam following fiery speeches by Mossadeq and some MPs. In the face of these circumstances, the British government was determined to modify the 1933 oil contract in a bid to strengthen its bases. But the conditions changed due to the awareness of MPs and people of the significance of oil for Iran’s history and economy. Before the botched assassination attempt on the shah on February 4, 1949, Ayatollah Kashani released a statement against Anglo-Iranian Oil Company (AIOC) and simultaneously a group of lawmakers voted for the annulment of the oil contract with Britain. However, London was making every effort to legalize the contract and it submitted the Gass-Golshaian Agreement to the assembly whose term was ending.     

That agreement – popularly known as the Supplemental Agreement – was concluded between Iran’s Finance Minister Abbas-Qoli Golshaian and the AIOC’s Sir Gass on July 17, 1949, in response to Iranian demands for revision of the royalty system of the 1933 concession agreement. The sum of 49 million pounds represented the additional financial benefits which under the revised system would have accrued to Iran.

The Gass-Golshaian draft agreement submitted to the assembly was replaced by a bill for the nationalization of oil industry in Iran.

 

Oil Nationalized

 

In the 16^th national assembly, the National Front was represented by eight MPs including Mossadeq. In June 1950 when the Iranian government was seeking secret talks with AIOC, the National Front shifted its attention from domestic to foreign affairs and declared any deal with the Britons as plunder of Iran’s national resources. MP Hossein Fatemi, a member of the National Front, proposed nationalization of oil industry to the Oil Committee of the parliament. The committee was led by Mossadeq who wanted independence for Iran. Mossadeq was opposed to Britain’s efforts to dominate Iran through AIOC and its embassy in Tehran.    

On November 25, 1950, Mossadeq submitted the following bill to the assembly:

“In the name of the prosperity of the Iranian nation and in order to guarantee global pace, we, the undersigned, propose that Iran’s oil industry be declared national in all spots without exception, i.e., all exploration, extraction and production operations come under the control of the Iranian government.” 

 

PM Opposes

 

The proposed nationalization hit opposition by then Prime Minister Ali Razmara. The bill was defeated after Razmara delivered the following address:

“You cannot even run a cement factory with your staff. Due to your policies, the country’s factories are producing losses. How will you be able to extract and nationalize oil?”

Gholam-Hossein Forouhar, then minister of finance, withdrew the draft additional agreement. He said: “Those who opposed the agreement made a big mistake.”

Forouhar had said that nationalization of the oil industry will increase unemployment and impoverish people.

Razmara imagined that after the withdrawal of the bill, the sensitivity of the MPs to nationalization will decline and that he could then block a historic event. But his imagination turned out to be a wrong one because after the withdrawal of the Gass-Golshaian draft agreement, the MPs were following up on the issue with stronger motivation.

 

Razmara Gunned Down

 

Mossadeq openly dismissed Razmara’s remarks about the nationalization of the oil industry.

Razmara was finally assassinated and the nationalization project faced no more obstacles.

 

Repercussions

 

One month after the nationalization of the oil industry in March 1951, Prime Minister Hossein Ala stepped down. The national assembly convened to pick a successor. Jamal Emami proposed Mossadeq for the post and he accepted without any precondition in an attempt to executive the oil industry nationalization plan. The news of Mossadeq’s prime ministership captivated the entire globe and become the subject of analyses by political and economic circles in the west and in the east.   

The US government immediately voiced its readiness to cooperate with Iran in oil recovery projects. The news of Mossadeq having become prime minister elicited reactions from US companies. But the British government suffered two major losses. On the one hand, it had to buy its oil in dollars, and for this purpose, it had to pay 300 million dollars to Aramco for oil. On the other, it lost its oil revenues in Iran.

 

British Firms Leave Iran

 

In the aftermath of the nationalization of oil industry in Iran, Britain sought a lot to benefit again from this major source of income. It took legal action against Iran at the Hague court of justice, but Mossadeq defended Iran’s national interest. Then, it threatened military action against Iran through deploying 4,000 parachutists in Cyprus. In the end, it reconsidered its decision to attack Iran.

Nationalization of oil in Iran put an end to the presence of Britain in the country. The British government turned into a strong opponent of Mossadeq and it engineered a coup against him.

The Economist wrote in a commentary that the British government was facing budget deficit because it no longer gained any revenues from Iran’s oil. It accused the government of incompetence.

For its part, the Christian Science Monitor wrote that the British government would have collapsed had the coup not been plotted against Mossadeq.

The idea of overthrow of the Mossadeq government by a coup was first proposed by the British government and the AIOC.     

The coup was conducted in cooperation with the US government in August 1953.

 

Conclusion

 

After the finalization of the oil industry, the Expropriation Committee departed for the south of Iran and named an interim board of directors in the AIOC which had become National Iranian Oil Company (NIOC). Foreign staff in the company were unhappy with those conditions and they finally left Iran on October 2, 1952.

We briefly reviewed the events which led to the nationalization of oil industry in Iran. When the oil was nationalized, less than 30 Iranians were working in Iran’s oil company.

Nationalization of oil industry was the beginning of a campaign for the indigenization of the petroleum industry.

Review of Iran Oil Nationalization Movement

 

In the Name of Iranian Nation

 

Iran first awarded oil concession to foreign governments under the Qajar Dynasty. The most prominent one is the D'Arcy Concession which was signed in 1901 between William Knox D'Arcy and Mozzafar al-din Shah of Persia. The oil concession gave D’Arcy the exclusive rights to prospect for oil in Persia (now Iran).

Reza Shah, the founder of Pahlavi regime, scrapped the D’Arcy Concession and signed the 1933 contract with England.

After the fall of Reza Shah, the 1933 contract was declared illegal by a group of legislators in the national assembly. The British government then signed the Gass-Golshaian Agreement which was voted down by the assembly.

MPs affiliated with the National Front raised the idea of nationalization of petroleum industry.

Finally on March 20, 1951, the nationalization movement – led by Mohammad Mossadeq and Ayatollah Abol-Qasem Kashani – emerged victorious.

 

Oil for Iranians

 

In the aftermath of the downfall of Reza Shah in September 1942, anti-colonialism sentiments reached their peak in Iran. Based on a proposal by nationalist MP Mossadeq, the national assembly adopted a piece of legislation which barred the Iranian government from negotiating any oil concession to foreigners. The bill envisaged three to eight years of imprisonment besides job loss for government officials violating the law. Anti-Britain campaign gathered steam following fiery speeches by Mossadeq and some MPs. In the face of these circumstances, the British government was determined to modify the 1933 oil contract in a bid to strengthen its bases. But the conditions changed due to the awareness of MPs and people of the significance of oil for Iran’s history and economy. Before the botched assassination attempt on the shah on February 4, 1949, Ayatollah Kashani released a statement against Anglo-Iranian Oil Company (AIOC) and simultaneously a group of lawmakers voted for the annulment of the oil contract with Britain. However, London was making every effort to legalize the contract and it submitted the Gass-Golshaian Agreement to the assembly whose term was ending.     

That agreement – popularly known as the Supplemental Agreement – was concluded between Iran’s Finance Minister Abbas-Qoli Golshaian and the AIOC’s Sir Gass on July 17, 1949, in response to Iranian demands for revision of the royalty system of the 1933 concession agreement. The sum of 49 million pounds represented the additional financial benefits which under the revised system would have accrued to Iran.

The Gass-Golshaian draft agreement submitted to the assembly was replaced by a bill for the nationalization of oil industry in Iran.

 

Oil Nationalized

 

In the 16^th national assembly, the National Front was represented by eight MPs including Mossadeq. In June 1950 when the Iranian government was seeking secret talks with AIOC, the National Front shifted its attention from domestic to foreign affairs and declared any deal with the Britons as plunder of Iran’s national resources. MP Hossein Fatemi, a member of the National Front, proposed nationalization of oil industry to the Oil Committee of the parliament. The committee was led by Mossadeq who wanted independence for Iran. Mossadeq was opposed to Britain’s efforts to dominate Iran through AIOC and its embassy in Tehran.    

On November 25, 1950, Mossadeq submitted the following bill to the assembly:

“In the name of the prosperity of the Iranian nation and in order to guarantee global pace, we, the undersigned, propose that Iran’s oil industry be declared national in all spots without exception, i.e., all exploration, extraction and production operations come under the control of the Iranian government.” 

 

PM Opposes

 

The proposed nationalization hit opposition by then Prime Minister Ali Razmara. The bill was defeated after Razmara delivered the following address:

“You cannot even run a cement factory with your staff. Due to your policies, the country’s factories are producing losses. How will you be able to extract and nationalize oil?”

Gholam-Hossein Forouhar, then minister of finance, withdrew the draft additional agreement. He said: “Those who opposed the agreement made a big mistake.”

Forouhar had said that nationalization of the oil industry will increase unemployment and impoverish people.

Razmara imagined that after the withdrawal of the bill, the sensitivity of the MPs to nationalization will decline and that he could then block a historic event. But his imagination turned out to be a wrong one because after the withdrawal of the Gass-Golshaian draft agreement, the MPs were following up on the issue with stronger motivation.

 

Razmara Gunned Down

 

Mossadeq openly dismissed Razmara’s remarks about the nationalization of the oil industry.

Razmara was finally assassinated and the nationalization project faced no more obstacles.

 

Repercussions

 

One month after the nationalization of the oil industry in March 1951, Prime Minister Hossein Ala stepped down. The national assembly convened to pick a successor. Jamal Emami proposed Mossadeq for the post and he accepted without any precondition in an attempt to executive the oil industry nationalization plan. The news of Mossadeq’s prime ministership captivated the entire globe and become the subject of analyses by political and economic circles in the west and in the east.   

The US government immediately voiced its readiness to cooperate with Iran in oil recovery projects. The news of Mossadeq having become prime minister elicited reactions from US companies. But the British government suffered two major losses. On the one hand, it had to buy its oil in dollars, and for this purpose, it had to pay 300 million dollars to Aramco for oil. On the other, it lost its oil revenues in Iran.

 

British Firms Leave Iran

 

In the aftermath of the nationalization of oil industry in Iran, Britain sought a lot to benefit again from this major source of income. It took legal action against Iran at the Hague court of justice, but Mossadeq defended Iran’s national interest. Then, it threatened military action against Iran through deploying 4,000 parachutists in Cyprus. In the end, it reconsidered its decision to attack Iran.

Nationalization of oil in Iran put an end to the presence of Britain in the country. The British government turned into a strong opponent of Mossadeq and it engineered a coup against him.

The Economist wrote in a commentary that the British government was facing budget deficit because it no longer gained any revenues from Iran’s oil. It accused the government of incompetence.

For its part, the Christian Science Monitor wrote that the British government would have collapsed had the coup not been plotted against Mossadeq.

The idea of overthrow of the Mossadeq government by a coup was first proposed by the British government and the AIOC.     

The coup was conducted in cooperation with the US government in August 1953.

 

Conclusion

 

After the finalization of the oil industry, the Expropriation Committee departed for the south of Iran and named an interim board of directors in the AIOC which had become National Iranian Oil Company (NIOC). Foreign staff in the company were unhappy with those conditions and they finally left Iran on October 2, 1952.

We briefly reviewed the events which led to the nationalization of oil industry in Iran. When the oil was nationalized, less than 30 Iranians were working in Iran’s oil company.

Nationalization of oil industry was the beginning of a campaign for the indigenization of the petroleum industry.

From Reuter to National Oil

 

 

By Mohsen Qazali

 

The story of Iran’s oil started as soon as the Qajar kings found travelled to Europe. Nasseraddin Shah travelled to Europe and warded a concession to Reuter. The story did not end here. Muzaffaruddin Shah, who succeeded his father, awarded the D’Arcy concession to Britain. After the end of the Qajar dynasty, Reza Shah, the founder of the Pahlvai regime, first burnt the D’Arcy contract in a symbolic gesture, but he signed a more shameful contract with the Britons in 1933.

The Iranian nation was fed up with so many donations and gradually a campaign was triggered against foreign dominance of Iran’s petroleum industry. The movement was led by Ayatollah Abol-Qasem Kashani and Mohammad Mossadeq.

Here is a chronology of Iran’s petroleum industry:

 

July 25, 1873: Reuter Concession

 

Nasseraddin Shah Qajar awarded a concession to Baron Julius Reuter for recovery from Iran’s natural resources including oil.

 

May 28, 1901: D’Arcy Concession

 

The D'Arcy Concession was a petroleum oil concession that was signed in 1901 between William Knox D'Arcy and Muzzafaruddin Shah of Persia. The oil concession gave D’Arcy the exclusive rights to prospect for oil in Persia (now Iran). During this exploration for oil, D’Arcy and his team encountered financial troubles and struggled to find sellable amounts of oil.

 

May 26, 1908: Oil Explored in Iran

 

Oil was found 360 meters deep underground in Iran.

 

December 1, 1932: D’Arcy Concession Annulled

 

On November 27, 1932, Hassan Taqizadeh wrote a letter to B. R. Jackson, head of Anglo-Persian Oil Company, declaring the D’Arcy Concession null and void. The company opposed, but Iran’s national assembly officially annulled the concession on December 1.

 

April 30, 1933: 1933 Agreement

 

The second oil contract was signed between Iran and APOC. It was named after the year of its signature. It was signed for 60 years.

 

July 14, 1936: Oil Workers Strike

 

Labor unions went on strike in protest to improper conditions of Iranians working in oil-rich regions run by APOC. Riots erupted leaving 50 dead and more than 150 injured.

 

January 20, 1949: Gov’t Impeached 

 

Abbas Eskandari, a member of national assembly, proposed a censure motion against the government about the 1933 contract. Eskandari is the MP who is remembered to have suggested for the first time the idea of nationalization of oil industry on August 21, 1948.

 

February 4, 1949: Negotiations with APOC

 

After MPs protested to Iran-APOC contract due to Iran’s meager share of oil revenues as well as difficult working conditions for Iranian oil workers, the APOC agreed to negotiate the terms of the contract.

 

June 5, 1949: Oil Nationalization Proposed

 

Gholam-Hossein Rahimian, a member of the national assembly, asked in a speech why the MPs did not officially declare the termination of the oil contract. He told the lawmakers to propose nationalization of the oil industry. The idea was not welcomed because the legislators did not have any idea of what he meant.

 

June 10, 1949: Ayatollah Kashani Returns From Exile

 

Ayatollah Kashani, a leader of the nationalization moment, returned to Iran from one year and half exile. He received rapturous welcome in Tehran. In his interviews, he spoke of nationalization of the oil industry and restoration of the rights of the Iranian nation.

 

July 17, 1949: Gass-Golshaian Deal Signed

 

Negotiations between the Iranian government and the APOC for the company to settle its debts with Iran led to the signature of an agreement between the APOC’s representative and Iran’s minister of finance.

 

June 26, 1950: Petroleum Committee Formed

 

The 16^th national assembly established a Petroleum Committee to review the terms of Gass-Golshaian contract. The committee was ordered by Mossadeq.

 

November 25, 1950: Gass-Galshaian Rejected

 

The agreement signed between Iran’s minister of finance, Abbas-Ali Golshaian and APOC’s Sir Gass faced protest from MPs.

 

January 1, 951: Petroleum Committee Mission

 

The Petroleum Committee was assigned a task to define a framework for oil contracts in two months. The task for the committee had the approval of 40 MPs in the national assembly.

 

March 2, 1951: Fadaians Struggle for Oil

 

Then prime minister, Ali Razmara was opposed to nationalization of petroleum industry. Fadaians of Islam invited people for a speech on March 3 in Soltani Mosque on the subject of Iran’s oil.

 

March 20, 1951: Nationalization of Oil Industry

 

On March 15, the Petroleum Committee’s report regarding nationalization of the oil industry was approved. Several days later, it was endorsed in the Senate and signed off on by the shah the same day. March 20 was named after nationalization of the oil industry.

 

June 8, 1951: Expropriation Committee Goes to Khuzestan

 

A delegation named by Mossadeq was dispatched to Khuzestan to supervise Britain’s expropriation from Iran’s oil. They were seen off by thousands of people in Tehran. The delegation was headed by Mehdi Bazargan.

 

June 19, 1951: Expropriation

 

Following the collapse of talks between Iran and Britain, the Anglo-Iranian Oil Company was officially expropriated.

 

 

 

 

Norouz, Rebirth of Nature

 

By Parisa Sadeqieh

 

Strolling in the city in the final days of the calendar year is always pleasant. One has the feeling that a big clock has been installed at the highest point of the city and countdown has started.

People get more hectic as the Persian New Year approaches. The last month of the Iranian year ends on March 20.

In preparation for New Year, Iranians renovate their life and belongings. Most cars plying the streets have their boots filled with newly purchased things. Someone purchases a new carpet while someone else decides to replace its furniture.

Norouz marks the first day of spring and the beginning of the year in the Iranian calendar. It is celebrated on the day of the astronomical Northward equinox, which usually occurs on March 21 or the previous/following day depending on where it is observed. As well as being a Zoroastrian holiday and having significance amongst the Zoroastrian ancestors of modern Iranians, it is also celebrated in parts of the South Asian sub-continent as the New Year. The moment the Sun crosses the celestial equator and equalizes night and day is calculated exactly every year and Iranian families gather together to observe the rituals.  

 

Tradition and Mythology

 

The celebration has its roots in Ancient Iran. Due to its antiquity, there exist various foundation myths for Norouz in Iranian mythology. In the Zoroastrian tradition, the seven most important Zoroastrian festivals are the Gahambars and Norouz, which occurs at the spring equinox.

Between sunset of the day of the 6th Gahanbar and sunrise of Norouz was celebrated Hamaspathmaedaya (later known, in its extended form, as Frawardinegan). This and the Gahanbar are the only festivals named in the surviving text of the Avesta.

The Shahnameh, dates Norouz as far back to the reign of Jamshid, who in Zoroastrian texts saved mankind from a killer winter that was destined to kill every living creature. The mythical Persian King Jamshid (Yima or Yama of the Indo-Iranian lore) perhaps symbolizes the transition of the Indo-Iranians from animal hunting to animal husbandry and a more settled life in human history. In the Shahnameh and Iranian mythology, he is credited with the foundation of Norouz. In the Shahnama, Jamshid constructed a throne studded with gems. He had demons raise him above the earth into the heavens; there he sat on his throne like the sun shining in the sky. The world's creatures gathered in wonder about him and scattered jewels around him, and called this day the New Day or Norouz. This was the first day of the month of Farvardin (the first month of the Persian calendar).

 

History

 

Although it is not clear whether proto-Indo-Iranians celebrated a feast as the first day of the calendar, there are indications that both Iranians and Indians may have observed the beginning of both autumn and spring, related to the harvest and the sowing of seeds, respectively, for the celebration of New Year.

We have reasons to believe that the celebration is much older than that date and was surely celebrated by the people and royalty during the Achaemenid times (555–330 BC). It was, therefore, a highly auspicious occasion for the ancient Iranian peoples. It has been suggested that the famous Persepolis complex, or at least the palace of Apadana and the Hundred Columns Hall, were built for the specific purpose of celebrating Norouz. Although, there may be no mention of Norouz in recorded Achaemenid inscriptions,there is a detailed account by Xenophon of Norouz celebration taking place in Persepolis and the continuity of this festival in the Achaemenid tradition.

In 539 BC the Jews came under Persian rule thus exposing both groups to each other’s customs. The story of Purim as told in the Book of Esther is adapted from a Persian novella about the shrewdness of harem queens suggesting that Purim may be a transformation of the Persian New Year.

Norouz was the holiday of Arsacid/Parthian dynastic Empires who ruled Iran (248 BC-224 AD). There are specific references to the celebration of Norouz during the reign of Vologases I (51–78 AD), but these include no details. Before Sassanids established their power in West Asia around 300 AD, Parthians celebrated Norouz in Autumn and 1st of Farvardin began at the Autumn Equinox. During Parthian dynasty the Spring Festival was Mehragan, a Zoroastrian and Iranian festival celebrated in honor of Mithra.

Extensive records on the celebration of Norouz appear following the accession of Artaxerxes I of Persia, the founder of the Sassanid dynasty (224–651 AD). Under the Sassanid Emperors, Norouz was celebrated as the most important day of the year. Most royal traditions of Norouz such as royal audiences with the public, cash gifts, and the pardoning of prisoners, were established during the Sassanian era and persisted unchanged until modern times.

 

Pre-Norouz Customs

 

In the final days of the year, messengers of spring abound in the cities and villages. They sing traditional songs and put up shows in order to herald the end of the winter and the arrival of the spring. The most important pre-Norouz customs are known as Mir Norouzi, Amou Norouz and Haji Firouz.

Mir Norouzi is a ceremony in which someone is elected by people to run the society for five days. Mir means emir or king. This tradition is still observed by some ethnic groups like Kurds and Lors.

Amou Norouz (Uncle Norouz) ushers in the spring time every year according to Iranian tradition. Amou Norouz brings children gifts, much like his Western counterpart Santa Claus.

 

Haji Firouz

 

Haji Firouz in the language of literature and satire Haji  is the traditional herald of Norouz, the Persian New Year. He oversees celebrations for the new year perhaps as a remnant of the ancient Zoroastrian fire-keeper. His face is covered in soot and he is clad in bright red clothes and a felt hat. While ushering in Norouz, Hajji Firouz plays a tambourine and sings "Hāji Firouz-e, sal-i-ye ruz-e" (It is Hāji Firouz time, It happens one day in a year). People of all ages gather around him and his troupe of musicians and listen to them play the drum and dance through the streets with tambourines and trumpets spreading good cheer and the news of the coming New Year.

The sound of his songs and the sight of his dance is often analogous to hearing Christmas music in a shopping mall, telling all that Norouz is in the air. Although the blackness of his skin has been the source of some racial controversy in Iranian intellectual circles, Hāji Firouz's intentions and spirit have always been well received and loved by the people. People consider it only as a face paint and there is no racial implication.

 

Songs

 

Iranians believe that the New Year's Day must begin with joy, happiness and laughter so that during the rest of the year the families will continue to be happy. If the families are not happy, the faravahars who are guests of the families will leave the households which may result in the loss of abundance and blessings from the household. It is for this reason that during these days there are people with funny makeup and joyful songs who will bring laughter and joy to families and with their comical jests and songs bring laughter to houses, streets and market places.

 

Spring Cleaning

 

Spring cleaning is the practice of thoroughly cleaning a house in the springtime. The practice of spring cleaning is especially prevalent in climates with a cold winter.

The most common usage of spring cleaning refers to the yearly act of cleaning a house from top to bottom which would take place in the first warm days of the year typically in spring, hence the name. However it has also come to be synonymous with any kind of heavy duty cleaning or organizing enterprise. A person who gets their affairs in order before an audit or inspection could be said to be doing some spring cleaning.

It has been suggested that the origins of spring cleaning date back to the Iranian Norouz, the Persian New Year, which falls on the first day of spring. Iranians continue the practice of "khooneh tekouni" which literally means "shaking the house" just before the new year. Everything in the house is thoroughly cleaned, from the drapes to the furniture. A similar tradition is the Scottish "New Year's cleaning" on Hogmanay (December 31), a practice now also widespread in Ireland, New Zealand, and to North America.

In North America and northern Europe, the custom found an especially practical value due to those regions' continental and wet climates. During the 19th century in America, prior to the advent of the vacuum cleaner, March was often the best time for dusting because it was getting warm enough to open windows and doors (but not warm enough for insects to be a problem), and the high winds could carry the dust out of the house. For the same reason, modern rural households often use the month of March for cleaning projects involving the use of chemical products which generate fumes.

 

Haft Seen

 

Haft-Seen or the seven 'S's is a traditional table setting of Norouz, the traditional Iranian spring celebration. The haft seen table includes seven items all starting with the letter seen (س) in the Persian alphabet. Haft-Seen was originally called Haftchin (Haftĉin) derived from the words Chin, meaning "gather; pile up" and Haft, the number 7. The Haft Chin table includes the following items which symbolize Zoroastrian yazatas or divinities such as ātar and asmān.

 

The "Haft Chin" items are:

 

Mirror - symbolizing Sky

Apple - symbolizing Earth

Candles - symbolizing Fire

Golab - rose water symbolizing Water

Sabzeh - wheat, or barley sprouts symbolizing Plants

Goldfish - symbolizing Animals

Painted Eggs - symbolizing Humans and Fertility

 

After the New Year starts, Iranians visit their families. Those who might not have been on speaking terms decide to forget about differences and resume their friendly ties again.

The visits naturally have to be relatively short, otherwise one will not be able to visit everybody on their list. A typical visit is around 30 minutes, where you often run into other visiting relatives and friends who happen to be paying a visit to the same house at that time. Because of the house visits, you make sure you have a sufficient supply of pastry, cookies, fresh and dried fruits and special nuts on hand, as you typically serve your visitors with these items with tea or sherbet.

People normally leave on trips as most offices remain closed for two weeks.  

 

Sizdah Be-dar

 

Sizdahbedar or Sizdah Be-dar is the name of a ceremony in Persian Culture. Sizdah is the Persian term for thirteen. Leaving the house on the Thirteenth Day of Farvardin (the first month of Iranian calendar), and joyfully spending the day outdoors have been a national tradition since ancient times in Iran. Sizdah Bedar (in English: Getting rid of the Thirteenth) has been possibly considered as a tradition because some people believe the thirteen is an unlucky number, and everybody should get rid of the thirteen. That interpretation may be disputed since it is documented that in Persian, Bedar may also mean Raftan-e beh Dar-o Dasht (in English: Going Outdoors and Country Sides). Most of the times Sizdah Bedar coincides with the first day of April, which is known as April Fools' Day in the Western Culture.

Sizdah Berdar is reported to have been celebrated by the Iranians lived on the Iranian Plateau as far back as 536 BC. It is puzzling however to see no record about Sizdah Bedar after Iran became a part of the Muslim World in the seventh century. Amazingly none of the thousands of famous Europeans who traveled and visited Iran during Safavid era (1501–1736) and up to the last years of Qajars (1794–1925) referred to the celebration of Sizdah Bedar on their Itinerary Reports (in Persian: Safar Naameh-haa). The Iranian politician and writer Abdollah Mostofi (1876–1950), and traveler Edward Pollack who visited Iran in 1865 were possibly among the first authors who wrote about Sizdah Bedar and reported it in their books. It should be also noted that there are many poems on the praising of the Spring Season (in Persian: Bahaarieh), and the Iranian New year (Norouz) composed by various classical Iranian poets, but the verses on Sizdah Bedar written by the same groups of composers are rarely ever found. According to many researchers, problems may be attributed to the imposition of the specific codes of conduct regarding various aspects of daily life after Iran became a part of Muslim World in the seventh century. More research is needed to fill those voids.

 

Norouz Across the World

 

Norouz is celebrated in Greater Iran, Caucasus, Central Asia and by Iranians worldwide. It is a public holiday in Iran, Iraq, Afghanistan, Azerbaijan, Tajikistan, Turkmenistan, Uzbekistan, Kyrgyzstan, and India. Also the Canadian parliament by unanimous consent, has passed a bill to add Norouz to the national calendar of Canada, on March 30, 2009.

In Albania Sultan Nevruz is celebrated as a mainly mystical day by the Bektashi sect, and there are special ceremonies in the Tekke led by the clergy and large meals are served there. They celebrate this day as the birthday of Ali. Also all Albanians celebrate a secular version of Nowruz, called Spring Day. Nowruz is also celebrated by Kurdish people in Iraq and Turkey as well as by Parsis in the Indian subcontinent.

 

 

 

 

Norouz, Rebirth of Nature

 

By Parisa Sadeqieh

 

Strolling in the city in the final days of the calendar year is always pleasant. One has the feeling that a big clock has been installed at the highest point of the city and countdown has started.

People get more hectic as the Persian New Year approaches. The last month of the Iranian year ends on March 20.

In preparation for New Year, Iranians renovate their life and belongings. Most cars plying the streets have their boots filled with newly purchased things. Someone purchases a new carpet while someone else decides to replace its furniture.

Norouz marks the first day of spring and the beginning of the year in the Iranian calendar. It is celebrated on the day of the astronomical Northward equinox, which usually occurs on March 21 or the previous/following day depending on where it is observed. As well as being a Zoroastrian holiday and having significance amongst the Zoroastrian ancestors of modern Iranians, it is also celebrated in parts of the South Asian sub-continent as the New Year. The moment the Sun crosses the celestial equator and equalizes night and day is calculated exactly every year and Iranian families gather together to observe the rituals.  

 

Tradition and Mythology

 

The celebration has its roots in Ancient Iran. Due to its antiquity, there exist various foundation myths for Norouz in Iranian mythology. In the Zoroastrian tradition, the seven most important Zoroastrian festivals are the Gahambars and Norouz, which occurs at the spring equinox.

Between sunset of the day of the 6th Gahanbar and sunrise of Norouz was celebrated Hamaspathmaedaya (later known, in its extended form, as Frawardinegan). This and the Gahanbar are the only festivals named in the surviving text of the Avesta.

The Shahnameh, dates Norouz as far back to the reign of Jamshid, who in Zoroastrian texts saved mankind from a killer winter that was destined to kill every living creature. The mythical Persian King Jamshid (Yima or Yama of the Indo-Iranian lore) perhaps symbolizes the transition of the Indo-Iranians from animal hunting to animal husbandry and a more settled life in human history. In the Shahnameh and Iranian mythology, he is credited with the foundation of Norouz. In the Shahnama, Jamshid constructed a throne studded with gems. He had demons raise him above the earth into the heavens; there he sat on his throne like the sun shining in the sky. The world's creatures gathered in wonder about him and scattered jewels around him, and called this day the New Day or Norouz. This was the first day of the month of Farvardin (the first month of the Persian calendar).

 

History

 

Although it is not clear whether proto-Indo-Iranians celebrated a feast as the first day of the calendar, there are indications that both Iranians and Indians may have observed the beginning of both autumn and spring, related to the harvest and the sowing of seeds, respectively, for the celebration of New Year.

We have reasons to believe that the celebration is much older than that date and was surely celebrated by the people and royalty during the Achaemenid times (555–330 BC). It was, therefore, a highly auspicious occasion for the ancient Iranian peoples. It has been suggested that the famous Persepolis complex, or at least the palace of Apadana and the Hundred Columns Hall, were built for the specific purpose of celebrating Norouz. Although, there may be no mention of Norouz in recorded Achaemenid inscriptions,there is a detailed account by Xenophon of Norouz celebration taking place in Persepolis and the continuity of this festival in the Achaemenid tradition.

In 539 BC the Jews came under Persian rule thus exposing both groups to each other’s customs. The story of Purim as told in the Book of Esther is adapted from a Persian novella about the shrewdness of harem queens suggesting that Purim may be a transformation of the Persian New Year.

Norouz was the holiday of Arsacid/Parthian dynastic Empires who ruled Iran (248 BC-224 AD). There are specific references to the celebration of Norouz during the reign of Vologases I (51–78 AD), but these include no details. Before Sassanids established their power in West Asia around 300 AD, Parthians celebrated Norouz in Autumn and 1st of Farvardin began at the Autumn Equinox. During Parthian dynasty the Spring Festival was Mehragan, a Zoroastrian and Iranian festival celebrated in honor of Mithra.

Extensive records on the celebration of Norouz appear following the accession of Artaxerxes I of Persia, the founder of the Sassanid dynasty (224–651 AD). Under the Sassanid Emperors, Norouz was celebrated as the most important day of the year. Most royal traditions of Norouz such as royal audiences with the public, cash gifts, and the pardoning of prisoners, were established during the Sassanian era and persisted unchanged until modern times.

 

Pre-Norouz Customs

 

In the final days of the year, messengers of spring abound in the cities and villages. They sing traditional songs and put up shows in order to herald the end of the winter and the arrival of the spring. The most important pre-Norouz customs are known as Mir Norouzi, Amou Norouz and Haji Firouz.

Mir Norouzi is a ceremony in which someone is elected by people to run the society for five days. Mir means emir or king. This tradition is still observed by some ethnic groups like Kurds and Lors.

Amou Norouz (Uncle Norouz) ushers in the spring time every year according to Iranian tradition. Amou Norouz brings children gifts, much like his Western counterpart Santa Claus.

 

Haji Firouz

 

Haji Firouz in the language of literature and satire Haji  is the traditional herald of Norouz, the Persian New Year. He oversees celebrations for the new year perhaps as a remnant of the ancient Zoroastrian fire-keeper. His face is covered in soot and he is clad in bright red clothes and a felt hat. While ushering in Norouz, Hajji Firouz plays a tambourine and sings "Hāji Firouz-e, sal-i-ye ruz-e" (It is Hāji Firouz time, It happens one day in a year). People of all ages gather around him and his troupe of musicians and listen to them play the drum and dance through the streets with tambourines and trumpets spreading good cheer and the news of the coming New Year.

The sound of his songs and the sight of his dance is often analogous to hearing Christmas music in a shopping mall, telling all that Norouz is in the air. Although the blackness of his skin has been the source of some racial controversy in Iranian intellectual circles, Hāji Firouz's intentions and spirit have always been well received and loved by the people. People consider it only as a face paint and there is no racial implication.

 

Songs

 

Iranians believe that the New Year's Day must begin with joy, happiness and laughter so that during the rest of the year the families will continue to be happy. If the families are not happy, the faravahars who are guests of the families will leave the households which may result in the loss of abundance and blessings from the household. It is for this reason that during these days there are people with funny makeup and joyful songs who will bring laughter and joy to families and with their comical jests and songs bring laughter to houses, streets and market places.

 

Spring Cleaning

 

Spring cleaning is the practice of thoroughly cleaning a house in the springtime. The practice of spring cleaning is especially prevalent in climates with a cold winter.

The most common usage of spring cleaning refers to the yearly act of cleaning a house from top to bottom which would take place in the first warm days of the year typically in spring, hence the name. However it has also come to be synonymous with any kind of heavy duty cleaning or organizing enterprise. A person who gets their affairs in order before an audit or inspection could be said to be doing some spring cleaning.

It has been suggested that the origins of spring cleaning date back to the Iranian Norouz, the Persian New Year, which falls on the first day of spring. Iranians continue the practice of "khooneh tekouni" which literally means "shaking the house" just before the new year. Everything in the house is thoroughly cleaned, from the drapes to the furniture. A similar tradition is the Scottish "New Year's cleaning" on Hogmanay (December 31), a practice now also widespread in Ireland, New Zealand, and to North America.

In North America and northern Europe, the custom found an especially practical value due to those regions' continental and wet climates. During the 19th century in America, prior to the advent of the vacuum cleaner, March was often the best time for dusting because it was getting warm enough to open windows and doors (but not warm enough for insects to be a problem), and the high winds could carry the dust out of the house. For the same reason, modern rural households often use the month of March for cleaning projects involving the use of chemical products which generate fumes.

 

Haft Seen

 

Haft-Seen or the seven 'S's is a traditional table setting of Norouz, the traditional Iranian spring celebration. The haft seen table includes seven items all starting with the letter seen (س) in the Persian alphabet. Haft-Seen was originally called Haftchin (Haftĉin) derived from the words Chin, meaning "gather; pile up" and Haft, the number 7. The Haft Chin table includes the following items which symbolize Zoroastrian yazatas or divinities such as ātar and asmān.

 

The "Haft Chin" items are:

 

Mirror - symbolizing Sky

Apple - symbolizing Earth

Candles - symbolizing Fire

Golab - rose water symbolizing Water

Sabzeh - wheat, or barley sprouts symbolizing Plants

Goldfish - symbolizing Animals

Painted Eggs - symbolizing Humans and Fertility

 

After the New Year starts, Iranians visit their families. Those who might not have been on speaking terms decide to forget about differences and resume their friendly ties again.

The visits naturally have to be relatively short, otherwise one will not be able to visit everybody on their list. A typical visit is around 30 minutes, where you often run into other visiting relatives and friends who happen to be paying a visit to the same house at that time. Because of the house visits, you make sure you have a sufficient supply of pastry, cookies, fresh and dried fruits and special nuts on hand, as you typically serve your visitors with these items with tea or sherbet.

People normally leave on trips as most offices remain closed for two weeks.  

 

Sizdah Be-dar

 

Sizdahbedar or Sizdah Be-dar is the name of a ceremony in Persian Culture. Sizdah is the Persian term for thirteen. Leaving the house on the Thirteenth Day of Farvardin (the first month of Iranian calendar), and joyfully spending the day outdoors have been a national tradition since ancient times in Iran. Sizdah Bedar (in English: Getting rid of the Thirteenth) has been possibly considered as a tradition because some people believe the thirteen is an unlucky number, and everybody should get rid of the thirteen. That interpretation may be disputed since it is documented that in Persian, Bedar may also mean Raftan-e beh Dar-o Dasht (in English: Going Outdoors and Country Sides). Most of the times Sizdah Bedar coincides with the first day of April, which is known as April Fools' Day in the Western Culture.

Sizdah Berdar is reported to have been celebrated by the Iranians lived on the Iranian Plateau as far back as 536 BC. It is puzzling however to see no record about Sizdah Bedar after Iran became a part of the Muslim World in the seventh century. Amazingly none of the thousands of famous Europeans who traveled and visited Iran during Safavid era (1501–1736) and up to the last years of Qajars (1794–1925) referred to the celebration of Sizdah Bedar on their Itinerary Reports (in Persian: Safar Naameh-haa). The Iranian politician and writer Abdollah Mostofi (1876–1950), and traveler Edward Pollack who visited Iran in 1865 were possibly among the first authors who wrote about Sizdah Bedar and reported it in their books. It should be also noted that there are many poems on the praising of the Spring Season (in Persian: Bahaarieh), and the Iranian New year (Norouz) composed by various classical Iranian poets, but the verses on Sizdah Bedar written by the same groups of composers are rarely ever found. According to many researchers, problems may be attributed to the imposition of the specific codes of conduct regarding various aspects of daily life after Iran became a part of Muslim World in the seventh century. More research is needed to fill those voids.

 

Norouz Across the World

 

Norouz is celebrated in Greater Iran, Caucasus, Central Asia and by Iranians worldwide. It is a public holiday in Iran, Iraq, Afghanistan, Azerbaijan, Tajikistan, Turkmenistan, Uzbekistan, Kyrgyzstan, and India. Also the Canadian parliament by unanimous consent, has passed a bill to add Norouz to the national calendar of Canada, on March 30, 2009.

In Albania Sultan Nevruz is celebrated as a mainly mystical day by the Bektashi sect, and there are special ceremonies in the Tekke led by the clergy and large meals are served there. They celebrate this day as the birthday of Ali. Also all Albanians celebrate a secular version of Nowruz, called Spring Day. Nowruz is also celebrated by Kurdish people in Iraq and Turkey as well as by Parsis in the Indian subcontinent.

 

 

 

 

Norouz, Rebirth of Nature

 

By Parisa Sadeqieh

 

Strolling in the city in the final days of the calendar year is always pleasant. One has the feeling that a big clock has been installed at the highest point of the city and countdown has started.

People get more hectic as the Persian New Year approaches. The last month of the Iranian year ends on March 20.

In preparation for New Year, Iranians renovate their life and belongings. Most cars plying the streets have their boots filled with newly purchased things. Someone purchases a new carpet while someone else decides to replace its furniture.

Norouz marks the first day of spring and the beginning of the year in the Iranian calendar. It is celebrated on the day of the astronomical Northward equinox, which usually occurs on March 21 or the previous/following day depending on where it is observed. As well as being a Zoroastrian holiday and having significance amongst the Zoroastrian ancestors of modern Iranians, it is also celebrated in parts of the South Asian sub-continent as the New Year. The moment the Sun crosses the celestial equator and equalizes night and day is calculated exactly every year and Iranian families gather together to observe the rituals.  

 

Tradition and Mythology

 

The celebration has its roots in Ancient Iran. Due to its antiquity, there exist various foundation myths for Norouz in Iranian mythology. In the Zoroastrian tradition, the seven most important Zoroastrian festivals are the Gahambars and Norouz, which occurs at the spring equinox.

Between sunset of the day of the 6th Gahanbar and sunrise of Norouz was celebrated Hamaspathmaedaya (later known, in its extended form, as Frawardinegan). This and the Gahanbar are the only festivals named in the surviving text of the Avesta.

The Shahnameh, dates Norouz as far back to the reign of Jamshid, who in Zoroastrian texts saved mankind from a killer winter that was destined to kill every living creature. The mythical Persian King Jamshid (Yima or Yama of the Indo-Iranian lore) perhaps symbolizes the transition of the Indo-Iranians from animal hunting to animal husbandry and a more settled life in human history. In the Shahnameh and Iranian mythology, he is credited with the foundation of Norouz. In the Shahnama, Jamshid constructed a throne studded with gems. He had demons raise him above the earth into the heavens; there he sat on his throne like the sun shining in the sky. The world's creatures gathered in wonder about him and scattered jewels around him, and called this day the New Day or Norouz. This was the first day of the month of Farvardin (the first month of the Persian calendar).

 

History

 

Although it is not clear whether proto-Indo-Iranians celebrated a feast as the first day of the calendar, there are indications that both Iranians and Indians may have observed the beginning of both autumn and spring, related to the harvest and the sowing of seeds, respectively, for the celebration of New Year.

We have reasons to believe that the celebration is much older than that date and was surely celebrated by the people and royalty during the Achaemenid times (555–330 BC). It was, therefore, a highly auspicious occasion for the ancient Iranian peoples. It has been suggested that the famous Persepolis complex, or at least the palace of Apadana and the Hundred Columns Hall, were built for the specific purpose of celebrating Norouz. Although, there may be no mention of Norouz in recorded Achaemenid inscriptions,there is a detailed account by Xenophon of Norouz celebration taking place in Persepolis and the continuity of this festival in the Achaemenid tradition.

In 539 BC the Jews came under Persian rule thus exposing both groups to each other’s customs. The story of Purim as told in the Book of Esther is adapted from a Persian novella about the shrewdness of harem queens suggesting that Purim may be a transformation of the Persian New Year.

Norouz was the holiday of Arsacid/Parthian dynastic Empires who ruled Iran (248 BC-224 AD). There are specific references to the celebration of Norouz during the reign of Vologases I (51–78 AD), but these include no details. Before Sassanids established their power in West Asia around 300 AD, Parthians celebrated Norouz in Autumn and 1st of Farvardin began at the Autumn Equinox. During Parthian dynasty the Spring Festival was Mehragan, a Zoroastrian and Iranian festival celebrated in honor of Mithra.

Extensive records on the celebration of Norouz appear following the accession of Artaxerxes I of Persia, the founder of the Sassanid dynasty (224–651 AD). Under the Sassanid Emperors, Norouz was celebrated as the most important day of the year. Most royal traditions of Norouz such as royal audiences with the public, cash gifts, and the pardoning of prisoners, were established during the Sassanian era and persisted unchanged until modern times.

 

Pre-Norouz Customs

 

In the final days of the year, messengers of spring abound in the cities and villages. They sing traditional songs and put up shows in order to herald the end of the winter and the arrival of the spring. The most important pre-Norouz customs are known as Mir Norouzi, Amou Norouz and Haji Firouz.

Mir Norouzi is a ceremony in which someone is elected by people to run the society for five days. Mir means emir or king. This tradition is still observed by some ethnic groups like Kurds and Lors.

Amou Norouz (Uncle Norouz) ushers in the spring time every year according to Iranian tradition. Amou Norouz brings children gifts, much like his Western counterpart Santa Claus.

 

Haji Firouz

 

Haji Firouz in the language of literature and satire Haji  is the traditional herald of Norouz, the Persian New Year. He oversees celebrations for the new year perhaps as a remnant of the ancient Zoroastrian fire-keeper. His face is covered in soot and he is clad in bright red clothes and a felt hat. While ushering in Norouz, Hajji Firouz plays a tambourine and sings "Hāji Firouz-e, sal-i-ye ruz-e" (It is Hāji Firouz time, It happens one day in a year). People of all ages gather around him and his troupe of musicians and listen to them play the drum and dance through the streets with tambourines and trumpets spreading good cheer and the news of the coming New Year.

The sound of his songs and the sight of his dance is often analogous to hearing Christmas music in a shopping mall, telling all that Norouz is in the air. Although the blackness of his skin has been the source of some racial controversy in Iranian intellectual circles, Hāji Firouz's intentions and spirit have always been well received and loved by the people. People consider it only as a face paint and there is no racial implication.

 

Songs

 

Iranians believe that the New Year's Day must begin with joy, happiness and laughter so that during the rest of the year the families will continue to be happy. If the families are not happy, the faravahars who are guests of the families will leave the households which may result in the loss of abundance and blessings from the household. It is for this reason that during these days there are people with funny makeup and joyful songs who will bring laughter and joy to families and with their comical jests and songs bring laughter to houses, streets and market places.

 

Spring Cleaning

 

Spring cleaning is the practice of thoroughly cleaning a house in the springtime. The practice of spring cleaning is especially prevalent in climates with a cold winter.

The most common usage of spring cleaning refers to the yearly act of cleaning a house from top to bottom which would take place in the first warm days of the year typically in spring, hence the name. However it has also come to be synonymous with any kind of heavy duty cleaning or organizing enterprise. A person who gets their affairs in order before an audit or inspection could be said to be doing some spring cleaning.

It has been suggested that the origins of spring cleaning date back to the Iranian Norouz, the Persian New Year, which falls on the first day of spring. Iranians continue the practice of "khooneh tekouni" which literally means "shaking the house" just before the new year. Everything in the house is thoroughly cleaned, from the drapes to the furniture. A similar tradition is the Scottish "New Year's cleaning" on Hogmanay (December 31), a practice now also widespread in Ireland, New Zealand, and to North America.

In North America and northern Europe, the custom found an especially practical value due to those regions' continental and wet climates. During the 19th century in America, prior to the advent of the vacuum cleaner, March was often the best time for dusting because it was getting warm enough to open windows and doors (but not warm enough for insects to be a problem), and the high winds could carry the dust out of the house. For the same reason, modern rural households often use the month of March for cleaning projects involving the use of chemical products which generate fumes.

 

Haft Seen

 

Haft-Seen or the seven 'S's is a traditional table setting of Norouz, the traditional Iranian spring celebration. The haft seen table includes seven items all starting with the letter seen (س) in the Persian alphabet. Haft-Seen was originally called Haftchin (Haftĉin) derived from the words Chin, meaning "gather; pile up" and Haft, the number 7. The Haft Chin table includes the following items which symbolize Zoroastrian yazatas or divinities such as ātar and asmān.

 

The "Haft Chin" items are:

 

Mirror - symbolizing Sky

Apple - symbolizing Earth

Candles - symbolizing Fire

Golab - rose water symbolizing Water

Sabzeh - wheat, or barley sprouts symbolizing Plants

Goldfish - symbolizing Animals

Painted Eggs - symbolizing Humans and Fertility

 

After the New Year starts, Iranians visit their families. Those who might not have been on speaking terms decide to forget about differences and resume their friendly ties again.

The visits naturally have to be relatively short, otherwise one will not be able to visit everybody on their list. A typical visit is around 30 minutes, where you often run into other visiting relatives and friends who happen to be paying a visit to the same house at that time. Because of the house visits, you make sure you have a sufficient supply of pastry, cookies, fresh and dried fruits and special nuts on hand, as you typically serve your visitors with these items with tea or sherbet.

People normally leave on trips as most offices remain closed for two weeks.  

 

Sizdah Be-dar

 

Sizdahbedar or Sizdah Be-dar is the name of a ceremony in Persian Culture. Sizdah is the Persian term for thirteen. Leaving the house on the Thirteenth Day of Farvardin (the first month of Iranian calendar), and joyfully spending the day outdoors have been a national tradition since ancient times in Iran. Sizdah Bedar (in English: Getting rid of the Thirteenth) has been possibly considered as a tradition because some people believe the thirteen is an unlucky number, and everybody should get rid of the thirteen. That interpretation may be disputed since it is documented that in Persian, Bedar may also mean Raftan-e beh Dar-o Dasht (in English: Going Outdoors and Country Sides). Most of the times Sizdah Bedar coincides with the first day of April, which is known as April Fools' Day in the Western Culture.

Sizdah Berdar is reported to have been celebrated by the Iranians lived on the Iranian Plateau as far back as 536 BC. It is puzzling however to see no record about Sizdah Bedar after Iran became a part of the Muslim World in the seventh century. Amazingly none of the thousands of famous Europeans who traveled and visited Iran during Safavid era (1501–1736) and up to the last years of Qajars (1794–1925) referred to the celebration of Sizdah Bedar on their Itinerary Reports (in Persian: Safar Naameh-haa). The Iranian politician and writer Abdollah Mostofi (1876–1950), and traveler Edward Pollack who visited Iran in 1865 were possibly among the first authors who wrote about Sizdah Bedar and reported it in their books. It should be also noted that there are many poems on the praising of the Spring Season (in Persian: Bahaarieh), and the Iranian New year (Norouz) composed by various classical Iranian poets, but the verses on Sizdah Bedar written by the same groups of composers are rarely ever found. According to many researchers, problems may be attributed to the imposition of the specific codes of conduct regarding various aspects of daily life after Iran became a part of Muslim World in the seventh century. More research is needed to fill those voids.

 

Norouz Across the World

 

Norouz is celebrated in Greater Iran, Caucasus, Central Asia and by Iranians worldwide. It is a public holiday in Iran, Iraq, Afghanistan, Azerbaijan, Tajikistan, Turkmenistan, Uzbekistan, Kyrgyzstan, and India. Also the Canadian parliament by unanimous consent, has passed a bill to add Norouz to the national calendar of Canada, on March 30, 2009.

In Albania Sultan Nevruz is celebrated as a mainly mystical day by the Bektashi sect, and there are special ceremonies in the Tekke led by the clergy and large meals are served there. They celebrate this day as the birthday of Ali. Also all Albanians celebrate a secular version of Nowruz, called Spring Day. Nowruz is also celebrated by Kurdish people in Iraq and Turkey as well as by Parsis in the Indian subcontinent.