Siraf to End Crude Sales
Last February, Iran’s petroleum minister Bijan Zangeneh announced that the ground would be broken for the construction of eight gas condensate refineries in the coming months. That promise has now come true. The construction of the mini-refineries, known under Siraf project, has started.
On June 8, the ancient Siraf Port in the southern province of Bushehr, saw start of ground-breaking operations for the Siraf refining project which is aimed at putting an end to the crude sale of gas condensate, generation of value-added, job creation and guaranteeing maximum output from the supergiant offshore South Pars gas field which is being only operated by Iran and Qatar.
This article reviews the inauguration of one of the most important oil projects in Iran in the past months.
The ancient port of Siraf is one of the oldest in Bushehr province. It has a specific architecture. It used to house more than 300,000 people following different religions and cults.
Siraf used to be one of the most prosperous regions in Iran. It maintained massive business with Rome and Greece in Europe, Madagascar in Africa and China in Asia during the Sassanid and Islamic periods.
Potteries adorned with motifs, fabrics and jewelries, gypsum architecture, rooms decorated with artworks and two-storey or three-storey buildings are reminiscent of the ancient times. A deadly earthquake, which was followed by seven days of aftershocks, flattened the structures there in 367 AH.
Today, this port is set to restore its reputation by contributing to an increase in Iran’s refining capacity.
Siraf Refining Project
Siraf refining facilities are to be constructed on 300 ha of land in Pars II zone (Kangan) between development phases 13 and 19 of South Pars gas field in southern Iran. The total capacity of the refineries in this complex amounts to 480,000 b/d of gas condensate. In the first phase, Siraf plant is designed to produce 24,800 b/d of liquefied gas, 128,000 b/d of light naphtha, 147,600 b/d of heavy naphtha, 29,600 b/d of jet fuel and 149,600 b/d of gasoil.
The infrastructure in this project is to be completed in eight months. After that, construction of eight refineries, each with a capacity of 60,000 b/d, will start.
Each of eight companies working for Siraf project is committed to providing $300 million in equity, but they are not obliged to pay a lump sum. As the project makes progress, they would have to pay. This refinery would supply 70% of the feedstock needed for running petrochemical plants.
Namvaran, Gostaresh Energy Pasargad, Sazeh Nargan Falkon, Tapiko, Tanavob, Sata, Petro Farayand and Energy Amin Kasra are the companies involved in the construction of the eight gas condensate refineries.
The entire project is being financed and operated by the private sector. It is the first time Article 44 of the Construction, which stipulates privatization, is being implemented.
Start of Construction
Iran’s first vice president, Es’haq Jahangiri, told the inauguration of Siraf refining facilities construction that this project is one of macro-economic projects under way by Iran’s Ministry of Petroleum.
“One of the symbols of these economic policies is participation of people, which has been fully observed in this project. After the launch of his complex, one-third of its shares would be traded over-the-counter. The private sector is willing to enter this arena,” he said.
Selling Siraf Products
Addressing the ceremony, Zangeneh said: “We will continue the development of oil refineries in Jask [Port]. This is the first time that there has been subscription for the allocation of feedstock to refineries. The most qualified have been selected in terms of management and finance. Efforts will be made for the allocation of feedstock to petrochemicals through subscription.”
The minister said that the construction of Siraf refineries would not last over two years, adding that the operation will be accelerated if Iran’s economic conditions improve.
Noting that Iran’s policy is to stop crude sale of gas condensate, Zangeneh said: “By constructing these refineries, we would no longer export gas condensates, whose production would reach 1 mb/d after the completion of South Pars phases.”
“We will no longer have any problem for selling the petroleum products of these refineries. Even if these projects are operated by banks they would still be economical because the rate of return on investment would be 26%,” said the minister.
OTC Trading
Director of incorporated planning at National Iranian Oil Refining and Distribution Company (NIORDC), Shahaboddin Metaji, said 35% of the shares of Siraf refining project would be traded over the counter.
“Siraf refining project showed that people’s meager capitals could be used for the development of the petroleum industry,” he said.
Metaji said Siraf is the best option for avoiding the waste of gas condensates whose production is not controlled.
He said financial contributors to Siraf project are committed to trading at least 35% of the shares of the project off-exchange, for one year after its launch.
Largest Refining Project
Ali-Reza Sadeq-Abadi, managing director of Siraf Refining Infrastructure Company, said in the inauguration ceremony that investment in Siraf gas condensate refineries will return in nearly three years.
He said the 480,000-b/d gas condensate refineries are being financed by the private sector.
“There is a massive demand market for liquefied gas; therefore, marketing of the products supplied by this gas field would be easy,” he said.
Sadeq-Abadi said the Asian market is producing around 2.5 mb/d of gas condensate, 1 mb/d of which is exported and the rest is transformed into different products.
He said the project was divided into eight refineries, each costing $300 billion, in order to facilitate the finance.
Public Participation
The construction of eight Siraf gas refineries is a manifestation of participation of the private sector in Iran’s petroleum industry. There are major concerns about the project with finance being the most important one.
Metaji said National Development Fund of Iran (NDFI), Iran’s rainy day kitty awash with petrodollars, is expected to provide 70% of costs needed for this project.
He noted that Iran’s Ministry of Petroleum bears no responsibility with regard to the finance of these refineries.