Oil Price Slide, an Unsolicited Blessing

 

Throughout the history of development, oil has always been instrumental in the fluctuation of economic indicators.

The undeniable fact is that oil has always persuaded all the countries in the world to follow in its footsteps. However, there have been governments to resist this nature of black gold and still prefer to run their economy based on politics.

The conditions of oil markets over the past weeks depict the story of oil. The decline in oil prices has left two different images for the world’s economic history. The first image depicts countries depending on industrial production and always trying to continue production at lower costs. The second image portrays oil producers whose petrodollars serve their development programs. For the industrialized countries, lower oil prices help their industries manage their economies more smoothly. In the short term, there is something for industrialized countries to rejoice because their industry is running more quickly; therefore, they would be able to supply more products. But at the same time, lower oil prices reduce import rate, as well as level of consumption in oil-dependent countries. That would serve their interests in the long-term. The oil-dependent countries can make plans for their future in order to reduce their dependence on oil revenues.

In a country where development has always been tied to oil, development plans may fall through due to oil price fall. But that could be a good chance for them to wean their economy off oil once for all.

In a country like Iran there are strong economic potentials for economic development; therefore, the country can shore up its economy without dependence on crude oil sales. By devising well thought out strategies, Iran can achieve a big volume of non-oil production with oil serving as a supportive capital.

For a country like Iran, if the road is paved for the petrochemical industry, this industry can give Iran $70 billion in revenues a year. It is noteworthy that 18 years ago, Iran earned only $1 billion. Now, it is over $20 billion. This sum is attractive enough to accelerate efforts for breaking away from oil revenues. Now imagine that this figure would be able to facilitate production of 180 million tons of petrochemicals to give the country $70 billion in revenues.

Meantime, Iran is rich in gas and the most cohesive gas network has taken shape in the country. If Iran’s gas industry joins the trade cycle, it will bring about significant revenues.

Given Iran’s potential in gas and perspectives in petrochemicals, one could simply conclude that the oil price slump is an unsolicited blessing for moving towards an economy freed up of oil price fluctuations.

Iran Sticks to Oil Stance

 

There is no doubt that Iran's economy highly depends on oil. One does not need to be an economist to realize that. So far, all administrations in Iran have drawn up their annual budget bills based on oil price; therefore, any fluctuations in the price of oil cause serious problems for all oil producing countries. The recent oil price fall, which is being exacerbated jointly by the US and some OPEC members, has had undesirable impacts on oil producers and exporters and even non-oil economies including capital markets.

Iran held recently a major national economic forum to exchange views about Iran's economy and sketch out horizons for the future of the country’s economy. The forum was attended by government economic officials, private sector activists and economists.

A panel discussion held on the sidelines of this forum was focused on oil and energy. Minister of Petroleum Bijan Namdar Zangeneh, Minister of Energy Hamid Chitchian and OPEC Affairs general director Mehdi Assali reviewed reasons of oil price decline and ways to resolve this problem.

Zangeneh said the most important factor in oil price fall is oil oversupply in the face of weak demand. He said that the only tool the Organization of the Petroleum Exporting Countries holds for raising the prices is to cut production. He said OPEC decided to cut output by 2.5 mb/d in 2009 after oil prices kept falling. This decision to shore up oil prices helped double them to $80, he said, adding that the price soared past $100.

Zangeneh said some non-OPEC countries believe that lower production could increase prices. He said that Iran does not fully agree with the argument that falling oil prices would gradually bring a halt to shale oil production.

The Iranian minister said Iran has cut its production from 2.5 mb/d to 1 mb/d, but it has never backed down from its position. “It will not back down for one million barrels and it will not cut its production,” he said.

Zangeneh said media is for the first time resisting oil price decline, adding that Republicans and Democrats in the US remain divided on the US oil exports.

 

Boosting Oil Storage

 

Assali attributed the oil price falls to the high level of oil price stocks and the increase in their capacity in the past five years.

He also said the oil price fall stems from oversupply, adding that 60% of price falls depends on supply and the rest on demand. Assali said the current OPEC oversupply which is due to the elimination of Iranian and Libyan shares, is a political factor involved in plunging oil prices.

In the last OPEC Conference, he said, Iran favored a 1.5-mb/d cut in OPEC production ceiling. “Iran's argument was that by cutting production, oil price in the global markets will rise and the countries would spend oil revenues on developing downstream industries and petrochemical facilities instead of selling crude oil to global markets.”

He referred to Saudi Arabia’s view for stabilizing OPEC production ceiling based on the reasoning that shale oil production is non-economical due to a decline in oil prices, noting that the Saudi’s view has been high-risk and it will definitely not pursue OPEC interests in the long-term.

Assail said there are two strategies for oil producers with regard to oil price slide. “The first strategy is the invasive strategy which is the same as price war. This strategy will be such that the production should be maintained or increased and then any country with higher production cost be eliminated. This strategy is being pursued by Saudi Arabia in order to impose losses on other [OPEC] member states,” he said. “The second strategy is defensive strategy based on which the interests of oil producing countries should be preserved and a portion of the market be given to non-OPEC. It means that OPEC can hold the price below maximum-profit level in order to prevent involvement of non-OPEC rivals.”

Assail said projecting the conditions of supply and demand and oil price is very difficult due to the fact that oil production is growing faster in non-OPEC than in OPEC. He said that in recent months forecasts have been regularly changing.

 

$44b for Field Development

 

Hamid Pour-Mohammadi, deputy head of Management and Planning Organization, said Iran’s Ministry of Petroleum is allocating $15 billion for the integrated development of oil fields and $29 billion for the integrated development of phases 11-24 of South Pars gas field.

He said the ministry has lifted bans on the export of some commodities and eliminated duties as part of its actions for improving Iran’s economy. Pour-Mohammadi said Ministry of Petroleum has exercised necessary changes with regard to management of points of entry of commodities.

 

Oil Price Fall and Its Outlook

Ahmad Davoudi, director of energy and infrastructure at MPO, underscored the point that demand for crude oil has been growing at a slow pace in recent months, while the market has been glutted with oil, leading to a sharp decline in oil prices.

“To bear further proof to this view, the gradual decline in the price of most important commodities in the foodstuff and agriculture sectors, basic meals and energy commodities particularly coal and higher oil production in the US from non-conventional resources ,and the return of a portion of Middle East countries’ production to the market as proof of this assertion. That has led to accumulation of oil in commercial depots and ramps up pressure on prices,” he said.

Davoudi said under the present circumstances, forecasting oil prices even for the near future is very difficult. He added that the International Energy Agency (IEA) has revised its forecasts down for 2014 more than four times due to fluctuating prices. He said these complications are related to the behavior of both producers and consumers.

Davoudi said: “A large number of consumers are postponing their purchase as they foresee no fundamental balance between supply and demand.”

“On the other hand, big governments are levying heavier taxes in an attempt to prevent higher demand for oil and subsequently more oil imports in order to gain revenues from reduction in oil prices,” he said.

Davoudi said financial markets can no longer provide a more accurate analysis of oil prices due to uncertainty in supply and demand, noting that some supply/demand curves may even prove to be misleading because price fluctuations are high at a time they are expected to be low.

He said that OPEC oil producers face only two options. “Offensive strategy for maintaining market despite price fall: In fact the strategy OPEC is pursuing under leadership of its leading producers. This strategy is very risky for many reasons and could impose low prices on the oil market and harm the interests of other OPEC countries for a long time. The alternative strategy of cutting production for maintaining prices has also its own risks and may weaken OPEC’s influence on the oil market.”

Davoudi said the continuation of the present circumstances further destabilizes oil market, adding that the prices are unlikely to return to their high level of three years ago any time soon.

He also insisted on enhanced oil and gas production capacity in Iran and development of downstream industry as the only way for reducing the negative consequences of oil price fluctuations.       

                 

 

Iran, Pakistan and Future of World Gas Market

 

Today, gas makes up over 60% of Pakistan’s energy mix. But this country is running short of gas resources. Gas shortage in Pakistan is so serious that household consumers and factories are facing challenges. Energy shortage has always left destructive impacts on Pakistan’s economy. Industrial facilities in Pakistan are running much below their capacity due to energy shortage. For this reason, production is falling and many job opportunities are lost. Moreover, energy shortage has directly influenced domestic consumers and clients of commodities.

Chairman Pakistan Industrial and Traders Associations Front (PIAF) Malik Tahir Javed recently asked the Pakistan government not to ditch Iran-Pakistan gas pipeline which would help improve Pakistan’s economy and reduce unemployment rate in the country. He expressed surprise with the Pakistani government’s reluctance to get the project done.

Islamabad’s need for energy has been rising since 2005. Pakistan currently produces 4.3 bcf of gas, much lower than its 6 bcf demand. Therefore, Pakistan has to import gas in a bid to save its economy in the coming years. Gas import is the only solution for Pakistan. The issue of energy and particularly gas has always been important for Pakistan because it covers many economic activities.

Experts predict that Pakistan’s demand for electricity would soar past 36,217MW this year, 54,351MW in 2020 and 80,566MW in 2025 and 113,695MW in 2030. Pakistan is already facing 7,739MW in shortage as the country’s power plants are running short of 400 mcf/d of natural gas.

More than two decades ago, Pakistan started talks with Iran in the hope of receiving gas. At that time, India was also involved in the project. An Iran-Pakistan-India pipeline, known as Peace Pipeline, was supposed to be constructed in a bid to bring nuclear-armed warring neighbors – Pakistan and India – closer together. But after some time, India pulled out under pressure from the West. However, Pakistan stuck to the project in a bid to quench its thirst for this energy commodity. Finally, Pakistan signed an agreement with Iran in 2010. The contract required Iran to lay out 907 kilometers of pipeline stretching from Assaluyeh in southern Iran to southeastern border with Pakistan. Pakistan was supposed to extend the pipeline into its own territory in order to receive gas from Iran’s Assaluyeh. Iran immediately started building its own section and finished the 907-km pipeline. Iran has practically prepared the required infrastructure for pumping gas into its eastern neighbor. But Pakistan has not taken any action, casting doubt on the fate of the pipeline. Pakistan has been only biding for time. Under the agreement, Pakistan should have finished its own section of the pipeline by December 2014. But the New Year has started and Pakistan is not ready to import Iran’s gas. Islamabad has not even defined any plan for completing the trunkline in the near future. Some media reports even said that Pakistan may be planning to purchase liquefied gas instead of natural gas from Iran in order to facilitate the project and benefit from Oman gas terminal.

The Pakistani government has not added even one single meter to the pipeline built by Iran. Under the agreement signed between Tehran and Islamabad, Pakistan is committed to pay $3 million in penalties to Iran for each single day of delay in the project.

Pakistan claims that international sanctions block the construction of the pipeline. Iranian officials dismiss these allegations.

If constructed, this pipeline would truly bring peace and friendship to Southeast Asia. Pakistani officials incessantly claim that they desperately need to import gas from Iran. Pakistani Prime Minister Nawaz Sharif recently told Iran’s Minister of Economy and Finance Ali Tayyebnia that his government is determined to broaden its cooperation with the Islamic Republic.

Pakistan’s Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi recently admitted that his country has failed to complete the project on schedule. He claimed that international sanctions prevent Pakistan from extending the pipeline. But he insisted that his country needs Iran’s gas.

While reaffirming Pakistan’s commitment to the Iran-Pakistan pipeline, Abbasi told the Iranian minister of economy that sanctions imposed on Iran have discouraged banks and contractors from completing pipeline related projects in Pakistan.

The IP gas pipeline project is vital for the Pakistan’s energy needs and the government is fully committed to complete the project, Abbasi told the visiting Iranian delegation in Islamabad. However, he pointed out that banks, international contractors and equipment suppliers were not ready to get involved in the project due to international sanctions imposed on Iran.

Abbasi said Pakistan was planning to complete the project in two phases.

The first phase would include installing an LNG terminal at Gwadar Port, and laying a 42-inch, 700km long pipeline from Gwadar to Nawabshah for transferring gas to northern parts of the country.

The Pakistani minister informed the Iranian delegation that they were in negotiations with Chinese companies to construct this section of the pipeline.

The remaining 70 km-long section of the pipeline, from Gwadar to the Iranian border, will be completed by Pakistani companies.

Abbasi said that Pakistan wants to enhance bilateral trade and improve economic ties in sectors other than LPG, oil and gas, as well.

Abbasi said that Pakistan’s annual oil imports bill is $15 billion but direct oil trade between Iran and Pakistan is negligible, adding that he expected it to increase substantially once the sanctions are lifted.

Tayyebnia said that Iran had already completed its part of the gas pipeline, and hoped that Pakistan will also fulfill its commitment.

The Iranian minister said that their negotiations with the international community on the nuclear issue were successful and that they hoped that sanctions will soon be lifted.

 

Pakistan Looking for Alternative

 

Pakistan has envisaged several solutions for overcoming its growing energy needs. Gas imports from Iran, import of liquefied natural gas (LNG) from Qatar, India-Pakistan pipeline and Turkmenistan-Afghanistan-Pakistan-India (TAPI) are chief among them. But needless to say, gas imports from Iran, which borders Pakistan, is the most economical project. Other options would cost Islamabad too much. Qatar’s gas needs to be converted into super-cooled form of LNG, before Pakistan could import it. Importing LNG requires costly infrastructure, and Pakistan cannot afford it for the time being. Engagement in TAPI project is out of the question due to security concerns in Afghanistan. Despite many rounds of talks to that effect, the project has yet to become practical. Importing gas from India will also impose heavy costs on Pakistan because India has no gas to pump to Pakistan and it has first to reconvert its imported LNG into gas and then pump it to Pakistan in a trunkline. LNG costs more than $16 in Asian markets. How much should India charge Pakistan then?

 

Iran Committed to IP

 

Despite all procrastination by the Pakistani side, Iran has sincerely completed its own section of the pipeline. Based on Tehran-Islamabad agreement, either party failing to honor its commitments stipulated in the contract will have to pay penalties to the other party.

Now, Pakistan has defaulted and it is required by the agreement to pay $3 million a day to Iran.

That would no longer look strange to see Pakistan highlight international sanctions against Iran in an attempt to renege on its obligations.

Although the Pakistani petroleum minister claims that international sanctions are blocking the project, the Pakistani commerce minister has acknowledged that financial shortcomings are the main impediment for the completion of the project.

The former Pakistani government had proposed four options for financing the project on the Pakistani soil. They included tax collection to develop infrastructure for IP, signing of agreement with a third party consortium, finance of the project by Russia and China and Iran’s contribution to the Pakistani section of the pipeline.

The Pakistani government finally asked Iran in October 2012 to finance the rest of the pipeline. But after Hassan Rouhani was elected president and Bijan Namdar Zangeneh was named petroleum minister, this option was ruled out. “The Pakistanis themselves acknowledge that they have problem with paying for gas,” the Iranian minister said at the time.

“I care for Iran’s money,” said Zangeneh. “Sanctions are a pretext because even if there were no sanctions the other party could not reimburse Iran.”

The Iranian minister once again criticized Pakistan for its failure to stick to its commitments under the deal the two countries had signed. “Iran has no problem for delivering gas to Pakistan,” he said.

Zangeneh said Iran Gas Trunkline 7 (IGAT 7) has already been constructed stretching from Assaluyeh to Chabahar Port in southeastern Iran.

“Although this pipeline has been extended as far away as the border with Pakistan, this neighboring country is not yet ready to receive gas from Iran,” said the minister.

Zangeneh said Iran has no intention of writing off Pakistan’s debts accumulated by penalties incurred due to delaying the construction of its section of the gas pipeline.

The minister also said that Iran and Pakistan will continue their negotiations until the pipeline issue is resolved.

The activities Pakistan has so far done with regard to its own section of the gas pipeline are as follows:

• Appointment of consultant in April 2011;
•  Preliminary study of the route of the pipeline in July 2011;
•  Feasibility study of the project in March 2012 ;and
•  Submission of details about assessment in April 2012.

ILF Consulting Engineers, a German-Austrian company, confirmed in March 2016 that it is providing “advice and planning” work in the technological development of an Iranian-Pakistan pipeline project.

One must wait and see what would befall the IP project. Has Pakistan stopped inventing pretexts to conduct the project?

Becoming operational, Iran-Pakistan gas pipeline would serve as a corridor for transmission of energy from the Middle East to Far East.

The world keeps watchful eye on Iran’s 34tcm of gas. That provides Iran with a good chance to strengthen its presence in global markets.

According to Iran’s Vision Plan, the country intends to win a 10% share in world gas trade. Signature of deals with other countries lies within this framework.

Achieving this significant and strategic objective has requirements, most important of which are infrastructure and destination markets. With regard to the infrastructure, more than 34,000 kilometers of high-pressure gas transmission lines are already operational in the country. Other pipeline projects – IGAT9, IGAT10 and IGAT11, are also under construction. Iran eyes 70,000 kilometers of high-pressure gas transmission line.

The world gas market is waiting for a reliable and stable supplier of gas like Iran which is already an important element in oil markets.

 

Gas, Unknown Gold

 

Whenever one speaks about energy and its economic value, everybody thinks of oil. But it would be interesting to know that gas plays a role as strategic as oil. Since 2010, gas consumption has grown 50% and the “golden age of gas scenario” developed by experts maintains that gas will become the main energy commodity for countries by 2035 with a 25% share in the world energy basket. However, due to continuous oil supply, difficulty of gas transmission to Europe and oil-based industry, gas price has not yet achieved its genuine value.

 

Gas Supergiants

 

Russia holds the world’s largest gas reserves. It sits atop 48.7 tcm of gas in place. Iran comes second with 33.6 tcm. With a farther distance come Qatar, Turkmenistan, the US, Saudi Arabia and Iraq. Gas transmission infrastructure in Russia has let this country win a big share in the gas market in East Europe and West Europe. By developing its liquefied natural gas (LNG) sector, Qatar has managed to win a one-fourth share of the world’s LNG production, nearly 7 mcm/d. Indonesia, Malaysia, Australia and Algeria are other LNG major players.

At present, LNG has a nearly 25% share in the world’s gas market. But development of shale reservoirs and the fields whose gas could not be piped would bring this share up to 40% by 2020.

 

Iran, Top Gas Holder

 

The British Petroleum (BP) said in one of its reports that Russia’s gas reserves stand at 31.3 tcm, much lower than what the country has officially announced. If this figure is correct, Iran will be the first holder of gas reserves in the world.

Iran produced 170 bcm of gas in 2013 which accounts for 4.6% of world gas production. Iran was the fourth largest gas producer after the US, Russia and Qatar in that year. After President Hassan Rouhani took office in August 2013, Minister of Petroleum Bijan Namdar Zangeneh adopted policies for enhancing Iran’s gas production by 100 mcm through development of South Pars gas field. And in line with these policies and according to the latest figures released, 100 mcm has been added to South Pars production.

If everything goes ahead as planned, Iran’s gas production would reach 260 to 300 bcm by 2016 to become the third largest gas producer in the world.

 

Gas Production in Mideast

 

Qatar, the largest LNG producer in the world, has not significantly grown in recent years and gas pressure fall has hindered production in this country. Moreover, other gas producers like Saudi Arabia, Iraq and the United Arab Emirates have focused on oil production due to their problems with gas production.

Saudi Arabia consumes most of its gas domestically like in injecting gas into oil fields, cooling and transportation. It even depends on imports to meet its own needs.

Qatar is suffering from low LNG prices in the world and it needs new investment to revive its gas wells.

Iraq needs Iran’s gas due to lack of infrastructure for gas production and shortage of investment. Last year, Iran agreed to extend a pipeline to its western neighbor for pumping natural gas.

 

Mideast Gas Demand

 

At present, Turkey heavily depends on Iran’s gas. It receives 40% of its gas from Iran and it still needs more gas.

Armenia and Azerbaijan are both gas buyers of Iran in the north, and Afghanistan can become a permanent buyer of Iran’s gas if the required infrastructure is built in northeast Iran. Pakistan and India also need Iran’s gas. Pakistani fuel smugglers are currently smuggling fuel from Iran and India is buying Qatar’s LNG on a massive scale in order to meet its needs.

Iran-Pakistan gas pipelines, whose Pakistani section has yet to be constructed, could transfer Iran’s gas to India.

 

Strategic Role of Iran’s Gas                             

 

The countries’ growing need for gas and the daily growing demand for this energy indicate the significance of this source of energy. But from a strategic point of view, using an alternative source would ensure consumers that they should not get frustrated under critical conditions like during the crisis in Ukraine.

The Iran-Pakistan pipeline would allow Iran’s gas to reach Far East. Iran can envisage exporting gas to China through this pipeline.

In the meantime, Europe would not be unwilling to lay out an alternative pipeline as the crisis continues to escalate over Ukraine. Construction of a pipeline to transmit Iran’s gas to Europe would be a good option.

Given Iran’s current gas production, its domestic demand and the thirsty markets in the region, transmission of gas from Iran to far destinations like Europe is not economical.

But given Iran’s plan to raise its production and cut consumption would make the country a reliable source of gas for the world. This issue is of high significance for world energy markets. That is why Western officials speak about Iran’s gas transmission to Europe from time to time.

Iran, Pakistan and Future of World Gas Market

 

Today, gas makes up over 60% of Pakistan’s energy mix. But this country is running short of gas resources. Gas shortage in Pakistan is so serious that household consumers and factories are facing challenges. Energy shortage has always left destructive impacts on Pakistan’s economy. Industrial facilities in Pakistan are running much below their capacity due to energy shortage. For this reason, production is falling and many job opportunities are lost. Moreover, energy shortage has directly influenced domestic consumers and clients of commodities.

Chairman Pakistan Industrial and Traders Associations Front (PIAF) Malik Tahir Javed recently asked the Pakistan government not to ditch Iran-Pakistan gas pipeline which would help improve Pakistan’s economy and reduce unemployment rate in the country. He expressed surprise with the Pakistani government’s reluctance to get the project done.

Islamabad’s need for energy has been rising since 2005. Pakistan currently produces 4.3 bcf of gas, much lower than its 6 bcf demand. Therefore, Pakistan has to import gas in a bid to save its economy in the coming years. Gas import is the only solution for Pakistan. The issue of energy and particularly gas has always been important for Pakistan because it covers many economic activities.

Experts predict that Pakistan’s demand for electricity would soar past 36,217MW this year, 54,351MW in 2020 and 80,566MW in 2025 and 113,695MW in 2030. Pakistan is already facing 7,739MW in shortage as the country’s power plants are running short of 400 mcf/d of natural gas.

More than two decades ago, Pakistan started talks with Iran in the hope of receiving gas. At that time, India was also involved in the project. An Iran-Pakistan-India pipeline, known as Peace Pipeline, was supposed to be constructed in a bid to bring nuclear-armed warring neighbors – Pakistan and India – closer together. But after some time, India pulled out under pressure from the West. However, Pakistan stuck to the project in a bid to quench its thirst for this energy commodity. Finally, Pakistan signed an agreement with Iran in 2010. The contract required Iran to lay out 907 kilometers of pipeline stretching from Assaluyeh in southern Iran to southeastern border with Pakistan. Pakistan was supposed to extend the pipeline into its own territory in order to receive gas from Iran’s Assaluyeh. Iran immediately started building its own section and finished the 907-km pipeline. Iran has practically prepared the required infrastructure for pumping gas into its eastern neighbor. But Pakistan has not taken any action, casting doubt on the fate of the pipeline. Pakistan has been only biding for time. Under the agreement, Pakistan should have finished its own section of the pipeline by December 2014. But the New Year has started and Pakistan is not ready to import Iran’s gas. Islamabad has not even defined any plan for completing the trunkline in the near future. Some media reports even said that Pakistan may be planning to purchase liquefied gas instead of natural gas from Iran in order to facilitate the project and benefit from Oman gas terminal.

The Pakistani government has not added even one single meter to the pipeline built by Iran. Under the agreement signed between Tehran and Islamabad, Pakistan is committed to pay $3 million in penalties to Iran for each single day of delay in the project.

Pakistan claims that international sanctions block the construction of the pipeline. Iranian officials dismiss these allegations.

If constructed, this pipeline would truly bring peace and friendship to Southeast Asia. Pakistani officials incessantly claim that they desperately need to import gas from Iran. Pakistani Prime Minister Nawaz Sharif recently told Iran’s Minister of Economy and Finance Ali Tayyebnia that his government is determined to broaden its cooperation with the Islamic Republic.

Pakistan’s Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi recently admitted that his country has failed to complete the project on schedule. He claimed that international sanctions prevent Pakistan from extending the pipeline. But he insisted that his country needs Iran’s gas.

While reaffirming Pakistan’s commitment to the Iran-Pakistan pipeline, Abbasi told the Iranian minister of economy that sanctions imposed on Iran have discouraged banks and contractors from completing pipeline related projects in Pakistan.

The IP gas pipeline project is vital for the Pakistan’s energy needs and the government is fully committed to complete the project, Abbasi told the visiting Iranian delegation in Islamabad. However, he pointed out that banks, international contractors and equipment suppliers were not ready to get involved in the project due to international sanctions imposed on Iran.

Abbasi said Pakistan was planning to complete the project in two phases.

The first phase would include installing an LNG terminal at Gwadar Port, and laying a 42-inch, 700km long pipeline from Gwadar to Nawabshah for transferring gas to northern parts of the country.

The Pakistani minister informed the Iranian delegation that they were in negotiations with Chinese companies to construct this section of the pipeline.

The remaining 70 km-long section of the pipeline, from Gwadar to the Iranian border, will be completed by Pakistani companies.

Abbasi said that Pakistan wants to enhance bilateral trade and improve economic ties in sectors other than LPG, oil and gas, as well.

Abbasi said that Pakistan’s annual oil imports bill is $15 billion but direct oil trade between Iran and Pakistan is negligible, adding that he expected it to increase substantially once the sanctions are lifted.

Tayyebnia said that Iran had already completed its part of the gas pipeline, and hoped that Pakistan will also fulfill its commitment.

The Iranian minister said that their negotiations with the international community on the nuclear issue were successful and that they hoped that sanctions will soon be lifted.

 

Pakistan Looking for Alternative

 

Pakistan has envisaged several solutions for overcoming its growing energy needs. Gas imports from Iran, import of liquefied natural gas (LNG) from Qatar, India-Pakistan pipeline and Turkmenistan-Afghanistan-Pakistan-India (TAPI) are chief among them. But needless to say, gas imports from Iran, which borders Pakistan, is the most economical project. Other options would cost Islamabad too much. Qatar’s gas needs to be converted into super-cooled form of LNG, before Pakistan could import it. Importing LNG requires costly infrastructure, and Pakistan cannot afford it for the time being. Engagement in TAPI project is out of the question due to security concerns in Afghanistan. Despite many rounds of talks to that effect, the project has yet to become practical. Importing gas from India will also impose heavy costs on Pakistan because India has no gas to pump to Pakistan and it has first to reconvert its imported LNG into gas and then pump it to Pakistan in a trunkline. LNG costs more than $16 in Asian markets. How much should India charge Pakistan then?

 

Iran Committed to IP

 

Despite all procrastination by the Pakistani side, Iran has sincerely completed its own section of the pipeline. Based on Tehran-Islamabad agreement, either party failing to honor its commitments stipulated in the contract will have to pay penalties to the other party.

Now, Pakistan has defaulted and it is required by the agreement to pay $3 million a day to Iran.

That would no longer look strange to see Pakistan highlight international sanctions against Iran in an attempt to renege on its obligations.

Although the Pakistani petroleum minister claims that international sanctions are blocking the project, the Pakistani commerce minister has acknowledged that financial shortcomings are the main impediment for the completion of the project.

The former Pakistani government had proposed four options for financing the project on the Pakistani soil. They included tax collection to develop infrastructure for IP, signing of agreement with a third party consortium, finance of the project by Russia and China and Iran’s contribution to the Pakistani section of the pipeline.

The Pakistani government finally asked Iran in October 2012 to finance the rest of the pipeline. But after Hassan Rouhani was elected president and Bijan Namdar Zangeneh was named petroleum minister, this option was ruled out. “The Pakistanis themselves acknowledge that they have problem with paying for gas,” the Iranian minister said at the time.

“I care for Iran’s money,” said Zangeneh. “Sanctions are a pretext because even if there were no sanctions the other party could not reimburse Iran.”

The Iranian minister once again criticized Pakistan for its failure to stick to its commitments under the deal the two countries had signed. “Iran has no problem for delivering gas to Pakistan,” he said.

Zangeneh said Iran Gas Trunkline 7 (IGAT 7) has already been constructed stretching from Assaluyeh to Chabahar Port in southeastern Iran.

“Although this pipeline has been extended as far away as the border with Pakistan, this neighboring country is not yet ready to receive gas from Iran,” said the minister.

Zangeneh said Iran has no intention of writing off Pakistan’s debts accumulated by penalties incurred due to delaying the construction of its section of the gas pipeline.

The minister also said that Iran and Pakistan will continue their negotiations until the pipeline issue is resolved.

The activities Pakistan has so far done with regard to its own section of the gas pipeline are as follows:

• Appointment of consultant in April 2011;
•  Preliminary study of the route of the pipeline in July 2011;
•  Feasibility study of the project in March 2012 ;and
•  Submission of details about assessment in April 2012.

ILF Consulting Engineers, a German-Austrian company, confirmed in March 2016 that it is providing “advice and planning” work in the technological development of an Iranian-Pakistan pipeline project.

One must wait and see what would befall the IP project. Has Pakistan stopped inventing pretexts to conduct the project?

Becoming operational, Iran-Pakistan gas pipeline would serve as a corridor for transmission of energy from the Middle East to Far East.

The world keeps watchful eye on Iran’s 34tcm of gas. That provides Iran with a good chance to strengthen its presence in global markets.

According to Iran’s Vision Plan, the country intends to win a 10% share in world gas trade. Signature of deals with other countries lies within this framework.

Achieving this significant and strategic objective has requirements, most important of which are infrastructure and destination markets. With regard to the infrastructure, more than 34,000 kilometers of high-pressure gas transmission lines are already operational in the country. Other pipeline projects – IGAT9, IGAT10 and IGAT11, are also under construction. Iran eyes 70,000 kilometers of high-pressure gas transmission line.

The world gas market is waiting for a reliable and stable supplier of gas like Iran which is already an important element in oil markets.

 

Gas, Unknown Gold

 

Whenever one speaks about energy and its economic value, everybody thinks of oil. But it would be interesting to know that gas plays a role as strategic as oil. Since 2010, gas consumption has grown 50% and the “golden age of gas scenario” developed by experts maintains that gas will become the main energy commodity for countries by 2035 with a 25% share in the world energy basket. However, due to continuous oil supply, difficulty of gas transmission to Europe and oil-based industry, gas price has not yet achieved its genuine value.

 

Gas Supergiants

 

Russia holds the world’s largest gas reserves. It sits atop 48.7 tcm of gas in place. Iran comes second with 33.6 tcm. With a farther distance come Qatar, Turkmenistan, the US, Saudi Arabia and Iraq. Gas transmission infrastructure in Russia has let this country win a big share in the gas market in East Europe and West Europe. By developing its liquefied natural gas (LNG) sector, Qatar has managed to win a one-fourth share of the world’s LNG production, nearly 7 mcm/d. Indonesia, Malaysia, Australia and Algeria are other LNG major players.

At present, LNG has a nearly 25% share in the world’s gas market. But development of shale reservoirs and the fields whose gas could not be piped would bring this share up to 40% by 2020.

 

Iran, Top Gas Holder

 

The British Petroleum (BP) said in one of its reports that Russia’s gas reserves stand at 31.3 tcm, much lower than what the country has officially announced. If this figure is correct, Iran will be the first holder of gas reserves in the world.

Iran produced 170 bcm of gas in 2013 which accounts for 4.6% of world gas production. Iran was the fourth largest gas producer after the US, Russia and Qatar in that year. After President Hassan Rouhani took office in August 2013, Minister of Petroleum Bijan Namdar Zangeneh adopted policies for enhancing Iran’s gas production by 100 mcm through development of South Pars gas field. And in line with these policies and according to the latest figures released, 100 mcm has been added to South Pars production.

If everything goes ahead as planned, Iran’s gas production would reach 260 to 300 bcm by 2016 to become the third largest gas producer in the world.

 

Gas Production in Mideast

 

Qatar, the largest LNG producer in the world, has not significantly grown in recent years and gas pressure fall has hindered production in this country. Moreover, other gas producers like Saudi Arabia, Iraq and the United Arab Emirates have focused on oil production due to their problems with gas production.

Saudi Arabia consumes most of its gas domestically like in injecting gas into oil fields, cooling and transportation. It even depends on imports to meet its own needs.

Qatar is suffering from low LNG prices in the world and it needs new investment to revive its gas wells.

Iraq needs Iran’s gas due to lack of infrastructure for gas production and shortage of investment. Last year, Iran agreed to extend a pipeline to its western neighbor for pumping natural gas.

 

Mideast Gas Demand

 

At present, Turkey heavily depends on Iran’s gas. It receives 40% of its gas from Iran and it still needs more gas.

Armenia and Azerbaijan are both gas buyers of Iran in the north, and Afghanistan can become a permanent buyer of Iran’s gas if the required infrastructure is built in northeast Iran. Pakistan and India also need Iran’s gas. Pakistani fuel smugglers are currently smuggling fuel from Iran and India is buying Qatar’s LNG on a massive scale in order to meet its needs.

Iran-Pakistan gas pipelines, whose Pakistani section has yet to be constructed, could transfer Iran’s gas to India.

 

Strategic Role of Iran’s Gas                             

 

The countries’ growing need for gas and the daily growing demand for this energy indicate the significance of this source of energy. But from a strategic point of view, using an alternative source would ensure consumers that they should not get frustrated under critical conditions like during the crisis in Ukraine.

The Iran-Pakistan pipeline would allow Iran’s gas to reach Far East. Iran can envisage exporting gas to China through this pipeline.

In the meantime, Europe would not be unwilling to lay out an alternative pipeline as the crisis continues to escalate over Ukraine. Construction of a pipeline to transmit Iran’s gas to Europe would be a good option.

Given Iran’s current gas production, its domestic demand and the thirsty markets in the region, transmission of gas from Iran to far destinations like Europe is not economical.

But given Iran’s plan to raise its production and cut consumption would make the country a reliable source of gas for the world. This issue is of high significance for world energy markets. That is why Western officials speak about Iran’s gas transmission to Europe from time to time.

Iran, Pakistan and Future of World Gas Market

 

Today, gas makes up over 60% of Pakistan’s energy mix. But this country is running short of gas resources. Gas shortage in Pakistan is so serious that household consumers and factories are facing challenges. Energy shortage has always left destructive impacts on Pakistan’s economy. Industrial facilities in Pakistan are running much below their capacity due to energy shortage. For this reason, production is falling and many job opportunities are lost. Moreover, energy shortage has directly influenced domestic consumers and clients of commodities.

Chairman Pakistan Industrial and Traders Associations Front (PIAF) Malik Tahir Javed recently asked the Pakistan government not to ditch Iran-Pakistan gas pipeline which would help improve Pakistan’s economy and reduce unemployment rate in the country. He expressed surprise with the Pakistani government’s reluctance to get the project done.

Islamabad’s need for energy has been rising since 2005. Pakistan currently produces 4.3 bcf of gas, much lower than its 6 bcf demand. Therefore, Pakistan has to import gas in a bid to save its economy in the coming years. Gas import is the only solution for Pakistan. The issue of energy and particularly gas has always been important for Pakistan because it covers many economic activities.

Experts predict that Pakistan’s demand for electricity would soar past 36,217MW this year, 54,351MW in 2020 and 80,566MW in 2025 and 113,695MW in 2030. Pakistan is already facing 7,739MW in shortage as the country’s power plants are running short of 400 mcf/d of natural gas.

More than two decades ago, Pakistan started talks with Iran in the hope of receiving gas. At that time, India was also involved in the project. An Iran-Pakistan-India pipeline, known as Peace Pipeline, was supposed to be constructed in a bid to bring nuclear-armed warring neighbors – Pakistan and India – closer together. But after some time, India pulled out under pressure from the West. However, Pakistan stuck to the project in a bid to quench its thirst for this energy commodity. Finally, Pakistan signed an agreement with Iran in 2010. The contract required Iran to lay out 907 kilometers of pipeline stretching from Assaluyeh in southern Iran to southeastern border with Pakistan. Pakistan was supposed to extend the pipeline into its own territory in order to receive gas from Iran’s Assaluyeh. Iran immediately started building its own section and finished the 907-km pipeline. Iran has practically prepared the required infrastructure for pumping gas into its eastern neighbor. But Pakistan has not taken any action, casting doubt on the fate of the pipeline. Pakistan has been only biding for time. Under the agreement, Pakistan should have finished its own section of the pipeline by December 2014. But the New Year has started and Pakistan is not ready to import Iran’s gas. Islamabad has not even defined any plan for completing the trunkline in the near future. Some media reports even said that Pakistan may be planning to purchase liquefied gas instead of natural gas from Iran in order to facilitate the project and benefit from Oman gas terminal.

The Pakistani government has not added even one single meter to the pipeline built by Iran. Under the agreement signed between Tehran and Islamabad, Pakistan is committed to pay $3 million in penalties to Iran for each single day of delay in the project.

Pakistan claims that international sanctions block the construction of the pipeline. Iranian officials dismiss these allegations.

If constructed, this pipeline would truly bring peace and friendship to Southeast Asia. Pakistani officials incessantly claim that they desperately need to import gas from Iran. Pakistani Prime Minister Nawaz Sharif recently told Iran’s Minister of Economy and Finance Ali Tayyebnia that his government is determined to broaden its cooperation with the Islamic Republic.

Pakistan’s Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi recently admitted that his country has failed to complete the project on schedule. He claimed that international sanctions prevent Pakistan from extending the pipeline. But he insisted that his country needs Iran’s gas.

While reaffirming Pakistan’s commitment to the Iran-Pakistan pipeline, Abbasi told the Iranian minister of economy that sanctions imposed on Iran have discouraged banks and contractors from completing pipeline related projects in Pakistan.

The IP gas pipeline project is vital for the Pakistan’s energy needs and the government is fully committed to complete the project, Abbasi told the visiting Iranian delegation in Islamabad. However, he pointed out that banks, international contractors and equipment suppliers were not ready to get involved in the project due to international sanctions imposed on Iran.

Abbasi said Pakistan was planning to complete the project in two phases.

The first phase would include installing an LNG terminal at Gwadar Port, and laying a 42-inch, 700km long pipeline from Gwadar to Nawabshah for transferring gas to northern parts of the country.

The Pakistani minister informed the Iranian delegation that they were in negotiations with Chinese companies to construct this section of the pipeline.

The remaining 70 km-long section of the pipeline, from Gwadar to the Iranian border, will be completed by Pakistani companies.

Abbasi said that Pakistan wants to enhance bilateral trade and improve economic ties in sectors other than LPG, oil and gas, as well.

Abbasi said that Pakistan’s annual oil imports bill is $15 billion but direct oil trade between Iran and Pakistan is negligible, adding that he expected it to increase substantially once the sanctions are lifted.

Tayyebnia said that Iran had already completed its part of the gas pipeline, and hoped that Pakistan will also fulfill its commitment.

The Iranian minister said that their negotiations with the international community on the nuclear issue were successful and that they hoped that sanctions will soon be lifted.

 

Pakistan Looking for Alternative

 

Pakistan has envisaged several solutions for overcoming its growing energy needs. Gas imports from Iran, import of liquefied natural gas (LNG) from Qatar, India-Pakistan pipeline and Turkmenistan-Afghanistan-Pakistan-India (TAPI) are chief among them. But needless to say, gas imports from Iran, which borders Pakistan, is the most economical project. Other options would cost Islamabad too much. Qatar’s gas needs to be converted into super-cooled form of LNG, before Pakistan could import it. Importing LNG requires costly infrastructure, and Pakistan cannot afford it for the time being. Engagement in TAPI project is out of the question due to security concerns in Afghanistan. Despite many rounds of talks to that effect, the project has yet to become practical. Importing gas from India will also impose heavy costs on Pakistan because India has no gas to pump to Pakistan and it has first to reconvert its imported LNG into gas and then pump it to Pakistan in a trunkline. LNG costs more than $16 in Asian markets. How much should India charge Pakistan then?

 

Iran Committed to IP

 

Despite all procrastination by the Pakistani side, Iran has sincerely completed its own section of the pipeline. Based on Tehran-Islamabad agreement, either party failing to honor its commitments stipulated in the contract will have to pay penalties to the other party.

Now, Pakistan has defaulted and it is required by the agreement to pay $3 million a day to Iran.

That would no longer look strange to see Pakistan highlight international sanctions against Iran in an attempt to renege on its obligations.

Although the Pakistani petroleum minister claims that international sanctions are blocking the project, the Pakistani commerce minister has acknowledged that financial shortcomings are the main impediment for the completion of the project.

The former Pakistani government had proposed four options for financing the project on the Pakistani soil. They included tax collection to develop infrastructure for IP, signing of agreement with a third party consortium, finance of the project by Russia and China and Iran’s contribution to the Pakistani section of the pipeline.

The Pakistani government finally asked Iran in October 2012 to finance the rest of the pipeline. But after Hassan Rouhani was elected president and Bijan Namdar Zangeneh was named petroleum minister, this option was ruled out. “The Pakistanis themselves acknowledge that they have problem with paying for gas,” the Iranian minister said at the time.

“I care for Iran’s money,” said Zangeneh. “Sanctions are a pretext because even if there were no sanctions the other party could not reimburse Iran.”

The Iranian minister once again criticized Pakistan for its failure to stick to its commitments under the deal the two countries had signed. “Iran has no problem for delivering gas to Pakistan,” he said.

Zangeneh said Iran Gas Trunkline 7 (IGAT 7) has already been constructed stretching from Assaluyeh to Chabahar Port in southeastern Iran.

“Although this pipeline has been extended as far away as the border with Pakistan, this neighboring country is not yet ready to receive gas from Iran,” said the minister.

Zangeneh said Iran has no intention of writing off Pakistan’s debts accumulated by penalties incurred due to delaying the construction of its section of the gas pipeline.

The minister also said that Iran and Pakistan will continue their negotiations until the pipeline issue is resolved.

The activities Pakistan has so far done with regard to its own section of the gas pipeline are as follows:

• Appointment of consultant in April 2011;
•  Preliminary study of the route of the pipeline in July 2011;
•  Feasibility study of the project in March 2012 ;and
•  Submission of details about assessment in April 2012.

ILF Consulting Engineers, a German-Austrian company, confirmed in March 2016 that it is providing “advice and planning” work in the technological development of an Iranian-Pakistan pipeline project.

One must wait and see what would befall the IP project. Has Pakistan stopped inventing pretexts to conduct the project?

Becoming operational, Iran-Pakistan gas pipeline would serve as a corridor for transmission of energy from the Middle East to Far East.

The world keeps watchful eye on Iran’s 34tcm of gas. That provides Iran with a good chance to strengthen its presence in global markets.

According to Iran’s Vision Plan, the country intends to win a 10% share in world gas trade. Signature of deals with other countries lies within this framework.

Achieving this significant and strategic objective has requirements, most important of which are infrastructure and destination markets. With regard to the infrastructure, more than 34,000 kilometers of high-pressure gas transmission lines are already operational in the country. Other pipeline projects – IGAT9, IGAT10 and IGAT11, are also under construction. Iran eyes 70,000 kilometers of high-pressure gas transmission line.

The world gas market is waiting for a reliable and stable supplier of gas like Iran which is already an important element in oil markets.

 

Gas, Unknown Gold

 

Whenever one speaks about energy and its economic value, everybody thinks of oil. But it would be interesting to know that gas plays a role as strategic as oil. Since 2010, gas consumption has grown 50% and the “golden age of gas scenario” developed by experts maintains that gas will become the main energy commodity for countries by 2035 with a 25% share in the world energy basket. However, due to continuous oil supply, difficulty of gas transmission to Europe and oil-based industry, gas price has not yet achieved its genuine value.

 

Gas Supergiants

 

Russia holds the world’s largest gas reserves. It sits atop 48.7 tcm of gas in place. Iran comes second with 33.6 tcm. With a farther distance come Qatar, Turkmenistan, the US, Saudi Arabia and Iraq. Gas transmission infrastructure in Russia has let this country win a big share in the gas market in East Europe and West Europe. By developing its liquefied natural gas (LNG) sector, Qatar has managed to win a one-fourth share of the world’s LNG production, nearly 7 mcm/d. Indonesia, Malaysia, Australia and Algeria are other LNG major players.

At present, LNG has a nearly 25% share in the world’s gas market. But development of shale reservoirs and the fields whose gas could not be piped would bring this share up to 40% by 2020.

 

Iran, Top Gas Holder

 

The British Petroleum (BP) said in one of its reports that Russia’s gas reserves stand at 31.3 tcm, much lower than what the country has officially announced. If this figure is correct, Iran will be the first holder of gas reserves in the world.

Iran produced 170 bcm of gas in 2013 which accounts for 4.6% of world gas production. Iran was the fourth largest gas producer after the US, Russia and Qatar in that year. After President Hassan Rouhani took office in August 2013, Minister of Petroleum Bijan Namdar Zangeneh adopted policies for enhancing Iran’s gas production by 100 mcm through development of South Pars gas field. And in line with these policies and according to the latest figures released, 100 mcm has been added to South Pars production.

If everything goes ahead as planned, Iran’s gas production would reach 260 to 300 bcm by 2016 to become the third largest gas producer in the world.

 

Gas Production in Mideast

 

Qatar, the largest LNG producer in the world, has not significantly grown in recent years and gas pressure fall has hindered production in this country. Moreover, other gas producers like Saudi Arabia, Iraq and the United Arab Emirates have focused on oil production due to their problems with gas production.

Saudi Arabia consumes most of its gas domestically like in injecting gas into oil fields, cooling and transportation. It even depends on imports to meet its own needs.

Qatar is suffering from low LNG prices in the world and it needs new investment to revive its gas wells.

Iraq needs Iran’s gas due to lack of infrastructure for gas production and shortage of investment. Last year, Iran agreed to extend a pipeline to its western neighbor for pumping natural gas.

 

Mideast Gas Demand

 

At present, Turkey heavily depends on Iran’s gas. It receives 40% of its gas from Iran and it still needs more gas.

Armenia and Azerbaijan are both gas buyers of Iran in the north, and Afghanistan can become a permanent buyer of Iran’s gas if the required infrastructure is built in northeast Iran. Pakistan and India also need Iran’s gas. Pakistani fuel smugglers are currently smuggling fuel from Iran and India is buying Qatar’s LNG on a massive scale in order to meet its needs.

Iran-Pakistan gas pipelines, whose Pakistani section has yet to be constructed, could transfer Iran’s gas to India.

 

Strategic Role of Iran’s Gas                             

 

The countries’ growing need for gas and the daily growing demand for this energy indicate the significance of this source of energy. But from a strategic point of view, using an alternative source would ensure consumers that they should not get frustrated under critical conditions like during the crisis in Ukraine.

The Iran-Pakistan pipeline would allow Iran’s gas to reach Far East. Iran can envisage exporting gas to China through this pipeline.

In the meantime, Europe would not be unwilling to lay out an alternative pipeline as the crisis continues to escalate over Ukraine. Construction of a pipeline to transmit Iran’s gas to Europe would be a good option.

Given Iran’s current gas production, its domestic demand and the thirsty markets in the region, transmission of gas from Iran to far destinations like Europe is not economical.

But given Iran’s plan to raise its production and cut consumption would make the country a reliable source of gas for the world. This issue is of high significance for world energy markets. That is why Western officials speak about Iran’s gas transmission to Europe from time to time.

Iran, Secure Gas Supplier

 

The managing director of National Iranian Gas Exports Company (NIGEC) says Persian Gulf states which have no independent gas reservoirs and mainly produce associated gas are potential customers for Iran’s gas.

Ali-Reza Kameli said that these energy-rich states fail to meet their domestic demand because they have to inject most of their gas into their oil fields.

“Therefore, Iran with abundant gas reserves has become the priority option for gas supply in the region due to its proximity to these countries,” he said.

“Exporting gas to easily accessible countries including the Persian Gulf states like Oman, Kuwait, the United Arab Emirates, Saudi Arabia, Bahrain and Iraq has been reviewed. These countries need gas as they produce associated gas and they do not have independent gas reservoirs and the gas they produce is fed into oil reservoirs or consumed for cooling purposes,” said Kameli.

Regarding gas exports to Iraq, he said: “Iran has two contracts for exporting gas to Iraq. Based on the first contract signed in July 2013, Iran was committed to exporting 7 mcm/d of gas from Natfshahr to Diyalah province and Baghdad in the first phase.”

He said the pipeline will be an extension of Iran Gas Trunkline 6 (IGAT6) for the delivery of gas to Naftshahr.

“The pipeline stretching from Chahar Maleh to Naftshahr has had over 90% physical progress in its first phase which measures 97 kilometers long. Iran was supposed to export gas on a tentative basis last summer, but it couldn’t due to security conditions created following Daesh (Islamic State of Iraq and the Levant) attacks in Iraq,” he added.

He said Iraq has reportedly completed 90% of its own section of the pipeline, adding that the project, which could be completed in only two months, is hamstrung due to the ISIL attacks.

“The entire pipe-laying operations in the Iranian section have been done and only hydro test remains to be done. It is forecasted to be ready for startup by April. Then, if secure exports conditions are prepared the flow of gas will start,” he said.

With regard to Iran’s second contract for gas exports to Iraq, Kameli said negotiations have been done for the delivery of Iran’s gas to Basra through Khorramshahr. He said an Iranian delegation is expected to travel to Iraq soon for finalizing the agreement.

“Based on forecasts, Iran will complete in one year a 28-kilometer pipeline stretching from Khorramshahr to Arvandroud for the delivery of 5 mcm/d of gas to Basra. This one-year period will start after the contract is signed,” he said.

 

Gas-to-Electricity

 

Kameli said private companies have expressed their readiness to invest in and contribute to electricity generation and exports to neighboring countries. He said electricity exports to neighboring countries lies within the framework of Iran’s policy of diversifying gas exports and boosting electricity exports.

He said Ministry of Petroleum has already signed agreements with some private entities for that purpose. These agreements, he said, authorize private companies to conduct studies on the construction of power plants along borders.

One of these agreements has so far resulted in the signature of a final contract based on which a gas-to-electricity power plant would be built to export electricity to neighboring countries.

“All responsibilities rest with the investor for investment, getting required permission for building power plant and required installations for transmission and marketing in the destination country,” said Kameli.

 

Iran Positive on IP

 

Kameli said Iran has completed 1,100 kilometers of its section of a pipeline supposed to carry natural gas from Iran to Pakistan. He said that Iran has yet to complete 300 kilometers of its own section as far away as the border with Pakistan. He, however, said that Pakistan has done nothing for its 780-kilometer section due to financial problems.

The administration of former president Mahmoud Ahmadinejad had promised to assign Iranian contractors to complete the project for Pakistan, but Iran’s senior officials did not agree.

Once Pakistan claimed that Iran is supposed to finance part of the project, but these claims were rejected because they were undocumented.

The new Pakistani government claims that it cannot persuade foreign companies to build the extension of the pipeline due to international sanctions imposed on Iran over its nuclear program. But Iran dismissed this pretext because the sanctions were in effect when Iran and Pakistan signed agreement for the pipeline.

“Finally Pakistan announced that it has held talks with a Chinese company for investment in order to establish an LNG terminal and pipeline. This pipeline project which stretches from Gwadar Port to Nawabshah is some 700 kilometers long and the terminal will be built in Nawabshah. Therefore, only 80 kilometers will be up to Pakistan,” Kameli said.

Asked if repeated delays would not force Pakistan to pay penalties to Iran, he said: “Pakistan is Iran’s longtime friend and neighbor and the Iranian president and minister of petroleum have insisted on positive approach in the negotiations and there has never been any question of termination of the contract. The interests of both sides should be safeguarded.”

Kameli said gas contracts are long-term and they have their own challenges, adding that these agreements require financial, legal, engineering and planning assessments which need knowledge and expertise.

“We hope that by expanding gas transactions we will be able to promote the status of Iran to the first holder of gas reserves in the world,” he said.

 

Germans Eager to Invest in Iran Oil Sector

 

The managing director of German-Iranian Chamber of Industry and Commerce says German companies are extremely willing to invest in Iran’s petroleum industry; however, they have to find legal loopholes in a bid to surmount challenges stemming from international sanctions imposed on Iran.

Daniel Bernbek, who speaks fluent Persian, received Iran Petroleum in his office in north Tehran.

 

Q: Let’s start with a question about German-Iranian Chamber of Industry and Commerce. When did it start work and what tasks does it handle?

A: The chamber was established in 1975 as an exclusive Iranian-German body involved in mutual imports and exports. At present, more than 2,000 companies are working under this chamber with most of them being Iranians. Generally speaking, German-Iranian Chamber of Industry and Commerce is a bridge connecting these two countries and tries to safeguard trade and economic relations between the two counties under normal and abnormal conditions like the sanctions.

 

Q: You referred to sanctions imposed on Iran. How is your work running?

A: Due to the sanctions, the German-Iranian Chamber of Industry and Commerce has increased its activities and it mainly offers consultation services to companies to continue cooperation and it seeks legal ways to prevent a cut in the relations. However, I have to acknowledge that Germany’s exports to Iran have fallen to some extent over the past ten years. Some German-made commodities and equipment come to Iran indirectly and they are not taken into account in Germany’s official exports data.

 

Q: You said “legal ways”. What do you exactly mean by that?

A: The sanctions imposed on Iran do not cover all activities and that enables us to find legal loopholes after accurately studying the details of the sanctions. A major portion of our activities is related to drawing up a list of all Iranian companies and commodities and monitor them closely with the help of German companies in order to know if they are under sanctions. We constantly make it clear to all German companies that they should not easily give up Iran’s market if investing in Iran serves their interests. They should instead find legal ways to continue their transactions. Under the present circumstances, we mainly make efforts to convince German companies and investors so that they would not have any fear of dealing with Iran.

 

Q: In your view, to what extent can the contribution of Iranian and German companies and their representation in Iran be of help?

A: That could to some extent be of help for the continuation of trade under sanctions. Some German companies are now represented in Iran and some others left Iran under pressure from sanctions.

 

Q: How do you assess the potentialities of Iran’s oil and gas industry?

A: Iran’s petroleum industry is more than century-old, but due to a variety of political and economic events like war and issues like sanctions, the potentialities of this valuable industry in Iran have not been used. Oil-rich neighboring countries like Iraq, Qatar and Saudi Arabia have made remarkable progress in the oil and gas industries by attracting foreign investment and applying state-of-the-art technology. Iranian officials have been saying incessantly that Iran’s oil and gas industries would need $500 billion in investment over the next ten years. However, I believe that more than that figure should be invested in Iran which enjoys such great potentialities in the oil, gas and petrochemical sectors. Therefore, it is necessary to look for a solution as soon as possible to benefit from these resources. To that effect, technologically advanced countries like Germany, the Netherlands and Norway should be asked to help. For Germans, reducing air pollution and safeguarding the environment are very important and they have developed effective technologies for that purpose. During a visit to Assaluyeh, I saw many flares burning. These flares produce economic losses and also damage the environment.

Using state-of-the-art technologies can provide a change for investment, but it is scarcely seen in oil-rich countries in the region.

 

Q: Would you please talk about cooperation between the two countries in the oil and gas sectors, too?

A: I have to admit that German companies are not advanced enough in the oil extraction and development activities. The US, the Netherlands and Norway are more qualified in this regard. Iran and Germany were maintaining significant transactions in petroleum industry equipment, particularly refinery equipment and turbines. Alas, these transactions have declined due to the sanctions. Of course, German-Iranian Chamber of Industry and Commerce is doing its best to accomplish its task of salvaging Iran-Germany trade ties by providing consultation services regarding technology and technical savvy.

 

Q: Have you seen any positive change since President Hassan Rouhani took office in August 2013, leading to the resumption of stalled nuclear talks between Iran and P 5+1?

A: Yes, definitely! That’s a positive point that has raised hopes.

 

Q: Do you have any tangible examples?

A: The first point is that German companies, particularly those working in the oil and gas sectors, are more than motivated to be active in Iran. During this short period of time, several joint conferences have been held and German trade delegations have visited Iran, a development unseen in the past six years.

I think that the foreign policy pursued by Iran’s new administration has turned out to be positive and has influenced the German government. I am supposed to address a conference in Germany about the activities of German oil, gas and petrochemical companies. Opportunities for investment in Iran’s oil and gas industries will be discussed in the planned conference. Such meetings were impossible in the past and companies also showed no willingness to attend.

 

Q: In case the sanctions are fully lifted, how do you think Iran-Germany oil and gas cooperation will go ahead?

A: One cannot say that the conditions will be fully back to normal in the short term. It needs time. We should also keep in mind that some lobbies do not favor such better relations and they always try to hinder expansion of relations. Once sanctions have been lifted, they would no longer have any other pretext.

 

Q: Besides its upstream oil sector, Iran has always lucrative opportunities for investment in its downstream sector like refining and petrochemicals. Are German companies willing to invest in these sectors?

A: German companies are much willing to invest in these sectors. We are waiting for the preparation of this opportunity and I am assured that the Iranian government is willing to benefit from European technology. To that effect, German-Iranian Chamber of Industry and Commerce will press ahead with its mission.

 

Q: Iran hosts international oil and gas show every year in spring. How do you predict the presence of German companies in the next show?

A: We’ve already started negotiations with the National Iranian Oil Company (NIOC) for presence in the exhibition. Tehran’s Oil and Gas Show is a good platform for introducing opportunities of investment and helping companies interact. We will be active in this regard, and predict that some German companies will attend for the first time Tehran’s oil show.

 

Germans Eager to Invest in Iran Oil Sector

 

The managing director of German-Iranian Chamber of Industry and Commerce says German companies are extremely willing to invest in Iran’s petroleum industry; however, they have to find legal loopholes in a bid to surmount challenges stemming from international sanctions imposed on Iran.

Daniel Bernbek, who speaks fluent Persian, received Iran Petroleum in his office in north Tehran.

 

Q: Let’s start with a question about German-Iranian Chamber of Industry and Commerce. When did it start work and what tasks does it handle?

A: The chamber was established in 1975 as an exclusive Iranian-German body involved in mutual imports and exports. At present, more than 2,000 companies are working under this chamber with most of them being Iranians. Generally speaking, German-Iranian Chamber of Industry and Commerce is a bridge connecting these two countries and tries to safeguard trade and economic relations between the two counties under normal and abnormal conditions like the sanctions.

 

Q: You referred to sanctions imposed on Iran. How is your work running?

A: Due to the sanctions, the German-Iranian Chamber of Industry and Commerce has increased its activities and it mainly offers consultation services to companies to continue cooperation and it seeks legal ways to prevent a cut in the relations. However, I have to acknowledge that Germany’s exports to Iran have fallen to some extent over the past ten years. Some German-made commodities and equipment come to Iran indirectly and they are not taken into account in Germany’s official exports data.

 

Q: You said “legal ways”. What do you exactly mean by that?

A: The sanctions imposed on Iran do not cover all activities and that enables us to find legal loopholes after accurately studying the details of the sanctions. A major portion of our activities is related to drawing up a list of all Iranian companies and commodities and monitor them closely with the help of German companies in order to know if they are under sanctions. We constantly make it clear to all German companies that they should not easily give up Iran’s market if investing in Iran serves their interests. They should instead find legal ways to continue their transactions. Under the present circumstances, we mainly make efforts to convince German companies and investors so that they would not have any fear of dealing with Iran.

 

Q: In your view, to what extent can the contribution of Iranian and German companies and their representation in Iran be of help?

A: That could to some extent be of help for the continuation of trade under sanctions. Some German companies are now represented in Iran and some others left Iran under pressure from sanctions.

 

Q: How do you assess the potentialities of Iran’s oil and gas industry?

A: Iran’s petroleum industry is more than century-old, but due to a variety of political and economic events like war and issues like sanctions, the potentialities of this valuable industry in Iran have not been used. Oil-rich neighboring countries like Iraq, Qatar and Saudi Arabia have made remarkable progress in the oil and gas industries by attracting foreign investment and applying state-of-the-art technology. Iranian officials have been saying incessantly that Iran’s oil and gas industries would need $500 billion in investment over the next ten years. However, I believe that more than that figure should be invested in Iran which enjoys such great potentialities in the oil, gas and petrochemical sectors. Therefore, it is necessary to look for a solution as soon as possible to benefit from these resources. To that effect, technologically advanced countries like Germany, the Netherlands and Norway should be asked to help. For Germans, reducing air pollution and safeguarding the environment are very important and they have developed effective technologies for that purpose. During a visit to Assaluyeh, I saw many flares burning. These flares produce economic losses and also damage the environment.

Using state-of-the-art technologies can provide a change for investment, but it is scarcely seen in oil-rich countries in the region.

 

Q: Would you please talk about cooperation between the two countries in the oil and gas sectors, too?

A: I have to admit that German companies are not advanced enough in the oil extraction and development activities. The US, the Netherlands and Norway are more qualified in this regard. Iran and Germany were maintaining significant transactions in petroleum industry equipment, particularly refinery equipment and turbines. Alas, these transactions have declined due to the sanctions. Of course, German-Iranian Chamber of Industry and Commerce is doing its best to accomplish its task of salvaging Iran-Germany trade ties by providing consultation services regarding technology and technical savvy.

 

Q: Have you seen any positive change since President Hassan Rouhani took office in August 2013, leading to the resumption of stalled nuclear talks between Iran and P 5+1?

A: Yes, definitely! That’s a positive point that has raised hopes.

 

Q: Do you have any tangible examples?

A: The first point is that German companies, particularly those working in the oil and gas sectors, are more than motivated to be active in Iran. During this short period of time, several joint conferences have been held and German trade delegations have visited Iran, a development unseen in the past six years.

I think that the foreign policy pursued by Iran’s new administration has turned out to be positive and has influenced the German government. I am supposed to address a conference in Germany about the activities of German oil, gas and petrochemical companies. Opportunities for investment in Iran’s oil and gas industries will be discussed in the planned conference. Such meetings were impossible in the past and companies also showed no willingness to attend.

 

Q: In case the sanctions are fully lifted, how do you think Iran-Germany oil and gas cooperation will go ahead?

A: One cannot say that the conditions will be fully back to normal in the short term. It needs time. We should also keep in mind that some lobbies do not favor such better relations and they always try to hinder expansion of relations. Once sanctions have been lifted, they would no longer have any other pretext.

 

Q: Besides its upstream oil sector, Iran has always lucrative opportunities for investment in its downstream sector like refining and petrochemicals. Are German companies willing to invest in these sectors?

A: German companies are much willing to invest in these sectors. We are waiting for the preparation of this opportunity and I am assured that the Iranian government is willing to benefit from European technology. To that effect, German-Iranian Chamber of Industry and Commerce will press ahead with its mission.

 

Q: Iran hosts international oil and gas show every year in spring. How do you predict the presence of German companies in the next show?

A: We’ve already started negotiations with the National Iranian Oil Company (NIOC) for presence in the exhibition. Tehran’s Oil and Gas Show is a good platform for introducing opportunities of investment and helping companies interact. We will be active in this regard, and predict that some German companies will attend for the first time Tehran’s oil show.

 

Low Oil Prices Rattle Giants

 

Major European and American oil companies are feeling the pinch from falling oil prices.

Oil giants like British Petroleum (BP) and ConocoPhillips have had to axe hundreds of jobs as their oil projects are becoming loss-producing.

BP announced it is to cut 200 jobs and at least 100 contractors as part of planned job cuts in the wake of the falling price of oil.

The oil company is also expected to lower pay for contractors, staff heard in a briefing in Aberdeen. Cuts were announced last December as part of a major restructuring of the company in response to the falling oil prices. Britain has been charging these companies 200 million pounds in taxes. This figure is an important factor in Britain’s economy and crisis in North Sea petroleum industry will cut it.

Schlumberger, the Houston, Texas-based oil services company, announced plans to lay off some 9,000 employees, roughly 7 per cent of its workforce, as low commodity costs weigh on the energy sector and its own production outlook.

Reporting its fourth quarter result for 2015, Schlumberger took a $1.77bn pre-tax charge including $296m for job cuts and $806m for writing down the value of some of its offshore seismic surveying vessels.

Royal Dutch Shell and its partner Qatar Petroleum ditched a $6.5bn (£4.3bn) project in the latest sign of the broadening impact of falling oil and gas prices on the hydrocarbons industry. The Al-Karaana petrochemicals project in Qatar, supposed to be the largest in the world, won't progress because of the current climate in the energy industry.

Premier Oil had warned the market that it could face a $300m hit to its finances from falling prices. UK-listed Tullow Oil was also preparing to cut jobs across the business in the first quarter in response to the downturn.

Oil driller Helmerich & Payne Inc. and Pioneer Energy Services lost their contracts for supply of drilling rigs.

The world’s biggest miner BHP Billiton also said it was cutting back its operating US shale oil rigs by 40% amid slumping prices.

 

BHP said it would reduce the number of rigs from 26 to 16 by the end of the June in response to weaker oil prices.

US drillers have taken a record number of oil rigs out of service as OPEC sustains its production, sending prices below $50 a barrel.

Analysts including HSBC Holdings Plc say the decline shows that the Organization of Petroleum Exporting Countries is winning its fight for market share and slowing the growth that has propelled US production to the highest in at least three decades. OPEC’s decision not to curb its output amid increasing supplies from the US and other countries has driven global oil prices down 58 percent since June.

 

 

Iran 2015 Gas Exports to Grow

 

Iran is poised to increase gas exports to Middle East countries in 2015, according to reports from National Iranian Gas Company.

Director for international affairs of NIGC, Azizollah Ramezani, said Iran will start pumping gas to Iraq in May.

He said that Iran will start supplying 25 mcm/d of gas to its western neighbor, adding that Iran can increase this volume to 35 mcm/d in hot seasons.

“Moreover, we have started talks with Iraq for exporting gas to Basra and based on preliminary negotiations, it is possible to export 25 mcm/d there and we can boost it to 35 mcm/d. Therefore, the volume of Iran’s gas exports to Iraq will be up to 70 mcm,” said Ramezani.

NIGC also plans to export 30 mcm/d of gas to Oman, he said. He added that preliminary talks have been held on technical and executive aspects of the project.

He also said that Iran has potential to deliver 25 to 30 billion cubic meters (bcm) of gas per year to Europe.

 “The studies conducted by the European Parliament indicate that Iran has potential to export 25 to 30 bcm of gas a year to Europe,” he said.

He said the study also shows that 12 countries can provide Europe with gas, adding that Iran, Turkmenistan and Azerbaijan are viewed as potential partners.

“Iran, in collaboration with Turkmenistan and Azerbaijan, is looking for a route to export gas to Europe,” Ramezani added.

He said Europe is seeking to diversify its sources of gas supply.

“Iran currently holds 1.5% of the global gas trade and this figure must rise to 10% by 2025,” said Ramezani.

NIGC exported 9.75 bcm of gas in 2014 and imported 6.328 bcm.

 

China’s First Finance of Iran Petchem

 

The finance of Masjed Soleyman Petrochemical Company by Wuhuan Engineering Corporation (WUHUAN) is the first of kind by China.

After five years of talks, $800 million was paid to Wuhuan in advance in order for the Chinese company to fund the project.

Yousef Davoudi, managing director of Masjed Soleyman Petrochemical Company, said two European countries are in charge of license and design for the project while the Chinese contractor is constructing it.

The official also said that more than IRR 200 billion is to be invested in Zilayi Special Zone in the city of Masjed Soleyman.

“Masjed Soleyman Petrochemical Plant is located near Karoun oil field which can produce 66 mcm/d of associated gas that would be used in Masjed Soleyman Petrochemical Company,” said Davoudi.

Wuhuan Engineering Corporation (WUHUAN) which was established in 1958

 is an engineering consulting, design and contracting enterprise of chemical petro-chemical and medical industries with all class A certificates.

Since its founding, WUHUAN has accomplished over 800 types of various projects and has developed more than 180 prized items. 

 

Petchem Output at 35mt

 

Petrochemical production in Iran has exceeded 35 million tons since the start of the calendar year last March, a top official at National Petrochemical Company said.

Ali-Mohammad Bosaqzadeh said the output constitutes 71% of the rated capacity of petrochemical plants in Iran.

He said this year’s petrochemical production has been up 9% year-on-year.

Bosaqzadeh said Pars Special Economic Energy Zone has produced 14.4 million tons of petrochemicals during the same period.

He said Mehr, Pars, Zagros, Arya Sasol, Jam, Morvarid and Kavian petrochemical plants have been operating at more than 110% of their nominal capacity.

He also said that Iran’s petrochemical production is expected to reach 43 million tons by the end of the calendar year in March.

The most important advantage for investment in Iran’s petrochemical industry is access to proper feedstock – natural gas, ethane, naphtha and gas condensate – in large volumes and at competitive prices.

Once South Pars gas field is fully developed, 650,000 b/d of condensate, 6.7 million tons of liquefied petroleum gas (LPG) and four million tons a year of ethane will be available for petrochemical plants.

 

Drilling Congress to be Held

Iran’s 2nd National Congress of Drilling will be held on 3rd and 4th March in the Center for International Conferences of the Research Institute of Petroleum Industry (RIPI) in Tehran.

Secretary of the congress Ezatollah Kazemzadeh made the remarks in an interview with Shana, adding several specialized sessions will also take place during the two-day event.

He noted that more than 700 drilling industrialists and managers, as well as academicians will take part in the congress which includes presenting articles, delivering speeches, holding specialized meetings and displaying posters. The congress will also examine the challenges Iran’s drilling industry face.

According to the official, the congress has extended the deadline for submitting articles up to February fifth and all applicants could send their articles to the congress Secretariat before ending the deadline.

The National Congress of Drilling has posted the latest news and information related to the event to the following address: http://irandrilling.com.

Drilling operations, drilling engineering, drilling and safety, protection and environment, drilling services, drilling equipment, geology and reservoir engineering are the main issues the event is going to address.

 

 

 

 

Zangeneh: Oil price to rebound if Iran bans lifted

Tehran, Jan 23, IRNA – Petroleum Minister Bijan Namdar Zangeneh said the lifting of economic sanctions imposed against Iran over its nuclear program can help rebound oil prices to a logical level.

“With the removal of sanctions against Iran, the trend of global oil price will become rational,” Zangeneh also told Mehr News Agency on Friday, adding that the lifting of economic embargoes against Iran could shore up oil prices.

Zangeneh also said falling oil prices would not have an impact on the construction of mini liquefied natural gas (LNG) terrains in South Pars oil and gas field.

“The plummeting global oil price has no impact on the economic justification for building the LNG plants. Undoubtedly, the construction of these refineries will be carried out according to schedule,” he said.

 

China’s 2014 Iran oil imports up 28%

Tehran, Jan 23, IRNA -- China’s crude oil imports from Iran jumped by nearly 30 percent last year to their highest average level since 2011, customs data showed on Friday, as Iran’s largest oil client boosted shipments after an interim deal eased sanctions on Tehran.

Western sanctions against Iran were eased in a late-2013 deal that allowed it to export about 1 million barrels per day (bpd) amid negotiations over its nuclear program. The lighter sanctions prompted both China and India to raise crude purchases from Iran, especially over the first half of 2014, Reuters reported.

Last year, China lifted 27.5 million tons of Iranian crude and condensate, an increase of 28.3 percent over 2013, the customs data showed. That put its daily average at 549,250 bpd, almost even with the 555,000 bpd imported in 2011 before the United States and the European Union tightened sanctions.

The December imports from Iran rose 19.1 percent from a year ago to 604,740 bpd, and were up 17 percent from November.

China, Iran’s largest buyer, also recorded exporting 320,000 tons, or 6,400 bpd, of crude to Iran in 2014, including 240,000 tons in December.

The exported volumes likely have to do with the movement of crude in and out of storage that sources with knowledge of the matter said state-owned Iranian oil company is leasing in the northeast Chinese port of Dalian.

Iran has made at least two deliveries of crude from the Dalian site to India and one to South Korea.

China’s crude imports from top exporter Saudi Arabia were down 7.9 percent in 2014 from the previous year to 993,320 bpd.
 

Indian imports 12%More Iran oil

 Import of Essar Oil, a private sector Indian oil company from Iran in December 2014 increased by 12%, as compared to a month earlier.

Statistics show that import of Essar Oil from Iran in the nine months of 2014 starting April with an increase of about 36.4% over the same period in the previous year amounted to 117 thousand barrels per day.

Indian refineries increased oil imports from Iran in 2014 and as a result oil import of India from Iran in 2014 increased by 42% as compared to 2013.

The same figures indicated that daily import of Essar Oil from Iran increased from 54 thousand barrels in December 2013 to 175 thousand barrels in the same month in 2014.

The company imported an average 129,200 barrels of oil from Iran in 2014 which was about 59% more than the amount in 2013.

Essar Oil’s import in December 2014 increased by 18% as compared with the same month in 2013 amounting to 373,3000 barrels per day.

The company’s import in 2014 increased by 6.8% compared to the previous year (2013).

 

Iran Wooing Europeans, Asians for Investment

 

A Ministry of Petroleum official announced that Iran’s new set of oil deals has been negotiated with Asian and European firms and no American company has been talked to.

Head of Oil Contracts Revision Committee, noting the new round of negotiations on oil, asserted that the talks have been with Asian and European countries and no American oil company has negotiated with Iran.

Mehdi Hosseini, while pointing that the deals have been defined on fields of exploring, expanding and increasing the recycle ratio of oil and gas, said: “on the condition of suspending sanctions, it is predicted that a great number of new opportunities would be available for international companies to invest in Iran oil and gas industry.”

Stressing that the severe decline of oil price has not affected the foreign investment on Iran’s oil and gas projects, Hosseini added Iran’s oil industry has great potential to attract foreign investors.

The official also named factors such as low production cost, low risk of investment, and high security ratio of investment as benefits of Iran oil industry for the investors.

 

Phases 15, 16 to Begin Condensate Export

 

Some 750,000 barrels of gas condensates will be exported from South Pars Gas Field's phases 15 and 16 in the near future, the manager of phases 15 and 16 said.

Reza Forouzesh added that agreements were reached by the National Iranian Oil Company’s International Department and Iranian Oil Terminals Company to export gas condensate from phases 15 and 16.

Storage tanks and a gas condensate unit have been installed to launch loading and exporting operations.

“Currently, phases 15 and 16 produce 34 million cubic meters (mcm) of gas,” he said, adding that the figure will increase to about 40 mcm in the coming days.

Minister of Petroleum Bijan Namdar Zangeneh expressed satisfaction over the phases' development, adding that it will come on stream as scheduled.

South Pars gas field development project’s phases 15 and 16 aim at producing 56.6 mcm of natural gas, 75,000 barrels of gas condensate, 400 tons of sulfur per day and annual production of 1.05 million tons of LPG (propane and butane) and one million tons of ethane as feedstock for petrochemical units.

Offshore and onshore installations of the phases include two excavation platforms (each containing 11 wells), two 32-inch offshore pipelines to transfer gas over 115 kilometers, gas sweetening units and related services.

 

 

 

Petchem, Key to Iran Industrial Development

 

The managing director of National Petrochemical Company (NPC) says Iran enjoys abundant feedstock for its petrochemical sector and many countries are eager to invest in Iran’s petrochemical industry. In an interview with Iran Petroleum, Abbas Sha'ri-Moqaddam said all coasts off Persian Gulf and the Sea of Oman enjoy potential to become petrochemical hub.

The following is the full text of the interview Sha'ri-Moqaddam gave to Iran Petroleum:

 

Q: Would you please start by highlighting the advantages of Iran’s petrochemical industry, particularly for foreign investors and government’s support in this regard?

A: Iran enjoys unique advantages with regard to the development of petrochemical industry, because it enjoys abundant liquid and gas feedstock. Iran sits atop 18% of the world’s gas and 9% of the world’s oil reserves, and in terms of hydrocarbon reserves, Iran ranks the first in the world. Furthermore, there are other advantages in Iran like long border waters in the Persian Gulf and the Sea of Oman. That could economically benefit foreign investors so that they would ship their products to target markets at least expensive rates. There are also educated and experienced youth in Iran and numerous companies are active in Iran in designing, engineering, construction and installation. These factors can be strong points for Iran. Above all, Iran is home to more than 75 million people and it neighbors important consumer markets like Central Asia, Iraq, India and China. That can be a good advantage for investors.

Special and free zones in Iran also constitute an advantage for investment in Iran. According to the law, foreign investors can invest up to 100% in these zones and be exempted from duties and taxes for 10 years.

                                   

Q: Many trade delegations from Germany, France, Belgium, Austria, the Netherlands, etc. visited Iran in a bid to facilitate petrochemical trade in Iran. What has been the outcome of the latest talks and agreements to that effect?

A: Different countries and companies are eager to resume their activity in Iran. As you know, the rate of return on investment in the banks in European and developed countries has been reduced even to negative figures. In other words, the banks will charge depositors for holding their money. Iran can be a good place for such investors because they would be happy even with 10% interest. In the meantime, huge oil and gas reserves in Iran guarantee foreign investment. Iran is potentially rich.

We have negotiated directly and indirectly with delegates from different countries, but all of them are waiting for the outcome of nuclear talks. Moreover, setting a long-term formula for feedstock price for them is of special significance. Under the 7^th and 8^th administrations, National Iranian Oil Company was free to set price of feedstock. When South Africa’s Sasol intended to invest in Iran, NPC announced the ethane price at $61 per ton for ten years. It was approved by the Board of Directors. This pricing formula was then approved by NIOC Board of Directors. Then, the South Africa entered Iran for investment and it proved to be successful. The foreign partner brought in technology and management besides capital. Arya Sasol plant became the top complex in the region. This collaboration was so attractive for Sasol that when it decided to invest in gas-to-liquids (GTL) projects through shale gas in the US, it came under US pressure to pull out of Iran. They resisted US pressure for years.

But today, that freedom of action about feedstock price setting is rare. The pricing formula has become like a melting bullet which no side can withstand. It changes hand between different organs and no party is ready to deal with it.

 

Q: You are well familiar with the country’s present circumstances both politically and economically. Is there a solution for facilitating the presence of foreign companies and financiers in the petrochemical industry?

A: The fact is that this industry needs capital and technology; both of them are found beyond Iran’s borders. They should be brought to Iran from the countries owning wealth and technology. The European countries enjoy the necessary technical savvy, but the technologies owned by American companies are not comparable with other countries in terms of efficiency and price. If we want to realize the objectives enshrined in the Vision Plan, we have no option but to have doors opened to us.  The administration of President Hassan Rouhani has managed to win the confidence of foreign companies for investment in Iran. In return, they are extremely willing for Iran sanctions to be lifted in the shortest possible time. But they are not ready to accept all risks and come to Iran before the sanctions are lifted. They fear heavy punishments and penalties they face. Only Indian companies have voiced readiness for presence in Iran’s petrochemical industry and that is because the money for Iran’s oil exports to India has been blocked in the banks of this country and they intend to use this money for financing petrochemical projects. In any case, Iranian politicians are making efforts to convince the world about the peaceful nature of Iran’s nuclear program.

 

Q: Suppose that Iran and the P5+1 reach agreement and the economic sanctions against Iran are lifted. In what fields does Iran need the cooperation of foreign companies?

A: Petrochemical industry is in the group of industries obliged to move ahead as technology makes progress and benefits from more advanced technologies with higher efficiency. But the technology used in some projects like methanol or urea fertilizer production has not changed a lot; therefore, we are dependent on foreign companies. But in some other cases like the technology for converting gas to olefins or converting gas to propylene we had better use the state-of-the-art technology.

 

Q: What plans does National Petrochemical Company (NPC) have for developing downstream sectors of the petrochemical industry?

A: In the past, Iran’s Petroleum Ministry was in charge of development of upstream and mid-stream sectors and the downstream sector was fully controlled by Ministry of Industry, Mine and Trade. But the parliament recently concluded that the petrochemical industry – from upstream to downstream – should have a single administrator and this issue is reflected in the tasks of Ministry of Petroleum. Based on this parliamentary decision, the NPC Board of Directors decided to enter downstream sectors of petrochemical industry so that we would be in charge of the entire petrochemical industry in the country.

 

Q: An issue to be discussed further in the future is new petrochemical hubs in Iran. How are these hubs now and what do we need for them to improve?

A: In my view, all Persian Gulf and Sea of Oman coasts can become petrochemical hubs due to their easy access to feedstock and high seas. The new hubs currently under construction by the private sector are in Chabahar, Jask and Parsian zones because Iran-Pakistan gas pipeline, with a capacity of transmitting 105 mcm/d of gas, has been built in southeast Iran, and Pakistan is expected to receive only 25 mcm/d from this pipeline. Therefore, this pipeline can supply more than 75 mcm/d of gas feedstock for petrochemical plants. On the other hand, ports and railroads in southeast Iran and Chabahar Free Zone can attract investors. It is also envisaged to build the necessary infrastructure in Jask, Parsian and Lavan zones. Natural gas will be the main feedstock of Iran’s new petrochemical plants in the future because there would be insufficient ethane on hand. Since Iran will have gas for more than one century, it will be one of the most secure countries for building petrochemical plants.

 

Q: NPC has marked its 50^th anniversary. Would you please tell us about the perspective of this company?

A: The future of this industry is bright and promising. Petrochemical sector is the only chance for the country’s industry and it has to replace crude oil sales. We should produce petrochemicals to be job creating and income generating for the country. The country’s petrochemical industry has currently the capacity to produce 60 million tons, 40 million tons of which is already being used. Moreover, many projects had been designed and some of them have progressed more than 60%. A large quantity of equipment and machinery has also been purchased and we have to make efforts to complete these half-finished important projects like West Ethylene Pipeline.

Had the sanctions not exerted pressure and the events of the past years not happened we should have had 100 million tons of capacity instead of 60 million tons. We should also take into account the point that this industry spent 2.7 to 3 billion Euros under the eighth administration, while we should have attracted 8 billion Euros a year.

There are currently unique potentialities for the development of the petrochemical industry. We should benefit from both Iranian and foreign investors. We should also help to remove misunderstandings about the nature of our nuclear program. Every time I meet with a foreign delegation, I tell them they should not wait for the problems to be resolved themselves. I ask them to tell their government and officials that Iran’s nuclear program is peaceful and they should not let misunderstandings linger on, because continuation of the current trend will harm both Iran and the world.

 

Q: How about incomplete and nearly completed petrochemical projects in Iran?

A: Currently, 62 incomplete petrochemical projects have remained from the fourth and fifth development plans. Among them, 15 are more than 60% completed and some of them like Takht-e Jamshid, Kavian, Lorestan, Mahabad, Kurdestan, Hegmataneh, Kaveh, EMG Morvarid, Marvdasht, Pardis, Damavand, Karoun and Dalahou are expected to come on stream this year and early next year. But there will be efforts for West Ethylene Pipeline to be fully constructed this year. Unfortunately, due to land ownership problems, the physical progress is slow.

This year, a total of 1.3 million tons is added to the country’s petrochemical production. Next year, more than 7.1 million tons will be added. Meantime, officials at National Iranian Oil Company have promised to deliver the entire ethane produced in South Pars –two million tons – to petrochemical plants as of next August. Given gas production hike in South Pars next year and the implementation of the aforesaid 14 projects, we will see an 8-million-ton surge in petrochemical production next year.

Miandoab, Andimeshk, Bushehr, Masjed Soleyman, Sabalan, Lordegan, Hengam, Kharg, Genaveh, Dashtestan, Siraf, Petro Kimia, Park Estyrene, Veniran, Arg Shimi Parsa, Marjan, Gachsaran and Firouzabad are expected to come on-stream in three to four years. Moreover, with the cession of Kharg NGL and Genaveh and Dashtestan petrochemical plants to Oil Pensions Fund, these projects are most likely to come on-stream.

If the sanctions against petrochemical sector are eased to the extent that financial transactions and technology transfer are facilitated, we can be hopeful that the capacity of Iran’s petrochemical production would soar from the current 60 million tons to 100 million tons by the end of the sixth development plan.

 

Q: China is expected to finance some petrochemical projects in Iran. Where are these projects?

A: Eighteen projects have been introduced to China for financing. The finance of Sabalan, Lordegan, Bushehr and Masjed Soleyman has already been activated and the rest is being followed up on. Moreover, 18 petrochemical projects have been introduced to National Development Fund of Iran. Chief among them are Andimeshk, Sadaf, Ilam, Salman Farsi, Petrokimia, Fasa, Jahrom, Darab, Firouzabad, Miandoab, Gachsaran, Golestan, Ardebil, Siraf Energy, Zanjan and Kaveh Methanol.

Kaveh Petrochemical Plant, which is the largest producer of methanol in the world, has made good progress by using resources of its stakeholders and is expected to come online next year.

 

Petchem, Key to Iran Industrial Development

 

The managing director of National Petrochemical Company (NPC) says Iran enjoys abundant feedstock for its petrochemical sector and many countries are eager to invest in Iran’s petrochemical industry. In an interview with Iran Petroleum, Abbas Sha'ri-Moqaddam said all coasts off Persian Gulf and the Sea of Oman enjoy potential to become petrochemical hub.

The following is the full text of the interview Sha'ri-Moqaddam gave to Iran Petroleum:

 

Q: Would you please start by highlighting the advantages of Iran’s petrochemical industry, particularly for foreign investors and government’s support in this regard?

A: Iran enjoys unique advantages with regard to the development of petrochemical industry, because it enjoys abundant liquid and gas feedstock. Iran sits atop 18% of the world’s gas and 9% of the world’s oil reserves, and in terms of hydrocarbon reserves, Iran ranks the first in the world. Furthermore, there are other advantages in Iran like long border waters in the Persian Gulf and the Sea of Oman. That could economically benefit foreign investors so that they would ship their products to target markets at least expensive rates. There are also educated and experienced youth in Iran and numerous companies are active in Iran in designing, engineering, construction and installation. These factors can be strong points for Iran. Above all, Iran is home to more than 75 million people and it neighbors important consumer markets like Central Asia, Iraq, India and China. That can be a good advantage for investors.

Special and free zones in Iran also constitute an advantage for investment in Iran. According to the law, foreign investors can invest up to 100% in these zones and be exempted from duties and taxes for 10 years.

                                   

Q: Many trade delegations from Germany, France, Belgium, Austria, the Netherlands, etc. visited Iran in a bid to facilitate petrochemical trade in Iran. What has been the outcome of the latest talks and agreements to that effect?

A: Different countries and companies are eager to resume their activity in Iran. As you know, the rate of return on investment in the banks in European and developed countries has been reduced even to negative figures. In other words, the banks will charge depositors for holding their money. Iran can be a good place for such investors because they would be happy even with 10% interest. In the meantime, huge oil and gas reserves in Iran guarantee foreign investment. Iran is potentially rich.

We have negotiated directly and indirectly with delegates from different countries, but all of them are waiting for the outcome of nuclear talks. Moreover, setting a long-term formula for feedstock price for them is of special significance. Under the 7^th and 8^th administrations, National Iranian Oil Company was free to set price of feedstock. When South Africa’s Sasol intended to invest in Iran, NPC announced the ethane price at $61 per ton for ten years. It was approved by the Board of Directors. This pricing formula was then approved by NIOC Board of Directors. Then, the South Africa entered Iran for investment and it proved to be successful. The foreign partner brought in technology and management besides capital. Arya Sasol plant became the top complex in the region. This collaboration was so attractive for Sasol that when it decided to invest in gas-to-liquids (GTL) projects through shale gas in the US, it came under US pressure to pull out of Iran. They resisted US pressure for years.

But today, that freedom of action about feedstock price setting is rare. The pricing formula has become like a melting bullet which no side can withstand. It changes hand between different organs and no party is ready to deal with it.

 

Q: You are well familiar with the country’s present circumstances both politically and economically. Is there a solution for facilitating the presence of foreign companies and financiers in the petrochemical industry?

A: The fact is that this industry needs capital and technology; both of them are found beyond Iran’s borders. They should be brought to Iran from the countries owning wealth and technology. The European countries enjoy the necessary technical savvy, but the technologies owned by American companies are not comparable with other countries in terms of efficiency and price. If we want to realize the objectives enshrined in the Vision Plan, we have no option but to have doors opened to us.  The administration of President Hassan Rouhani has managed to win the confidence of foreign companies for investment in Iran. In return, they are extremely willing for Iran sanctions to be lifted in the shortest possible time. But they are not ready to accept all risks and come to Iran before the sanctions are lifted. They fear heavy punishments and penalties they face. Only Indian companies have voiced readiness for presence in Iran’s petrochemical industry and that is because the money for Iran’s oil exports to India has been blocked in the banks of this country and they intend to use this money for financing petrochemical projects. In any case, Iranian politicians are making efforts to convince the world about the peaceful nature of Iran’s nuclear program.

 

Q: Suppose that Iran and the P5+1 reach agreement and the economic sanctions against Iran are lifted. In what fields does Iran need the cooperation of foreign companies?

A: Petrochemical industry is in the group of industries obliged to move ahead as technology makes progress and benefits from more advanced technologies with higher efficiency. But the technology used in some projects like methanol or urea fertilizer production has not changed a lot; therefore, we are dependent on foreign companies. But in some other cases like the technology for converting gas to olefins or converting gas to propylene we had better use the state-of-the-art technology.

 

Q: What plans does National Petrochemical Company (NPC) have for developing downstream sectors of the petrochemical industry?

A: In the past, Iran’s Petroleum Ministry was in charge of development of upstream and mid-stream sectors and the downstream sector was fully controlled by Ministry of Industry, Mine and Trade. But the parliament recently concluded that the petrochemical industry – from upstream to downstream – should have a single administrator and this issue is reflected in the tasks of Ministry of Petroleum. Based on this parliamentary decision, the NPC Board of Directors decided to enter downstream sectors of petrochemical industry so that we would be in charge of the entire petrochemical industry in the country.

 

Q: An issue to be discussed further in the future is new petrochemical hubs in Iran. How are these hubs now and what do we need for them to improve?

A: In my view, all Persian Gulf and Sea of Oman coasts can become petrochemical hubs due to their easy access to feedstock and high seas. The new hubs currently under construction by the private sector are in Chabahar, Jask and Parsian zones because Iran-Pakistan gas pipeline, with a capacity of transmitting 105 mcm/d of gas, has been built in southeast Iran, and Pakistan is expected to receive only 25 mcm/d from this pipeline. Therefore, this pipeline can supply more than 75 mcm/d of gas feedstock for petrochemical plants. On the other hand, ports and railroads in southeast Iran and Chabahar Free Zone can attract investors. It is also envisaged to build the necessary infrastructure in Jask, Parsian and Lavan zones. Natural gas will be the main feedstock of Iran’s new petrochemical plants in the future because there would be insufficient ethane on hand. Since Iran will have gas for more than one century, it will be one of the most secure countries for building petrochemical plants.

 

Q: NPC has marked its 50^th anniversary. Would you please tell us about the perspective of this company?

A: The future of this industry is bright and promising. Petrochemical sector is the only chance for the country’s industry and it has to replace crude oil sales. We should produce petrochemicals to be job creating and income generating for the country. The country’s petrochemical industry has currently the capacity to produce 60 million tons, 40 million tons of which is already being used. Moreover, many projects had been designed and some of them have progressed more than 60%. A large quantity of equipment and machinery has also been purchased and we have to make efforts to complete these half-finished important projects like West Ethylene Pipeline.

Had the sanctions not exerted pressure and the events of the past years not happened we should have had 100 million tons of capacity instead of 60 million tons. We should also take into account the point that this industry spent 2.7 to 3 billion Euros under the eighth administration, while we should have attracted 8 billion Euros a year.

There are currently unique potentialities for the development of the petrochemical industry. We should benefit from both Iranian and foreign investors. We should also help to remove misunderstandings about the nature of our nuclear program. Every time I meet with a foreign delegation, I tell them they should not wait for the problems to be resolved themselves. I ask them to tell their government and officials that Iran’s nuclear program is peaceful and they should not let misunderstandings linger on, because continuation of the current trend will harm both Iran and the world.

 

Q: How about incomplete and nearly completed petrochemical projects in Iran?

A: Currently, 62 incomplete petrochemical projects have remained from the fourth and fifth development plans. Among them, 15 are more than 60% completed and some of them like Takht-e Jamshid, Kavian, Lorestan, Mahabad, Kurdestan, Hegmataneh, Kaveh, EMG Morvarid, Marvdasht, Pardis, Damavand, Karoun and Dalahou are expected to come on stream this year and early next year. But there will be efforts for West Ethylene Pipeline to be fully constructed this year. Unfortunately, due to land ownership problems, the physical progress is slow.

This year, a total of 1.3 million tons is added to the country’s petrochemical production. Next year, more than 7.1 million tons will be added. Meantime, officials at National Iranian Oil Company have promised to deliver the entire ethane produced in South Pars –two million tons – to petrochemical plants as of next August. Given gas production hike in South Pars next year and the implementation of the aforesaid 14 projects, we will see an 8-million-ton surge in petrochemical production next year.

Miandoab, Andimeshk, Bushehr, Masjed Soleyman, Sabalan, Lordegan, Hengam, Kharg, Genaveh, Dashtestan, Siraf, Petro Kimia, Park Estyrene, Veniran, Arg Shimi Parsa, Marjan, Gachsaran and Firouzabad are expected to come on-stream in three to four years. Moreover, with the cession of Kharg NGL and Genaveh and Dashtestan petrochemical plants to Oil Pensions Fund, these projects are most likely to come on-stream.

If the sanctions against petrochemical sector are eased to the extent that financial transactions and technology transfer are facilitated, we can be hopeful that the capacity of Iran’s petrochemical production would soar from the current 60 million tons to 100 million tons by the end of the sixth development plan.

 

Q: China is expected to finance some petrochemical projects in Iran. Where are these projects?

A: Eighteen projects have been introduced to China for financing. The finance of Sabalan, Lordegan, Bushehr and Masjed Soleyman has already been activated and the rest is being followed up on. Moreover, 18 petrochemical projects have been introduced to National Development Fund of Iran. Chief among them are Andimeshk, Sadaf, Ilam, Salman Farsi, Petrokimia, Fasa, Jahrom, Darab, Firouzabad, Miandoab, Gachsaran, Golestan, Ardebil, Siraf Energy, Zanjan and Kaveh Methanol.

Kaveh Petrochemical Plant, which is the largest producer of methanol in the world, has made good progress by using resources of its stakeholders and is expected to come online next year.

 

Iran Petchem Eyes $70b in Revenues 

 

Iran’s petrochemical industry has experienced ups and downs during its 50 years of life.

During eight years of war with Iraq, Iran never stopped soliciting Japanese companies to continue working at Bandar Imam Petrochemical Plant so that this sector could move towards a brighter future. Some retired employees of petrochemical industry remember nights they had to sleep in boots, but they always take pride in those days.

For an industry that has left behind years of hardship under Iraqi bombardment and international sanctions, realizing a brighter future is not out of reach.

Iran’s petrochemical industry started work with a single chemical fertilizer plant in the southern city of Shiraz. Now, there are more than 70 petrochemical plants with a production capacity of 60 million tons a year in the country.

National Petrochemical Company (NPC) recently hosted a ceremony to mark its 50^th anniversary.

 

Iran for Strong Regional Presence

 

Minister of Petroleum Bijan Namdar Zangeneh told the ceremony that Iran’s petrochemical industry has experienced two major jumps after the 1979 Islamic Revolution. He said efforts made during Reconstruction Period brought the value of petrochemical products to $1 billion, adding that the figure has now reached nearly $25 billion thanks to efforts which started under management of Mohammad-Reza Nematzadeh since he took office in 1997 as NPC chief.

Zangeneh expressed hope that the current managing-director of NPC, Abbas Sheri-Moqaddam, would mark the third jump in the petrochemical sector.

The minister said phases 15&16 and 7&18 of the giant South Pars gas field are expected to start producing 40 million tons a year of ethane and liquefied gas. He said such volume of production would leave no place for feedstock shortage at petrochemical plants.

Zangeneh said NPC has to undertake many efforts for the development of this industry, adding that supporting technology and research and commercialization, management and introduction of small projects to investors, private sector involvement and establishment of project funds should be envisaged by NPC.

The minister said an advantage in Iran is its extended gas transmission network, which is even larger than Russia’s.

He said that Iranian petrochemical plants can benefit from 30-40% empty capacity of gas network during months when consumption is normally lower.

“Iran neighbors ten countries which have no petrochemical industry. Except for Saudi Arabia and somewhat for Qatar, other countries have no petrochemical industry and our country should take advantage of this opportunity to win their markets. The petrochemical industry should turn from an exporter of raw materials to a producer of final products. For that purpose, there must be incentives,” he said.

Zangeneh said there is big inclination for investment in Iran, referring to the planned construction of eight gas condensate mini-refineries.

Zangeneh said a large number of Iranian companies volunteered to build the refineries after the project was announced although Ministry of Petroleum made it clear that it would have nothing to do with the projects.

“When people feel that a project is economically lucrative they will definitely participate in its development,” he said.

 

Jask, Chabahar, Future Petchem Hubs

 

Nematzadeh, now minister of industry, mine and trade, said in the ceremony that Chabahar enjoys potential to grow like Assaluyeh. He added that Jask could also become another petrochemical hub if petrochemical parks are constructed there.

“Petrochemical industry brings about development and prosperity everywhere it is present and the scattered presence of petrochemical plants can facilitate job creation,” he said. He added that several important petrochemical plants including Kurdestan Petrochemical Plant are to come on-stream later this year, leading to development of border provinces.

The minister said the advantages of petrochemical industry are clear to everyone. “Iran, possessing massive hydrocarbon reserves, enjoys many advantages for expanding and developing its petrochemical industry and we feel obliged to take step in solidarity for improving people’s living conditions. Upstream and downstream petrochemical sectors need to undergo development altogether and downstream petrochemical industries can supply products of higher value, resulting in more profitability for this industry.”

Nematzadeh said polymers, aromatics and similar products should not be compared with raw materials. “These valuable materials are produced from oil and gas and therefore one should say that they have their own special value. Development of the downstream petrochemical sector gives rise to acceptable job creation and figures show that downstream industries create 10 times more jobs,” he said.

Nematzadeh said midstream petrochemical industries have failed to grow sufficiently due to their need for advanced technology and investment. “We hope that the mid-stream sector of this industry could complete the production chain in the future.”

The minister said Iran should seek foreign investment into its petrochemical sector while trying to invest in the petrochemical sector of other countries.

Nematzadeh said Iran’s petrochemical exports are forecasted to reach $13 billion this calendar year to March while $7 billion worth of diverse petrochemical products would be produced in the country.

 

Iran Petchem Capacity to Rise 8.4 mt

 

Sheri-Moqaddam said in his address to the gathering that NPC has developed plans for completing 15 projects which had been abandoned after more than 60% of progress. He said that Iran’s petrochemical industry will see its production capacity grow 8.4 million tons by March 2016 after these unfinished projects become operational.

He said Iran’s petrochemical industry has undergone development in three phases. He said the first phase was before the 1979 Islamic Revolution and some 5 million tons of capacity was created.

The second phase, he said, was during the final years of the Iraqi imposed war. At that time, Iran brought its production capacity to nearly 14 million tons.

Sheri-Moqaddam said the third phase was under reformist president Mohammad Khatami and the country’s petrochemical production capacity reached 60 million tons in 2005.

“Had the same trend continued our production capacity would have been 120 million tons, but unfortunately it didn’t happen due to tough sanctions,” he said.

Sheri-Moqaddam said Iran developed its petrochemical industry before the revolution by attracting foreign direct investment. “But after the revolution, this type of investment was promoted in the third phase of development after some 30 years under the fourth development plan and the largest one was contribution to Arya Sasol polymer. With the incorrect implementation of privatization, this industry suffered the hardest blows. This industry was no longer a burden upon the government and it even helped the government,” he said.

Sheri-Moqaddam said the value of petrochemical products destined for exports under the 7^th and 8^th administrations did not exceed tens of millions of dollars, but then NPC managing-director (Mr Nametazadeh) managed to get more than $6 billion in loans from foreign institutes without any government securities for the development of petrochemical industry.

“Now the 60-million-ton capacity achieved in three phases has been given to the private sector without leaving any significant source of income for the NPC, but their liabilities are upon us and we have to pay them to foreign companies and financers,” said Sheri-Moqaddam.

He said of billions of dollars of wealth generated in the petrochemical industry remains only a 20% share from Persian Gulf Holding company, ownership of Petrochemical Research and Technology Company (PRTC) and Bandar Imam Special Economic Zone with most of them being cost-intensive.

He said that all shares of Damavand Petrochemical Plant, a low percentage of a service company and several other contractor companies still belong to NPC.

Sheri-Moqaddam said Iran is currently producing only 40 million tons of petrochemicals although it has potential to produce 60 million tons due to shortage of feedstock.

He said three of 15 projects which are more than 60% completed have a total capacity of 1.4 million tons. He said these three projects are expected to come on-stream by next March.

Sheri-Moqaddam also said that 11 other projects with a total capacity of 7 million tons are to come on-stream next calendar year.

He said Iran’s petrochemical output will rise 8.4 million tons by March 2016.

Sheri-Moqaddam said start-up of 67 half-finished projects, supply of feedstock, presence of NPC in the downstream sector and use of state-of-the-art technology are key points in the petrochemical industry’s roadmap.

“In case appropriate conditions are prepared for the execution of this roadmap we will be able to bring the country’s production capacity to 180 million tons and petrochemical industry’s revenue to more than $70 billion a year,” he said.

Sheri-Moqaddam expressed hope that Iran and six world powers would strike a permanent nuclear deal so that the sanctions would be eased and foreign investment will flow in.   

 

Iran Petchem Eyes $70b in Revenues 

 

Iran’s petrochemical industry has experienced ups and downs during its 50 years of life.

During eight years of war with Iraq, Iran never stopped soliciting Japanese companies to continue working at Bandar Imam Petrochemical Plant so that this sector could move towards a brighter future. Some retired employees of petrochemical industry remember nights they had to sleep in boots, but they always take pride in those days.

For an industry that has left behind years of hardship under Iraqi bombardment and international sanctions, realizing a brighter future is not out of reach.

Iran’s petrochemical industry started work with a single chemical fertilizer plant in the southern city of Shiraz. Now, there are more than 70 petrochemical plants with a production capacity of 60 million tons a year in the country.

National Petrochemical Company (NPC) recently hosted a ceremony to mark its 50^th anniversary.

 

Iran for Strong Regional Presence

 

Minister of Petroleum Bijan Namdar Zangeneh told the ceremony that Iran’s petrochemical industry has experienced two major jumps after the 1979 Islamic Revolution. He said efforts made during Reconstruction Period brought the value of petrochemical products to $1 billion, adding that the figure has now reached nearly $25 billion thanks to efforts which started under management of Mohammad-Reza Nematzadeh since he took office in 1997 as NPC chief.

Zangeneh expressed hope that the current managing-director of NPC, Abbas Sheri-Moqaddam, would mark the third jump in the petrochemical sector.

The minister said phases 15&16 and 7&18 of the giant South Pars gas field are expected to start producing 40 million tons a year of ethane and liquefied gas. He said such volume of production would leave no place for feedstock shortage at petrochemical plants.

Zangeneh said NPC has to undertake many efforts for the development of this industry, adding that supporting technology and research and commercialization, management and introduction of small projects to investors, private sector involvement and establishment of project funds should be envisaged by NPC.

The minister said an advantage in Iran is its extended gas transmission network, which is even larger than Russia’s.

He said that Iranian petrochemical plants can benefit from 30-40% empty capacity of gas network during months when consumption is normally lower.

“Iran neighbors ten countries which have no petrochemical industry. Except for Saudi Arabia and somewhat for Qatar, other countries have no petrochemical industry and our country should take advantage of this opportunity to win their markets. The petrochemical industry should turn from an exporter of raw materials to a producer of final products. For that purpose, there must be incentives,” he said.

Zangeneh said there is big inclination for investment in Iran, referring to the planned construction of eight gas condensate mini-refineries.

Zangeneh said a large number of Iranian companies volunteered to build the refineries after the project was announced although Ministry of Petroleum made it clear that it would have nothing to do with the projects.

“When people feel that a project is economically lucrative they will definitely participate in its development,” he said.

 

Jask, Chabahar, Future Petchem Hubs

 

Nematzadeh, now minister of industry, mine and trade, said in the ceremony that Chabahar enjoys potential to grow like Assaluyeh. He added that Jask could also become another petrochemical hub if petrochemical parks are constructed there.

“Petrochemical industry brings about development and prosperity everywhere it is present and the scattered presence of petrochemical plants can facilitate job creation,” he said. He added that several important petrochemical plants including Kurdestan Petrochemical Plant are to come on-stream later this year, leading to development of border provinces.

The minister said the advantages of petrochemical industry are clear to everyone. “Iran, possessing massive hydrocarbon reserves, enjoys many advantages for expanding and developing its petrochemical industry and we feel obliged to take step in solidarity for improving people’s living conditions. Upstream and downstream petrochemical sectors need to undergo development altogether and downstream petrochemical industries can supply products of higher value, resulting in more profitability for this industry.”

Nematzadeh said polymers, aromatics and similar products should not be compared with raw materials. “These valuable materials are produced from oil and gas and therefore one should say that they have their own special value. Development of the downstream petrochemical sector gives rise to acceptable job creation and figures show that downstream industries create 10 times more jobs,” he said.

Nematzadeh said midstream petrochemical industries have failed to grow sufficiently due to their need for advanced technology and investment. “We hope that the mid-stream sector of this industry could complete the production chain in the future.”

The minister said Iran should seek foreign investment into its petrochemical sector while trying to invest in the petrochemical sector of other countries.

Nematzadeh said Iran’s petrochemical exports are forecasted to reach $13 billion this calendar year to March while $7 billion worth of diverse petrochemical products would be produced in the country.

 

Iran Petchem Capacity to Rise 8.4 mt

 

Sheri-Moqaddam said in his address to the gathering that NPC has developed plans for completing 15 projects which had been abandoned after more than 60% of progress. He said that Iran’s petrochemical industry will see its production capacity grow 8.4 million tons by March 2016 after these unfinished projects become operational.

He said Iran’s petrochemical industry has undergone development in three phases. He said the first phase was before the 1979 Islamic Revolution and some 5 million tons of capacity was created.

The second phase, he said, was during the final years of the Iraqi imposed war. At that time, Iran brought its production capacity to nearly 14 million tons.

Sheri-Moqaddam said the third phase was under reformist president Mohammad Khatami and the country’s petrochemical production capacity reached 60 million tons in 2005.

“Had the same trend continued our production capacity would have been 120 million tons, but unfortunately it didn’t happen due to tough sanctions,” he said.

Sheri-Moqaddam said Iran developed its petrochemical industry before the revolution by attracting foreign direct investment. “But after the revolution, this type of investment was promoted in the third phase of development after some 30 years under the fourth development plan and the largest one was contribution to Arya Sasol polymer. With the incorrect implementation of privatization, this industry suffered the hardest blows. This industry was no longer a burden upon the government and it even helped the government,” he said.

Sheri-Moqaddam said the value of petrochemical products destined for exports under the 7^th and 8^th administrations did not exceed tens of millions of dollars, but then NPC managing-director (Mr Nametazadeh) managed to get more than $6 billion in loans from foreign institutes without any government securities for the development of petrochemical industry.

“Now the 60-million-ton capacity achieved in three phases has been given to the private sector without leaving any significant source of income for the NPC, but their liabilities are upon us and we have to pay them to foreign companies and financers,” said Sheri-Moqaddam.

He said of billions of dollars of wealth generated in the petrochemical industry remains only a 20% share from Persian Gulf Holding company, ownership of Petrochemical Research and Technology Company (PRTC) and Bandar Imam Special Economic Zone with most of them being cost-intensive.

He said that all shares of Damavand Petrochemical Plant, a low percentage of a service company and several other contractor companies still belong to NPC.

Sheri-Moqaddam said Iran is currently producing only 40 million tons of petrochemicals although it has potential to produce 60 million tons due to shortage of feedstock.

He said three of 15 projects which are more than 60% completed have a total capacity of 1.4 million tons. He said these three projects are expected to come on-stream by next March.

Sheri-Moqaddam also said that 11 other projects with a total capacity of 7 million tons are to come on-stream next calendar year.

He said Iran’s petrochemical output will rise 8.4 million tons by March 2016.

Sheri-Moqaddam said start-up of 67 half-finished projects, supply of feedstock, presence of NPC in the downstream sector and use of state-of-the-art technology are key points in the petrochemical industry’s roadmap.

“In case appropriate conditions are prepared for the execution of this roadmap we will be able to bring the country’s production capacity to 180 million tons and petrochemical industry’s revenue to more than $70 billion a year,” he said.

Sheri-Moqaddam expressed hope that Iran and six world powers would strike a permanent nuclear deal so that the sanctions would be eased and foreign investment will flow in.   

 

Research in Iran Petchem Industry

 

In today’s world, research and technology development is a key factor in the growth and progress of industries. Daily growing inclination for research and technology and acquisition of modern technologies constitute a major factor in the level of development of countries and social welfare. As the world population rises day by day and industries grow, there is growing need for energy. Meantime, oil reserves are being consumed increasingly and the latest scientific and technological achievements have been used for enhancing recovery from oil and gas reservoirs. Resolving problems related to identification of oil reservoirs, including discovery, drilling, production, transmission and treatment of crude oil and delivery of petroleum products to consumers at minimum costs with maximum efficiency, require research with a view to acquiring new technologies.

Iran's petroleum industry, which is more than  one century old, has noted the significance of research and technology in realizing its objectives ; therefore, it has always sought to motivate research and culture building for the development of technology so that new technologies would be mastered for benefitting from the technical capacity and potentialities of universities, research and scientific centers.

At present, Iranian petroleum industry’s research system has been implemented upon instruction of Minister of Petroleum Bijan Namdar Zangeneh with the objective of policymaking and making the necessary coordination for creativity, blossoming and innovation in research activities, particularly in upstream oil sector for dynamism and evolution in research in order to find effective approaches in exploration, drilling, production and enhanced recovery from oil reservoirs. To that effect, the R&D directorates of the main four subsidiaries of Ministry of Petroleum and their offshoots have expanded their research and development activities in an attempt to meet the growing needs of Iran's petroleum industry with regard to mastering technologies.

For more information on research activities in Iran's petroleum industry, Iran Petroleum is focusing on petrochemical sector as Iran's petrochemical industry is marking its 50^th birthday. To that effect, Petrochemical Research and Technology Company (PRTC) and its projects are introduced in this issue.

PRTC is a subsidiary and the main research body of National Petrochemical Company (NPC). It has managed to develop technical knowledge for processing, catalysts and chemicals required in the petrochemical industry and oil and gas refining with the help of experienced researchers and specialists. PRTC has three research and technology centers in Tehran, Arak and Bandar Imam Special Economic Zone. It has so far conducted numerous researches. Some of them are as follows:

 

Propylene via Methanol (PVM)

 

At present, the main source of propylene production is thermal break of naphtha and other hydrocarbons. Due to decreasing naphtha reserves and its growing price, propylene via methanol (PVM) has become an alternative for propylene production.

Given the huge volume of gas reserves in Iran and the daily growing production of methanol in Iran and the world as well as forecasts for oil price slide in the coming years, devising plans for developing products of high value added like propylene is an economic reason for using methanol instead of selling it in crude form.

PVM involves two stages – catalyst and processing. Two types of catalysts have been developed and optimized for this purpose. They are DME and PVM. The catalysts used in this unit are domestically developed and they have been optimized with industrial grade raw materials.

In this project, the technical savvy for processing and necessary catalysts has been developed from lab scale to demo unit with domestic hardware and software facilities. In the meantime, the process of converting methanol to propylene and indigenized catalysts has been patented.

The advantages of PVM include optimal use of raw materials, low feedstock price, easy access to feedstock and technical knowledge, low-pressure process, good temperature, high percentage of conversion and Zeolite-based catalytic stability as well as production of valuable materials like liquefied petroleum gas (LPG).

 

Gas Mix

 

High-quality mixes with clear and reliable levels of concentration are the largest used materials in calibration. Different gas mixes are mainly used in sensitive analysis system and controlling systems for calibration. An important point with gas mixes is their high consumption and needs of various industries including petrochemical, oil and gas industries for them.

These gas mixes used to be purchased from abroad, but due to restrictions in their development, many industrial and manufacturing companies in the country have volunteered to produce them.

Gas mixes have been successfully used for preparing standardized gases required for VAM unit of PRTC in Mahshahr and the NF3 unit of Bandar Imam Petrochemical Plant. Other plants located in Bandar Mahshahr Special Economic Zone have also moved to procure their required gas from PRTC. At present, PRTC has become a reference for gas mixes needed by companies located in Mahshahr Special Economic Zone. They provide gas mixes in gas cylinders of different volumes and with maximum pressure possible.

The advantages of domestic manufacturing products includes replacement of domestically developed gases and an end to imports, lack of dependence on other countries for gas mixes, saving foreign currency, extending deadline due to limited shelf life and preparing mixes at the shortest possible time. Investment in this product leads to profitability between 3 and 5 years.

 

Radar Level Transmitter

 

There are different methods for measuring the level of liquid in storage tanks. One of these methods is by using radar level transmitter. Generally, electromagnetic waves need to be used for this purpose and other methods are not effective. The outstanding features of these reservoirs include depth, non-homogenous beds, high precision in measurement, high temperature, corrosion and flammability of materials inside the tank. All storage tanks used in the oil, gas and petrochemical industries need radar level transmitters for measurement. This transmitter was already purchased from American and European countries and it cost too much. Now, this product has been developed for the first time in Iran on industrial scale.

Using radar waves for measuring distance and the content of storage tanks is one of the most recent methods applied in European and American countries. Thanks to efforts undertaken by PRTC, this product has been indigenized in two years. The method used in this system is FMCW and functions with the emission of a 1.5-GHz frequency band by using FFT algorithm. The developed system can measure up to the depth of 20 meters with an accuracy of 1 millimeter. This product is used in all industrial units including oil, gas and petrochemical industries.

This system was installed and used at Shahid Montazeri Power Plant on fuel oil storage tanks in the central city of Isfahan for one year. It has been also installed on the water reservoir of PRTC center in the central city of Arak, as well as on Basis Oil facility of Sepahan Oil Company. This Iranian-made product has been certified by EPIL and ECM of Italy. The advantages of radar level transmitters include domestic manufacturing, high accuracy and usability of storage facilities under difficult conditions, long lifetime and low maintenance costs. This domestically manufactured product enjoys other advantages like high precision, insensitivity to fluctuations of liquid level, resistance to corrosion and high temperature and pressure.

 

Methanol Synthesis Catalyst

 

One of the most important usages of methanol is in fuel cells or additives to vehicles fuel. If methanol is used as fuel, its consumption will rise significantly. At present, methanol production capacity at petrochemical plants in Iran, including Shiraz, Kharg, Fanavaran and Zagros, stand at more than five million tons a year. Eight more plants are to be added in the coming years and the production capacity of methanol is expected to exceed 20 million tons a year. In that case, consumption of methanol synthesis catalyst, which is a strategic product Iran imports for feeding petrochemical plants, will rise from the current 300 tons a year to more than 1,200 tons a year. This catalyst has been produced by PRTC by using advanced precipitation of carbonates with nitrates of these metals. It has won final approval of pilot-scale reactor tests. In this company, acquisition of technical knowledge for methanol synthesis catalyst and its industrial production have been envisaged

Iran Petchem Industry Turns 50

 

Petrochemical industry in a country sitting atop around 9% of total oil and 18% of total gas reserves in the world has always been in the spotlight due to its profitability. The main reasons behind the existence of petrochemical industry have been to meet such requirements as healthcare, sanitation, housing, clothing, foodstuff and welfare. The most important aspect of petrochemical industry has been its effectiveness.

Activity in petrochemical industry started in Iran in March 1959 with the establishment of Chemical Fertilizer Agency affiliated with Ministry of Economy and Finance. Six years later, National Petrochemical Company was set up.

Iran’s first petrochemical unit was launched in 1963 in the southern city of Shiraz with the startup of a chemical fertilizer plant there. Two years later, Iran’s Senate signed into law a piece of legislation adopted by National Consultative Assembly for the development of petrochemical industry. The law authorized NPC to cooperate directly with Iranian and foreign institutes and companies for the production of petrochemical products.

Before the victory in 1979 of the Islamic Revolution, the process of development of petrochemical industry started in Iran with the objective of meeting domestic needs for chemical fertilizers as well as other basic chemical and petrochemical materials. Establishment of Razi (Shahpour), Abadan, Pasargard, Carbon Ahvaz (Iran), Kharg, Farabi (Iran Nippon), Shiraz petrochemical development projects, as well as major parts of Bandar Imam Petrochemical Plant (Iran-Japan plant) are all the outcome of efforts  made by Iranian petrochemical engineers before the victory of the Islamic Revolution.

Following the revolution, Iran’s Ministry of Petroleum focused its policies on the construction of petrochemical plants and increasing the share of petrochemical production and exports in the downstream oil sector.

Given the essence and nature of development, Iran’s petrochemical industry witnessed propitious growth following the 1979 revolution. However, eight years of war imposed on Iran slowed down progress in this sector.

 

Petrochemical Development

 

The process of development of Iran’s petrochemical industry incorporates six steps:

 

1. Creation: This step started with the establishment of NPC in 1963 and the construction of Shiraz fertilizer plant a year later.
2. Primary Expansion: This period covers 1964-1978. In 1978, Shiraz, Razi, Abadan, Kharg, Farabi, Iran Carbon and Polica factories were operational. NPC’s petrochemical production totaled 1.6 million tons. Shiraz, Razi and Iran- Japan petrochemical projects were not yet ready to come on-stream.
3. Recession Period: This period started in 1978 and continued into the years Iran and Iraq were fighting. Due to the impacts of the 1980-1988 war, production from these companies fell to its minimum level. Operations for completion of Bandar Imam, with a capacity of 5 million tons, came to a halt. Only operations for the expansion of Shiraz plant with a capacity of 1.5 million tons and development of Razi plant with a capacity of 1.15 million tons continued. In 1988, the NPC output reached 880,000 tons despite financial restrictions during the war.
4. Revival and Reconstruction: Implementation of first and second five-year development plans including development of Isfahan, Arak, Khorassan, Urmia and Tabriz petrochemical plants and completion of Bandar Imam petrochemical plant during 1989-1999 period brought the country’s petrochemical production to 7.5 million tons during the first plan and to 11 million tons in the second plan. Iran’s petrochemical output hit 2.4 million tons after the end of the war in 1988.
5. Jump: The start of the third five-year development plan in 2000 brought about the development of petrochemical industry. Two years before that, the strategic foundation of petrochemical industry development were laid. During 1999-2004 period, implementation of this strategy won Iran’s petrochemical industry international reputation and the market equations were changed. Mahshahr and Assaluyeh were the venues for the implementation of this strategy. These two regions were, later on, known in the petrochemical market. In 2004, Iran produced 15 million tons of products and managed to win toehold in petrochemical market in the world. Tabriz, Urmia, Khorassan, Bou Ali Sina, Khuzestan, Bistoun, Fanavaran, Amir Kabir, Shahid Tondguyan, Maroun, Pars, Zagros, Arya Sasol, Nouri (Borzouyeh), Pardis, Jam, Kermanshah, Laleh, Karoun and Mehr petrochemical plants were established during this period. Cooperation with world petrochemical giants, technology transfer, training human resources at different levels and formation of international contractual companies were the fruits of this wise strategy. Throughout the implementation of the third five-year plan, NPC moved to win international recognition. The outstanding points of that period were the promotion of Iran’s petrochemical status in the Middle East and the world and a higher share for non-oil commodities in national economy.
6. Stability: After the end of the invasive strategy in petrochemical production and development throughout 1997-2005, particularly in Mahshahr and Assaluyeh special zones, and the construction of West Ethylene Pipeline stretching from Assalueyh to Mahabad and Miyandoab with the objective of poverty eradication in villages in western Iran were followed up on within the framework of the fourth five-year development plan. Iran’s petrochemical production capacity reached 40 million tons by the end of the fourth development plan. The output reached 60 million tons in 2013.
7. Privatization: In 2007, a major privatization drive began in Iran within the framework of Article 44 of the Constitution. A number of petrochemical companies and plants were privatized, but with the formation of Persian Gulf Petrochemical Company, plants and companies were privatized altogether. In 2009, a law was approved for the NPC to continue its activities.  

   

 

 

Firm Determination for West Karoun Development

 

By Mahnaz Mohammadi

 

West Karoun region has always been reminiscent of efforts by Iranians, both during years of imposed war and today.

The oil fields located in West Karoun region are among the highly prioritized projects of petroleum industry in Iran. Minister of Petroleum Bijan Namdar Zangeneh and managing director of National Iranian Oil Company Rokneddin Javadi have firmly supported these projects. If South Pars gas field is highlighted for gas production, West Karoun is focused upon for oil production.

The oil fields in West Karoun are shared by Iran and Iraq. They are Yadavaran, North Yaran, South Yaran, North Azadegan and South Azadegan.

These five fields are expected to undergo development for a 1mb/d output. Development of these fields will give rise to a new oil civilization in West Karoun. With the development of these fields, the Iranian Ministry of Petroleum’s objective of raising oil and gas condensate production capacity to 5.7 million barrels by 2018 will be realized to some extent.

At present, Iranian human resources and domestic manufacturing capacities are largely used in the development of these fields. Never have these fields seen such extensive involvement of Iranian contractors and domestic manufacturers in recent years.

West Karoun fields are located in a former battle ground. Around 120 million square meters has been demined and 12,000 unexploded rockets, shells and missiles and 60,000 landmines have been discovered and defused. Demining operations are still under way because many zones remain infested with landmines.

South Azadegan is the most important project in West Karoun. Development of this field has always hit snags. Abdorreza Haji-Hosseinnejad, managing director of Petroleum Engineering and Development Company, said: “Once, we were not allowed to get tough on contractors. But after the 11^th administration took office, Iran’s minister of petroleum severely instructed us to carry out our task with regard to this development project in the best possible manner.”

He said many foreign companies including French and Japanese companies have expressed their readiness for operating West Karoun projects.

“Different companies proposed to cooperate with us and we have no problem with their presence. But they are waiting for the sanctions to be lifted of before coming to Iran for investment. If a nuclear accord is signed we will have better conditions and operations will go ahead more quickly and smoothly, and we will be under less pressure. Even if no agreement is reached we will continue to do our job and we will reach 500,000 to 550,000 b/d by 2017,” said Haji-Hosseinnejad.

Azadegan oil field was discovered 17 years ago. Located 100 kilometers west of the city of Ahvaz, the field sprawls on 1,500 square kilometers. Its proven crude oil reserves are estimated at 33 billion barrels. The discovery of a new oil layer in 2009 increased the volume of the field’s oil in place by 2.2 billion barrels. Azadegan is the largest oil field in Iran and is the world’s third largest after Saudi Arabia’s Ghawar and Kuwait’s Burqan oil fields.

Azadegan is divided into North Azadegan and South Azadegan oil fields. Development of South Azadegan field, which is shared with Iraq, has been defined under two phases. The first phase envisages drilling of 185 wells for the production of 320,000 b/d of oil and 197 mcf/d of gas.

 

16 Drilling Rigs

 

Haji-Hosseinnejad said China’s CNPCI, the former contractor for South Azadegan, showed a weak performance. “The Chinese company had installed only three rigs in South Azadegan for 19 months, but now 16 drilling rigs are operating.”

 

Oil Output Hike

 

In South Azadegan, 40 wells are being drilled by National Iranian Drilling Company, 40 by National Iranian South Oil Company, 20 by a private company and 50 by joint venture companies. South Azadegan’s output is forecasted to reach 320,000 b/d by March 2017 from the current 50,000 b/d.

In the second phase, the field’s output is envisaged to reach 600,000 b/d. An early production of 50,000 b/d from 22 wells of the field is under way.

The contractor of South Azadegan oil field said a tender is being launched for early production of 80,000 b/d of oil from this field.

Mahmoud Marashi said the number of drilling rigs operating in this joint field is to rise from 16 to 24 in the near future, adding that drilling is hoped to be over in this field in two years.

Over the past six months, more than 50,000 meters of drilling has been done while China’s CNPCI had drilled 40,000 meters in 19 months.

Plans are also under way for conducting feasibility studies for the second phase of development of South Azadegan oil field to produce 600,000 b/d.

Marashi said environmental concerns are addressed throughout development of South Azadegan field. He added that the rigs have been located in order to minimize damage to the environment.

 

North Azadegan and 86% Progress

 

North Azadegan is another field in West Karoun. Based on agreements signed in the past, development of this field is under way by Chinese contractors. Keramat Behbahani, who is in charge of development of North Azadegan oil field, said operations have been mainly in water.

He said that the filed can produce 75,000 b/d of oil, adding that North Azadegan holds 5.7 billion barrels of oil in place.

CNPCI started developing this field in 2009 and is expected to have finished the project next July, he said, adding that the development project is more than 87% completed now.

Production, desalting, processing and gas delivery facilities are under construction at an acceptable pace.

The contracts signed for the development of this field are all EPCCO-based. Procurement of commodities has faced no problem and domestic manufacturers have a 51% share in supply of equipment for the project.

By the end of the first phase of development, production from this field is expected to reach 75,000 b/d. The second phase of development is expected to see output from the field double.

 

Yadavaran Oil Field

 

Yadavaran oil field is located 70 kilometers southwest of Ahvaz along the border with Iraq. This field is jointly operated by Iran and Iraq. At present, Iran is overtaking Iraq in terms of recovery from this joint field.

Yadavaran is 45 kilometers long and 15 kilometers wide. It extends from north to south. Yadavaran is known as Sandbad in Iraq. It produces light and heavy crude oil. The wells drilled in Yadavaran can be active for 25 years.

The field is estimated to hold 12 billion barrels of oil in place, but some studies put the figure at 34 billion barrels.

So far, 55 wells have been drilled in this field, 49 of which are production wells, 3 are appraisal wells and 3 are for wastewater injection.

Hadi Nazarpour, manager of Yadavaran oil field development, said 85,000 b/d of oil is expected to be recovered from this field in its first phase of development in March.

He said the first production phase will start soon.

Nazarpour said the second phase of development of the field, which envisages 180,000 b/d of oil, is waiting for the approval of NIOC.

“In the third phase, the total production from this field is envisaged at 300,000 b/d,” he said.

“So far, we have produced 30 million barrels from this field, while Iraq has had no production from this field,” he added.

Nazarpour said Yadavaran is producing light and heavy crude oil with API at 39.5 and 21 to 22, respectively.

 

North Yaran

 

North Yaran field is another field in west Karoun. It is located 130 kilometers west of the city of Ahvaz along the border with Iraq.

Arash Baqerzadeh, manager of the development project, said plans have been made for gradual production from this jointly operated field.

He said that 5,000 b/d of oil is currently recovered from this field, adding that production would reach 12,000 to 15,000 b/d upon approval of NIOC next year.

He said the field would be producing 30,000 b/d by March 2016. He added that 30,000 meters of drilling has been done in this field over the past eight months.

Baqerzadeh said four wells have already been drilled and the number of drilling rigs is being doubled to eight to accelerate drilling there.

Iranian manufacturing companies are the main suppliers of equipment and commodity to this field.

 

South Yaran

 

South Yaran in Iran is known as Majnourn in Iraq. Homayoun Kazemi, manager of South Yaran development, has said that production from this field would reach 40,000 b/d later this year.

“By adding four drilling rigs, the number of drilling rigs operating in South Yaran will reach 12,” he said.

Kazemi said South Yaran is planned to produce 40,000 b/d of crude oil. He added that a new master development plan is being drawn up for production hike.

Firm Determination for West Karoun Development

 

By Mahnaz Mohammadi

 

West Karoun region has always been reminiscent of efforts by Iranians, both during years of imposed war and today.

The oil fields located in West Karoun region are among the highly prioritized projects of petroleum industry in Iran. Minister of Petroleum Bijan Namdar Zangeneh and managing director of National Iranian Oil Company Rokneddin Javadi have firmly supported these projects. If South Pars gas field is highlighted for gas production, West Karoun is focused upon for oil production.

The oil fields in West Karoun are shared by Iran and Iraq. They are Yadavaran, North Yaran, South Yaran, North Azadegan and South Azadegan.

These five fields are expected to undergo development for a 1mb/d output. Development of these fields will give rise to a new oil civilization in West Karoun. With the development of these fields, the Iranian Ministry of Petroleum’s objective of raising oil and gas condensate production capacity to 5.7 million barrels by 2018 will be realized to some extent.

At present, Iranian human resources and domestic manufacturing capacities are largely used in the development of these fields. Never have these fields seen such extensive involvement of Iranian contractors and domestic manufacturers in recent years.

West Karoun fields are located in a former battle ground. Around 120 million square meters has been demined and 12,000 unexploded rockets, shells and missiles and 60,000 landmines have been discovered and defused. Demining operations are still under way because many zones remain infested with landmines.

South Azadegan is the most important project in West Karoun. Development of this field has always hit snags. Abdorreza Haji-Hosseinnejad, managing director of Petroleum Engineering and Development Company, said: “Once, we were not allowed to get tough on contractors. But after the 11^th administration took office, Iran’s minister of petroleum severely instructed us to carry out our task with regard to this development project in the best possible manner.”

He said many foreign companies including French and Japanese companies have expressed their readiness for operating West Karoun projects.

“Different companies proposed to cooperate with us and we have no problem with their presence. But they are waiting for the sanctions to be lifted of before coming to Iran for investment. If a nuclear accord is signed we will have better conditions and operations will go ahead more quickly and smoothly, and we will be under less pressure. Even if no agreement is reached we will continue to do our job and we will reach 500,000 to 550,000 b/d by 2017,” said Haji-Hosseinnejad.

Azadegan oil field was discovered 17 years ago. Located 100 kilometers west of the city of Ahvaz, the field sprawls on 1,500 square kilometers. Its proven crude oil reserves are estimated at 33 billion barrels. The discovery of a new oil layer in 2009 increased the volume of the field’s oil in place by 2.2 billion barrels. Azadegan is the largest oil field in Iran and is the world’s third largest after Saudi Arabia’s Ghawar and Kuwait’s Burqan oil fields.

Azadegan is divided into North Azadegan and South Azadegan oil fields. Development of South Azadegan field, which is shared with Iraq, has been defined under two phases. The first phase envisages drilling of 185 wells for the production of 320,000 b/d of oil and 197 mcf/d of gas.

 

16 Drilling Rigs

 

Haji-Hosseinnejad said China’s CNPCI, the former contractor for South Azadegan, showed a weak performance. “The Chinese company had installed only three rigs in South Azadegan for 19 months, but now 16 drilling rigs are operating.”

 

Oil Output Hike

 

In South Azadegan, 40 wells are being drilled by National Iranian Drilling Company, 40 by National Iranian South Oil Company, 20 by a private company and 50 by joint venture companies. South Azadegan’s output is forecasted to reach 320,000 b/d by March 2017 from the current 50,000 b/d.

In the second phase, the field’s output is envisaged to reach 600,000 b/d. An early production of 50,000 b/d from 22 wells of the field is under way.

The contractor of South Azadegan oil field said a tender is being launched for early production of 80,000 b/d of oil from this field.

Mahmoud Marashi said the number of drilling rigs operating in this joint field is to rise from 16 to 24 in the near future, adding that drilling is hoped to be over in this field in two years.

Over the past six months, more than 50,000 meters of drilling has been done while China’s CNPCI had drilled 40,000 meters in 19 months.

Plans are also under way for conducting feasibility studies for the second phase of development of South Azadegan oil field to produce 600,000 b/d.

Marashi said environmental concerns are addressed throughout development of South Azadegan field. He added that the rigs have been located in order to minimize damage to the environment.

 

North Azadegan and 86% Progress

 

North Azadegan is another field in West Karoun. Based on agreements signed in the past, development of this field is under way by Chinese contractors. Keramat Behbahani, who is in charge of development of North Azadegan oil field, said operations have been mainly in water.

He said that the filed can produce 75,000 b/d of oil, adding that North Azadegan holds 5.7 billion barrels of oil in place.

CNPCI started developing this field in 2009 and is expected to have finished the project next July, he said, adding that the development project is more than 87% completed now.

Production, desalting, processing and gas delivery facilities are under construction at an acceptable pace.

The contracts signed for the development of this field are all EPCCO-based. Procurement of commodities has faced no problem and domestic manufacturers have a 51% share in supply of equipment for the project.

By the end of the first phase of development, production from this field is expected to reach 75,000 b/d. The second phase of development is expected to see output from the field double.

 

Yadavaran Oil Field

 

Yadavaran oil field is located 70 kilometers southwest of Ahvaz along the border with Iraq. This field is jointly operated by Iran and Iraq. At present, Iran is overtaking Iraq in terms of recovery from this joint field.

Yadavaran is 45 kilometers long and 15 kilometers wide. It extends from north to south. Yadavaran is known as Sandbad in Iraq. It produces light and heavy crude oil. The wells drilled in Yadavaran can be active for 25 years.

The field is estimated to hold 12 billion barrels of oil in place, but some studies put the figure at 34 billion barrels.

So far, 55 wells have been drilled in this field, 49 of which are production wells, 3 are appraisal wells and 3 are for wastewater injection.

Hadi Nazarpour, manager of Yadavaran oil field development, said 85,000 b/d of oil is expected to be recovered from this field in its first phase of development in March.

He said the first production phase will start soon.

Nazarpour said the second phase of development of the field, which envisages 180,000 b/d of oil, is waiting for the approval of NIOC.

“In the third phase, the total production from this field is envisaged at 300,000 b/d,” he said.

“So far, we have produced 30 million barrels from this field, while Iraq has had no production from this field,” he added.

Nazarpour said Yadavaran is producing light and heavy crude oil with API at 39.5 and 21 to 22, respectively.

 

North Yaran

 

North Yaran field is another field in west Karoun. It is located 130 kilometers west of the city of Ahvaz along the border with Iraq.

Arash Baqerzadeh, manager of the development project, said plans have been made for gradual production from this jointly operated field.

He said that 5,000 b/d of oil is currently recovered from this field, adding that production would reach 12,000 to 15,000 b/d upon approval of NIOC next year.

He said the field would be producing 30,000 b/d by March 2016. He added that 30,000 meters of drilling has been done in this field over the past eight months.

Baqerzadeh said four wells have already been drilled and the number of drilling rigs is being doubled to eight to accelerate drilling there.

Iranian manufacturing companies are the main suppliers of equipment and commodity to this field.

 

South Yaran

 

South Yaran in Iran is known as Majnourn in Iraq. Homayoun Kazemi, manager of South Yaran development, has said that production from this field would reach 40,000 b/d later this year.

“By adding four drilling rigs, the number of drilling rigs operating in South Yaran will reach 12,” he said.

Kazemi said South Yaran is planned to produce 40,000 b/d of crude oil. He added that a new master development plan is being drawn up for production hike.

Kish Energy Fair; a Venue for Investment

 

The 11^th international energy exhibition in Kish Island was held from January 12 to 15 with 200 Iranian and foreign companies having been represented.

The outstanding feature of this exhibition was its focus on attracting investment from domestic and foreign companies and enhancing the level of interaction between them.

The event was co-sponsored by the four main subsidiaries of Ministry of Petroleum (National Iranian Oil Company, National Iranian Gas Company, National Petrochemical Company and National Iranian Oil Refining and Distribution Company), Tehran Kala Naft Company, Electricity Industry Syndicate, Union of Water and Wastewater Companies.

The Kish exhibition was inaugurated in the presence of the general director of public relations of Ministry of Petroleum and the head of Kish Free Zone.

Akbar Nematollahi, general director of public relations of Ministry of Petroleum, said the ministry plans to convert oil and energy exhibitions into specialized events.

He said that at least four general oil exhibitions are held annually in Iran. “All these exhibitions are general and similar. Therefore, we are trying to allot each exhibition to a specific theme in order to move towards specialization of these exhibitions,” he said.

Nematollahi said Ahvaz exhibition turned into a specialized exhibition of commodity and equipment for petroleum industry this year.

He said that plans are under way for Tehran Oil and Gas Show to become a gathering point for domestic and foreign companies and contractors. “Our proposal to the organizers of Kish exhibition is to convert it to a venue for the presence of investors,” he said.

“The conditions are apparently not ready for this purpose this year, but we hope that it would happen next year,” said Nematollahi.

“Of course, we recommend the organizers of this exhibition that they are the final decision-makers. But we support this exhibition under any circumstances,” he said.

Nematollahi expressed hope that the organizers of Kish energy exhibition would see more foreign companies attend the event. He said that more than 600 foreign companies attended Tehran’s 2014 oil show, which was up 300% from the year before.

He said that foreign companies will be more willing to attend events in Iran when the conditions become easier and atmosphere changes.

In response to a question about changing Kish Island to an energy hub, Nematollahi said: “Since numerous projects are under way around Kish Island and taking into account the conditions of Kish as a free trade zone, foreign companies may follow their activities in Kish without any restrictions.”

 

Venue for Attracting Investment

 

Ali-Asghar Mounesan, managing director of Kish Free Trade Zone Organization, said the advantages of annual energy exhibitions in Kish Island include display of the latest achievements by Iranian and foreign manufacturers in oil, gas, petrochemical, water, electricity and renewable energy sectors, exchange of information and capacities and communication between manufacturers and consumers.

“Presence in this exhibition provides a good opportunity for marketing of energy sector products and equipment, particularly in the oil and gas sectors, and participants can interact over investment,” he said.

 

Egyptians Willing to Invest in Iran

 

A group of 130 Iranian and 70 foreign companies attended the 11^th Kish Energy Exhibition. Egypt, the United Arab Emirates, China, Italy, Germany, Britain, South Korea, France, Spain, Poland, Czech Republic, Slovenia, Ireland, Switzerland, Belgium, Austria, the Netherlands, Denmark, Canada, Sweden and Albania were represented.

An outstanding feature of this exhibition was the presence of an Egyptian company for the first time in Iran. The managers of the company expressed willingness for further cooperation with Iran’s petroleum industry.

MCS which specializes in maintenance of offshore drilling rigs and underwater pipelines attended Kish exhibition for the first time upon the proposal of its Iranian partner and got familiar with opportunities in Iran’s petroleum industry.

Khaled Aboud, development manager of MCS, underscored the fact that the services provided by this company are monopolized by three countries. He said a British and a Danish company are also active in this field, adding that MCS is the top company in this regard.

Aboud said MCS is currently cooperating with international giants like British Petroleum (BP) and Italy’s Eni. He said MCS is providing services to many countries like Norway, Italy, Spain, Venezuela, Africa and the United Arab Emirates.

Aboud said Iran, an oil-rich country, has complicated oil equipment, adding that these features provide a very valuable opportunity for service-providing companies.

He said his company hopes to directly communicate with Iranian petroleum industry managers with a view to forming trade transactions. Aboud said MCS has already provided indirect services to Iranian companies.

He said the services provided by MCS can cut production costs by 25%, noting the falling crude oil prices in the global markets.

Aboud said MCS is an exporter of services and technology, noting that it does not take into consideration international sanctions.

He said international sanctions are unlikely to hinder MCS’s decision to be active in Iran.

Aboud said he has held several meeting with senior officials of NIOC and expressed hope that MCS would be able to operate Iran’s oil projects in the near future.

 

Petro Arses Fidar

 

Petro Arses Fidar (PETRO-CO) Company is consisted of a highly experienced staff that specializes in providing oil industry goods like standard industrial instruments, pipes, valves and flanges and designing ESD and DCS systems, gas chlorination, optimization and submission of old system replacement projects, provision of industrial automation system equipment and industrial and lab instruments.

The company has been able to meet the needs of its clients within a short amount of time through technical interaction, benefitting from the specialized trainings of famous manufacturers such as Rockwell Automation and Emerson Process Management, forming financial partnerships with domestic and international colleagues and direct association with the consumer, and membership in the American NFPA Standard Society.

Motajaba Saffarian, managing director of Petro Arses Fidar, said managers of European companies have been invited to Iran in recent years to get familiar with opportunities for investment in Iran. He said that some European companies have been reluctant to come to Tehran due to the sanctions.

He said that a German company, which Petro Arses Fidar represents in Tehran, accepted to attend the 2014 Oil and Gas Show in Tehran.

Saffarian said a French industrialist also attended the Kish Energy Exhibition to get first-hand information about opportunities for investment in Iran.

The French industrialist whose company specializes in industrial valves for the petroleum industry said his company would be willing to become more active in Iran’s market after sanctions have been eased.

He said his company is already present in many countries in the Middle East region, but said Iran’s petroleum industry market is much more extended.

“In Iran’s petroleum industry, there is great potential for activity and investment and they should not be ignored easily,” he said.

He said his company is ready to train Iranian manpower. He noted that sanctions are a political issue which should not be allowed to overshadow the economy.

 

Iran Oil Market

 

The Emirati Golden Pole Company showcased its achievements in Kish Energy Exhibition. This company which supplies commodities and parts for oil, gas and petrochemical industries is in close contact with Iran’s Ministry of Petroleum.

It has established offices in several countries and it is capable of procuring any commodity for the petroleum industry.

One of partners of Golden Pole is Technofit which attended the Kish exhibition. Mohammad Seddiq, a senior manager of Technofit, said Kish Island is a good platform for all international companies. The Indian manager said Iran is facing growing need for production and refining because it is a large oil and gas producer.

Seddiq said he has been cooperating with Iran’s petroleum industry for more than 15 years. He expressed hope for enhanced cooperation in coming years, saying: “Marketing plays a significant role in trade. Many factories have good products, but they cannot make progress due to weakness in marketing. The Kish exhibition is a good venue where producers and consumers are both present for exchanging views and information.”

According to Seddiq, Iran’s oil market has numerous projects for operation and Iranians are more active than other Middle East countries.

 

Spain Technology

 

Alongside foreign companies were Iranian companies. Some of these Iranian companies have managed to become manufacturers after having served as representative of foreign companies and having transferred in technologies. Aban is one of these companies. It is active in UPS and is cooperating with Spain and Taiwan.

Kayvan Hosseinzadeh, managing director of Aban, said his company did not like to be an importer or assembler of commodity and equipment.

“Following serious efforts, and despite conditions for sanctions, we managed for the first time to sign an agreement with Spain and Taiwan for the transfer of 3-phase modular UPS technology,” he said.

Hosseinzadeh said 85% of this key equipment used in petroleum industry projects is manufactured domestically.

Kia Generator, in cooperation with Italian and Lebanese companies, has managed to indigenize generators and some parts and equipment.

The operational zones run by Iran Offshore Oil Company (IOOC) and Iran’s Central Oil Fields Company (ICOFC) as well as phases 17&18 of South Pars gas field were among projects in which the products of Kia Generators were used.

On the sidelines of Kish Energy Exhibition, several specialized panel discussions with focus on electricity exports, investment in oil and energy and investment pathology were held.

Kish Energy Fair; a Venue for Investment

 

The 11^th international energy exhibition in Kish Island was held from January 12 to 15 with 200 Iranian and foreign companies having been represented.

The outstanding feature of this exhibition was its focus on attracting investment from domestic and foreign companies and enhancing the level of interaction between them.

The event was co-sponsored by the four main subsidiaries of Ministry of Petroleum (National Iranian Oil Company, National Iranian Gas Company, National Petrochemical Company and National Iranian Oil Refining and Distribution Company), Tehran Kala Naft Company, Electricity Industry Syndicate, Union of Water and Wastewater Companies.

The Kish exhibition was inaugurated in the presence of the general director of public relations of Ministry of Petroleum and the head of Kish Free Zone.

Akbar Nematollahi, general director of public relations of Ministry of Petroleum, said the ministry plans to convert oil and energy exhibitions into specialized events.

He said that at least four general oil exhibitions are held annually in Iran. “All these exhibitions are general and similar. Therefore, we are trying to allot each exhibition to a specific theme in order to move towards specialization of these exhibitions,” he said.

Nematollahi said Ahvaz exhibition turned into a specialized exhibition of commodity and equipment for petroleum industry this year.

He said that plans are under way for Tehran Oil and Gas Show to become a gathering point for domestic and foreign companies and contractors. “Our proposal to the organizers of Kish exhibition is to convert it to a venue for the presence of investors,” he said.

“The conditions are apparently not ready for this purpose this year, but we hope that it would happen next year,” said Nematollahi.

“Of course, we recommend the organizers of this exhibition that they are the final decision-makers. But we support this exhibition under any circumstances,” he said.

Nematollahi expressed hope that the organizers of Kish energy exhibition would see more foreign companies attend the event. He said that more than 600 foreign companies attended Tehran’s 2014 oil show, which was up 300% from the year before.

He said that foreign companies will be more willing to attend events in Iran when the conditions become easier and atmosphere changes.

In response to a question about changing Kish Island to an energy hub, Nematollahi said: “Since numerous projects are under way around Kish Island and taking into account the conditions of Kish as a free trade zone, foreign companies may follow their activities in Kish without any restrictions.”

 

Venue for Attracting Investment

 

Ali-Asghar Mounesan, managing director of Kish Free Trade Zone Organization, said the advantages of annual energy exhibitions in Kish Island include display of the latest achievements by Iranian and foreign manufacturers in oil, gas, petrochemical, water, electricity and renewable energy sectors, exchange of information and capacities and communication between manufacturers and consumers.

“Presence in this exhibition provides a good opportunity for marketing of energy sector products and equipment, particularly in the oil and gas sectors, and participants can interact over investment,” he said.

 

Egyptians Willing to Invest in Iran

 

A group of 130 Iranian and 70 foreign companies attended the 11^th Kish Energy Exhibition. Egypt, the United Arab Emirates, China, Italy, Germany, Britain, South Korea, France, Spain, Poland, Czech Republic, Slovenia, Ireland, Switzerland, Belgium, Austria, the Netherlands, Denmark, Canada, Sweden and Albania were represented.

An outstanding feature of this exhibition was the presence of an Egyptian company for the first time in Iran. The managers of the company expressed willingness for further cooperation with Iran’s petroleum industry.

MCS which specializes in maintenance of offshore drilling rigs and underwater pipelines attended Kish exhibition for the first time upon the proposal of its Iranian partner and got familiar with opportunities in Iran’s petroleum industry.

Khaled Aboud, development manager of MCS, underscored the fact that the services provided by this company are monopolized by three countries. He said a British and a Danish company are also active in this field, adding that MCS is the top company in this regard.

Aboud said MCS is currently cooperating with international giants like British Petroleum (BP) and Italy’s Eni. He said MCS is providing services to many countries like Norway, Italy, Spain, Venezuela, Africa and the United Arab Emirates.

Aboud said Iran, an oil-rich country, has complicated oil equipment, adding that these features provide a very valuable opportunity for service-providing companies.

He said his company hopes to directly communicate with Iranian petroleum industry managers with a view to forming trade transactions. Aboud said MCS has already provided indirect services to Iranian companies.

He said the services provided by MCS can cut production costs by 25%, noting the falling crude oil prices in the global markets.

Aboud said MCS is an exporter of services and technology, noting that it does not take into consideration international sanctions.

He said international sanctions are unlikely to hinder MCS’s decision to be active in Iran.

Aboud said he has held several meeting with senior officials of NIOC and expressed hope that MCS would be able to operate Iran’s oil projects in the near future.

 

Petro Arses Fidar

 

Petro Arses Fidar (PETRO-CO) Company is consisted of a highly experienced staff that specializes in providing oil industry goods like standard industrial instruments, pipes, valves and flanges and designing ESD and DCS systems, gas chlorination, optimization and submission of old system replacement projects, provision of industrial automation system equipment and industrial and lab instruments.

The company has been able to meet the needs of its clients within a short amount of time through technical interaction, benefitting from the specialized trainings of famous manufacturers such as Rockwell Automation and Emerson Process Management, forming financial partnerships with domestic and international colleagues and direct association with the consumer, and membership in the American NFPA Standard Society.

Motajaba Saffarian, managing director of Petro Arses Fidar, said managers of European companies have been invited to Iran in recent years to get familiar with opportunities for investment in Iran. He said that some European companies have been reluctant to come to Tehran due to the sanctions.

He said that a German company, which Petro Arses Fidar represents in Tehran, accepted to attend the 2014 Oil and Gas Show in Tehran.

Saffarian said a French industrialist also attended the Kish Energy Exhibition to get first-hand information about opportunities for investment in Iran.

The French industrialist whose company specializes in industrial valves for the petroleum industry said his company would be willing to become more active in Iran’s market after sanctions have been eased.

He said his company is already present in many countries in the Middle East region, but said Iran’s petroleum industry market is much more extended.

“In Iran’s petroleum industry, there is great potential for activity and investment and they should not be ignored easily,” he said.

He said his company is ready to train Iranian manpower. He noted that sanctions are a political issue which should not be allowed to overshadow the economy.

 

Iran Oil Market

 

The Emirati Golden Pole Company showcased its achievements in Kish Energy Exhibition. This company which supplies commodities and parts for oil, gas and petrochemical industries is in close contact with Iran’s Ministry of Petroleum.

It has established offices in several countries and it is capable of procuring any commodity for the petroleum industry.

One of partners of Golden Pole is Technofit which attended the Kish exhibition. Mohammad Seddiq, a senior manager of Technofit, said Kish Island is a good platform for all international companies. The Indian manager said Iran is facing growing need for production and refining because it is a large oil and gas producer.

Seddiq said he has been cooperating with Iran’s petroleum industry for more than 15 years. He expressed hope for enhanced cooperation in coming years, saying: “Marketing plays a significant role in trade. Many factories have good products, but they cannot make progress due to weakness in marketing. The Kish exhibition is a good venue where producers and consumers are both present for exchanging views and information.”

According to Seddiq, Iran’s oil market has numerous projects for operation and Iranians are more active than other Middle East countries.

 

Spain Technology

 

Alongside foreign companies were Iranian companies. Some of these Iranian companies have managed to become manufacturers after having served as representative of foreign companies and having transferred in technologies. Aban is one of these companies. It is active in UPS and is cooperating with Spain and Taiwan.

Kayvan Hosseinzadeh, managing director of Aban, said his company did not like to be an importer or assembler of commodity and equipment.

“Following serious efforts, and despite conditions for sanctions, we managed for the first time to sign an agreement with Spain and Taiwan for the transfer of 3-phase modular UPS technology,” he said.

Hosseinzadeh said 85% of this key equipment used in petroleum industry projects is manufactured domestically.

Kia Generator, in cooperation with Italian and Lebanese companies, has managed to indigenize generators and some parts and equipment.

The operational zones run by Iran Offshore Oil Company (IOOC) and Iran’s Central Oil Fields Company (ICOFC) as well as phases 17&18 of South Pars gas field were among projects in which the products of Kia Generators were used.

On the sidelines of Kish Energy Exhibition, several specialized panel discussions with focus on electricity exports, investment in oil and energy and investment pathology were held.

Global oil and Asian product market, January

Iraqi and Russian exports rise

 

Crude prices started this year at five-year lows. This was on the back of ample global supplies and infirm signs of oil demand growth. Crude supplies in all regions are plentiful. Europe has abundant sour crude, thanks to rising exports by Iraq and Russia. Iraq output rose by around 500k b/d to 3.68mn b/d in December. This sharp increase in Iraqi production offset falls from other OPEC members. Export tariff changes have encouraged Russian producers to delay loadings of Ural from December 2014 to January 2015. The rate of tariff in the new tariff system for 2015 has been decreased. However, this situation in Russia waned by the end of January.

• U.S dollar value appreciation

 

Any possible slight improvement in oil prices was prevented by expected stronger U.S dollar.

• Probable positive points of lower oil prices

 

On the other hand IMF researchers see the positive points of lower oil prices and said “we find a gain for world GDP of between 0.3pc and 0.7pc in 2015, compared with a scenario without the drop in oil prices”. They believe economic growth will improve in this situation.

Looking ahead, seasonal refinery maintenance is coming and the gap between supply and demand will likely be widening. 

 

 

Asian Product Markets

In Singapore products market- leader product market in Asia- the mean fell sharply in tandem with crude prices (see graph 2).

Some of the changes in product prices are because of crude price changes. Hence, in order to investigate product market fundamental and its performance, it is necessary to look at product price changes in comparison with crude price changes. Products market at the top of the barrel including gasoline and naphtha performed weak during January.  Moreover, at the middle of the barrel, gasoil and jet fuel were fundamentally weak. Fuel oil in both grades were slightly infirm after two months of strong performance, but still considerably strong compared to January 2014. (see graph 3)

 

 

Products market fundamentals in brief

January 2015	Light Distillates Products		Middle Distillates Products		Heavy Products
	Gasoline	Naphtha	Gasoil	Jet Fuel	Fuel Oil 180	Fuel Oil 380
	↓	↓	↓	↓	↓	↓

(Upward arrow: strength, downward arrow: weakness)

Light Distillates (gasoline, naphtha)

Asian naphtha market slightly weakened due to the ample supplies in the region. There were a lot of naphtha in the market as many cargoes have arrived from West to East. Higher export volumes from India is likely to put more pressure on naphtha market. However, healthy petrochemical demand helped the naphtha market and as a result the crack trend – differential between Dubai crude prices and Singapore naphtha prices - went down slightly (see graph 3).

This situation for supply would be more continued since some of the crackers in Korea are planned to go under maintenance during March to April.

Singapore gasoline market was sharply weakened due to the supply side. Significant exports from North Asia fill the market.  In the meantime, gasoline sales in the region was high due to the lower outright prices. But demand was not enough to overcome plentiful supplies ,and finally Singapore light distillate stocks reached to a two- month high in January.

 

Middle Distillates (gasoil, jet fuel)

Middle distillates products performed weak at the beginning of the year 2015. More supply availabilities from South Korea and India was showing off in January, while the outlook for the rest of the year 2015 is facing with challenges. New refining capacities in Persian Gulf combined with higher expected exports from India will likely draw the market in 2015.

Jet fuel supplies in Asia were abundant. It was somehow due to the closed arbitrage from Asia to Northwest Europe. Looking ahead, seasonal buying interest is expected to happen because of the lunar new year holidays in late February. Moreover, Japan demand for kerosene fell and this caused more jet fuel production. Every year during winter, Japanese refineries produce more kerosene in expense of lower jet fuel.

Fuel Oil

Fuel oil market in both grades weakened slightly, but still considerably strong compared to January 2014. The fuel oil 380 cst is used mostly as bunker fuel.  Bunker fuel demand was robust in some ports across the Asia Pacific and Middle East. Therefore, firm freight rates and shortfall of high-density fuel oil -380 cst- in Singapore pushed the fuel oil 380 cst up.

Petrobras Deploys Low-Cost Subsea Tree

 

 

Petrobras says it deployed its first wet christmas tree at the end of last year using cables in the pre-salt area of the Santos basin.

The main innovation was the use of a subsea equipment support vessel (SESV) to install the equipment on the Sapinhoá field, instead of a costlier drilling vessel. This resulted in a time saving of around 10 days, leading to a gain of more than $5 million.

The 7-SPH-2D-SP well is in a water depth of 2,130 m (6,988 ft).

Petrobras says the operation, which involved lowering the christmas tree into position and installing it on the wellhead using a suspended cable, was carried out from an SESV using a subsea equipment guidance system.

SBM Offshore Readies Angola FPSO

SBM Offshore has received formal production readiness notice (PRN) for the N’Goma FPSO from Eni for the block 15/06 West Hub development offshore Angola.

Following the first successful oil recovery in November 2014 and completion of the 72-hour continuous production test in early December, PRN goes into effect retroactively as of Nov. 28, 2014. The vessel is on hire from that date onward.

Eni operates block 15/06 on behalf of joint venture participants Sonangol Pesquisa e Produção, SSI Fifteen Ltd., and Falcon Oil Holding Angola SA. The FPSO will operate under a 12-year lease and operate contract with Eni Angola SpA on the development.

Det norske Completes Alvheim Subsea Tieback

Det norske oljeselskap and its partners have started production from the Bøyla field in block 24/9 in the northern Norwegian North Sea.

The field is the fourth to be tied into the Alvheim FPSO following the Alvheim, Volund, and Vilje developments.

Total investments in Bøyla are around NOK 5 billion ($659 million). Det norske estimates recoverable reserves at 23 MMboe.

Development involved a subsea installation with two horizontal production wells and one water injector tied back to the Alvheim infrastructure via a 28-km (17.4-mi) pipeline. Processing capacity of the FPSO is around 150,000 b/d. The vessel has undergone minor modifications to receive and process volumes from Bøyla.

At peak, production from the new field is expected to exceed 20,000 boe/d, although drilling on the second production well had to be suspended late last year.

Indonesia Supports Lengo Gas Project

Indonesia’s government has approved KrisEnergy’s development plan for the Lengo gas field in the Bulu production sharing agreement (PSA) offshore East Java.The operator can now pursue formal negotiations for gas sales agreements with potential buyers.

Bulu extends over 697 sq km (269 sq mi) in three separate areas – Bulu A, Bulu B, and Bulu C – in the East Java basin in water depths of 50-60 m (164-197 ft). Lengo, in the Bulu A area, will be produced via four development wells and an unmanned wellhead platform, with a 20-in., 65-km (40-mi) subsea pipeline transporting the gas directly to shore.

Maari Field Redevelopment Starts Production

OMV has delivered first oil shipment from its Maari field redevelopment drilling campaign offshore New Zealand.

The Maari Growth project is designed to enhance production and recovery from the producing Maari field, 80 km (49.7 mi) off the Taranaki coast in 100 m (328 ft) of water. Production started in February 2009 but has declined.

W MR-8A, which came online on Nov. 28, is producing from a previously undrained compartment in the field. The well was side tracked out of an abandoned injection well and drilled horizontally into the Moki formation to a total length of 3,824 m (12,543 ft).

China's Dec Russian Crude Imports Hit Record

China's crude oil imports from Russia surged to a record 876,000 barrels per day in December, Chinese customs data showed, as refiners took advantage of multi-year low spot prices for Russian oil.

For 2014 as a whole, imports of Russian crude jumped 36 percent to a record of about 662,000 bpd, posting the fastest growth among China's top suppliers.

Russia overtook Oman to become the third-highest exporter to China after Saudi Arabia and Angola, and its exports are set to rise again this year with expected higher flows from the far eastern port of Kozmino, under deals between the nations' state oil firms.

Chinese state-run refiners Sinopec Corp and smaller ChemChina took at least eight of the 20 cargoes Russian crude ESPO that loaded in December after premiums for the seaborne grade hit multi-year lows due to ample supply, traders said.

"They caught the chance to buy cheap ESPO," a trader with a North Asian firm said.

Volumes in December were up 86 percent from the same month a year ago.

China now buys Russian oil via both overland pipelines and seaborne tankers. A spur of the East Siberia-Pacific Ocean pipeline connects to China's northeast region, a refining base largely controlled by China's top energy firm PetroChina .

Russia also pumps some oil via the Kazakhstan-China pipeline that arrives at China's northwest region of Xinjiang.

Top Russian oil producer Rosneft has also agreed to ship 180,000 bpd of oil to a planned joint venture refinery in northern Chinese city Tianjin from 2020.

Egypt Awards $2.2b LNG Tender

 

Egypt's state gas board has awarded a $2.2 billion tender to import 75 cargoes of liquefied natural gas (LNG) to four international firms, its chairman said, as the country seeks new energy sources.

Declining production and increasing consumption has turned the Arab world's most populous country from an energy exporter to a net importer, prompting a flurry of activity in past months to boost foreign supplies.

The four companies will supply four cargoes a month over about two years, Khaled Abdel Badie of state-run Egyptian Natural Gas Holding Company (EGAS) told Reuters.

Abdel Badie did not identify the four companies. Seven firms, including London-based energy major BP, bid for the tender in October.

The country of about 90 million relies heavily on gas to generate power for households and industry, but has had difficulty securing imports because it lacks a terminal to process LNG.

But after two years of delays, Egypt contracted Norway's Hoegh LNG for a floating storage and regasification unit, opening the door to LNG imports once the terminal is operational by the end of March.

Since the deal with Hoegh was finalized, Egypt has signed a deal with Algeria for six LNG cargoes and expects to complete an agreement with Russia's Gazprom later this month.

Norway to Remain Stable Gas Supplier to EU

Norway will remain a stable gas supplier to Europe for many years to come, Norwegian Prime Minister Erna Solberg said.

The announcement was made at a press briefing after her meeting with President of the European Council Donald Tusk in Brussels, Belgium.

"We have discussed interdependence on energy security in Europe. And I would like to underline that Norway is and will continue to be a stable and reliable gas supplier to the EU for many years to come," Solberg told journalists.German Energy Security Not Compromised as Russia Scraps Ukraine Gas Transit According to Solberg, it is important for Norway to be involved in discussing energy security in Europe as it might help reach transparency in all decisions related to the energy sector.

The news came amid the efforts of the European Council to reduce Europe's dependence on Russian gas and clarify expectations by Europe that Norway will remain a consistent fuel supplier.

In March 2014, the export of Norwegian gas to Europe set a record, when Gassco, a Norwegian gas transport system operator, reported a 10 percent increase in export to Belgium, France and Germany. The gas export to EU at the time was measured to be a total of 233 million cubic meters per day.

OPEC, Aramco Happy With Oil Price

 

OPEC Secretary General Abdalla Salem El-Badri recently told a Davos audience that OPEC's decision not to restrict supply to bolster prices was "a pure economic decision" and logical.

"It was a pure economic decision," said El-Badri.

"I don't understand, everyone is crying [and saying this was a] decision against the US, [it is a] war between Saudi and US.

"It is all nonsense.  It is the logic."

He said that if OPEC had decided to restrict supply now, it would have been expected to restrict it again and again in future as non-OPEC supply increased.

Echoing the comments, Saudi Aramco CEO Khalid A Al-Falih suggested prices had been artificially high, having been "propped up by geopolitics."

"The bubble of fear burst [in 2014]," he said, resulting in a faltering of confidence in sustainable high prices, he said.

"People will be more careful before committing large sums to the oil and gas industry [in future]."

 

Eni CEO Urges OPEC to Act Now

 

The head of Italian energy company Eni Spa urged OPEC to act to restore stability in oil prices, which he warned could overshoot to $200 per barrel several years down the road because of low investment now.

Claudio Descalzi told Reuters Television he expected prices to stay low for 12-18 months but then start a gradual recovery as US shale oil production began falling.

Oil prices have sunk by almost 60 percent since June to below $50 a barrel due to a large supply glut. The price slide accelerated after the Organization for Petroleum Exporting Countries (OPEC) decided in November not to cut production.

Speaking on the sidelines of the World Economic Forum in Davos, Switzerland, Descalzi said the oil industry will cut capital spending by 10-13 percent this year as a result of the oil price collapse.

However, he said the world should avoid a further massive drop in investment in oil exploration and production as it would create oil shortages in the future, leading to price spikes.

CNPC Focuses on Natural Gas

Stung by the slump in crude oil prices, China National Petroleum Corp., the nation’s biggest energy producer, said it will speed up natural gas exploration in 2015 and take “revolutionary measures” to cut costs.

CNPC also signaled its caution on the outlook for crude by pledging to focus on domestic oil and gas fields over foreign projects, according to comments from Chairman Zhou Jiping posted to the state-owned company’s website.

CNPC is using its annual work conference in Beijing, which runs from Sunday through Tuesday, to set its strategy for the year ahead. Zhou’s comments follows a steep cut in Citigroup Inc.’s 2015 target price on the company’s main listed unit, PetroChina Co. (857), citing the impact of lower oil prices.

Big oil companies are ratcheting back investment and costs as they deal with a 56 percent drop in the price of Brent crude since June due to a global glut. CNPC and its state-owned peers are also in the throes of delivering on government-mandated reforms to give markets a more decisive say in China’s economy.

“Natural gas could be the more economical fuel to produce than crude under the low oil price environment,” said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC. “In the longer term, natural gas has more growth potential in China than crude as the latter is more likely to just post slow-paced growth for many years to come.”

 

Maintaining steady domestic supplies of oil and gas given uncertainty on the outlook for crude is “the right way to maintain China’s energy security no matter what happens outside the country,” said Yu.

Emirates Debates Airfare Cut on Lower Oil Prices

Dubai's flagship airline, Emirates, is studying whether to cut the fuel surcharge it passes on to customers to reflect recent drops in oil prices, its president said in The National, an Abu Dhabi-based newspaper.

Tim Clark also said the falling prices -- oil is now about 60 percent cheaper than it was at its June peak -- would be "a huge boost" to the airline's 2014 earnings. That should offset disruption from runway work at its home airport and a decline in business with Russia, he said.

Emirates has been reviewing the impact of lower oil prices since November and is likely to introduce new prices in April. The new prices will take into account the Emirates fuel surcharge and other factors.

"The oil price fall has given us the opportunity to review our whole pricing structure," Tim Clark said at the World Economic Forum in Davos, according to comments in The National.

Emirates is the second of the three major Persian Gulf-based airlines to announce possible price cuts. Earlier this month, the chief executive of Qatar Airways said it would reduce its fuel surcharge, without saying when or to what extent.

While considering what benefit it can pass on to consumers, Emirates will maintain the margins needed for investment in expansion and to meet profit levels, the National quoted Clark as saying.

The Dubai-based carrier reported a profit of 1.9 billion dirham (345 million pounds) in the six months to Sept. 30, with fuel accounting for 38 percent of Emirates' operating costs in the period.

The 11.8 percent rise came despite an expected loss of around 1 billion dirham of revenue caused by disruption during the upgrading and refurbishing of the two runways at Dubai International Airport between May and July.

 

Declining traffic on its Russian services could also affect full-year earnings, with the airline reducing capacity to Moscow and St. Petersburg, Clark was quoted as saying.

The ruble has almost halved against the dollar since July as oil prices fell and the West imposed sanctions on Russia over its role in Violence in Ukraine.

Saudi Oil Minister Naimi to Stay for Now

Saudi Arabia's new King Salman was quick to keep veteran oil minister Ali al-Naimi in a message aimed at calming a jittery energy market mindful of Naimi's powerful role within the OPEC.

The 79-year-old Naimi has been a leading figure in the market for two decades and successfully argued in November that OPEC should maintain the production ceiling previously agreed upon, despite a sharp fall in oil prices in order to safeguard market share.

That policy is unlikely to change under Salman, analysts say.

"What is happening now is the result of the Kingdom policy, not just the King's policy," said analyst Yasser Elguindi of Medley Global Advisors. "The Kingdom will continue to make policy based solely on economic rather than political considerations. The oil weapon has long been defunct."

With Naimi to stay for now, analysts said the focus was on for how long, as his departure could impact Saudi oil policy, OPEC and oil prices generally.

"Naimi is very likely to stay in the short run, not to make it look like the new king is gearing up for a policy change... there was talk he would be handing over in the coming year or so ...In fact, this might delay his retirement somewhat," said analyst Samuel Ciszuk of the Swedish Energy Agency.

"I think it will be difficult to change ministers in the current situation. If Naimi goes I would think that he would prefer to go after there is some order put back into OPEC," said Olivier Jakob from consultancy Petromatrix.

Naimi's successor would be just the fifth oil minister in Saudi history. His predecessors were Abdullah al-Tariki (1960-1962), Ahmed Zaki Yamani (1962-1986) and Hisham Nazer (1986-1995).

Khalid al-Falih, chief executive of state giant Saudi Aramco, and Saudi Deputy Oil Minister Prince Abdulaziz bin Salman are among the top contenders for the position, analysts say.

Naimi was promoted to the top oil job in 1995 after joining Saudi Aramco at the age of 12 as an office boy and rising to become CEO.

Bulgaria; Unable to Halt South Stream Construction

 

Sofia cannot move to suspend activities related to the construction of the South Stream gas pipeline, a former Energy Minister and current MP said.

"If we suspend activities unilaterally... this would be a violation of the shareholders' agreement between the two shareholders. This is why we cannot put an end to the issuance of permits," Delyan Dobrev, who heads Parliament's Energy Committee, told the Bulgarian National Television.

He was referring to the shareholders at South Stream Bulgaria AD, a joint venture set up in 2010 by state-owned Bulgarian Energy Holding (BEH) and Russian energy giant Gazprom to be in charge of the pipeline's construction on Bulgarian soil. On Friday, South Stream Bulgaria CEO Dimitar Gogov announced his entity was still operational and was being financed by the shareholders.

Gogov then revealed activities aimed at obtaining a final construction permit were still being carried out.

On Sunday Dobrev blamed Russia for failing to provide an official announcement that the project was over.

South Stream was declared abandoned by Russian President Vladimir Putin in December. Another project, the so-called "Turkish Stream", was announced as a substitute.

But Dobrev believes the latter pipeline is not economically feasible. He told the BNT that "building a gas pipeline via Turkey to feed Eastern Europe is like departing for Plovdiv from Sofia and passing through Vratsa and Gabrovo to make it shorter." (Plovdiv is in Bulgaria's south, while Vratsa and Gabrovo are in the north.)

In his words, Turkish Stream is unlikely to happen for this reason.

Moscow announced earlier in January that it was intending to redirect the entire gas flow via Ukraine to Turkish Stream once it was completed, urging Europe to prepare for the shift.

UK MPs Urge Fracking Moratorium

 

A group of British lawmakers has called for a moratorium on shale gas fracking, saying developing the unconventional gas resources was incompatible with targets to fight climate change.

The British government is counting on getting shale gas out of the ground to help stem a decline in the country's North Sea energy resources and reduce its dependence on gas imports.

In a report accompanying an amendment to a proposed law to be discussed in parliament, members of the Environmental Audit Committee said they want to see a moratorium on all shale fracking.

"A moratorium on the extraction of unconventional gas through fracking is needed to avoid both the inconsistency with our climate change obligations and to allow the uncertainty surrounding environmental risks to be fully resolved," the members of parliament (MPs) said in the report.

Britain is legally bound to reduce greenhouse gas emissions by at least 80 percent by 2050, and cutting reliance on fossil fuels in the energy mix is an essential part of this goal.

Environmental Committee MPs, including the Conservative Party's former environment minister Caroline Spelman and the Green Party's ex-leader Caroline Lucas, said Britain could not get enough shale gas out of the ground to make its development commercially viable.

The lawmakers also expressed concern about environmental risks linked to fracking, such as chemical leaks into groundwater resources and disposal of waste water produced in the process.

They added that if a country-wide moratorium was not imposed, fracking should at least be banned from national parks and other areas of environmental importance.

Britain imposed a moratorium on fracking in 2012 after a series of earth tremors were measured near a shale gas drilling site in northwest England.

A number of independent reports subsequently judged shale gas fracking to be safe and the government lifted the ban but imposed stricter monitoring guidelines.

Oil Price Falling; Benefits and Disadvantages for China

 

By Shuaib Bahman

 

The unprecedented fall in oil prices in recent months has elicited mixed reactions with regard to its impacts on producers and consumers. China, an economically developing country with daily growing energy consumption, plays a significant role in the balance of world markets. When China moved to get involved in global transactions in the early 21^st century by joining the World Trade Organization (WTO) in 2001, oil prices reached $100, up $20. At that time, oil demand grew in China, Japan and Britain alike and that significantly influenced markets.

In 2013, China surpassed the US as the largest importer of liquid fuel. China’s energy consumption in the coming years is a determining factor in oil pricing.

Plunging oil prices would have both positive and negative impacts on the economy of China.

In this article, we try to study the effect of China’s economic growth on energy consumption while examining energy strategy adopted by this country, as well as profits and losses for China as oil prices keep falling.

 

Economic Growth and Energy Consumption

 

With an average 20% annual growth rate over the past three decades, China has become the record holder of sustainable economic growth in history. China’s economic growth remained untouched when Asia experienced economic crisis in 1997 and the world plunged into economic downturn in 2008. China saw its economic growth increase seven times, after it carried out market reforms in the 1980s.

The fast trend of industrialization in China in the past decade has increased this country’s demand for energy. China’s energy consumption grew 300% in 2012 compared with 2000. This growth was related to all sources of energy and while China has become the world’s largest economy, the consumption of energy commodities like coal, iron ore as well as oil and gas has increased in this country.

During the three-year period leading to 2012, oil consumption in China rose from 1.7 mb/d to 10.2 mb/d, natural gas consumption increased from 380 bcf/year to 5.3 tcf/year while coal consumption went from 727 million tons a year to 4 trillion tons a year.

China imported 281.92 million tons of crude for $219.6 billion in 2013 to become the largest oil importer in the world.

China’s proven oil reserves stand at 16 billion barrels which constitute only 2.3% of the world’s total reserves. But China alone houses 22% of the world’s entire population and imports 6 mb/d of crude oil to meet 60% of its consumption.

According to the US Energy Information Administration, China is forecasted to consume 3 mb/d more oil in 2020 compared with 2012. This amount of oil constitutes one-fourth of the world’s growing demand over the same period. That shows China’s dependence on energy produced by other countries, as well as energy market developments. China’s demand for energy is likely to grow faster than other big economies. Therefore, China has no option but to rely further on oil imports.

According to Oxford Economics, China’s economy is predicted to grow 7% in the coming decade and remain at 6.5% for the following decade. That would place China in the rank of the fastest growing economy among economic giants in the world. The world’s average economic growth stands at 3.6%.

Although due to infrastructural changes in China, the economic growth of this country is likely to be a bit lower, China remains at large distance from other countries in terms of energy demand and it will continue to heavily depend on energy.

 

China’s Energy Strategy

 

Fast economic growth and growing energy consumption have largely changed China’s energy strategy. On the one hand, this country is forced to increase its domestic production while on the other; it is raising its energy imports.

China’s domestic oil production has grown from 2 mb/d to 4.4 mb/d over the past three decades, while China was an oil exporter 15 years after it embarked on economic reforms. China became again an oil importer in 1993 and it was the world’s largest oil importer in 2013.

Although China, accounting for 12% of world’s energy consumption, is instrumental in the world energy market, it is worried that powerful rivals like the US and Russia would get their hands on energy supply security in the future. For this reason, China is making efforts to acquire a major share of the world energy market. In this regard, China’s energy strategy is based on the four following approaches:

 

1. Development of resources and diversifying sources of oil import
2. Increasing oil imports from Africa and Latin America and shifting from Middle East to other regions.
3. Building oil storage facilities to deal with possible oil import halt
4. Boosting energy cooperation at regional and international levels

 

In general, it seems that energy consumption in China will keep growing at a faster rate as long as its population and economic growth goes on. To that effect, production, distribution and consumption of energy will become a major challenge for China in the coming years. Therefore, energy supply will be a major cause of concern for Chinese leaders. Therefore, energy prices and their fluctuations can significantly affect China’s economic future and bring profits or losses to this country.

 

Positive and Negative Impacts of Oil Price Fall

 

It has become a general perception that high oil prices benefit producers while low prices are in the interest of consumer countries. But the fact is that any temporary or permanent fluctuation, which makes prices unrealistic, will harm both producers and consumers and will pose challenges to their economies.

As far as China is concerned, low energy prices benefit China in the short term, but they will produce losses for China’s economy in the long term.

Low energy prices will have at least three positive effects on China’s economy:

 

1. Economic Growth: According to estimates, it seems that low oil prices in 2014 have cut China’s import costs by around $17 billion. China’s economic growth is estimated to rise between 0.14% and 0.36% in 2015 if oil prices continue to decline by 50%. In the first quarter of 2014, China’s gross domestic product (GDP) stood at 7.4%, lower than the predicted 7.5%. Moreover, during the last quarter of 2014, China’s economic performance turned out to be disappointing as the country registered the lowest annual economic growth rate in 25 years. Official data shows China’s industrial growth fell by 4.2% to 108.85 billion Euros last November, unprecedented since August 2012. Therefore, low prices are shoring up China’s economy at a time China’s 2014 economy plunged into recession. Currently, lower production costs due to low oil prices can help China boost its economic growth.
2. Energy Reforms: A long-time challenge in China pertains to reforms in the energy sector of the country. Low oil prices and less demand for black gold have made conditions more conducive to reforming the pricing mechanism of this vital energy commodity. To that effect, the Chinese government can take practical action. Since China’s energy sector is under state monopoly, Chinese oil companies are unwilling to undergo reforms as long as oil prices stand low. However, under the present circumstances, the Chinese government can take steps towards reforming its energy sector in light of falling oil prices. Therefore, current low oil prices have made the conditions favorable for the Chinese government to conduct energy reforms.
3. Energy Storage: Precise data is not available about China’s strategic stockpile and its storage capacities, but low oil prices seem to have convinced China to take maximum benefit from the opportunities available. After the end of the first phase of boosting strategic energy stockpile in 2009, China is apparently busy with the second phase of strategic energy storage. The volume of China’s crude oil storage is equivalent to 30-day oil imports. China plans to increase its storage volume to 600 million barrels or 90-day imports. In its latest estimate, Thomson Reuters announced that China’s crude oil imports exceeded 31 million tons (more than 7 mb/d) for the first time in December 2014, up 10% month-on-month. It shows that thanks to plunging oil prices due to supply glut in 2014, China has more than doubled its strategic crude oil storage.

 

Oil price slump is beneficial to China in the short term, but it would pose challenges for this country in the long term:

 

1. Imports Replace National Production

 

If oil prices continue to slump, the suppliers of oil in China will see their production costs increase by 25% and then they would stop producing. PetroChina is a case in point. After oil prices went on downward trend, PetroChina, which is the main producer of oil and gas in China and owner of some refineries in the country, announced plans to cut production from Daqing oil field. PetroChina has decided to cut production from Daqing by 1.5 mb/d at a time it experienced 40-million-ton production capacity over the past seven years.

PetroChina, which supplies one-fourth of China’s oil demand, has produced 50 million tons a year of oil over the past 27 years. Now it plans to cut its production to 32 million tons by 2020. From the viewpoint of managers of this company, lowering oil production is a reasonable decision because imports are more economical for this country in light of low oil prices. But, switching to imports from national production will in the long term cause problems for China’s petroleum industry and will make this country fully dependent on oil imports. New fluctuations and sudden oil price hike could give rise to numerous security and economic consequences for China.

 

2. Stagnation in Chinese Products Market

 

In the short term, low oil prices would cut production costs in China, but this country will lose major markets for its products in the long term. Oil producers will see their purchase power decline in case their revenues fall due to low oil prices. That would definitely affect China’s transactions with its customers. Therefore, China will not benefit too much from low energy prices.

 

3. Oil Companies’ Loss

 

Chinese oil companies have invested $73 billion in world energy assets since 2011 in order to supply growing demand of the country. At present, China is active in more than 40 countries and it controls around 7% of the world oil production. But oil price slide could affect investment by Chinese oil companies and pose challenges to them because low oil prices will make investment in major projects non-profitable and such objectives would no longer be profitable for the Chinese companies. Furthermore, low oil prices will cause lots of problems for producers and that would challenge their security and stability. That would dissuade big companies from making major investments. In the past, China’s oil companies had expressed their discontent with obstacles to investment in politically unstable countries like Sudan, Iraq, Syria and Libya.

 

Energy Security, Alternative to Price Slide

 

The consequences of oil price fall are heralding big changes the world is poised to experience in the future. The monetary and financial policies and geopolitical activities of all countries are expected to change significantly as the future of energy markets are changing. That would provide China with a variety of opportunities and challenges. On the one hand, China can significantly affect prices in the world markets due to its daily growing consumption while on the other it may benefit or suffer losses from oil price decline.

In the short term, China may be able to find a solution to meet its oil needs by importing oil, purchasing the shares of oil producing companies and take over oil fields. But in the long term, low oil prices will directly affect the economic recession of the world’s most populated country. Therefore, China is seeking to stabilize prices at a reasonable level and secure energy supply rather than to wait for low oil and gas prices.

The Chinese are well aware that low oil prices will leave more negative impacts on the economy of the world’s most populated economy in the long term. Given the fact that China’s economic policies significantly affect oil prices in 2015, Beijing is likely to reconsider its energy strategy. For China, energy security is more significant than low energy prices. To that effect, China’s energy approach is regulated based on perpetual energy security at acceptable prices rather than price fluctuations and decline.                 

        

Oil Price Falling; Benefits and Disadvantages for China

 

By Shuaib Bahman

 

The unprecedented fall in oil prices in recent months has elicited mixed reactions with regard to its impacts on producers and consumers. China, an economically developing country with daily growing energy consumption, plays a significant role in the balance of world markets. When China moved to get involved in global transactions in the early 21^st century by joining the World Trade Organization (WTO) in 2001, oil prices reached $100, up $20. At that time, oil demand grew in China, Japan and Britain alike and that significantly influenced markets.

In 2013, China surpassed the US as the largest importer of liquid fuel. China’s energy consumption in the coming years is a determining factor in oil pricing.

Plunging oil prices would have both positive and negative impacts on the economy of China.

In this article, we try to study the effect of China’s economic growth on energy consumption while examining energy strategy adopted by this country, as well as profits and losses for China as oil prices keep falling.

 

Economic Growth and Energy Consumption

 

With an average 20% annual growth rate over the past three decades, China has become the record holder of sustainable economic growth in history. China’s economic growth remained untouched when Asia experienced economic crisis in 1997 and the world plunged into economic downturn in 2008. China saw its economic growth increase seven times, after it carried out market reforms in the 1980s.

The fast trend of industrialization in China in the past decade has increased this country’s demand for energy. China’s energy consumption grew 300% in 2012 compared with 2000. This growth was related to all sources of energy and while China has become the world’s largest economy, the consumption of energy commodities like coal, iron ore as well as oil and gas has increased in this country.

During the three-year period leading to 2012, oil consumption in China rose from 1.7 mb/d to 10.2 mb/d, natural gas consumption increased from 380 bcf/year to 5.3 tcf/year while coal consumption went from 727 million tons a year to 4 trillion tons a year.

China imported 281.92 million tons of crude for $219.6 billion in 2013 to become the largest oil importer in the world.

China’s proven oil reserves stand at 16 billion barrels which constitute only 2.3% of the world’s total reserves. But China alone houses 22% of the world’s entire population and imports 6 mb/d of crude oil to meet 60% of its consumption.

According to the US Energy Information Administration, China is forecasted to consume 3 mb/d more oil in 2020 compared with 2012. This amount of oil constitutes one-fourth of the world’s growing demand over the same period. That shows China’s dependence on energy produced by other countries, as well as energy market developments. China’s demand for energy is likely to grow faster than other big economies. Therefore, China has no option but to rely further on oil imports.

According to Oxford Economics, China’s economy is predicted to grow 7% in the coming decade and remain at 6.5% for the following decade. That would place China in the rank of the fastest growing economy among economic giants in the world. The world’s average economic growth stands at 3.6%.

Although due to infrastructural changes in China, the economic growth of this country is likely to be a bit lower, China remains at large distance from other countries in terms of energy demand and it will continue to heavily depend on energy.

 

China’s Energy Strategy

 

Fast economic growth and growing energy consumption have largely changed China’s energy strategy. On the one hand, this country is forced to increase its domestic production while on the other; it is raising its energy imports.

China’s domestic oil production has grown from 2 mb/d to 4.4 mb/d over the past three decades, while China was an oil exporter 15 years after it embarked on economic reforms. China became again an oil importer in 1993 and it was the world’s largest oil importer in 2013.

Although China, accounting for 12% of world’s energy consumption, is instrumental in the world energy market, it is worried that powerful rivals like the US and Russia would get their hands on energy supply security in the future. For this reason, China is making efforts to acquire a major share of the world energy market. In this regard, China’s energy strategy is based on the four following approaches:

 

1. Development of resources and diversifying sources of oil import
2. Increasing oil imports from Africa and Latin America and shifting from Middle East to other regions.
3. Building oil storage facilities to deal with possible oil import halt
4. Boosting energy cooperation at regional and international levels

 

In general, it seems that energy consumption in China will keep growing at a faster rate as long as its population and economic growth goes on. To that effect, production, distribution and consumption of energy will become a major challenge for China in the coming years. Therefore, energy supply will be a major cause of concern for Chinese leaders. Therefore, energy prices and their fluctuations can significantly affect China’s economic future and bring profits or losses to this country.

 

Positive and Negative Impacts of Oil Price Fall

 

It has become a general perception that high oil prices benefit producers while low prices are in the interest of consumer countries. But the fact is that any temporary or permanent fluctuation, which makes prices unrealistic, will harm both producers and consumers and will pose challenges to their economies.

As far as China is concerned, low energy prices benefit China in the short term, but they will produce losses for China’s economy in the long term.

Low energy prices will have at least three positive effects on China’s economy:

 

1. Economic Growth: According to estimates, it seems that low oil prices in 2014 have cut China’s import costs by around $17 billion. China’s economic growth is estimated to rise between 0.14% and 0.36% in 2015 if oil prices continue to decline by 50%. In the first quarter of 2014, China’s gross domestic product (GDP) stood at 7.4%, lower than the predicted 7.5%. Moreover, during the last quarter of 2014, China’s economic performance turned out to be disappointing as the country registered the lowest annual economic growth rate in 25 years. Official data shows China’s industrial growth fell by 4.2% to 108.85 billion Euros last November, unprecedented since August 2012. Therefore, low prices are shoring up China’s economy at a time China’s 2014 economy plunged into recession. Currently, lower production costs due to low oil prices can help China boost its economic growth.
2. Energy Reforms: A long-time challenge in China pertains to reforms in the energy sector of the country. Low oil prices and less demand for black gold have made conditions more conducive to reforming the pricing mechanism of this vital energy commodity. To that effect, the Chinese government can take practical action. Since China’s energy sector is under state monopoly, Chinese oil companies are unwilling to undergo reforms as long as oil prices stand low. However, under the present circumstances, the Chinese government can take steps towards reforming its energy sector in light of falling oil prices. Therefore, current low oil prices have made the conditions favorable for the Chinese government to conduct energy reforms.
3. Energy Storage: Precise data is not available about China’s strategic stockpile and its storage capacities, but low oil prices seem to have convinced China to take maximum benefit from the opportunities available. After the end of the first phase of boosting strategic energy stockpile in 2009, China is apparently busy with the second phase of strategic energy storage. The volume of China’s crude oil storage is equivalent to 30-day oil imports. China plans to increase its storage volume to 600 million barrels or 90-day imports. In its latest estimate, Thomson Reuters announced that China’s crude oil imports exceeded 31 million tons (more than 7 mb/d) for the first time in December 2014, up 10% month-on-month. It shows that thanks to plunging oil prices due to supply glut in 2014, China has more than doubled its strategic crude oil storage.

 

Oil price slump is beneficial to China in the short term, but it would pose challenges for this country in the long term:

 

1. Imports Replace National Production

 

If oil prices continue to slump, the suppliers of oil in China will see their production costs increase by 25% and then they would stop producing. PetroChina is a case in point. After oil prices went on downward trend, PetroChina, which is the main producer of oil and gas in China and owner of some refineries in the country, announced plans to cut production from Daqing oil field. PetroChina has decided to cut production from Daqing by 1.5 mb/d at a time it experienced 40-million-ton production capacity over the past seven years.

PetroChina, which supplies one-fourth of China’s oil demand, has produced 50 million tons a year of oil over the past 27 years. Now it plans to cut its production to 32 million tons by 2020. From the viewpoint of managers of this company, lowering oil production is a reasonable decision because imports are more economical for this country in light of low oil prices. But, switching to imports from national production will in the long term cause problems for China’s petroleum industry and will make this country fully dependent on oil imports. New fluctuations and sudden oil price hike could give rise to numerous security and economic consequences for China.

 

2. Stagnation in Chinese Products Market

 

In the short term, low oil prices would cut production costs in China, but this country will lose major markets for its products in the long term. Oil producers will see their purchase power decline in case their revenues fall due to low oil prices. That would definitely affect China’s transactions with its customers. Therefore, China will not benefit too much from low energy prices.

 

3. Oil Companies’ Loss

 

Chinese oil companies have invested $73 billion in world energy assets since 2011 in order to supply growing demand of the country. At present, China is active in more than 40 countries and it controls around 7% of the world oil production. But oil price slide could affect investment by Chinese oil companies and pose challenges to them because low oil prices will make investment in major projects non-profitable and such objectives would no longer be profitable for the Chinese companies. Furthermore, low oil prices will cause lots of problems for producers and that would challenge their security and stability. That would dissuade big companies from making major investments. In the past, China’s oil companies had expressed their discontent with obstacles to investment in politically unstable countries like Sudan, Iraq, Syria and Libya.

 

Energy Security, Alternative to Price Slide

 

The consequences of oil price fall are heralding big changes the world is poised to experience in the future. The monetary and financial policies and geopolitical activities of all countries are expected to change significantly as the future of energy markets are changing. That would provide China with a variety of opportunities and challenges. On the one hand, China can significantly affect prices in the world markets due to its daily growing consumption while on the other it may benefit or suffer losses from oil price decline.

In the short term, China may be able to find a solution to meet its oil needs by importing oil, purchasing the shares of oil producing companies and take over oil fields. But in the long term, low oil prices will directly affect the economic recession of the world’s most populated country. Therefore, China is seeking to stabilize prices at a reasonable level and secure energy supply rather than to wait for low oil and gas prices.

The Chinese are well aware that low oil prices will leave more negative impacts on the economy of the world’s most populated economy in the long term. Given the fact that China’s economic policies significantly affect oil prices in 2015, Beijing is likely to reconsider its energy strategy. For China, energy security is more significant than low energy prices. To that effect, China’s energy approach is regulated based on perpetual energy security at acceptable prices rather than price fluctuations and decline.                 

        

R&D Role in Iran’s Petroleum Industry

 

Iran’s petroleum industry needs to benefit from state-of-the-art technologies in the world in order to undergo development. Access to these new technologies, as an important factor in production hike, needs research. Undoubtedly, the technologies currently used in this industry are the result of studies conducted by Iranian researchers.

Iran’s petroleum industry no longer thinks of purchasing technology and technical savvy with oil revenues, but it thinks of developing knowledge and technology for achieving wealth. That is the point underscored by Minister of Petroleum Bijan Namdar Zangeneh.

Over recent years, Iran’s Ministry of Petroleum has motivated its subsidiaries to benefit from new technologies. National Iranian Oil Company (NIOC), one of the main four subsidiaries of Ministry of Petroleum, has conducted widespread research to meet the needs of Iran’s petroleum industry in the field of research and technology.

With a view to making optimal use of oil and gas reservoirs in the country, the R&D Directorate of NIOC has managed to accomplish a number of research projects with the help of Research Institute of Petroleum Industry, Petroleum University of Technology and Oil and Gas Reservoirs Enhanced Recovery Research Center. Development of technologies for exploration, enhanced recovery, well drilling, production and processing are among the main objectives of the R&D Directorate of NIOC.

For more clarification, Iran Petroleum has conducted an interview with Mohammad-Ali Emadi, director of research and technology at NIOC.

 

Q: How do you evaluate significance of research and technology in the development of petroleum industry?

A: Research and technology is instrumental in the oil and gas industries. The reason is that fossil energy consumption produces pollution and environmental obligations require paying more attention to this issue. That necessitates benefiting from research and technology. Minimizing consumption of hydrocarbon resources is another option for reducing pollution. That could be resolved with the help of research and technology.

Generally speaking, in the petroleum industry, boosting output, increasing effectiveness and quality of commodity, reducing risk, reducing losses and increasing profits in oil companies and in the R&D Directorate are important issues. Recovery from hydrocarbon reserves and exploration of unconventional sources of fossil energy like shale oil and gas, production from oil and gas fields, drilling operations, refining and transmission all need utilizing advanced technologies.

 

Q: How do you compare research and technology in Iran and in countries in the Middle East region?

A: Geologically speaking, Iran and other countries in the region are located in similar sedimentary conditions. Since most regional countries are OPEC member states, the existence of huge hydrocarbon reserves in the region has caused massive activities to be conducted for exploring more information about reservoirs. There has been tough rivalry for respecting environmental obligations.

Iran and regional countries could be compared from different aspects in research and technology. An important issue is allocation of budget for research and technology. In Iran, due to special attention paid to this sector by the government and the parliament, 4% of domestic resources and 1% of capital resources are earmarked for research and technology.

However, the existence of some international impediments and reduction of oil revenues could negatively affect budget allocation for research and technology. If we want to compare Iran and regional countries, we should say that Iran is growing in research and technology in terms of human resources, facilities, laboratories and self-sufficiency efforts. In manufacturing, management and steering also, Iran’s petroleum industry is in better conditions than regional countries. Human resources, facilities, laws and regulations are appropriate.

 

Q: What does Iran’s petroleum industry need in research and technology?

A: The needs of Iran’s petroleum industry in research and technology stem from existing challenges. That involves the petroleum industry and the environment. In order to improve the petroleum industry, costs have to be cut while the quality of petroleum products like gasoline and gasoil should improve.

Management of petroleum industry operations like exploration, drilling, production, transmission and exports needs to comply with the state-of-the-art technologies. Regarding research and technology strategies, eleven sections have been defined mainly in the upstream sector. They are aimed at upgrading the level of NIOC at regional and international levels. They include projects conducted by RIPI, universities and research centers. The findings of these projects are used by other companies.

 

Q: Are domestic capacities in research and technology able to meet the needs of Iran’s petroleum industry?

A: In response to this question, I would like to note that Iran’s petroleum industry faces numerous needs in research and technology ,and given the extent of activities in this industry with regard to human resources, facilities, technology management and methodology, this directorate needs more financial resources. Marco-management and improving the level of management in research and technology are of high significance and we should move from research-for-research to research-for-practice. We should further rely on technology and its effectiveness so that we would achieve wealth through knowledge. To that effect, we have earmarked more budgets for pilots and mass production so that a model could be designed for the private sector to be activated for the commercialization of projects.

 

Q: What’s the role of research and technology in Iran Petroleum Contract (IPC), the new model which is expected to be unveiled soon?

A: The Oil Contracts Revision Committee focuses on using the financial resources and technology developed by foreign companies so that the level of Iran’s petroleum industry would grow by benefiting from the state-of-the-art technologies. Therefore, in these contracts, one important point pertains to technology transfer and this time it is expected to be more beneficial for Iran. According to IPC, 50% of contracts should benefit from domestic manufacturing, technology and engineering. Management of this 50% share is very important and the capabilities of domestic companies should be in compliance with standards, time and budget.

 

Q: Are domestic manufacturers capable of meeting this demand?

A: Yes, the policies of Iran’s petroleum industry for manufacturing strategic equipment have been defined in 10 groups which include widely used equipment in the petroleum industry. Chief among this equipment are drilling bits, seamless pipes, CRA pipes, compressor and turbine, downhole pumps, intelligent pig and tubing pipes. Iranian companies are capable of manufacturing some of this equipment, but they would need more efforts to build others. Generally speaking, we have made significant progress in manufacturing equipment for petroleum industry in the country over recent years.

 

Q: Catalysts are vital for the petroleum industry. Our country has made valuable progress in indigenizing this important equipment. Would you please tell us more on that?

A: Since catalysts are widely used in Iran’s petroleum industry, mainly in petrochemical, refining and gas sectors, development of this product has made significant growth. In general, except for a limited number of catalysts which are not produced domestically, other catalysts used in the petroleum industry are made in Iran.

 

Q: How do you compare investment in research and technology by world oil giants and Iran?

A: In terms of investment in research and technology, Iran’s petroleum industry is far from world oil giants. Foreign companies are allocating huge budget to this field. We are currently facing budget deficit and our financial resources are both in rials and foreign currency. Therefore, we should not compare investment in research and technology by Iran and world oil giants. Today, knowledge-based companies have seen their revenues rise significantly in parks of science and technology. For example, Stanford University gains more than $60 billion annually from selling technical knowledge developed by its 2,000 knowledge-based companies. If knowledge-based companies are helped, the petroleum industry could be easily promoted in the region and the world. We are currently facing restrictions in research, but this problem is being resolved with the establishment of knowledge-based companies. It is hoped that Iran could rival big companies in terms of investment in research and technology in the future.

 

Q: What has been done for enhanced recovery from oil fields in Iran? Are any new methods being used?

A: For productivity in enhanced recovery, new management criteria need to be defined. Both hardware and software sectors need to be reformed so that enhanced recovery from oil and gas fields would improve. Moreover, due to the maturity of some oil fields in Iran, new methods of enhanced recovery have to be used for these fields. Gas injection, water injection and thermal methods are among them. The proper method would be used based on costs and economic estimates for each field. These methods have to be used in fields which meet conditions for enhanced recovery.

 

Q: How has Iran’s petroleum minister dealt with the issue of research and technology since taking office in 2013?

A: We can say that the volume of investment made by the new administration in petroleum industry research projects has increased significantly. Given the Iranian petroleum minister’s good knowledge of the country’s petroleum industry, there has been special focus on using state-of-the-art technology in this industry. The minister has supported research and technology in the petroleum industry by preparing logical mechanisms. He has been insisting on the point that the chain of knowledge and technology generation should result in manufacturing of products and that science should be commercialized so that the country’s needs would be met by converting knowledge to national wealth. The petroleum minister has always insisted on the acquisition of knowledge, research and technology and their transfer into production and petroleum industry.

Iran Masters Cryopump Technology

 

Indigenization and acquiring modern technical knowhow have always been a major cause of concern for Iran’s petroleum industry. This issue has become more important in recent years as managers of Iranian Ministry of Petroleum focus further on domestic capabilities for meeting the country’s needs. But the significance and advantages of commercialization and revenue generation should not be ignored. Managers of petroleum industry have, in recent years, explored obstacles to commercialization and sought approaches in order to guarantee investment in different sectors. Iran’s petroleum industry is estimated to attract several hundred billion dollars in investment in the coming decades with 50% to 70% spent on equipment purchase. The strategic nature of the petroleum industry and its dependence on foreign companies are being used as a lever of pressure against the country. Therefore, from the viewpoint of national security and political haggling, independence in the petroleum sector is very important. Every year, Iran’s petroleum industry is witnessing the end of monopoly by foreign companies. Iranian engineers recently managed to acquire technology for manufacturing pumps which used to be built only in the US, Germany and Japan. These pumps, unveiled in the presence of deputy petroleum minister Emad Hosseini, are able to operate in depths and under 48 degrees centigrade.

Faraj Pourvand, managing director of Iran Industrial Pumps Company which has manufactured these pumps, said: “Cryogenic pumps are used for pumping liquefied propane at very low temperature and for transferring LPG from refinery to ships carrying this energy commodity for export to other countries.” He said that the Iranian pumps enjoy the same quality as European pumps; moreover, they are even much better than the Asian ones. The price of domestically manufactured pumps is lower by a third than that of European ones, he added.

Design and manufacture of this pump lasted more than three years. According to studies, domestic manufacturing of pumps used in oil, gas and petrochemical industries and big water supply and power plant pumps has saved Iran more than $400 million. These pumps are installed 40 meters down liquefied propane and butane reservoirs in South Pars gas field. Due to their high sensitivity, operation in very low temperature and immersion in liquefied propane and butane, these pumps have a complicated design.

“By manufacturing these pumps, Iran is now among the four top producers. Due to the very low temperature of liquefied propane, cryogenic pumps have been designed for pumping this product,” he said.

These pumps are tested under 196 degrees centigrade with liquefied nitrogen. Manufacturing of this pump has cost IRR 20 billion.

Pourvand said the first series of these pumps are to be delivered to phases 17&18 of South Pars soon, adding that cryogenic pumps destined for Phase 14 of South Pars are being manufactured. Contracts are also being signed for cryopump manufacturing for phases 19 and 22-24. Over the past two years, 380 advanced pumps have been manufactured for Phase 14, more than 200 for phases 20-21 and 308 pumps for the Persian Gulf Star Refinery.

Emad Hosseini, deputy petroleum minister for engineering affairs, told the ceremony that Iran’s Ministry of Petroleum has managed to indigenize the most complicated industrial pumps by supporting domestic manufacturing. “We used to import the least sophisticated pumps,” he said.

He said there was no infrastructure for indigenizing petroleum industry equipment and commodities in the past eight years, adding that Ministry of Petroleum is transparently conducting such activities as electronic system of commodities as part of indigenization efforts.

Hosseini said Ministry of Petroleum is drafting a new directive in order to streamline administrative red tape, adding that the directive developed earlier deals with transportation costs, customs clearance and competitiveness of domestic manufacturing.

He expressed hope that the Ministry of Petroleum’s e-procurement system would be launched before March so that foreign commodities similar to those manufactured in Iran would not be allowed into the country.

Hosseini said all tenders for equipment manufacturing would be done based on a vendor list of domestic manufacturers.

He said 15% to 20% of equipment used in petroleum industry projects is rotary equipment, adding that Iran hopes to reach self-sufficiency in this field.

History of Buyback Deals in Iran

 

For more than one decade, buyback contracts have been the main mechanism for the development of oil and gas fields in Iran. Over this period, a large number of buyback contracts have been signed between National Iranian Oil Company (NIOC) and foreign oil companies. Since buyback has proven to be a successful instrument in attracting foreign investment into the oil sector, Iran’s legislative body has authorized NIOC to use buyback mechanism for both exploration and development of oil fields in special oil-rich regions in Iran.

Buyback originates from the 1974 Petroleum Law. This law imposed tough restrictions on foreign companies willing to invest in Iran’s upstream oil and gas sectors. According to Petroleum Law, adopted five years before Iran’s Islamic Revolution, the activity of foreign oil companies in exploration, development and production was limited to cases in which foreign companies were acting as contractor on behalf of NIOC. Signing of any contract, including concessions and production sharing were declared banned because foreign oil companies were not operating under supervision of NIOC. Instead, risk service contracts were approved and some such contracts were signed. These contracts were flexible in terms of volume of operation, investment and wages. Exploration and development costs and risks were covered by foreign oil companies which served as contractor for NIOC. In the meantime, if a commercially viable oil field was discovered and developed, a portion of its oil was sold to the foreign developer at market prices in order to recoup costs. If no such oil field was discovered the contract was terminated and only foreign oil company suffered losses.

 

Post-Revolution Contracts

 

Following the victory of the Islamic Revolution, Iranian Constitution approved tough restrictions on foreign investment in Iran. Many sectors of the economy were nationalized and foreigners were banned from establishing a company in Iran. But after Iraq invaded Iran in 1980, the Iranian parliament authorized NIOC to gain short-term, mid-term and long-term loans for financing five oil and gas projects. The loan was to be paid back by 100,000 b/d for three years. In 1981, the parliament authorized NIOC to sign contracts worth up to $3.2 billion for the development of North Pars and South Pars gas fields provided that all costs would be reimbursed through production from these fields. The Central Bank of Iran was also authorized to guarantee the reimbursement of costs.

 

New Buyback Model

 

A new model of buyback contract was then defined. According to this new type of buyback, foreign oil companies were required to operate oil projects in Iran at their own costs. After a project reached the production phase, foreign oil companies got back their investment. Since CBI guaranteed the recoupment of costs, the risk for any shortage of production was covered by NIOC. Foreign oil companies did not cover any risk and that was the difference between this type of buyback and the model defined later by NIOC to shift the risks to foreign partner.

 

Final Changes

 

The next step was taken in the budget bill for 1993. The NIOC was authorized to sign contracts worth up to $2.6 billion with foreign oil companies provided that:

1. The installments would be paid back exclusively through export of production from the project; therefore, there would be no guarantee for any decline in production.
2. Iran would use its maximum potential in designing, engineering, manufacturing and installation.
3. Technology transfer would be carried out through investment sharing agreements between Iranian and foreign companies.
4. At least 30% of domestically manufactured equipment would be used.

 

This law authorized foreign oil companies to invest in special oil and gas projects like the development of North Pars and South Pars fields, as well as Assaluyeh gas refinery under buyback deals.

Yazd, a City in Desert

 

Whatever grows in desert are patient and valiant trees standing tall benefitting from the least amount of water available. These trees without expecting to enjoy ideal circumstances surface in infertile desert and continue their lives.

Yazd is an adobe city built on frugality. People in Yazd are hard-working and clever. They first developed wind-catchers from mud. They also dug desert to reach water. People of Yazd planted trees in the middle of desert and left a legacy which surprised the entire world. Yazd subdued the desert.

This old city is almost entirely built in brown-red adobe clay, helping to blend it into the surrounding desert landscape and to keep its building interiors cool.

 

Jameh Mosque

 

One’s eyes adapt to this mono-color, after which the bright turquoise and intricate Persian Islamic design in the Jameh Mosque will make you feel like you’ve put on 3-D glasses. Gaze at the mosque’s designs long enough and they’ll dizzy you, pull you in and play tricks on your eyes as you try to discern the calligraphy, symmetry and symbolism buried within.

Yazd’s Friday Mosque, which is one of the largest and the most beautiful mosques in Iran, was built in the 8^th century AH when the Ilkhanid Dynasty was in power in Iran. The foundations for the mosque were first laid two centuries before.

The building which currently exists in Yazd spans around 10,000 square meters.

The mosque is a fine specimen of the Azari style of Persian architecture. The mosque is crowned by a pair of minarets, the highest in Iran, and the portal's facade is decorated from top to bottom in dazzling tile work, predominantly blue in color. Inside the mosque, there is a long arcaded courtyard where, behind a deep-set south-east (veranda), is a sanctuary chamber (shabestan). This chamber, under a squat tiled dome, is exquisitely decorated with faience mosaic: its tall faience altar, dated 1365, is one of the finest of its kind in existence.

This mosque is an important monument for a variety of reasons: First, it is an ancient architecture which has been used in Yazd’s religious buildings for centuries. Second is the mosaic decoration of rooftops. Third is the carving out of Quranic verses on white tiles set on a turquoise background in the altar. A collection of valuable Qurans are put on display there.

Two large minarets, measuring 50 meters high, were built under Shah Tahmasb of the Savafid dynasty.

The body of these minarets is covered with tiles graved with Arab admiration for God and Quranic verses.

 

Amir Chakhmaq Square

 

Amir Chakhmaq Shami and his wife, Seti Fatimeh built this square, in the 9th century AH. Hadji Qanbar Bazaar on the east side of the square was one of the buildings constructed by Nezameddin Hadj Qanbar Jahanshahi. The famous Mir Chakhmaq Mosque and theater for passion plays are located on the north of the square.

Amir Chakhmaq Complex is a prominent structure noted for its symmetrical sunken alcoves. It is a mosque located on a square of the same name. It also contains a caravanserai, a bathhouse, a cold water well, and a confectionery. At night, the building is lit up after twilight hours and after sun set with orange lighting in the arched alcoves which makes it spectacular.

The prominent structure has a three-storey elaborate façade of symmetrical sunken arched alcoves. It is the largest structure in Iran. In the centre, are two very tall minarets. The spiral staircase in one of the two minarets is said to create a feeling of claustrophobia, while it provides views of Yazd. Arcades have been added recently on the flanks to provide safety from traffic. Only the first floor above the ground level is accessible. There is a shopping complex in the basement of structure. This is a grand structure of which many innocents souls spent their lives.

 

Tallest Wind-Catcher

 

Dowlatabad Garden, built in 1160 AH, is among famous gardens in Iran. A wind-catcher installed in this garden is the tallest ever known in the world. Its archway provides an attractive view of the building.

This garden has an aggregate of different buildings which were designed and constructed during the time of Mohammad Taqi Khan in the Zandieh era. It was the residence of Khan , his government and officials. The wind trapper of this garden is 33 meters high and is considered an architectural masterpiece and a symbol of the Yazdi architects' genius, mental ability, talent and art. The most significant characteristics of the design of this building is believed to be the attempt of the architect in selecting tactful angles for providing the best views and landscape internally. The Dowlatabad garden is regarded as one of the sites worth visiting due to verdant gardening skill in landscape architecture, irrigation method, and in the richness of architectural design. It is for this reason that the same has been recorded as a historic building.

 

Alexander’s Prison

 

The city of Yazd has long won fame for housing the Alexander’s Prison. Some historians believe that after occupying Iran, Alexander of Macedonia sent people to exile in Yazd.

Alexander Prison is a five-century year old school. There is a well inside the courtyard which is 5 meter deep that according to local legends it has been built by Alexander the Great as a dungeon. Now, through a spiral staircase you can climb down the well, relax for some moments and have a drink in its nice teahouse. Some of the inner rooms have been changed into souvenir shops producing and offering handicrafts. From outside, an 18-meter tall dome distinguishes Alexander Prison from its surrounding buildings.

The 15^th-century domed school may be known as Alexander’s Prison because of a reference to this apparently dastardly place in a Hafez poem. It is not thoroughly clear whether the deep well in the middle of its courtyard was in fact built by Alexander the Great and used as a dungeon or not. The building itself is worth a look for the small display on the old city of Yazd, the clean toilets and the mercifully cool subterranean teahouse.

The early-11^th-century brick tomb of the 12 imams is almost next door to Alexander’s Prison. The once-fine (but now badly deteriorated) inscriptions inside bear the names of the Shiite Imams, though none are actually buried here.

 

Fire Temple

 

The majority of Iran’s Zoroastrian population lives in Yazd province. That is why Yazd is known as the province of fire temples. Varahram Fire Temple is the most famous fire temple of Zoroastrians, Varahram is widely known for the age of its fire, which is approximately 1,500 years old and never extinguished.

It originated in the Nahid Fire Temple situated in southern Fars province. Then it was shifted to the village of Haftador near Aqda. Later on, it was again taken to another village called Torkabad in Ardakan. The fire finally came to Yazd in 1325 from the cave of Eshgeft-e-Yazdan. Before the current Fire Temple was built, the fire was housed in Moubedan. But today, you can see it burning amidst the heart of the city in a well-known residential area of Yazd.

Built by the Zoroastrians based in Yazd and the country of India, this temple depicts architecture reminiscent of the ancient times of Persia.

Yazd, a City in Desert

 

Whatever grows in desert are patient and valiant trees standing tall benefitting from the least amount of water available. These trees without expecting to enjoy ideal circumstances surface in infertile desert and continue their lives.

Yazd is an adobe city built on frugality. People in Yazd are hard-working and clever. They first developed wind-catchers from mud. They also dug desert to reach water. People of Yazd planted trees in the middle of desert and left a legacy which surprised the entire world. Yazd subdued the desert.

This old city is almost entirely built in brown-red adobe clay, helping to blend it into the surrounding desert landscape and to keep its building interiors cool.

 

Jameh Mosque

 

One’s eyes adapt to this mono-color, after which the bright turquoise and intricate Persian Islamic design in the Jameh Mosque will make you feel like you’ve put on 3-D glasses. Gaze at the mosque’s designs long enough and they’ll dizzy you, pull you in and play tricks on your eyes as you try to discern the calligraphy, symmetry and symbolism buried within.

Yazd’s Friday Mosque, which is one of the largest and the most beautiful mosques in Iran, was built in the 8^th century AH when the Ilkhanid Dynasty was in power in Iran. The foundations for the mosque were first laid two centuries before.

The building which currently exists in Yazd spans around 10,000 square meters.

The mosque is a fine specimen of the Azari style of Persian architecture. The mosque is crowned by a pair of minarets, the highest in Iran, and the portal's facade is decorated from top to bottom in dazzling tile work, predominantly blue in color. Inside the mosque, there is a long arcaded courtyard where, behind a deep-set south-east (veranda), is a sanctuary chamber (shabestan). This chamber, under a squat tiled dome, is exquisitely decorated with faience mosaic: its tall faience altar, dated 1365, is one of the finest of its kind in existence.

This mosque is an important monument for a variety of reasons: First, it is an ancient architecture which has been used in Yazd’s religious buildings for centuries. Second is the mosaic decoration of rooftops. Third is the carving out of Quranic verses on white tiles set on a turquoise background in the altar. A collection of valuable Qurans are put on display there.

Two large minarets, measuring 50 meters high, were built under Shah Tahmasb of the Savafid dynasty.

The body of these minarets is covered with tiles graved with Arab admiration for God and Quranic verses.

 

Amir Chakhmaq Square

 

Amir Chakhmaq Shami and his wife, Seti Fatimeh built this square, in the 9th century AH. Hadji Qanbar Bazaar on the east side of the square was one of the buildings constructed by Nezameddin Hadj Qanbar Jahanshahi. The famous Mir Chakhmaq Mosque and theater for passion plays are located on the north of the square.

Amir Chakhmaq Complex is a prominent structure noted for its symmetrical sunken alcoves. It is a mosque located on a square of the same name. It also contains a caravanserai, a bathhouse, a cold water well, and a confectionery. At night, the building is lit up after twilight hours and after sun set with orange lighting in the arched alcoves which makes it spectacular.

The prominent structure has a three-storey elaborate façade of symmetrical sunken arched alcoves. It is the largest structure in Iran. In the centre, are two very tall minarets. The spiral staircase in one of the two minarets is said to create a feeling of claustrophobia, while it provides views of Yazd. Arcades have been added recently on the flanks to provide safety from traffic. Only the first floor above the ground level is accessible. There is a shopping complex in the basement of structure. This is a grand structure of which many innocents souls spent their lives.

 

Tallest Wind-Catcher

 

Dowlatabad Garden, built in 1160 AH, is among famous gardens in Iran. A wind-catcher installed in this garden is the tallest ever known in the world. Its archway provides an attractive view of the building.

This garden has an aggregate of different buildings which were designed and constructed during the time of Mohammad Taqi Khan in the Zandieh era. It was the residence of Khan , his government and officials. The wind trapper of this garden is 33 meters high and is considered an architectural masterpiece and a symbol of the Yazdi architects' genius, mental ability, talent and art. The most significant characteristics of the design of this building is believed to be the attempt of the architect in selecting tactful angles for providing the best views and landscape internally. The Dowlatabad garden is regarded as one of the sites worth visiting due to verdant gardening skill in landscape architecture, irrigation method, and in the richness of architectural design. It is for this reason that the same has been recorded as a historic building.

 

Alexander’s Prison

 

The city of Yazd has long won fame for housing the Alexander’s Prison. Some historians believe that after occupying Iran, Alexander of Macedonia sent people to exile in Yazd.

Alexander Prison is a five-century year old school. There is a well inside the courtyard which is 5 meter deep that according to local legends it has been built by Alexander the Great as a dungeon. Now, through a spiral staircase you can climb down the well, relax for some moments and have a drink in its nice teahouse. Some of the inner rooms have been changed into souvenir shops producing and offering handicrafts. From outside, an 18-meter tall dome distinguishes Alexander Prison from its surrounding buildings.

The 15^th-century domed school may be known as Alexander’s Prison because of a reference to this apparently dastardly place in a Hafez poem. It is not thoroughly clear whether the deep well in the middle of its courtyard was in fact built by Alexander the Great and used as a dungeon or not. The building itself is worth a look for the small display on the old city of Yazd, the clean toilets and the mercifully cool subterranean teahouse.

The early-11^th-century brick tomb of the 12 imams is almost next door to Alexander’s Prison. The once-fine (but now badly deteriorated) inscriptions inside bear the names of the Shiite Imams, though none are actually buried here.

 

Fire Temple

 

The majority of Iran’s Zoroastrian population lives in Yazd province. That is why Yazd is known as the province of fire temples. Varahram Fire Temple is the most famous fire temple of Zoroastrians, Varahram is widely known for the age of its fire, which is approximately 1,500 years old and never extinguished.

It originated in the Nahid Fire Temple situated in southern Fars province. Then it was shifted to the village of Haftador near Aqda. Later on, it was again taken to another village called Torkabad in Ardakan. The fire finally came to Yazd in 1325 from the cave of Eshgeft-e-Yazdan. Before the current Fire Temple was built, the fire was housed in Moubedan. But today, you can see it burning amidst the heart of the city in a well-known residential area of Yazd.

Built by the Zoroastrians based in Yazd and the country of India, this temple depicts architecture reminiscent of the ancient times of Persia.

Saving Petroleum Products

 

Yazd is one of the highly visited Iranian provinces; therefore, companies like National Iranian Oil Products Distribution Company (NIOPDC) plays a crucial role in providing services to residents. The NIOPDC branch in Yazd province distributes a variety of oil products including gasoline, gasoil, fuel oil, kerosene and jet fuel.

Mohammad Farazmand, manager of Yazd zone of NIOPDC, said 1.492 million liters of oil products were distributed across the province during the first three quarters of the Iranian calendar year (which starts in March). This volume of oil products distributed was down 305 million liters year-on-year.

“In order to reduce fuel consumption, two objectives are required to be followed up on. The first one is culture building. People should be convinced that the slightest reduction in fuel consumption could finance infrastructure and the future of the country and lead to development. The other objective should be sought in imposing legal obligations on the price of energy carriers,” he said.

Farazmand said improving public transportation system in Iran and particularly in underdeveloped provinces and cities could be of great help in saving fuel. He said that in some provinces people have to use their private cars due to underprivileged public transport system.

Regarding the number of gas stations in Yazd province, he said that there are 45 compressed natural gas (CNG) stations while four others are in the final stages of construction. He said that all cities in Yazd province have CNG stations and that fuel distribution takes place without any long queues.

Farazmand said the gas stations are operating at 40% of their capacity and expressed hope that growing CNG consumption in Yazd and other provinces would allow export of gasoline.

He said that two cities in Yazd province have yet no access to gas network. He added that 40,000 rural households still consume kerosene which the NIOPDC branch in Yazd province is supplying.

Farazmand said Yazd province is ranked the first among provinces in Iran in terms of per capita gasoil consumption. He said the consumption per capita stands at 1,498 liters, added that gasoil consumption is an index for development of a province.

Farazmand said Yazd owes its development to mines and greenhouses.

“Yazd province also lies on North-South transit route and many trucks headed to southern Iran cross this province,” he said.

“55% of gasoil is consumed in transportation, the share of agriculture is 7%, the share of industries is 9% and the share of power plants stands at 28%,” he added.

Farazmand also pointed to the health, safety, environment (HSE) certificate awarded to the NIOPDC zone in Yazd province and said that compliance with safety and environmental regulations won the company the certificate.

He also said drivers of oil tankers have received special training in order to minimize accidents. He added that although Yazd Zone has highest number of oil tankers, it has recorded the lowest rate of road accidents.