Gas, Viable Alternative to Oil

Equations of future world and forecasts about energy consumption in coming years herald challenges to energy plans and consumption of fuels like oil in industries.

Projection has long been rife about the end of oil’s reign on the global economy, but different aspects of this issue are currently signaling the expiry of oil in global energy equations.

This new impression of fuel patterns has caused the world economy to experience two different kinds of life. The first one pertains to countries living on high oil income. These countries are currently anxious as oil prices keep falling. The second one comprises countries that have been using oil as a commodity for completing their chain of industrial development. This group is now seeking to use alternative energies in industrial development as oil resources are exhausting.

The first group will contract economic cancer after oil resources end, but the second group will survive as it seeks new sources of energy to live in the industrialized world.

Alternative energies are likely to allay many concerns about oil challenges in the coming years. But gas seems to be the only reliable and viable source for economic survival.

In other words, gas will be enjoying a highly significant position in future world and from now, the stabilized position of this source of energy could be observed in the table of world energies.

Some analysts may still believe that the significance of gas could not be pushed to bold relief after oil wells deplete, and it will take several decades before the world would witness the efficiency of gas consumption.

In response to these analysts, one can say firmly that gas should be given the chance to stabilize its position in the global industrial growth now.

The Gas Exporting Countries Forum (GECF), which brings together gas exporters, provides the best chance for gas to become significantly known in the world.

In future world, gas will set the basis for a new market whose pillars have already started taking shape. As long as gas will be able to meet energy market needs, the issue of renewables will be to some extent an academic issue.

In order for the GECF, known by some as gas OPEC, to continue its economic viability after oil resources run short there would be no option but to reclaim the lost wisdom  in the Organization of the Petroleum Exporting Countries.

The issue of GECF has already become the talking point in order to spare gas markets the fate which has befallen oil market. In such a case, if consumers determine the conditions and regulations for energy production, the gas market will face a big challenge.

Whereas, over the past decades, energy consumers knew quite well that oil producers depend on oil revenue, consumers have on certain occasions made decisions for oil producers by intervening in the market equations; and producers did not disagree with them.

But the GECF should now make plans in order to steer clear of improper actions in the energy market.

Iran, with 33.7 tcm of gas, could be instrumental in shaping a standard market for gas in the future provided that they would be able to benefit from economic diplomacy. Iran’s Ministry of Petroleum has already proven that it knows the savoir-faire for that purpose. Adopting customized and proper diplomatic strategies is highly significant for realizing this objective.

Last but not least, ensuring gas producers about their rights in future markets would guarantee industrial development in the countries exporting raw materials, because these countries will have no other option but to turn to production; and gas will be the last option that could help them make progress.

Iran Oil Diplomacy Unyielding

Iran’s Ministry of Petroleum is experiencing busy schedules these days. Senior foreign officials are constantly traveling to Iran to meet with Iran’s petroleum minister, Bijan Zangeneh. After visits by German, Italian, British and South Korean officials, the Russians travelled to Tehran to review avenues of oil and gas cooperation between Tehran and Moscow. Moreover, top officials from Japan, Indonesia, Armenia and Afghanistan also met with Zangeneh in Tehran in the past month.

On October 21, Zangeneh met with Russian Energy Minister Alexander Novak. In this meeting, which was attended by representatives of major Russian oil and gas and transportation companies, the two sides discussed ways of enhancing cooperation level on energy issues.

In the meeting, Zangeneh highlighted Iran’s willingness for broadening relations with Russia, saying: “Given the commonalities between the two countries in holding huge oil and gas reserves and the possibility of exporting them to global markets, Tehran and Moscow can expand their ties in the energy sector.”

He referred to new contracts for the development of oil and gas fields as a topic of discussion with his Russian counterpart.

He said that Russian companies plan to attend the November conference in Tehran, in which Iran Petroleum Contract (IPC) will be unveiled.

Zangeneh said Russian companies have already sought information about IPC and Iran’s future plans for the development of oil and gas fields.

The Iranian minister said his negotiations with Novak also focused on providing services and supplying commodities in the petroleum industry, adding: “The Russian companies have been recommended to partner with qualified Iranian companies and register a company in Iran for conducting joint projects.”

Zangeneh said Iran has invited Russian companies to operate downstream projects like refining and petrochemical projects.

He also said that Iran and Russia discussed the possibility of oil and gas swap. “Both countries have good facilities in this field. Iran can receive gas, crude oil and petroleum products from Russia in the north and deliver them to Russia’s gas, crude oil and petroleum products customers in the south.”

Zangeneh said negotiations were also held on bilateral relations, cooperation between OPEC and non-OPEC countries and the Third Gas Summit of the Gas Exporting Countries Forum (GECF) due to be held in Tehran.

“The horizon of expanding cooperation between the two countries in the oil and gas sectors is very bright and we hope that we would be able to reach good agreements in these sectors,” he said.

Zangeneh said Russia is happy with the current level of oil prices and believes that no interference should be made with the market. “Novak believes that since Russia has had no surplus production to cause oversupply in the market and others have had overproduction; therefore, this group must make efforts to prop up the market,” said the Iranian minister.

Zangeneh said Russia believes that the market should be let free to go ahead in its natural state.

For his part, Novak referred to the history of Iran-Russia relations, saying: “During this trip, a large number of major Russian companies involved in the oil and gas, transportation and communications sectors are present.”

Noting that level of trade and economic cooperation between Iran and Russia will enhance, the Russian minister expressed hope that this meeting will contribute to broadening Iran-Russia relations.

Novak also said he discussed Iran-Russia cooperation in his meeting with Iran’s Minister of Communications and Information Technology Mahmoud Vaezi.

The Russian minister said an Iranian delegation is planned to visit Moscow in the near future to discuss the establishment of an Iran-Russia joint bank. He said Russia and Iran plan to undertake joint projects worth $35 to $40 billion.

Iran-Japan Upstream/Downstream Cooperation

Japanese Foreign Minister Fumio Kishida met with Zangeneh in Tehran on October 12.

Japanese companies were engaged in extensive energy cooperation with Iran before international sanctions were imposed. They are now willing to return to Iran’s petroleum industry after removal of sanctions.

After the meeting, Zangeneh said Iran and Japan can sign contracts for the implementation of the Joint Comprehensive Plan of Action (JCPOA), which is the official title of Iran’s historic nuclear deal with six world powers.

He said no tender bid would be needed if Japanese companies are willing to invest directly in Iran.

“Iran and Japan can cooperate in petrochemical, refining and distribution, and LNG sectors,” said Zangeneh.

The minister said Kishida is the second high-ranking Japanese official to visit Iran over recent months, adding that negotiations with Japanese companies continue for future contracts.

Zangeneh said the Japanese companies will have to create insurance coverage if they intend to expand their service activities in Iran.

“By relying on insurance coverage, the Japanese companies can finance the projects they are willing to operate in Iran,” he added.

Zangeneh said he expected Japan to return its oil purchase from Iran to the pre-sanctions level, adding: “The Japanese are also interested in Iran’s upstream and downstream oil sectors.”

He also said that Iran has asked Japanese companies to cooperate with Iran in energy efficiency and energy conservation projects. “Iran is ready to consider proposals of Japanese companies,” he said.

Kishida said Japanese companies are ready to broaden cooperation with Iran in different energy and economic sectors.

He said that the representatives of big Japanese companies accompanying him during his trip are willing to cooperate with Iran in different sectors of the petroleum industry.

Kishida said Japanese companies welcome a final agreement with Iran, adding that he discussed ways of broadening economic cooperation in his talks with Zangeneh.

Indonesia Needs Iran Oil/Gas

On October 16, Zangeneh met with Indonesian Energy and Mineral Resources Minister Sudirman Saeid in Tehran. In the meeting, they stressed the need for joint cooperation.

After the meeting, Zangeneh said Iran in interested in exporting crude oil, gas condensate and petroleum products like liquefied petroleum gas (LPG) to Indonesia. “Indonesia can invest in oil, gas and petrochemical projects in Iran,” said the minister.

Zangeneh referred to the growing petroleum products consumption in Indonesia, saying: “In addition to the issue of exports, Iran can contribute to building refinery in this country so as to serve both sides.”

He said he and the Indonesian official have mainly discussed generalities. He said that Indonesian state-run and private companies can start talks with Iranian companies and go ahead step by step.

Zangeneh referred to Indonesia’s contribution to urea production plant in Iran and said that the project was halted due to international sanctions. He said the project is to be relaunched.

He said Indonesia is willing to purchase LNG from Iran, adding that his country needs liquefied natural gas (LNG) to generate electricity to meet its growing needs.

Zangeneh said Iran would support Indonesia’s bid to rejoin the Organization of the Petroleum Exporting Countries in the upcoming OPEC Conference. He said Indonesia has recently put forward its intention to return to OPEC.

“We hope that under the aegis of Iran’s support in the future meeting of OPEC, the return of this country to the Organization of the Petroleum Exporting Countries will be finalized and Iran and Indonesia would once again continue their cooperation at the level of global oil market within the framework of OPEC,” said the minister.

For his part, the Indonesian minister said Jakarta is willing to expand oil cooperation with Iran.

He said talks have started with Iranian companies, adding: “Indonesia needs oil and gas.”

Sudirman Saeid said his second visit to Tehran is aimed at completing the previous negotiations held on the issue of oil and gas cooperation.

“Both countries enjoy many opportunities and capabilities for cooperation,” he said.

Armenia Seeks More Iran Gas

On October 4, Zangeneh met with visiting Armenian Minister of Energy and Natural Resources Yervand Zakharian.

After the meeting, Zangeneh said Armenia wants to buy more gas from Iran.

“In this meeting, we discussed this issue and also Iran’s more electricity imports from Armenia,” he said.

Zangeneh said the framework of cooperation between the two countries will be similar to that of the previous years, adding: “The details of transactions between Iran and Armenia are planned to be considered by the two countries.”

Zakharian said the third power transmission line connecting Iran and Armenia is projected to have been constructed by 2018.

“We hope that we would be able to fully benefit from the capacity of Iran-Armenia gas pipeline and Iran-Armenia existing power transmission lines as well as a third power transmission line which is to be built,” he said.

“In this meeting, we examined the volume of electricity exchange between Iran and Armenia in 2018 as the third line of power transmission is being completed,” he added.

Zakharian said the construction of a third power transmission line between Iran and Armenia would multiply by five the current volume of exchanges between Tehran and Yerevan.

Iran and Armenia signed an agreement in 2004 for Iran to supply gas to Armenia. The annual capacity of this pipeline is around 2.3 bcm.

According to the agreement, Iran’s gas will feed power plants in Armenia. In return, Iran will import electricity from Armenia.

Delivering Techno-Engineering Services to Afghanistan

On October 17, Zangeneh received Afghan Mines and Petroleum Minister Daud Shah Saba in Tehran.

After the meeting, Zangeneh said Iran will offer technical services to Afghanistan for the discovery of oil and natural gas resources.  

Regarding Iran’s export of oil products especially gasoil to Afghanistan, he said that some delegations were decided to be dispatched from the both countries to reach agreement for enhancing the level of Iran’s oil product exports to its neighboring country.

By boosting the amount of Iran’s legal exports of oil products to Afghanistan, smuggling of these products from Iran to its neighboring country will be prevented and also Afghanistan will receive oil products with higher quality, Zangeneh said.       

Phase 19 of South Pars 88% Complete

Despite international sanctions against Iran’s petroleum industry in recent years, the country has managed to make progress at a satisfactory level in its joint oil and gas fields. At present, the first priority for Iranian petroleum industry managers is the development of supergiant South Pars offshore gas field, which Iran shares with neighboring Qatar in the Persian Gulf waters. Today, all decision-makers in Iran are determined to develop the remaining phases of this joint field as soon as possible. That is why the development of this joint field is considered Iran’s top industrial priority.

Despite international sanctions and plunging oil prices in the world markets, the administration of President Hassan Rouhani has managed to push ahead with its huge gas projects over recent years.

Having prioritized the phase development of South Pars, senior petroleum industry managers have made great achievements. For instance last winter, more than 100 mcm/d of gas was added to the South Pars output. There are also plans for as much increase in the South Pars production in the current calendar year.

Phase 19 of South Pars is planned to produce more than 12.5 mcm/d of gas in winter. Therefore, this development phase offers hopes for sufficient gas production next winter.

Phase 19 is more than 88% complete and the priority for Iranian engineers is to start up one terrain of this refinery with offshore gas through one of the platforms in this phase. An important point with this project is the recent operation of its utility units. Platform SPD 19C of this phase is ready to be installed in its location in the Persian Gulf. This platform, weighing nearly 2,700 tons, has been fully designed and manufactured in Iran. It is the first of a group of offshore platforms known under 35-month plan, which started in July 2010. Jacket construction and installation were the first phase of construction of this platform. With the installation of this platform in its location, it would be possible to operate Platform SPD2 for the recovery of 50 mcf of gas from South Pars and its delivery to the onshore refinery.

There are numerous projects in the offshore section of Phase 19 megaproject, including four offshore platforms, 21 wells and two 230-km gas transmission lines stretching from the main platforms to the onshore refinery and one 6-km pipeline for transferring gas condensate to a single-point mooring (SPM) with a capacity of 7,000 cubic meters per hour.

Phase 19 is located in the western part of the South Pars gas field. Its onshore installations lie in Tonbak region (some 210 km southeast of Bushehr Port) with an area around 128 ha between refineries of Phases 11 and 12 of South Pars, in the Pars Special Economic Energy Zone.

The capacity of this phase equals that of two conventional phases. In the refinery of Phase 19, around 57 mcm of combined sour gas, gas condensate, water and other impure substances is received from offshore installations before being converted into finished products.

Ali-Akbar Shabanpour, CEO of Pars Oil and Gas Company, has said that the onshore section of Phase 19 of South Pars is visited regularly every week.

Both onshore and offshore sections of this phase are being developed rapidly. The onshore section is behind schedule, but planning is under way for the acceleration of the project.

Phase 19 is the most active phase in the South Pars. Progress in the refinery sector is nearly 87%.

The boiler unit has already been launched, while utility in different units has to be activated.

Iranian Firms’ Share

Currently, around 8,500 people are directly or indirectly working in Phase 19 of South Pars. According to plans, all construction operations and installation will be done by Iranian contractors. Domestically manufactured equipment has been used in this development phase in a bid to maximize use of domestic capacity. According to the following table, Iranian companies have a share higher than 54% in this phase.

Sector

Weight Coefficient

Iranian Share

Foreign Share

Onshore

66.23%

71.29%

28.71%

Offshore

19.22%

11.00%

89.00%

Well Drilling and Development

14.55%

37.58%

62.42%

Total

100.00%

54.80%

45.20%

  Due to the involvement of Petropars, Iranian Offshore Engineering and Construction (IOEC) in this project, a big chunk of hard currency has been saved. The familiarity of Petropars and IOEC with the procedure needed for operating such projects and maximizing use of domestic resources has broken the monopoly of big oil companies on the prices in the gas projects of South Pars zone and an important achievement of this project has been enhancement of the country’s gas production capacity.

Full operation of Phase 19 by Iranian engineers and companies indicates the potentialities they have achieved in recent years.

Add to this, $2.5 billion in annual revenue reaped from this phase.

IPC to Be Unveiled in November

Iran is to unveil its newly developed model of oil contracts aimed at tempting back foreign investors as international sanctions are planned to be lifted on Iran.

The head of Iranian Ministry of Petroleum’s Oil Contracts Restructuring Committee, Mehdi Hosseini said, a conference is to be held in Tehran on November 28-29 for introducing the Iran Petroleum Contract (IPC).

“This conference is planned to be held in the presence of domestic and foreign companies, academics and economic elites,” he said.

Hosseini said that during the conference, a report on the activities of the petroleum industry will be presented and the IPC will be detailed for Iranian and foreign investors.

He said Iranian petroleum ministry will also announce its priorities for investment during the two-day conference during which an exhibition of Iranian companies will be also held.

“The private sector should not be worried [about the prospective presence of foreign companies in Iran] ; on the contrary it has to benefit from this opportunity to make itself known to international fora,” said Hosseini.

“Under the new contracts, domestic companies will grow alongside foreign companies within a regular structural framework so that domestic companies would be able to attend international fora independently in the coming years,” he said.

US Oil Firms Likely to Attend IPC Conference

A senior Iranian oil official has held out the possibility of presence of US oil companies at a Tehran conference for introducing Iran Petroleum Contract (IPC).

“The petroleum ministry’s considerations are about foreign industrial and trade companies and we believe that this kind of cooperation with foreign companies will not only have economic benefits for both sides, but also it can narrow down political differences,” Amir-Hossein Zamani-Nia, deputy petroleum minister for international affairs and commerce, said. “Of course this issue is not limited to the US, and it is applicable to other countries, particularly our neighbors.”

“So far, companies from Austria, Italy, Germany, France, Spain and Britain have come forward to negotiate with Iran due to existence of good opportunities for investment in and the blossoming of petroleum industry for these companies,” he said.

Zamani-Nia gave assurances that international oil sanctions will be lifted on Iran in two months.

He said the time has come for the development of Iran’s petroleum industry following the adoption of nuclear deal with six world powers.

“At present, the world is looking at Iran’s petroleum industry and the oil and gas industries, with their attractive points, will pave the way for growth and blossoming; furthermore, it can bring about economic and political advantages for the country’s economy,” he added.

Zamani-Nia said after the implementation of Iran’s nuclear deal, Iranian and foreign companies can finalize their contracts.

He reiterated that the return of international companies will be of help to domestic contractors, saying: “One condition set by the Ministry of Petroleum in the new contracts is that international companies must have an Iranian partner for involvement in Iran’s petroleum industry so that domestic empowerment would take shape along with investment.”

He said the idea behind this condition is to empower the domestic private sector, transfer in knowhow and technology and let Iranian contracts manage the projects.

“Alongside these objectives, the manufacturing of oil equipment by domestic specialists for use in Iran and for export to the region is also followed up in these projects because Iran is the only country in the Middle East to offer scientific group for such activities,” he said.

Iran-Saudi Joint Fields to Undergo Development

Plans are under way for the development of oil fields Iran shares with Saudi Arabia, managing director of Pars Special Economic Energy Zone (PSEEZ) said.

Mehdi Yousefi named Farzad A, Farzad B and Esfandiar fields as reservoirs held jointly by Iran and Saudi Arabia.

These fields are located in Pars III zone, Yousefi said, adding: “Although the independent fields near this region are not our priority, potential investors can make plans for investment in processing facilities and development of independent fields like Golshan, Ferdowsi and Kuhmond.”

Pars III zone covers three cities in the southern Bushehr province.

Similar to the PSEEZ, the zone will offer incentives–such as tax exemption and favorable import-export regulations—to companies investing in crude production infrastructure in the zone.

"The National Iranian Oil Company is striving to attract foreign and domestic investment to develop Pars III (energy zone) in Bushehr Province," Yousefi was quoted as saying by Mehr News Agency.

The project is being developed in an estimated 16,000 hectares of lands in Bushehr to boost Iran's oil production capacity from joint fields with Arab neighbors.

First-Ever FLNG Contract Soon

The National Iranian Oil Company (NIOC) will in the near future conclude the contract on transaction of flaring gases from three oil fields which will be the country’s first water-based project of floating liquefied natural gas (FLNG), a company official said.

“Out of the three contracts on selling flare gases to be finalized soon, one is drafted with the objective of producing maritime LNG,” said Ali Kardor, NIOC deputy managing director for investment and finance.

Anticipating that a new tender bid for selling flare gases will be further embraced by foreign companies in the post-sanction era, he said FLNG projects are justified and NIOC welcomes launching them to develop the offshore gas resources.

Kardor said FLNG cost price is nearing LNG cost price in the world.

“Iran’s petroleum industry welcomes the construction of FLNG units even in regions with sweet gas, and we have had talks to that effect,” he said.

Zangeneh Inaugurates 3 Desalting Units

Iran’s petroleum minister, Bijan Zangeneh, on October 28-29 travelled to the oil-rich southwestern city of Ahvaz where he inaugurated three desalting units. The minister also visited West Karoun oil fields.

Haft Shahidan desalting unit in Masjed Soleyman, the first desalting plant in Lab Sefid oil field as well as the desalting unit of Mansouri oil field were inaugurated in the presence of the Iranian minister.

Haft Shahidan desalting plant is constructed to process oil produced from Masjed Soleyman, Lali, Par Siah, Zilaei and Karoun oil fields. It has a capacity of 55,000 b/d.

The capacity of Lab Sefid desalting plant stands at 30,000 b/d. This plant processes oil supplied from Lab Sefid field and desalts it to boost its quality.

The desalting unit of Mansouri oil field with a capacity of 75,000 b/d was the third project inaugurated during Zangeneh’s visit.

Mansouri oil field is being developed to see its production rise from 60,000 to 100,000 b/d in the first phase and to 150,000 b/d in the second phase after feasibility studies have been concluded.

The first phase of development of Mansouri oil field involves seven packages including workover and completion of 12 wells, construction of a desalting unit, laying water supply pipeline and providing 132-kv power transmission lines.

The desalting plant in Mansouri oil field is an important part of the development project of the reservoir. Undertaken fully by Iranian contractors under the supervision of the Petroleum Engineering and Development Company (PEDEC), the project has so far cost IRR 1,670 billion, IRR 1,220 billion is for the construction of Mansouri desalting.

After inaugurating the desalting units, Zangeneh visited oil fields in West Karoun region, including Azadegan, Yaran, Yadavaran and Mansouri fields, in order to have first-hand account of the development projects.

Iran’s petroleum minister said the first phase of development of West Karoun region could be finished in three years, adding that West Karoun oil fields’ total output would vary between 600 and 700 tb/d.

“With the removal of sanctions, the problem of supply of some parts and equipment will have been resolved and the implementation of projects will pick up speed,” he said.

During Zangeneh’s visit, it was announced that North Azadegan oil field would soon start producing 75 tb/d of oil.

GECF: 2000-2015

Some 15 years have passed since the Gas Exporting Countries Forum (GECF) was founded. The forum has held gatherings in its member states and it did not have any specific secretariat from the very beginning. The first ministerial meeting of GECF was held in Tehran in May 2001. Called by Iran’s then minister of petroleum, the GECF ministerial meeting was attended by high ranking representatives of Algeria, Brunei, Indonesia, Malaysia, Oman, Qatar, Russia, Turkmenistan and Norway as observer.

During this first ministerial meeting, it was agreed that the objectives of the forum will be to foster the concept of mutuality of interests by favoring dialogue among producers, between producers and consumers and between governments and energy-related industries to provide a platform for research and exchange of views, and to promote a stable and transparent energy market. These and other goals were outlined in a document prepared by the expert meeting and approved by the ministers as a mandate of the GECF.

Databank in 2002

Between 2001 and 2003, the basic structure of the forum consisted of a ministerial meeting as the highest decision-making instance and an expert meeting as a technical advisor. The ministerial meetings were held annually: In 2002 in Algeria and in 2003 in Qatar. The 2md ministerial meeting in Algiers emphasized the importance of cooperation between producers and consumers to ensure the development of gas industry. Furthermore, the expert meeting was instructed to develop a database of gas projects and contracts terms and conditions and studies such as new gas utilizations and associated costs.

The 15 countries which met in Doha for the 3rd ministerial meeting in 2003 agreed to create a liaison office as a focal point for the gathering of data and for the supervision of GECF projects. This event was also an opportunity to follow up on studies on new gas utilizations, stress the relevance to develop a world supply and demand gas model and evaluate gas pricing.

During the 2004-2006 period, the forum advanced steadily towards the goal of developing a more integrated discussion platform; the 4th ministerial meeting in Cairo, Egypt, and the 5th ministerial meeting in Port-of-Spain. Trinidad and Tobago created the executive bureau (which would transform later into the executive board) and consolidated the liaison office.

In Cairo, the ministers highlighted the importance of fair prices for natural gas and the need for joint investments and research between member countries as a means to enhance cooperation, as well as the necessity to exchange information and data.

The 2005 meeting in Trinidad and Tobago was an occasion to agree on the general framework, the objectives and the structure of GECF (ministerial meeting, executive bureau, experts meeting and liaison office). Furthermore, the ministers decided to start developing the world supply and demand gas model. The ministerial meeting was not held in 2006, but the executive board met in Qatar to continue working on the relevant subjects of the GECF.

GECF Turns Global

Between 2007 and 2008, the definite establishment of the GECF institutional base took place. In this regard, during the 6th ministerial meeting held in 2007 in Doha, the achievements of the previous meetings were reviewed and it was recommended to develop a statute for the forum, to expand the liaison office so that it could become the secretariat of the organization and to draft its internal regulations. To this end, the ministers created the high level committee, which held meetings in Qatar, Egypt, Iran, Venezuela and Russia throughout 2007 and 2008.

The ministers held in December 2008 in Moscow one of their most important meetings, alongside with their 1st meeting in Iran. The 7th ministerial meeting established the Gas Exporting Countries Forum as an international intergovernmental body with the approval and signing of the agreement on the functioning of the Gas Exporting Countries Forum and the statute of the GECF. The GECF agreement and statute were signed by the ministers of the current member states of the forum: Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago and Venezuela. Netherlands and Norway were accepted as observer members. The city of Doha was selected as the headquarters of the forum. Furthermore, the ministers highly praised the findings of the study on gas prices, which was called for at the 6th ministerial meeting, and discussed the latest developments and trends in the gas industry.

Between 2009 and 2011, the forum witnessed progress in the consolidation of its internal structure and further discussions on key aspects of the gas industry. During the 8th ministerial meeting in Qatar, the budget for the organization for 2009 was approved and provisional authorities were appointed.

GECF 1st Secretary General

The signing of the GECF Host Country Agreement between Qatar and the GECF, the inclusion of the Netherlands as an observer member, the appointment as per the Statute of the authorities for 2010 and the election and appointment of Leonid Bokhanovskiy as the secretary general of the GECF were the main outcomes of the 9th ministerial meeting which was held in Doha in December 2009.    

The first secretary general of the GECF took office in January 2010 and set as his main duty to launch secretariat activity in Doha, to develop a forum for the GECF member countries to exchange information and to start in-house research activity by developing research and analytical capabilities.  The registration of the GECF with the UN and the meeting with the UN secretary general and the GECF secretary general was a truly important step forward to worldwide recognition of the GECF and open doors to closer dialogue between the two organizations.

Cooperation with international energy organizations is one of the priorities in the GECF’s agenda. To that effect, the secretariat has maintained working contacts with OPEC, IEF and IEA as well as with major independent and governmental energy research institutes.

In 2010, the GECF held two ministerial meetings – in Oran, Algeria in April and in Doha in December. The 10th ministerial meeting was an opportunity to exchange views on the latest and mid-term developments in the natural gas market, assess their impact on the GECF countries and provide guidelines for the newly established secretariat.

The ministers agreed that ensuring adequate and reliable supplies of gas at prices reflecting parity with oil prices is a challenge, considering that natural gas is an essential part of the fuel mix and plays an important role in meeting the global need for an environmental friendly energy source.

They also supported the enhancement of energy security by means of cross investments and technological exchange without unjustified barriers (especially those related to carbon taxation) between consumers and producers based on their growing mutual interdependence. Therefore, the ministers encouraged a model in which a gas consumer may participate in upstream and gas infrastructure development projects in a producer-exporter country, while a gas exporter may invest in mid and downstream networks and other gas facilities on a consumer side.

The acknowledgement of the relevant results of the report on the “International Gas Market Outlook to 2015” presented by Algeria, the assessment of the possibility of organizing a future gas summit of the GECF and sending the invitation to other gas exporting states that support the GECF statute to become part of the organization as members and observer members were part of the decisions of the 10th ministerial meeting.

working contacts with OPEC, IEF and IEA as well as with major independent and governmental energy research institutes.

In 2010, the GECF held two ministerial meetings – in Oran, Algeria in April and in Doha in December. The 10th ministerial meeting was an opportunity to exchange views on the latest and mid-term developments in the natural gas market, assess their impact on the GECF countries and provide guidelines for the newly established secretariat.

The ministers agreed that ensuring adequate and reliable supplies of gas at prices reflecting parity with oil prices is a challenge, considering that natural gas is an essential part of the fuel mix and plays an important role in meeting the global need for an environmental friendly energy source.

They also supported the enhancement of energy security by means of cross investments and technological exchange without unjustified barriers (especially those related to carbon taxation) between consumers and producers based on their growing mutual interdependence. Therefore, the ministers encouraged a model in which a gas consumer may participate in upstream and gas infrastructure development projects in a producer-exporter country, while a gas exporter may invest in mid and downstream networks and other gas facilities on a consumer side.

The acknowledgement of the relevant results of the report on the “International Gas Market Outlook to 2015” presented by Algeria, the assessment of the possibility of organizing a future gas summit of the GECF and sending the invitation to other gas exporting states that support the GECF statute to become part of the organization as members and observer members were part of the decisions of the 10th ministerial meeting.

Chairman and Secretary General

At the 11^th meeting, the ministers also agreed on the creation of steering committee to study the evolution of gas market and the outcomes of the global gas model. They also overviewed the latest developments in the international gas market and their impact in the member countries.

During the 12^th ministerial meeting held in June in Cairo, the ministers emphasized the importance of dialogue between producers and consumers for the purpose of achieving a stable gas market, the timeline of a mechanism to achieve balanced and fair gas prices for both parties, and the necessary cooperation between producers and consumers to support and sustain the required investments to develop the gas reserves in the producing countries and exchange of knowhow and technologies in that regard.

Preparations for holding the first GECF summit stayed as one of the main topics of discussion for the 13^th ministerial meeting held in Doha in November 2011. During this meeting, the ministers approved the program of work and budget of the GECF for 2012. The ministers welcomed Oman as a new member of the GECF and re-elected Leonid Bokhanovskiy as the GECF secretary general for 2012-2013.

The 1^st GECF summit was held in Doha in December 2011 and was unprecedented in terms of the level of participants and the scope of its concerns. The summit was attended by heads of state  and government from Algeria, Nigeria, Equatorial Guinea, Bolivia, Russia and Oman. Kazakhstan, Norway, the Netherlands and Venezuela were represented by ministers of energy. The participants stressed that the GECF is actively working towards elaborating best ways to meet the actual challenges of the regional and global gas markets, harmonizing in the long run the relations between gas producers and consumers, launching an adequate dialogue between them.

Another important issue under discussion was the definition of the position and role of natural gas in the construction of the low-carbon economy, the pairing of gas with the development of alternative energy and the promotion of its environmental advantages.

Between 2009 and 2012, the Executive Board(EB) met 10 times with concrete and fruitful results related to the development of the internal structure of the forum and the strengthening of its capabilities. Furthermore, several meetings of working groups or specialized bodies created in accordance with the statute have contributed in fulfilling the mandates of the ministers in such areas as long-term strategy, 5-year working plan for the secretariat, data reporting mechanism and gas summit.

In 2012, the forum was fully engaged in research and gas market modeling activity. Currently the secretariat is preparing forecasts for the market developments for the short-term on a regular basis and conducting several studies and research projects.

15^th ministerial meeting in Tehran

The second summit of the GECF was held in Moscow in July 2013. Hosted by President Vladimir Putin, the summit was attended by Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Oman, Qatar, Russia, Trinidad and Tobago, United Arab Emirates and Venezuela as well as Iraq, the Netherlands, and Norway as observers and OPEC ,IEA and IEF as guest international organizations.

The heads of state and government committed to foster economic growth of natural gas usage, promote the expansion of natural gas utilization in different sectors, and encourage GECF dialogue with all market players and stakeholders.

In November 2013, the 15^th ministerial meeting of the GECF was held in Tehran under the chairmanship of Iran’s Minister of Petroleum Bijan Zangeneh, President of the ministerial meeting, and Mohammad Bin Saleh Al-Sada, the minister of energy and industry of Qatar, as alternate president. In his opening remarks, the president of the ministerial meeting gave an overview of developments in the gas markets and outlined challenges facing the GECF and its member countries. The ministers appointed Mohammad Hossein Adeli of Iran as the secretary general of the forum for a period of two years.

In 2014, Adeli commenced his tenure as the second secretary general of the GECF for a tenure of two years in accordance with the GECF statute.

Adeli is currently embarking on a number of new initiatives and activities such as the Monthly GECF Lecture Series and other similar activities to transform the GECF to a credible international platform for gas.

This year, Tehran is hosting the 3^rd GECG Gas Summit in November.

The future for natural gas producers remains extremely bright. The Golden Age of Gas will only be 24-carat gold if we argue the case for gas vigorously and we fight to ensure that our fuel’s superiority over many of the alternatives is widely acknowledged.

It is around five years since the IEA launched the concept of a ‘Golden Age for Gas’. But in spite of that we see now that some major trends are affecting the dynamics of the gas markets changing them and bringing about challenges and promises as well. Energy technology developments that brought about the US shale gas production, is turning the US to an exporter in the near future. The emergence of new LNG exporters, the impact of geopolitics of gas supply, the price evolution in the form of convergence of prices and hub and hybrid pricing mechanism and the uncertainties about the energy policies and environmental commitments.

These elements have put before us new dynamics of gas markets with new realities to face that require us to recalculate for our future plans.

Natural gas can do two things: first, provide the abundant supply and the flexibility that can help emerging economies in particular, grow and increase their people’s access to energy and most importantly, electricity. And second: play a central role in combating climate change.

Global Growth

If now we look at some of the components that will shape the future of energy demand and the energy mix, the global growth picture seems to be a bit confusing. It’s not just that, after the 2008-09 crisis, a more stable global picture of around 3.4% growth in 2013 and 2014 is forecast by the IMF to dip to 3.1% this year.

There’s also the impact of slower than expected Chinese growth and a decoupling of GDP and energy consumption in china. This has affected particularly but not exclusively commodity exporting, emerging economies.

There’s also been a negative impact on what we might call conventional energy growth from faster than expected global renewable energy penetration and a step up in energy efficiency measures. Combined with lower oil prices, which will stall both oil and gas developments, these are all factors that can chip away at our short and medium term assumptions about oil, but in particular gas growth.

We don’t need to be in despair about this, it’s another indication that we will all have to work to bring about the optimal outcome for gas.

Global Gas Demand

It is the case that gas demand has been growing but the figures aren’t that compelling. 2014 growth was just 0.4% above that of 2013 and 1.4% higher than 2012. South America, the Middle East, North America and Asia Pacific have seen growth ranging from 1% to 6.3%, the forecast is that in 2015 gas growth will be 1.7% with perhaps just under 2% of growth in 2016.

But there are some currents that seem to pull in opposite directions. Despite the rhetoric about the urgency of the fight against global warming, coal has had a great few years in Europe – to the extent that it has chipped away more than 54 bcm of gas–fired power plants in a continent that prides itself as being the standard bearer of tackling global warming. At a time when gas should be displacing coal, we have seen European CCGT (Combined Cycle Gas Turbine) capacity mothballed. And that’s contributed to four consecutive years of declining European gas demand.

Given population and energy demand growth projections, it is hard to see that there will be anything other than significant gas growth between now and 2040.

This forecast which is estimated by GECF Global Gas Model, the development of which was recently completed suggest that primary gas demand could increase by 58% over the next 25 years. It would mean gas is challenging oil as the dominant fuel in OECD countries but still being eclipsed by coal and oil in non-OECD countries. Overall, that would mean that  share of gas in the fuel basket between 2014 and 2040 would rise from 21% to 25%, that’s why it is not exaggerated if we say that gas is a rising star.

The analysis suggests that natural gas demand over the period will grow faster than global energy demand by almost 1% per annum. Non-OECD East Asia and North America are expected to be the main drivers; nevertheless, the Middle East and Africa will also make a significant contribution.

Natural Gas Recourses and Production

If there’s one thing that is certain, even in an unpredictable energy world, it is the fact that availability of natural gas source is not an issue provided that adequate planning and investment could be carried out and assisted by supporting price and finance regimes.

The main regions producing gas today: North America, the CIS and the Middle East will remain the major producers by 2040, but there are likely to be new players from Africa and the East Med. Australia and non- OECD Asia should also increase their existing production volumes.

Another aspect of natural gas that will increase its possibility of additional penetration, is its flexibility. And a large part of that over the past decade has been the extraordinary growth of international trade in LNG.

Yes, we are long on LNG supply at the moment after a period of LNG tightness. But, undoubtedly LNG has made an extraordinary contribution to penetration of natural gas in the global markets.

Gas and Climate Change

If we are really serious about combating climate change, then we need to acknowledge that natural gas will play a critical role. However, people might be enthusiastic about renewables, we need to remember that their contribution is not only intermittent; they are also largely fuel sources that produce electricity. They can’t replace natural gas as a fuel stock in many other key areas such as industry, petrochemicals, and chemicals and, to some extent in large parts of the world, heating.

And we can be encouraged by some of the signs coming out of the run up to the next big climate change summit COP21 in Paris at the end of this year.

In the US, the trend has been solidly towards a gasification of the power generation sector. It may have begun in part by accident by the shale gas revolution making gas cheaper than coal but that has been followed up by the EPA’s (Environment Protection Agency) clean Power Plant, which is effectively squeezing much dirty coal out of the generation mix.

The broader pledge to cut GHG emissions by 26% to 28% below its 2005 level by 2050 is a further sign of the US getting serious about combating climate change. And that has to be good for gas.

But perhaps the biggest shift could come from China. While some media’s view is that china is choking on coal. The reality is that china is doing much more than many other countries to turn things round. China is looking to introduce a national emissions trading system to the power sector in the course of next year. It wants to peak its CO2 emissions around 2030 and aim to peak earlier. It is also looking to lower CO2 emissions per unit of GDP by 60-65% from its 2005 level.

Japan is looking to cut its GHG emission level by 26% by 2030 compared to 2013 and the EU is promising a binding target of at least a 40% domestic reduction in GHFG emissions by 2030 compared to the levels of 1990.

Conclusion

Now those of us in natural gas producing countries need to make sure that a transition from coal to gas is real. We need to make sure that, as energy demand increases, natural gas’s benefits of abundance and accessibility are fully acknowledged. We need to make it clear that ours is a secure supply and priced in a way to encourage investments and sustainability.

And these are all questions that will be central to the debate when GECF members meet in Tehran for our third Gas summit. We’ll be looking then to find avenues of cooperating on how we might promote natural gas.

Gas is available, accessible, sustainable and environmentally friendly. The central role of gas in the global energy mix should be an easy argument to make. The recent past has taught us that, this cannot be achieved without further cooperation among ourselves, and closer interaction with consumers and other stakeholders.

What we in the GECF are committing to now, is to reinforce our efforts in arguing the case for gas for producers and consumers

Iran’s Unused GECF Capacities

By Fereydoun Berkashli, Iran’s ex-National Representative, OPEC

The Gas Exporting Countries Forum (GECF) was established in 2001. The establishment of this forum was first proposed by Iran. Iran’s then petroleum minister, Bijan Zangeneh, planned to establish an OPEC-style gas producer body. But due to high sensitivity on the name of the Organization of the Petroleum Exporting Countries, the group of gas-rich countries was named ‘forum’. The Secretariat of such a forum should have been established in Iran, but Tehran did not file any such request and during the first years of establishment of GECF, the country hosting ministerial meetings served as the Secretariat. By that time, such a decision was no important at all.

The significance of establishment of GECF stemmed from the fact that gas prices were only a fraction of oil prices because gas was not viewed as a strategic fuel at that time.

GECF was established so that gas price would be set independently from oil price and that a mechanism would be worked out for the pricing of gas as independent commodity. The idea was that GECF would be empowered enough to become a lever in pricing and raise gas prices.

The GECF has so far held summits and ministerial meetings and its third summit is planned to be held in Tehran in November. The 18-member forum is likely to see growth in the market and more demand for natural gas as a clean fuel in coming years. GECF member states hold 42% of gas production and 70% of the world’s energy deposits. Sitting atop 34 bcm of gas, Iran holds the largest gas reserves in the world.

Although Iran is not yet benefiting from all its capacities in global markets, the future removal of sanctions will make GECF more effective for Iran. If sufficient investment is made in the gas industry and the development phases of South Pars gas field become operational Iran would be able to benefit from such circumstances and play a prominent role in gas activities.

GECF Member Countries

Member countries of the Gas Exporting Countries Forum (GECF) account for 42 percent of the world’s gas production, 70 percent of the world’s gas reserves, 38percentof pipeline gas transmission and 85 percent of liquefied natural gas (LNG) trade.

Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates and Venezuela constitute the 12 member states of GECF. The Iraq, Kazakhstan, Netherlands, Norway, Oman and Peru have observer status.

GECF is a multi-layered and open forum providing flexibility of participation in its activities. GECF highly values the potential of its full and Observer Members, and at the same time encourages further increase in their numbers and welcomes new members.

Iran

Iran is the 17th largest country in the world in terms of area at 1,648(1000 sq. km), and has a population of over 75 million. It is the second largest economy in the Middle East. Its proven oil reserves amounted to 157.8 billion barrels in 2013 and its natural gas reserves were estimated at 34.02 thousand bcf in that year. The country is influential in the Middle East due to its strategic position in the Strait of Hormuz and its vast area.

Algeria

Algeria has a mixed geography with a large portion falling in the desert region and a long coastal line along Mediterranean Sea in the north, with the main towns, fertile land and beach resorts. The country is bordered in the east by Tunisia and Libya, in the west by Morocco, Western Sahara and Mauritania, in the southwest by Mali, in the southeast by Niger, and in the north by the Mediterranean Sea. Algeria has had significant growth in recent years, mainly due to oil and gas exports. Its crude oil production, NGL and other liquids (1,000 b/d) stands at 1.630. Algeria exported 27.44 bcm of gas last year.

Bolivia

Bolivia is a diverse country located between the Andes and the Amazon, in which various ethnic groups coexist. It is bordered by Brazil to the north and east, Paraguay and Argentina to the south, and Chile and Peru to the west.

The hydrocarbon sector is controlled by the state-owned Yacimientos Petroliferos Fiscales Bolivianos (YPFB) company. Bolivia has the second largest natural gas reserves in South America after Venezuela, providing an important potential source of energy to its Southern Cone neighbors and to Brazil. Bolivia’s reserves are estimated at 24 bcf, but it remains the poorest South American state.

Egypt

The Arab Republic of Egypt is a country in North Africa, with the Sinai Peninsula forming a land bridge to Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean region, the Middle East and the Islamic world. Covering an area of about 1,000,000 square kilometers, Egypt is bordered by the Mediterranean Sea to the north, the Gaza Strip and Israel to the northeast, the Red Sea to the east, Sudan to the south and Libya to the west.

Egypt has an advanced energy industry based on, oil, natural gas, and hydro power. Oil and gas are produced in the western desert regions, the Gulf of Suez, the Nile Delta and the Mediterranean. In addition to its role as an oil and gas exporter, Egypt has strategic importance because of its operation of the Suez Canal and Sumed (Suez-Mediterranean) Pipeline. These are two routes for export of Persian Gulf oil and Suez Canal also for export of LNG.

Egypt's excess of natural gas will more than meet its domestic demand for many years to come. The Ministry of Petroleum and Mineral Resources has established expanding local gas utilization and the Egyptian petrochemical industry as its most significant strategic objectives. In 2009 around 30% of local gas production was exported most of which in the form of liquefied natural gas (LNG).

Their natural gas reserves were estimated at 66,000 bcf in 2005 and currently big companies like BP are operating gas projects there.

Equatorial Guinea

The Republic of Equatorial Guinea is situated on the oil and gas rich Gulf of Guinea and comprises the Rio Muni coastal enclave which consists of several islands of Cameroon coast and a part of the African mainland between Gabon and Cameroon. Equatorial Guinea is a fast growing economy due to investments in its recently discovered large reserves of oil and gas which are altering the economic and political status of the country. The upstream oil and gas industry is key to the economy of Equatorial Guinea and is growing rapidly with expanding foreign interest and investment. Launch of a new LNG facility in 2007 (Liquefied Natural Gas) plant contributed to rising gas output.

Libya

Libya is located in North Africa and shares borders with Tunisia, Algeria, Niger, Chad, Sudan, Egypt, and the Mediterranean Sea. It has a Mediterranean climate along the coast and a desert climate in the rest of the country. The bulk of the rainfall occurs between November and March. With an area of almost 1,800,000 square kilometers, Libya is the fourth largest country in Africa by area, and the 17th largest in the world.

Libya is a major oil producer with the oil sector contributing practically to all export earnings and over one-quarter of GDP. It is also an exporter of natural gas both by LNG and pipeline to Europe exporting about 9.9 billion cubic meters in 2009. The Libyan government plans to significantly increase the country’s natural gas production in order to expand the use of natural gas in the power sector. In 2001, the country’s proven gas reserves stood at 1.539 thousand bcf.

Nigeria

The Federal Republic of Nigeria is located in western Africa on the Gulf of Guinea and has a total area of 924,000 km2. It shares a 4,047 kilometers border with Benin, Niger, Chad, Cameroon, and has a coastline of at least 853 km.

Nigeria is the 12th largest producer of petroleum in the world and also possesses the largest natural gas reserves in the continent.  The capital-intensive oil sector provides 20 per cent of gross domestic product, 95 per cent of foreign exchange earnings, and about 65 per cent of budgetary revenues.

Natural gas reserves are well over 5 tcm and are several times as substantial as the crude oil reserves.

Qatar

The State of Qatar is located on the east coast of the Arabian Peninsula, bordering Saudi Arabia. It is approximately 160km long and 50-80km wide with a total land area of 11,586 sq km. The south is dominated by sand dunes.

Qatar holds the world’s third largest natural gas reserves and is the largest supplier of liquefied natural gas. Qatar proven natural gas reserves stand at approximately 25 trillion cubic meters. Qatar holds almost 14 percent of total world natural gas reserves and is the third-largest in the world after Russia and Iran. The majority of Qatar’s natural gas is located in the massive offshore North Field, which spans an area roughly equivalent to Qatar itself. In year 2010 Qatar celebrated achieving 77 Mta LNG production capacity.

Qatar is also a member of OPEC and is a significant net exporter of oil. GECF Headquarters are located in Doha, Qatar.

Russia

The Russian Federation covers more than an eighth of the Earth's land area and stretches from the Baltic and Black Seas in the west to the Pacific Ocean in the east. Russia has a population of 142 million. The country has the world's largest natural gas reserves, the 8th largest oil reserves and the second largest coal reserves. Russia is the world's leading natural gas exporter and leading natural gas producer, it is also the second largest oil exporter and largest oil producer, though Russia interchanges the latter status with Saudi Arabia from time to time.

Russia’s natural gas reserves were estimated at 48,000 bcf in 2011. It exported 221 bcf of gas in that year.

Trinidad and Tobago

The Republic of Trinidad and Tobago is an archipelagic state in the southern Caribbean, lying just off the coast of north-eastern Venezuela and south of Grenada in the Lesser Antilles. It shares maritime boundaries with other nations including Barbados to the northeast, Guyana to the southeast, and Venezuela to the south and west.

Oil and gas account for approximately 40% of GDP and 80% of exports. Recent growth has been fuelled by investments in liquefied natural gas (LNG), petrochemicals, and steel. Trinidad and Tobago achieved a century of commercial oil production in 2008. The country is known globally for the development of its natural gas sector and in 2011 engaged in providing energy services expertise to other countries on projects to enable the development of their natural gas sector. Additionally, downstream value-added petrochemical and other projects are in various stages of planning.

UAE

The United Arab Emirates is situated on the north-eastern margin of the Arabian Peninsula. It is bounded to the west and south by the border with Saudi Arabia, to the east by the Gulf of Oman to the southeast by the border with the Sultanate of Oman, as well as sharing maritime boundaries with Qatar, Oman and Iran.

The UAE has one of the highest per capita incomes in the world. Although it was heavily dependent on revenues from hydrocarbons in the initial years, the UAE is relatively well insulated from periods of low oil prices due to successful economic diversification, large foreign exchange reserves and overseas investments. The country’s natural gas reserves are estimated at 6.1 thousand bcf and its exports at 5.18 bcf.

Venezuela

Venezuela is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south. Venezuela's natural resources make it a country of vast economic potential. The petroleum sector dominates, accounting for 50% of central government revenue and over 90% of exports. It has the world's largest conventional oil reserves outside the Middle East and also one of the largest natural gas reserves. Venezuela’s natural gas reserves were estimated at 5.5 thousand bcf in 2012.

GECF; a Post-Sanctions Chance for Iran

Holding 17% of the world’s natural gas reserves, Iran has ideal potential for production. That could boost Iran’s role both in the region and in international markets. Despite all this, reliance on deposits would not be the only option for the country to achieve the regional and international position it deserves. One way of influence would be membership to regional and international bodies. Gas Exporting Countries Forum (GECF) has been recently established to manage supply and demand and coordinate affairs between gas producers. For a variety of reasons, the GECF is expected to be more influential.  Variety of factors:  lack of gas pricing mechanism, conflict of interests among member countries, geographical positions as well as conflicting domestic and foreign politics are among issues that have so far barred GECF from realizing its objectives completely. GECF has the potential to become more effective than similar bodies in the future. Ali-Reza Soltani, university professor and energy expert, tells Iran Petroleum in an interview that GECF will see its role come further to the limelight by 2020.

The following is the full text of his interview:

Q: In your view, what is the role and standing of GECF in gas international markets and equations?

A: The creation and establishment of GECF was inevitable given the growing share of gas in the world’s energy mix. That was an Iranian initiative. Since it started its activities [in 2001], the forum has raised the number of its members and now has 12 full members and 6 observer members. The geographical diversity of GECF member countries has automatically boosted the international standing of this forum. In the meantime, the presence of countries like Iran and Russia in this Forum has increased the diversity of this Forum compared to OPEC. Accounting for 42 percent of the world’s gas production, 70 percent of the world’s gas reserves, 38percentof pipeline gas transmission and 85 percent of liquefied natural gas (LNG) trade, GECF is a potentially powerful economic bloc. At present, this Forum is not as influential as it must be in the energy market, but it is expected to influence global energy equations in the future.

Q: Why hasn't GECF managed so far to enhance its influence?

A: Given the existing differences between international oil and gas markets, one cannot expect the GECF to act like Organization of the Petroleum Exporting Countries (OPEC). The philosophy behind formation and activities of this Forum differs from OPEC due to fundamental differences between production and trading of oil and gas. Over the past century, oil trading has been based on the purchase and sale of cargoes carried on ships. Oil pricing is also done based on active political elements influenced by supply and demand and the extraction, refining and raw material costs. But the conditions are different with regard to gas. In gas pricing, some elements like long-term gas transmission plans, extraction costs, pipeline transmission and LNG installations are involved. Therefore, one cannot consider a certain price for the trading of gas across the globe, as is the case with oil. Moreover, one cannot expect gas prices to be varying like oil prices. Gas prices will remain unchanged for years as specific formulas will be defined for that purpose. Some GECF member countries have hinted at the definition of a formula for determining the price of gas, but such a formula is unlikely to be achieved in the short-term.

Q: Why hasn’t GECF had any clear policy yet?

A: This Forum can work out certain mechanisms for its members so that they would reach basic agreement on such issues as gas pricing and the volume of gas trading. But there is doubt about how influential such an agreement would be in practice under the current circumstances. There is a conflict of interests between some GECF member states. For instance, Russia, Iran and Qatar are three GECF member states with different geographical and political conditions, each pursuing its own interests. Russia is the largest exporter of gas in the world and supplies the bulk of Europe’s gas needs. Europe depends on Russia in many aspects. In the meantime, this country has started its gas exports to East and Southeast Asia and these regions will soon become an active market for Russia. Therefore, Russia is the leader of gas export in the world. On the other hand, Iran sits atop the world’s second largest gas reserves. For many reasons, Iran enjoys a good status in the global gas exports; however, it has not succeeded to fully achieve an influential position in the global gas markets despite its abundant gas reserves. Qatar holds the world's third largest gas reserves. Due to its certain geographical conditions, it cannot export gas through pipeline and it has to rely on LNG exports. There are also African and South American countries with gas deposits, but their long-term plans are different due to their geographical conditions and the volume of reserves and gas consumption. Therefore, gas policy is defined based on geographical conditions and the production rate, not GECF policies. However, this Forum provides a good opportunity to seek avenues for further cooperation.

Q: to what extent has GECF moved in line with its member states ' objectives, including Iran’s?

A: The presence of Iran as the second largest holder of gas reserves in the world in this Forum is very important and the Forum’s member states are aware of this fact. What can boost Iran’s position within this Forum and subsequently in the global energy market is to boost its gas exports capacity. Due to its huge gas reserves in the world, Iran can play a key role in gas international markets. Of course, Iran has decided to produce and export gas products besides exporting raw gas. Anyway, this Forum can serve as coordinator for Iran in the process of gas trading and exports. As exporting technologies make progress and the geography of gas consumption changes, other trends are likely to take shape in the future.

But generally speaking, presence in regional and international fora and/or organizations could be instrumental in strengthening links between any country and the international system and even at regional level. Such a presence will definitely boost the status of countries in the region and will make them more influential. Today, the world is running on the economy and all international activities are strongly linked to economic changes. GECF is no exception to this mechanism. In the future, this organization would, more than before, influence the trends of gas trade and production and secondary gas markets. For this reason, Iran should contribute to strengthening GECF and boosting its influence in the region. Iran’s active presence in regional and international gas markets will bolster Iran’s bargaining power besides numerous political, economic and security advantages it would provide to Iran. Membership to GECF is an opportunity for Iran to increase its chances of gas trading at regional and international levels and bolster its standing. This issue takes up added importance in the post-sanctions era.

Q: Do you think that GECF will be able to become an influential body at international level in the near future?

A: That depends on the role of gas in global trading. In case gas trading is boosted both in terms of quantity and quality and the number of gas exporters and buyers increases as all predictions indicate, that would happen. The share and standing of this forum in the energy market is bracing for a major change these days. There is question of shale oil and gas. Production and trading of shale oil can bring about unimaginable changes in the conventional oil and gas market. Generally speaking one can say that we will see GECF play more prominent role in the 2020s because more countries will enter the gas economics domain and that will drastically change the share, standing and mechanism of gas energy at international level.

Iran Weight in GECF and Regional Gas Markets

Iran is preparing to host a summit of the world’s major gas producing countries in November.

The meeting of the Gas Exporting Countries Forum (GECF) on 23 November brings together such major producers as Russia, Qatar, Algeria, Iran and other GECF members. Together, the GECF’s 12 member countries account for 67% of the world’s gas reserves, 64% of global LNG exports and 42% of cross-border pipeline trade.

Iran with 34 tcm of gas reserves ranks number one in the world, but the huge amount of domestic consumption allows the country to export only about 30 mcm/d of gas, despite a 700-mcm/d production level.

However, in the light of country’s hope for lifting of sanctions in the first half of 2016, as well as accelerating development of giant South Pars gas field, Iran is preparing to become a major gas exporter in medium term.

Coming to GECF, Iran advantages a unique geological opportunity to realize an interaction atmosphere among members instead of competition as well as to link regional producers-customers.

For instance, Russian Energy Minister Alexander Novak said earlier that Gazprom has offered gas supplies to Iran under a swap arrangement, delivering gas to Iran's northern regions and taking Iranian LNG in the Persian Gulf.

Iran has an LNG plant, developed by 50 percent with 10.5 million tons (or above 14 billion cubic meters natural gas) of production capacity, which is expected to come on-stream by 2019-2020.

Russia and Iran are connected with 1474.5-km-long Gazi-Magomed-Astara-Bind-Biand gas pipeline, put into operation in 1971 and Azerbaijan has upgraded it last decade and installed the Astara gas compressor station.

However, the delivery capacity of this pipeline is restricted and Russia can deliver only 4 billion cubic meters of gas per year (bcm/y) to Iran's northwestern regions.

Iran has a plan to construct a 1850-km pipeline with 110 mcm/d (40 bcm/y) of gas transit capacity to these regions, aimed to export gas to EU, as well. The cost of construction of this pipeline (9th cross-country pipeline) is estimated at $6 billion.

Alongside the construction of this pipeline with 17 gas compressor stations, the operational expenditures of 110-mcm/d gas transit from South Pars to northwestern regions may reach even above $1 billion annually.

Iran has also a $4 billion project (11th cross-country pipeline) to deliver 110 mcm/d of gas from South Pars to northeastern regions, of which operational expenditures may reach $250 million to $300 million annually. There are infrastructures, connecting Russia to Iran through Turkmenistan to carry out gas delivery several times more than Azerbaijani route.

On the other hand, Iran is to boost gas production level to above 1.3 bcm/d by 2020-2021.

Overall, Iran has new agreements to export about 80 mcm/d (almost 30 bcm/y). These include a contract with Iraq, signed in 2013 for delivery of 25 mcm/d (9.125 bcm.y) to serve three power stations in Baghdad, while two countries are negotiating to supply a further 35 mcm/d (12.8 bcm/y) to the southern Iraqi city of Basra.

It also has an agreement to supply Oman with 10 bcm/y and an agreement to supply 8.0 bcm/y (22 mcm/d) to Pakistan. Another Persian Gulf neighbor, the UAE, is also being targeted as a potential customer.

Oman (observer member) and the UAE (full member) are themselves both gas producers and members of the GECF, but with export facilities that cannot always be filled with their own gas. Iraq, too, has substantial gas resources and is an observer at GECF. All this helps ensure that Iranian gas relations with many of its neighbors are on a cooperative, rather than competitive, basis.

Oman’s gas consumption almost doubled from 2009 to 2013. Currently the country imports above 5 mcm/d of gas through the Dolphin system, but Salim al Aufi, Undersecretary of the Ministry of Oil and Gas, said last April that with the rapid expansion of power generation capacity, industries and refinery projects in the Sultanate, the consumption of natural gas will increase by over ten per cent annually from this year. 

Coming to Pakistan, it is worth noting that the Iran-Pakistan pipeline – commonly termed ‘The Peace Pipeline’ could also be used to serve the Indian and Chinese markets.

Speaking on 30 September, Indian President Pranab Mukherjee said: “The Iran-Pakistan-India pipeline can be revived since Iran has already built the relevant section of the pipeline in its territory.”

China is to build a $2 billion worth gas pipeline with 700 km length from Gwadar Port to Nawabshah to supply gas to the thermal power plants there.

It has been expected that regarding Iran-Pakistan's gas agreement as well as placing Gwadar port in 80 km distance with Iran's borders, alongside Qatari gas, Iranian gas also can be delivered in Nawabshah and this pipeline can be stretched towards China or India.

State-run energy company “Qatar gas” will supply Pakistan with 3 million tons of LNG (equals to 4.14 bcm) annually for 15 years; however, the Pakistan’s Finance Ministry’s forecasted that this country would need about 290 mcm/d of gas by 2025.

 It seems Pakistan has no choice but import Iranian gas. This country is also keen to import Turkmen gas through the TAPI project, but the delivery capacity of this pipeline is far less than Pakistan’s projected gas demands in 2025.

Beside regional countries, Iran can develop further LNG plant in ten years to become gas supplier to EU, but for this goal, Islamic Republic should reduce energy intensity significantly.

Natural gas has a 70 percent share in Iran's actual primary energy consumption, which is above 1.6 billion barrels of oil equivalent (BOE).

The country also needs to double the gas-injection to mature oil wells to above 70 bcm/y, to enhance gas delivery to power plants by 20 bcm/y to curb liquid fuel consumption and to increase gas supplement to industrial, petrochemicals and housing sectors in coming years.

If Iran can improve the efficiency of its consumption sectors significantly, then it should be able to become a major gas exporter in coming years, possibly reaching, eventually, as much as 200 bcm/y, thus rivalling Russia, which had net exports of 177.7 bcm in 2014, and Qatar, which exported 123.5 bcm.

* Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service.

World Longest Ethylene Pipeline Ready for Operation

Downstream petrochemical industry could be viewed as an option for reducing crude oil and natural gas sales ,while generating the favorable value-added in the country. As a value-generating industry over the past decade, petrochemical industry has been on an upward trend in Iran.

Iranian officials have shifted attention to the petrochemical industry over the past several years because of its foreign currency-generating nature.

Iran’s petrochemical industry, which is already on the road of growth and development due to appropriate infrastructure, needs to complete its value chain. To that effect, simultaneously with the development of its upstream sector, the downstream sector of this high-value industry should be also taken into consideration as a national strategy. In the meantime, it has to be taken into account that for a balanced development of the petrochemical industry, downstream industries should be established across the country.

Iran is currently building the world’s largest ethylene pipeline in the world in its western provinces with the objective of developing its petrochemical industry and generating more value-added from ethane. This pipeline would enable Iran to supply raw materials to 65 plants.

The bulk of ethane produced in the refineries of the offshore South Pars gas field is planned to be supplied to Kavian Petrochemical Plant by March next year. By converting ethane and injecting it into the West Ethylene Pipeline (WEP), a big development will transpire the petrochemical industry.

WEP is considered as the most important and the largest petrochemical project remaining from the Fourth Five-Year Economic Development Plan (2005-2010). This project was initially approved by the Iranian government in 2002 with the objective of developing underdeveloped and underprivileged provinces, job creation, contribution of the private sector, motivation of production process and upgrading technology in the oil sector. The project was forecast to come on-stream by March 2008, but due to lots of changes, technical difficulties, increased project costs and non-realization of budget allocation, it is now 80% complete.

Given the existence of upstream plants on the way of WEP, downstream petrochemical industries are hoped to keep this industry away from crude oil and natural gas sales by producing diverse petrochemical products.

After completion, WEP will have a capacity to transfer 3.5 million tons of ethylene; 2.5 million tons of which will be supplied by South Pars and the remaining one million tons by Gachsaran. That would supply feedstock to 12 petrochemical plants.

The construction of Hamedan, Dehdasht, Mamesani, Boroujen and Kazeroun sections has not yet started and Tabriz Petrochemical Plant and Ilam Petrochemical

Plant have yet to start building their connections to WEP.

This pipeline is 2,700 km long and supplies feedstock to 11 petrochemical plants in Kermanshah, Andimeshk, Lorestan, Kurdestan, Miandoab and Mahabad. Kavian Petrochemical Plant and Kermanshah Polymer Plant are already operational and the ethylene produced by Kavian is received by Kermanshah. WEP carries Kavian Petrochemical Plant’s products with the objective of full development of the petrochemical industry in western parts of the country.

Iran’s petrochemical industry development has picked up speed in recent years. It will enter a new phase next year as new petrochemical plants in western Iran would become operational.

Hamedan Petrochemical Plant is in the final phase of construction, while Lorestan, Mahabad and Kurdestan petrochemical plants are planned to come online by March 2016. The first phase of Ilam Petrochemical Plant has been recently launched and it will be able to operate at full capacity next year.

Petchem Hub in West Iran

Undoubtedly, western Iran can grow into a secure industrial hub in the near future if the petrochemical industry is developed and plans are made for building downstream petrochemical plants. Such a hub would supply domestic needs, as well as exporting products.

The director of petrochemical projects at National Petrochemical Company (NPC), Marzieh Shah-Daei, said recently that besides Ilam Petrochemical Company which is close to becoming operational, three other petrochemical plants are under construction in western Iran. Operation of several petrochemical plants in western Iran including Lorestan, Mahabad and Kurdestan petrochemical plants will wipe out poverty and create development of infrastructure in underdeveloped areas.

Despite all-out support by NPC, the WEP is in the final stages of its construction.

Abbas Shari-Moqaddam, the CEO of NPC, said the section of WEP stretching from Assaluyeh to Miandoab has been built and ethylene has been injected in it. He added: “After some problems of this pipeline have been resolved, injection of ethylene on Miandoab-Mahabad stretch will take place.”

Shah-Daei also said recently that WEP has had 80% progress. “Now, the first phase of Kavian Petrochemical Plant is ready for operation and is waiting to receive feedstock and injection of ethylene.”

Referring to the more than 90% progress in the Lorestan, Kurdestan and Mahabad petrochemical plants located on the WEP route, she said: “According to planning, Lorestan Petrochemical Plant is to come online in the second half of the current [calendar] year.”

WEP can help create job opportunities in the region, as more petrochemical plants would be launched in the provinces fed by this pipeline.

Commissioning Operations

Given the conditions for WEP, the only body qualified to decide about the status of the project to remain state-run or be privatized is the government. The maintenance, control, security and accountability to ethylene consumers are important and sensitive issues with regard to the pipeline. In 2002, the Iranian government assigned the construction of WEP to Ministry of Petroleum. At that time, petrochemical plants were planned to be erected only in Kohguilyeh Boyer Ahmad, Kermanshah, West Azarbaijan and Kurdestan provinces to be fed by WEP, but gradually, other provinces like Khuzestan and Hamedan were included in the route of this pipeline.

With the implementation of Article 44 of the Constitution, the units located on the path of WEP were fully privatized, but no decision has been made about the status of the pipeline. This issue is now one of the most complicated industrial challenges facing this major project because maintenance of a 2,685-kilometer pipeline and the ethylene it carries is very sensitive and costly. This pipeline is unique.

Abdol-Hossein Bayat, deputy head of NPC for WEP affairs, recently said the operation of the pipeline has been ceded to a qualified company but without going through administrative red tape of tendering. He said that the pipeline is not planned to be ceded.

A scenario often bandied about, with regard to WEP has been to cede it to Kavian Petrochemical Plant as the main producer of ethylene. But now the conditions have changed and the final producer and consumer of ethylene is only one company.

Advantages

Production of some alcoholic substances, agricultural use and production of some chemicals are among other advantages of ethylene carriage by WEP. That issue, along with other applications of ethylene in polymer production, has given rise to conditions that make ethylene production and transfer, prosperous in the market. That shows the high value of this commodity. A main pivot of Iran’s macroeconomic policies is to avoid selling crude oil and natural gas.

It is a common knowledge that besides crude oil, what could spare the Iranian economy harm is sustainable development which means generation of value-added, joining cooperative projects and making maximum benefits from minimum facilities.

To that effect, WEP can contribute to the economy of western Iran. WEP and petrochemical plants located on its route are able to make great contribution to boosting the economic status of Iran, resolve unemployment problem by creating job opportunities, and generate revenue by processing, production and supply of high-value products.

Making maximum profits through establishing permanent market for petrochemicals, supply of products suiting the taste of market and making bigger profits, boosting national macro plans and sustainable job creation in the country, presenting an alternative model of development of downstream petrochemical industries across the country, preparing the ground for the further contribution of the private sector to the country’s development plans, helping implement Article 44 of the Constitution, factoring in downstream petrochemical industries, and minimizing risks and impacts of international sanctions are among the advantages of development of downstream petrochemical industries along with important projects like WEP in Iran.

Turkey Dreams of Energy Hub

In 2008, Turkey’s foreign ministry unveiled its national energy strategy. The document required the country to become the hub of energy transmission from Central Asia, Caucasus, Middle East, the Balkans and Russia to Europe. Turkey has stepped up its diplomatic efforts to realize this objective, and is planning to transform Ceyhan Port to an energy terminal in the region within the framework of its long-term political and economic plan. For this reason, Turkey has in recent years been one of the main negotiating parties to energy delivery to Europe.

On July 13, 2009, Austria, Hungary, Romania, Bulgaria and Turkey reached agreement on the construction of Nabucco pipeline. Two weeks later, Turkey and Russia signed two agreements on the construction of oil and gas pipelines.

Having signed these agreements in line with its ambitious plans to become an energy hub, Turkey took a step ahead in becoming a key player in Europe’s energy diplomacy, but Turkey becoming a south corridor for the transfer of energy to Europe has been politicized. The plan is likely to be materialized in the future, but it is facing numerous serious hurdles.

This article reviews the procedure designed for Turkey to become the region’s energy hub before analyzing the country’s strategy outlook.

Turkey is willing to serve as an intermediary in oil and gas delivery from Russia, the Caspian Sea and the Middle East to Europe. Turkey intends to become the focal point of transit between oil and gas producers and markets in Europe. In case this strategy is realized, Turkey will be able to become the vital link in energy delivery that would connect the Caspian Sea and the Middle East regions to Europe.

At present, there are various oil and gas pipelines in Turkey, but Ankara is willing to increase the number of these pipelines and routes. Therefore, it is important to examine the present conditions of these routes as well as projects pursued by the Turkish government.

Turkey Oil Pipelines

Kirkuk-Ceyhan Pipeline: Constructed in 1997, this pipeline has a capacity of 1.6 mb/d. This pipeline has faced numerous problems on many occasions for being decrepit. Furthermore, due to insecurity in Iraq, this pipeline has been grappling with terrorist challenges like explosions. In recent years, Iraq’s oil exports to Turkey through this pipeline have frequently been halted following sabotage attacks.

Baku-Tbilisi-Ceyhan: Launched in 2005, this pipeline’s final capacity is 1 mb/d. It was initially known as the “Project of the Century” as it was planned to carry oil from the Caspian Sea to the Mediterranean. The pipeline is currently facing numerous challenges. The Azeri government started cutting oil pumping into this pipeline in 2011 due to a drop in oil extraction from Azeri-Chirag-Guneshli (ACG) oil field off Caspian Sea. The fact is that construction of this pipeline was not economical from the very beginning, but it was built with US financial support because Washington was resolved to break Russia’s energy monopoly in the region and undercut Iran route.

Samsun-Ceyhan: Construction operations for this pipeline started in 2010 and it has the capacity to transfer up to 1.5 mb/d of oil. This pipeline carries oil from Russia to Turkey via the Black Sea and then to the Mediterranean coasts. The construction of this pipeline has minimized the passage of tankers through the Strait of Bosporus and subsequently damage to the environment is curtailed.

Ceyhan-Haifa: Still under construction

 Bosporus-Dardanelles: This pipeline can carry around 3 mb/d of oil.

    Turkey Gas Trunklines  

Tabriz-Ankara Trunkline: Launched in 2001, this pipeline has the capacity to carry 7.5 bcm of gas per year. Gas transfer through this pipeline has seen certain problems in recent years. In addition to technical failures and sporadic explosions, the price of Iran’s gas exports to Turkey has always caused challenges.

Turkish Stream: Operational since 2005

this pipeline has the capacity to transfer 16 bcm of gas a year. This pipeline currently accounts for the bulk of Russia’s gas exports to Turkey.

South Caucasus Pipeline (also known as Baku-Tbilisi-Erzurum): Built in 2006, this pipeline has the capacity of transferring 8 bcm a year. Over the past years, gas transfer from this pipeline has halted on various occasions due to fall in gas production from Azerbaijan’s Shah Deniz field.

Turkey-Greece Gas Trunkline: Launched in 2006, this pipeline has a capacity of 11.5 bcm. Turkey received 10 to 14 mcm/d of gas from South Caucasus, 250,000 mcm/d of which was exported to Greece.

The Arab Gas Pipeline is a natural gas pipeline in the Middle East. It exports Egyptian natural gas to Jordan, Syria, and Lebanon, with a branch underwater pipeline to the Zionist Regime. It has a total length of 1,200 kilometers at a cost of $1.2 billion. As of March 2012, the gas supply to the Zionist Regime and Jordan stopped due to 13 separate attacks on GASCO's feeder pipeline to El-Arish that have taken place since the beginning of the 2011 Egyptian revolution – carried out by Bedouin complaining of economic neglect and discrimination by the central Cairo government. By spring 2013, the pipeline returned to continuous operation, however, due to persistent natural gas shortages in Egypt, the gas supply to the Zionist Regime was suspended indefinitely, while the supply to Jordan was resumed, but at a rate substantially below the contracted amount. The pipeline has since been targeted by militants several more times.

Nabucco Pipeline: This pipeline is forecast to be ready to transfer 31 bcm of gas by 2020. It is expected to transfer a significant amount of Caspian Sea gas to Europe via Turkey. The reason for which the Europeans support this project is to put Russia aside and find new ways to supply their energy needs. Turkey has at least four reasons for supporting Nabucco. First, Nabucco is in line with Turkey’s needs to become the region’s energy hub. Second, this project would be instrumental in Ankara’s cooperation with the European Union and would pave the way for Turkey’s adhesion to the European bloc. Third, Turkey would get revenues from transit fees as the pipeline crosses its territory. Fourth, Turkey’s overdependence on Russia’s energy could prove challenging in the future. That is why Turkey is looking for alternative suppliers and diversifying its partners in the energy sector in an attempt to reduce its vulnerability to energy shortages. However, Nabucco is facing several major problems. One is that parties to the Nabucco consortium have so far failed to win guarantees for gas supply from the Caspian Sea littoral states and without this they would not be able to gather enough capital for building this pipeline. The second problem emanates from agreements Russia has signed with regional countries for the purchase and export of energy. It seems that in the future too, the Russians will sign agreements with countries like Azerbaijan and Turkmenistan in order to maintain their monopoly on Europe’s energy market. The third challenge to the construction of Nabucco refers to certain relations between the West and Iran. These tense ties have deprived the Europeans of the world’s second largest gas reserves and the most important source of gas in the Middle East. Therefore, the main challenge to Nabucco is insufficient gas because Turkmenistan is currently delivering all its gas destined for exports to Russia, and Azerbaijan will not be able to supply gas to Nabucco by itself. The fourth problem for Nabucco pipeline is that Nabucco is a parallel pipeline to South Stream pipeline designed by Russia. Therefore, Russia and even many Western governments have cast doubt on the construction of Nabucco. Turkey moved to sign the South Stream pipeline deal with Russia only 24 days after the signature of Nabucco gas pipeline.

Turkey- the Zionist Regime Pipeline: Negotiations between the Zionist Regime and Turkey are on hold due to their sour ties.

Iraq-Turkey Pipeline: Negotiations have yet to pay off to that effect. Since this pipeline should cross Kurdish zones, any agreement to that effect is unlikely at least in the near future.

Assaluyeh-Bazargan Pipeline: Negotiations are under way to that effect, but its implementation is unlikely at least any time soon.

Turkey Strategy Outlook

Turkey is playing a strategic geographical role in the region in terms of gas supply to European markets. Turkey’s chance of becoming the energy hub of the world stands high due to its geographical position. Furthermore, the discovery of new offshore natural gas fields in East Mediterranean provide a good chance for Ankara because Turkey is the only economical route for gas transfer from this region to markets in Europe and Asia. However, some political issues related to energy in East Mediterranean and Iraq need to be resolved first. Therefore, Turkey becoming the south corridor for the transfer of energy to Europe is a highly political issue and that is why it faces serious impediments and problems, some of which are as follows:

Bitter disputes between regional countries on energy
Rivalry between regional countries to become energy hub in the region
Russia’s efforts to maintain its monopoly on pipelines
Crisis and political instability in Turkey’s neighbors: Syria and Iraq
Political divergence between Turkey and Russia on some regional crises like the Ukraine, Syria and Iraq ones
Internal insecurity in Turkey due to the Ankara government’s crackdown on PKK militants

In general, although Turkey plans to serve as a crossing point for the construction of gas pipelines stretching from the Caspian Sea, Central Asia and the Middle East to Europe. That would help Ankara become a central player in the energy sector. However, Turkey’s success in benefiting from these advantages requires changes in the dynamics of regional relations in Caucasus and Central Asia, willingness by Iran and Russia to transfer their energy via Turkey and finally the conclusion of ongoing crises in the region.

1-----Offshore Field on Stream in Côte d’Ivoire

Foxtrot International LDC has started up a second platform on block CI-27 offshore Côte d’Ivoire.

This was installed in April under a four-year, $1-billion program to develop the Marlin oil and gas field and the Manta gas field.

It should double block CI-27’s hydrocarbons treatment capacity and increase reliability of gas deliveries, Foxtrot added. The first platform, processing natural gas and liquids from the Foxtrot and Mahi fields, began operating in 1999.

Marlin-B1ST, the first of five planned development wells, is flowing 1,100 b/d of 26° API oil through a 35/64­­­­-in. choke. It encountered 62 m (203 ft) of gross pay in the Cenomanian interval; an 18.5-m (60.7-ft) section of this interval was oil bearing, of which a 6.4-m (21-ft) section has been perforated.

Water depth is 100 m (328 ft).

Gas production from the block has been averaging 145 MMcf/d (4.11 MMcm/d), with output of oil and condensates hovering just below 1,000 b/d prior to startup of the new well.

Foxtrot International operates the concession in partnership with state oil company PETROCI, SECI, and ENERCI.

2-----Platform Operational in Philippines

Shell Philippines Exploration and its partners have started gas production from the new Depletion Compression Platform (DCP) serving the Malampaya field.

The new platform – the first designed and built in the Philippines – is adjacent to the existing Malampaya Shallow Water Platform, 50 km (31 mi) offshore Palawan.

Shell says the new facility, and the two new production wells completed in 2013, will maintain the level of gas production needed to fulfill commitments under existing gas sales agreements.

More than 1,400 Filipino personnel took around two years to construct the DCP at the Keppel Shipyard in Subic, Zambales.

The facility’s self-installing allowed it to be installed without the need for large specialized installation vessels.

It was built to float and towed from Subic to the Malampaya offshore location. The inbuilt jacking system was used to jack down the 80-m (262-ft) legs and lift the platform from the water into its final position.

Both Malampaya platforms are designed to withstand typhoons and earthquakes.

Shell’s partners in the project are Chevron and Philippines National Oil Co.- Exploration Corp.

3------Cooper Signs Deal for Sole Gas Offshore Australia

Cooper Energy has signed a heads of agreement (HoA) with glass container manufacturer O-I Australia for the sale of gas from the Sole field development in the Gippsland basin offshore Victoria.

This is the first supply agreement for Sole, currently undergoing front-end engineering and design ahead of a final investment decision, expected in September 2016.

The HoA covers the supply of one petajoule/r of gas for eight years, or the life of the field, and comprises 8% of Cooper’s share of Sole’s anticipated production. First deliveries to O-I Australia could begin in January 2019.

Cooper has 50% interests in the field and the onshore Orbost terminal that will receive the gas. Santos is the other partner.

Sole is in the VIC/RL3, 62 km (38.5 mi) from the Orbost Gas Plant. Development will likely include a subsea drill center with gas exported to Orbots via a subsea pipeline.

4----Guyana Oil Project Economically Sound

ExxonMobil is reportedly moving its deepwater Liza oil discovery offshore Guyana into the pre-front-end engineering and design (FEED) phase.

According to research and consulting firm GlobalData, the project could deliver significant returns for investors.

Its analysis suggests that an FPSO-based development at the field would return above 19.8% in a flat-oil-price scenario of $61.68/bbl.

Anna Belova, GlobalData’s senior upstream analyst, said: “While there is risk around the assumed initial production rates of 20,000/d per development well, there is upside in additional cost efficiencies as low oil prices have been accompanied with decreases in FPSO leasing terms and drillship day rates.

“Additionally, the 201 MMbbl recoverable reserves estimate falls on the lower end of 700 MMbbl of oil reserve suggestions from Guyana’s Minister of Governance.

“Higher reserve scenarios, recovering upward of 600 MMbbl, have an internal rate of return of over 35% while capturing the economies of scale realized with FPSO developments.”

Although cost metrics for the Liza scenarios are consistent with other projects featuring a leased FPSO, economic metrics are more favorable than global averages, the analyst claims, due to the competitiveness of the Guyanese production-sharing agreement regime.

Matthew Jurecky, GlobalData’s head of Oil & Gas Research and Consulting, added: “The Liza project will also be well-placed to benefit from any uplift in oil prices post-development. Its commercial success could redefine the basin as a global deepwater production player.”

5-----BP Retains Jee for North Sea Inspection Services

BP has extended its contract with Jee for integrity management services and in-line inspection engineering support in the North Sea.

The scope includes project coordination, risk and corrosion management, span assessment, intelligent and operational pigging support, and ad hoc engineering studies.

Jamie Burrows, Jee’s business development manager, said:  “We define the inspection interval that is required for our clients’ pipelines using a risk-based approach for cost optimization. Our methods ensure each scope of work is examined and any potential challenges are identified and addressed early on, eliminating the need for costly changes. In addition, this ensures delays to the schedule of inspections are avoided, providing further cost savings.”

Jee has worked with BP for more than 20 years in locations including Aberdeen, Angola, Azerbaijan, Norway, and Trinidad.

1----Azerbaijan Bases Budget on $50 Oil

Azerbaijan expects its economy to grow significantly slower next year, due to a decline in oil prices and an expected smaller output of the energy sector, whose sales of oil and gas are key sources of state revenue.

Gross domestic product is forecast to grow 1.8 percent in 2016, down from the 4.4 percent expected in 2015. Parliament approved a 2016 budget based on an estimated oil price of $50 per barrel, down from $90 this year.

It sees total government revenues of 14.6 billion manats ($13.9 billion), down from 19.4 billion manats expected this year. Spending of 16.3 billion manats is forecast, down from 21.1 billion manats in 2015.

A deficit of 2.9 percent of GDP is expected, up from 2.6 percent of GDP in 2015. The oil sector is expected to decline to 53.5 percent of GDP next year from 65.3 percent in 2015.

Economic growth in Azerbaijan has slowed dramatically since the oil boom of 2003-2007, when the economy expanded by an average of 21 percent per year, as oil production begins to reach a plateau.

The former Soviet republic's economy is now suffering from low oil prices and the repercussions of an economic crisis in the neighboring Russia. Brent crude is now being traded at around $50.

Azerbaijan, a mainly Muslim country between Russia and Iran, has tried to reduce its dependence on energy, as oil production begins to plateau, using fuel revenues to spur other sectors of the economy, such as industry and agriculture.

The country expects to produce 40 million tonnes of oil and 30 billion cubic meters (bcm) of gas in 2016, a senior official at state energy company SOCAR said in September, roughly steady compared with this year.

Azerbaijan plans to produce 40.7 million tonnes of oil and 30.2 bcm of gas in 2015.

2----Russia Oil Output to Surpass 2014 Volume

The volume of oil production in Russia is expected to surpass the 2014 figure by 0.8 percent in 2015, the federal budget documents released on the official website of Russia's lower house of parliament, the State Duma, reveal.

The Russian government expects oil production to reach about 531 million tonnes (metric tons) in 2015, while gas production is predicted to reach 626 billion cubic meters at the end of the year.

Oil export is expected to reach 237 tonnes by the end of 2015, while natural gas export is forecast to stand at 170 billion cubic meters at the end of the year.

In 2016, oil export is predicted to surpass 233 million tonnes, while gas export is expected to reach 175 billion cubic meters.

Russia’s federal budget is expected to increase by 195 billion rubles ($3.1 billion at the current exchange rate) in 2016 from maintaining the current rate of export duty on crude oil at 42 percent (as compared to an earlier plan of decreasing it to 36 percent).

3---UAE Cuts Spending Amid Oil Slump

The United Arab Emirates (UAE) approved a deficit-free federal budget for 2016 of 48.557 billion dirham (13.23 billion U. S. dollars) that sees a 1.11 percent drop compared to that of 2015, state news agency WAM reported.

The slight decrease in planned federal spending follows a sharp fall of oil price from around 110 dollars per barrel in July 2014 to around 48 dollars lately.

The budget of the Persian Gulf Arab state, a major oil supplier, gives priority to promote public services that touch on the lives of its entire people, including education, social development, and health, said the report.

Masood Ahmed, director Middle East and Central Asia at the International Monetary Fund (IMF) said the UAE would record a fiscal deficit of 3.5 percent of gross domestic product which could increase further in the coming years in case oil prices would not pick up significantly.

The IMF's Ahmed said the UAE like all Persian Gulf Arab states might have to take hard political decisions in order to keep spending and the fiscal deficit at bay. UAE does neither raise taxes on income nor does it raise a value-added tax until today.

4---Singapore to Liberalize Gas Market

Singapore plans to establish a domestic natural gas trading market to help support plans to become a centre for trading liquefied natural gas (LNG) and take advantage of the growing importance of the fuel in Asia's energy markets.

Singapore, already a global oil trading hub, is aiming to take advantage of rising LNG supplies in the region, particularly from Australia, and an increasing numbers of buyers especially in China, but also India and other parts of Asia.

The city-state produces more than 90 percent of its electricity from imported natural gas, including LNG; however gas users currently buy the fuel under bilateral contracts.

"(A domestic gas market) will allow domestic gas price discovery that reflects Singapore's demand and supply conditions," S. Iswaran, minister of trade and industry, said at the opening of Singapore's International Energy Week (SIEW).

Singapore is at the heart of Asian LNG trading routes, a region which consumes 70 percent of global supplies.

Although price reporting agencies like Platts, a division of McGraw-Hill Financial, publish Asian LNG prices, there is currently no established LNG benchmark.

Instead, most contracts are priced off a mix of oil, price reporting agency assessments, and regional contracts such as Britain's National Balancing Point (NBP) or the U.S. Henry Hub.

Singapore is competing with Japan, the world's largest importer of LNG, to become a regional centre for LNG trade. Japan is in the process of fully liberalizing its domestic electricity market, starting next year.

China, which has large pipeline imports, a growing number of LNG import terminals as well as domestic production, would also be a potential location for a natural gas trading hub, although its development is in its infancy.

5---- Persian Gulf Should Adjust to New Oil Prices

Persian Gulf economies need to adjust to the "new reality" of oil prices expected to remain low for some time, the International Monetary Fund says, recommending spending cuts and income diversification.

But the oil-rich monarchies remain in a strong position to make the necessary adjustments thanks to the large financial reserves they have built up during years of firmer prices, said the IMF regional outlook.

IMF Middle East and Central Asia chief Masood Ahmed, who was in Dubai for the outlook's release said: "Not only this year, but for the years to come, these countries will need to make an adjustment to better balance their spending to the new reality of the oil prices."

The budgets of [Persian] Gulf Cooperation Council (GCC) members Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates are facing an average deficit this year of 13 percent, Ahmed told AFP in an interview.

Their combined budget deficit exceeds $1 trillion, he said, as oil prices have plunged to about $50 a barrel from about $115 in June 2014, pressured by oversupply and weak demand.

The IMF expects economic growth in the GCC to slow to 3.25 percent this year and to 2.75 percent in 2016 from 3.5 percent in 2014.

"Most people today believe that oil prices may come up a little bit from where they are today... By 2020, we are expecting to see oil prices in the low and mid 60s rather than the figures they were used to," said Ahmed.

"That means that most of these countries will need to undertake a process of sizeable and sustained adjustment on the fiscal side."

Those adjustments should include finding ways to cut public spending and diversify income away from oil, said Ahmed, pointing mainly at the need to cut subsidies and reduce the public sector wage bill.

"Most nationals of the GCC countries work in the public sector, and that's a model that has to change over the next few years," he said.

Ahmed applauded a recent move by the UAE to lift subsidies on fuel as a "good example" for other GCC countries.

Kuwait lifted subsidies on diesel and kerosene and other states are planning subsidy cuts.

Capital spending on projects should also be moderated with the focus on efficiency.

"Capital spending has increased a lot in many of these countries. Some of these projects are already being slowed down; others are being postponed. But in all cases you can look at the efficiency," he said.

6---- Algeria Backs Venezuela on OPEC, Non-OPEC Summit

Algeria supports Venezuela’s call for a summit among heads of state from OPEC and other oil-exporting nations in a bid to lift crude prices, Algerian Foreign Minister Ramtane Lamamra said.

”Algeria has always been a pioneer when it comes to strengthening solidarity between producing countries,” Lamamra said in Paris after meeting President Francois Hollande. “We would only convene a summit if its success is guaranteed; meetings at the level of ministers and experts will therefore precede such an event.”

Venezuela has proposed that heads of state from the Organization of Petroleum Exporting Countries and other oil producers meet in November to discuss the price needed to sustain investments in future supplies, the country’s Oil Minister Eulogio del Pino said on Oct. 21. Speaking in Vienna during a meeting of experts from OPEC and non-OPEC, del Pino said Venezuela seeks to set an “equilibrium price” of about $88 a barrel.

Brent Crude

Algeria and Venezuela are among the OPEC states most affected by the 44 percent slump in oil over the past year. Saudi Arabia led the group to switch its strategy in November 2014 to focus on battering competitors such as U.S. shale producers and reclaiming market share. Brent crude, a global benchmark, breached $115 a barrel in June 2014 before tumbling and was 25 cents lower at $47.74 in London at 3:16 p.m. local time.

“The current price is not satisfactory,” Algeria’s Lamamra said. “Going back to the very high price of before would be an illusion and not realistic; there could be satisfactory solutions for everybody between the two” levels, he said.

Venezuela proposed a summit after the failure of its repeated efforts with Algeria to broker an agreement between the 12 members of OPEC and other oil producers to reduce supply to boost prices. Global markets will remain oversupplied next year amid slower demand growth and a potential recovery in Iranian exports once economic sanctions are removed, the International Energy Agency said two weeks ago.

OPEC’s plan to choke off growth in supply outside the prganization appears to be working. U.S. crude production has retreated about 500,000 barrels a day from the three-decade peak reached in June to 9.1 million a day in the week to Oct. 9, according to data from the Energy Information Administration. OPEC ministers are due to review policy on Dec. 4 in Vienna.

7---- Cheap Oil Requires Better Plan in Brazil

Current global oil prices should lead companies operating in Brazil to better plan their field developments, Magda Chambriard, president of oil industry watchdog ANP, said.

"The actual price of a barrel of petroleum demands more dedication to planning in the industry, which means that this is the moment to improve operationally," she said at an event in Rio de Janeiro, where the watchdog is also based.

The price of benchmark Brent crude oil has fallen by about half in the last year, slashing revenue across the industry. On top of that, leaders at IBP, the group that represents oil producers in Brazil, has also criticized government policy for making oil exploration and production less attractive in the country.

Chambriard also said that the weak interest in buying Brazilian oil and natural gas exploration and production rights at the government's 13th round of concession auction earlier this month was unexpected.

The auction was seen as a test for how Brazil's oil industry would respond to recent downturns in prices, the country's recession and a regulatory environment many industry groups consider increasingly uncertain.

Still, only 37 of 226 blocks on offer were sold and six of 10 basins received no bids at all.

8---- Poland, Baltic Leaders Sign Deal on Gas Link

Leaders from Poland, the Baltic States and the European Commission agreed to build a gas pipeline between Poland and Lithuania to secure gas supply for the Baltic region.

The European Union has labeled the GIPL (Gas Interconnector Poland-Lithuania) a priority project as it would shore up energy security for Baltic countries, which heavily rely on Russian gas.

The political leaders of Estonia, Latvia, Lithuania and Poland and Commission President Jean-Claude Juncker signed a joint declaration which should lead to the completion of the 534-kilometre (334-mile) pipeline in December 2019.

"A central element of the EU's Energy Union strategy is bridging missing links in the energy infrastructure," the Commission said in a statement.

"The participating states are committed to work together also in the future to further reinforce the region's integration into the EU's internal energy market."

The construction cost is estimated at 558 million Euros, with EU grants worth 305 million Euros.

It will initially be able to deliver 2.4 bcm of gas per year to Lithuania from Poland and send 1.0 bcm of gas in the other direction.

9----- Vitol Sees Oil Struggling to Break Above $60

Vitol, the world's largest oil trader, believes the crude price will struggle to trade above $60 a barrel next year, as the effects of slowing global demand growth could be compounded by a return of Iranian and maybe even Libyan barrels.

The price of oil has halved over the last 12 months, mainly as a result of unprecedented levels of production from some major exporting countries, but also as demand from China and other commodity consumers, such as Brazil and Russia, slackened.

Ian Taylor, the chief executive of Vitol, said his company forecast global oil demand growth in 2016 to reach around 1.35 million barrels per day (bpd), slowing from this year's strong expected growth of 1.7 million bpd.

Cheap oil encouraged record refining runs, but even this has not been enough to absorb oversupply and, as such, the price has held below $50 a barrel for much of the second half of this year.

Taylor said he expected consumption in China to increase next year, but global demand growth would likely still fall short of the levels seen this year.

"Will we get 1.7 million barrels a day in 2016? No. I don't think so and that's one of my worries. If we did get 1.7 million bpd in 2016, then we could easily get to $60, but I don't think we will," Taylor told the Reuters annual Commodities Summit.

"Can I see a big run next year? No. If we are above $60 by the end of 2016 I will be a little bit surprised."

The International Energy Agency forecasts demand growth of 1.21 million bpd in 2016.

10--- Sudan Officially Applies for OPEC Membership

Sudan has officially applied for membership in the Organization of the Petroleum Exporting Countries (OPEC), the country's oil minister Mohamed Zayed Awad said.

OPEC is an international organization founded by oil exporting nations in 1960 aimed to coordinate their crude oil market share.

Currently, OPEC has 12 members after several composition changes – specifically, Angola's accession and the return of Ecuador in 2007.

"We have already submitted an application and are waiting for a decision," the minister told reporters. "Now, everything depends on OPEC."

Global oil and Asian product market, October

During October, oil prices rebounded due to the worries on Middle East tension and winter stockpiling of crude oil. According to report by Argus, supply and demand are not expected to come back into balance until at least the second half of the next year. However, the oil market surplus has been reduced which is mostly on the back of decreased output growth in non OPEC countries. This has resulted into an improving outlook for the supply-demand balance, supporting oil prices.

$/bbl

Brent

Dubai

WTI

2015

Jan

48.50

45.57

47.24

Feb

58.02

55.44

50.66

Mar

56.48

54.66

47.77

Apr

60.77

58.55

54.43

May

64.68

63.56

59.29

Jun

62.82

61.79

59.81

Jul

56.21

56.17

51

Aug

47.01

47.69

42.77

Sep

47.71

45.38

45.46

Oct

49.27

46.82

46.92

According to OPEC Monthly Report, “ total OPEC crude oil production increased by 0.11 mb/d to average 31.57 mb/d in September. Crude oil output increased mostly in Iraq, Nigeria and UAE, while production in Saudi Arabia showed the largest drop of 48 tb/d. According to secondary sources, September OPEC crude oil production, not including Iraq, stood at 27.43 mb/d, an increase by 29 tb/d over the previous month.”

Iraqi oil production rose to a record high last month, leading to keep OPEC output above its agreed level. Iraqi output pushed OPEC production to a three-month high in September, more than offsetting a fall in Saudi output. US refiners bought more crude from Middle East countries during September compared to August. It seems that Iraq is in a struggle to have a bigger share of the market among other Middle East oil producers. However, the loading facilities and its terminals are not well-equipped and this causes loading delays.

Asian Product Markets

All products cracks – products prices versus Dubai prices- declined during October excluding naphtha.

Products market fundamentals in brief

October 2015

Light Distillates

Middle Distillates

Heavy Products

Gasoline

Naphtha

Gasoil

Jet Fuel

Fuel Oil 180 & 380 cst

↓

↑

↓

↓

↓

(Upward arrow: strength, downward arrow: weakness)

Light Distillates (gasoline, naphtha)

Gasoline demand in Asia decreased during October. Asian gasoline market was weak on the back of weaker post summer requirements. Moreover, gasoline demand from Indonesia – the key gasoline importer in the region- is set to fall with the start-up this month of new refining facilities that will cut the country’s fuel imports by 30%.The restart of TPPI 100 kb/d Tuban condensate splitter and a 62 kb/d catalytic cracker at Pertamina’s 348 kb/d Cilacap refinery, together will cut the country’s fuel imports by 30%. Indonesia usually imports about 300 kb/d of gasoline.

Asian naphtha market improved during October and the crack reached to its highest since April 2015. Naphtha crack was 2.57 $/bbl on average during the reporting month. The strength came from lower naphtha exports from India and Middle East. The issue was due to refinery maintenance in India and Middle East. The other supportive factor in naphtha market is seasonal effect which causes naphtha demand to be bullish at the end of each year. Therefore, the strong situation is expected to be continuous for the month of November. However, the long term outlook for naphtha market is bearish with coming new refineries in Middle east area and higher naphtha exports from the region. This expectation has caused the 2016 term price premiums for naphtha sale contracts to be limited.

Middle Distillates (gasoil, jet fuel)

Jet fuel and Kerosene market fell due to lower Japanese kerosene demand ahead of winter compared to last year. However, the market is expected to gain some supports in terms of more demand for heating purpose, by start of cold season.

Asian gasoil market followed the same trend as kerosene since March 2015. The market is under pressure from ample supply in the region. The arbitrage to ship cargoes to Europe remained unattractive due to high freight rates. Moreover, gasoil requirements in Iran’s power sector declined due to higher gas availability from South Pars.

Fuel Oil

During October, fuel oil demand in Asia waned seasonally due to lower power generation ending summer period. Similar to gasoil, fuel oil demand in Iran decreased due to lower power generation requirements in Iran on the back of higher gas supplies to the country’s power sector. The market weakness has been limited by fall in fuel oil stocks in Singapore and emerging demand from China and South Korea. The potential decline in regional trade volumes, which are likely to negatively impact the bunkering sector will may add more pressure on fuel oil market in the coming period.

Iran, Foreign Oil Firms Hold Direct Talks

After the United States and the European Union announced their decisions to lift sanctions on Iran, a new atmosphere has been taking shape for cooperation and interaction between Iran and foreign countries.

Analysts say post-sanctions era will create numerous chances for Iran and potential investors. Energy experts believe that Iran is the paradise of investment in oil and gas and eliminating Iran from energy markets is by no means possible. This issue has been highlighted times and again by Iran’s Minister of Petroleum Bijan Zangeneh.

Given Iran’s active oil diplomacy and the willingness of foreign countries for investment in Iran, the Iranian Petroleum and Energy Club 2015 Congress and Exhibition was held in Tehran from October 19 to October 21. Minister Zangeneh, managing directors of the main four subsidiaries of Iranian Ministry of Petroleum, senior managers of foreign companies, representatives of international energy agencies as well as representatives of the Organization of the Petroleum Exporting Countries (OPEC), Gas Exporting Countries Forum (GECF), International Energy Agency (IEA) and Iranian senior energy decision-makers were present in the event. Foreign companies were significantly presented in the congress. More than 130 representatives of major oil companies were in attendance.

Inaugurating the congress, Zangeneh touched on the future lifting of US and EU sanctions on Iran, saying: “Thanks to the government’s foresight, Iran managed to resolve the current problems in the international domain and enter a new phase of relationship with the international community.”

“Today, the EU and the US have [agreed to] lift all nuclear sanctions imposed on Iran – under the Joint Comprehensive Plan of Action (JCPOA),” said the minister.

Zangeneh said the sanctions will be lifted in two months following measures undertaken by Iran.

“Today is a beginning for joint cooperation between Iran and different countries,” he said.

Zangeneh noted that Iran needs investment and development of technology particularly in the oil sector in order to improve.

“New technology, exports market, financial resources and capital are needed by Iran in post-sanctions era,” he said.

Zangeneh said the sanctions have caused a boost in Iran’s technological development in addition to keeping Iran at distance from state-of-the-art technology.

“There are so many differences between today’s Iran and pre-sanctions Iran particularly in the oil and energy sector. Over recent years, domestic companies have witnessed important developments and have managed to tolerate these pressures and cross them,” he added.

Zangeneh expressed hope that this congress would be a starting point for cooperation between Iran and foreign companies in order to achieve accelerated growth in the post-sanctions era.

The minister said the top priority for Iran in the post-sanctions era would be to reclaim its lost share of market.

“In the first step, Iran will reclaim the share it lost due to sanctions and now Iran’s traditional customers are much willing [to see Iran return to market],” he added.

Unique Opportunities

Zangeneh underscored the necessity of transfer of technology in post-sanctions era and said Iran intends to introduce some upstream oil projects during a conference planned for unveiling Iran Petroleum Contract (IPC), a new model of oil contracts to replace buyback.

“The upstream oil sector is an important sector willing to use technology particularly for enhancing recovery from operating oil fields,” he said.

The minister said investment opportunities are not limited to upstream sector, adding: “There are unique opportunities in the downstream sector and particularly construction of LNG, petrochemical and refining facilities.”

“Development of gas exports in the form of LNG, mini-LNG and pipeline, is among Iran’s post-sanctions priorities,” said Zangeneh.

Saving Energy

Zangeneh said Iran and foreign companies can also cooperate in energy saving projects.

“The energy intensity in Iran is very high and we need foreign investment to deal with this issue,” he said.

Zangeneh said despite oil price slump in world markets, Iran is paying $40 billion to $50 billion in subsidies.

He said foreign direct investment, joint cooperation between Iranian and foreign companies and recruitment of Iranian manpower are options for cooperation.

“In post-sanctions era, we are obliged to create jobs for Iranian youths and business for Iranian companies,” he said.

Avoid ‘Corrupt’ Dealers

Zangeneh also expressed the Iranian Ministry of Petroleum’s firm determination to fight corruption.

He said: “I recommend foreign companies to avoid any encounter and negotiations with corrupt people because not only will they harm their own credit, but they will also lose the chance of presence in Iran.”

The minister said the sanctions era is now over, adding that all contracts should be handled in full transparency in the post-sanctions era.

Zangeneh said foreign companies willing to operate in oil projects in Iran should know that Iranian officials favor clean and transparent job. “We confront corrupt and profiteering people who intend to make gains from Iranian people’s assets under the current circumstances,” he said.

The minister said Iran is engaged in a fierce battle with corruption, adding that communications with senior Iranian oil officials will become easier in the post-sanctions era in a bid to prevent corruption.

“Certain people who have no other capability but deception and they became specialists in this issue during the period of sanctions, and now they intend to take advantage of post-sanctions era,” said Zangeneh.

“There is no need for companies to work with such people and they had better negotiate directly with senior oil officials,” he added.

New Technologies

Rokneddin Javadi, deputy minister of petroleum and managing director of National Iranian Oil Company, expressed satisfaction with the presence of foreign companies in the congress.

“Given existing potentialities and opportunities in technology-based energy business, particularly in the oil and power industries, I hope that the ground would be prepared for sharing experiences,” he said.

Javadi also hoped for the elucidation of cooperation between Iranian and foreign private sectors in order to take faster steps for economic blossoming in the country.

“Huge oil and gas deposits, trained and competent manpower and developing economic enterprises are providing a good chance for our country to benefit from international experiences in these fields and exchange them,” he added.

Javadi said the congress is the beginning of a long road for the realization of the general policies of energy efficiency plan, adding that non-governmental organs will have a good chance to make contribution to the country’s economic progress.

Noting that the congress’s agenda has centered on oil and technology pertaining to energy business particularly technologies developed over the past three decades, he said: “For instance, in the electricity sector, application of state-of-the-art technologies result in higher output of power plants, lower power consumption and intelligent transmission and distribution networks. Despite economic development in the world, electricity consumption has significantly declined.”

Javadi touched on the ramifications of benefitting from up-to-date technologies in developing upstream oil and gas industries, saying: “Improving drilling methods and using technologies like horizontal drilling, intelligent drilling, acquiring deepwater drilling technology, production and development in sedimentary layers or shale oil and gas and similar issues have created a big revolution in production industries across the globe.”

“Application of cutting edge technologies in petrochemical industry has resulted in the development of new licenses particularly in conversion of gas to propylene and boosting the capacity of petrochemical plants and bringing them to favorable economic conditions,” he said.

Javadi said: “In natural gas, energy and GTL sectors, great progress has been made. Furthermore, in energy efficiency, establishment of intelligent facilities or increasing the output of energy-intensive industries is the result of application of these technologies.”

Referring to the issue of renewable energies as a topic of discussion in the congress, he said: “By boosting the efficiency of solar panels, increasing the output of turbines and owing to other positive changes in this sector, we hope to find a chance for replacing fossil energies with renewables.”

Javadi said more than 20% of electricity consumption in Germany is supplied by renewables.

He also underscored the necessity of promoting the use of hybrid and electric cars as a replacement for fossil fuels. Javadi said that newly developed technologies must help cut energy consumption.

He said a conference is planned to unveil IPC, calling on the representatives of domestic and international companies present in the congress to attend the IPC conference and prepare the ground for taking faster steps in the economic sector after the lifting of the sanctions.

Javadi said the IPC conference is designed to clear the way for increasing oil production to 5 mb/d and gas output to 1.4 bcm/d.

South Pars, Outcome of Iranians’ Efforts

Gholam-Reza Manouchehri, managing director of the Iranian Offshore Engineering and Construction Company (IOEC) and secretary of the congress, said discussing the issue of energy is of significance in Iran.

“Our country holds the largest gas reserves and the third largest oil reserves in the world. It depends heavily on oil and gas production and exports, while population growth and per capita consumption growth have stirred the intensity of consumption of energy commodities,” he said.

Manouchehri said the energy consumption intensity stands high in Iran, while the value of gross national product (GNP) for consumption per unit of energy is unfavorable.

The growth of domestic potentialities in Iran over the past two decades, particularly during years of sanctions, has been unbelievable for foreign observers. A jump in gas and condensate production in South Pars gas field over the past two years is the result of national growth which places Iran among top countries in the region.

Despite the growth of private sector in Iran, said Manouchehri, there is still shortage of resources in the country.

He also said that downsizing the government and streamlining bureaucracy is a tough job.

“Understanding these features, policy-makings and planning in the energy sector has made our country very significant in the post-sanctions era,” said Manouchehri.

He, however, expressed satisfaction with the oil and gas regulations which, he said were in compliance with national needs and international developments.

Reiterating the need for the management of energy consumption in the country, Manouchehri said: “It would be no honor for us to see our gas consumption rise 7% annually. Certain measures have to be undertaken to that effect.”

He said technology saving is also instrumental in managing energy consumption in the world, adding that the presence of foreign companies alongside Iranian companies could clear the way for Iran to move in that direction.

Manouchehri touched on Supreme Leader Ayatollah Ali Khamenei’s policies notified to President Hassan Rouhani about oil and gas industries, saying: “Increasing the share of renewable and new energies, assigning associated gas gathering projects, increasing value-added through completing the value chain of oil and gas industry and developing the production of commodities with optimal output based on energy consumption intensity, making upstream and downstream oil and gas industries knowledge-based and constantly increasing recovery rate are among these policies.”

He said that the presence of well-known foreign companies and particularly senior managers and experts with relative knowledge of Iran could pave the ground for interaction with domestic companies.

Golden Era Awaiting Gas

Mohammad-Hassan Adeli, secretary general of the Gas Exporting Countries Forum (GECF)

), said in the gathering that the indicators of global gas markets herald a very bright future for gas producers in the world.

“The recent developments show that gas producers have a tough job ahead in order to bring gas production to the level this fuel deserves,” he said.

Adeli said a golden era is awaiting gas “if we fully and seriously review the challenges facing this industry and we prove that natural gas is much better than rival fuels.”

He said that the International Energy Agency (IEA) proposed the issue of golden era of gas five years ago.

Adeli said the US is set to become a natural gas exporter in the near future in light of its growing shale gas production.

“Various factors are involved in the current market, including technical developments, emergence of new exporters of liquefied natural gas, geopolitical effects of gas supply, price variations in the form of homogenization of prices and pricing mechanisms and concerns about energy and environmental policies,” he said.

“These factors present us with new aspects of the gas market, which we need to take into consideration in our future plans in order to be able to face the market realities more effectively,” said Adeli.

WPC Praises Congress

Jozef Toth, president of the World Petroleum Council (WPC), also addressed the congress.

He expressed pleasure for his presence in the event, saying the congress would “open up a worthwhile dialogue in order to ensure the stability of the energy sector and to strengthen international cooperation.”

He said: “This is especially important in times like this when the industry is experiencing an extreme downturn, with prices having dropped by 50% in the past year and market expectations looking at a prolonged weakness of oil prices into 2016.”

“With benchmark Brent crude below 50$ per barrel and the prospect of oil prices remaining lower for longer ,the industry needs to focus its efforts on making their businesses more economically robust mainly through simplification cost control and improved execution,” he added.

Toth also said that “rather than simplistic across-the-board cutbacks that can weaken a company’s long term position, leading companies need to focus on developing sustainable cost transparency and cost optimization capability.”

He noted that by collaborating across the industry, making structural changes, standardizing operations, implementing digital solution to improve productivity and profitability and optimizing internal capability to drive higher efficiency and agility, companies can emerge from uncertain times stronger and more competitive. “So while the business environment may remain difficult and unpredictable, oil and gas companies can take action in numerous areas to reduce the impact to the bottom line and emerge stronger, and in a better position to respond to the volatile crude cycle,” he said.

“Innovation which has made it possible to extract fossil fuels that weren’t accessible just a decade or two ago is a strong driver for the industry,” added Toth.

“Technological innovation has also had a huge impact on all aspect of supply chain. Advances ranging from 3-D and 4-D seismic tests to improvements in distillation and isomerization to liquefaction and regasifaction have had a profound impact on the way companies explore, drill, produce, process and distribute oil and gas.”

Other points highlighted in his address are as follows:

“The future will hold many more advances, as energy companies begin to examine nanotechnology, biotechnology and sustainable chemistry solution.

Ensuring safe operation is another top priority. This includes finding new ways to monitor the integrity of materials in changing environments or creating new systems for inspection, maintenance and repair.

In the oil and gas sector, collaboration is especially important due to the high cost and long leads times associated with oil and gas advancements. Even in the current economic downturn, there are good opportunities for international oil companies (IOCs) to partner with national oil companies (NOCs) on a long term, sustainable basis. The economic crisis can be a good time to focus on forming and strengthening strategic alliances, particularly with NOCs.

In the new economy, strategic alliances enable businesses to gain competitive advantage through access to a partner’s resources, including markets, technologies, capital and people. Teaming up with others, adds complementary resources and capabilities, enabling participants to grow and expand more quickly and efficiently. Our industry has a cyclical nature and it is particularly during such downturns, that it is more important than ever, that the oil and gas sector maintains its role as an important part of a sustainable future. Good leadership, high standards and ethical business practices are required to ensure the sustainable supply and efficient use of the world’s oil and gas resources for the benefit of all.”

Panel Discussions

On the first day of the congress, petroleum industry aspects were discussed. The Middle East and North Africa director of France’s Total, senior upstream officer of Italy’s Eni and CEO of Austria’s OMV exchanged views about the latest developments pertaining to upstream oil industry.

The LNG meeting was also held with the presence of Hamid-Reza Araqi, managing director of National Iranian Gas Company. The CEO of Linde, the LNG director of Mitsui Group, head of FGA and director for international affairs of NIGC.

On the second day of the congress, Iran’s minister of energy Hamid Chitchian, CEO of Ansaldo, power and gas manager of Siemens, CEO of Mitsubishi Hitachi Power System, head of Energy Research Institute and Iranian deputy minister of energy for electricity were present.

Also on the second day, a meeting was held on petrochemical and refining. Abbas Kazemi, managing director of the National Iranian Oil Refining and Distribution Company, Abbas Shari-Moqaddam, managing director of National Petrochemical Company, as well as senior vice president of Air Liquide and senior vice president of Japan’s JGC were in attendance.

On the third day of the congress, several seminars were held to introduce opportunities for investment in Iran’s petroleum industry, power industry as well as petrochemical sector.

Total, Eni, OMV Ready for Iran Oil Projects

The Iranian Petroleum and Energy Club 2015 Congress and Exhibition was held during Oct 19-Oct 21 in Tehran. The agenda envisaged for the event was a number of panel discussions on the petroleum and energy industries issues with the participation of managers and senior experts from international companies, as well as senior directors from Iran’s petroleum and energy industries.

The theme of the first panel discussion was the upstream oil sector. Rainer Seele, CEO of Austria’s OMV, Stephane Michel, Middle East and North Africa director of France’s Total, Antonio Vella, Eni’s Chief Upstream Officer, Mehdi Mir-Moezzi, chairman of the Board of Directors of Iranian Petroleum and Energy Club and Mohammad-Ali Emadi, head of the Enhanced Recovery Research Center, delivered speeches.

Seele was the first one to address the forum. He pointed to Iran’s huge oil and gas reserves, saying Iran is one of the most important and the most reliable countries with huge gas reserves in the world.

He said that OMV, with more than 50 years of experience in oil and gas industries, has had valuable cooperation with Iran’s petroleum industry particularly in exploration.

Noting that application of enhanced recovery technologies and methods like enhanced oil recovery (EOR) and improved oil recovery (IOR) in Iranian reservoirs is inevitable, Seele highlighted the world’s energy approach regarding replacement of gas with other fuels in order to reduce CO2 emissions.

He expressed hope that countries will move towards reducing air pollutants emission by their industries through development of their activities.

Iran Upstream Requirements

Mir-Moezzi, who is a former CEO of National Iranian Oil Company (NIOC), talked about upstream technology.

He underscored the necessity of applying cutting edge technologies in all upstream activities of the oil sector, saying: “To that effect, optimal management of reservoirs and applying methods of recovery enhancement rate must be taken into further consideration.”

He said that different oil and gas reservoirs have different conditions in the world, adding that a variety of technologies must be used for different reservoirs.

Underlining the point that various technologies must be applied in exploration, Mir-Moezzi said: “In this sector, new geophysical methods could be used. Moreover, by benefitting from geochemical studies, it would be possible to draw up geochemical assays for all regions and oil layers in the country.”

He said that the technologies are more extensive in development and production and relevant technologies pertain to well drilling, identification of fluids, improving the permeability of oil layers and management of reservoirs.

“For instance, drilling of horizontal wells in layers like South Pars or ageing fields whose vast parts underlie cities, like Ahvaz field, is a basic necessity. It is also necessary to drill cluster wells in some oil layers in order to manage the depletion of layers,” he said.

Mir-Moezzi said modern drilling methods can largely contribute to increasing the pace and precision and reducing costs.

He underlined the necessity of applying updated technologies in installations and management of reservoirs and said: “Reservoirs management may not be a technology; however, it incorporates many technologies and it requires specific policymaking.”

Mir-Moezzi said the new generation of oil contracts would provide an appropriate chance for the growth and development of technology in the country’s petroleum industry.

He said the findings of a study indicate that the average recovery rate in oil reservoirs in the world is 22%, in the US is 39% and in the North Sea is 46%. He said that 55% recovery rate would be a more operating one.

Mir-Moezzi said in 1960, 50-60% of the world oil output was gained from new fields. He said in the future only 7 to 10% of oil production will come from new fields, noting that this issue highlights the significance of concentration on mature fields and application of new EOR methods.

He said Iran sits atop around 600 billion barrels of oil in place, adding that a 10% boost in recovery would put Iran’s recoverable oil at 60 billion barrels, which equals 90% of oil produced so far.

Mir-Moezzi also said that a one-percent increase in recovery from Iranian oil reservoirs would earn Iran $300 billion in revenues (oil barrel at $50).

Iran Future Role

Michel said Total is ready to finance oil projects and transfer relevant technical know-how to Iran in the post-sanctions era.

“Total has extensive experience in various parts of the world such as the Middle East, Africa, Brazil and Russia .Total can benefit from the experiences in future projects,” he said.

He said a 50-percent decline in oil prices pose a serious challenge to the oil industry. Regarding fall in the prices, Total wants to pay the cost for the implementation of oil projects in Iran and other parts of the world, he added.

Michel said Iran will be instrumental in the future of gas and the global market of this product.

“Iran is one of the worlds’ biggest holders of oil and gas reservoirs and can play an important role in the global energy market,” said the Total official.

He said that Total has seen its costs decline due to its acquisition of new technologies in the gas and LNG industries.

Michel said Total will go ahead with its plans to cut CO2 emissions rate.

Eni Eyes Presence in Iran

Vella said Italy’s oil giant Eni is ready to return to Iran’s oil industry once the sanctions against the country are lifted.

He said the company plans to use the latest technologies in Iran’s oil projects, stressing that this is crucial in decreasing the project costs.  

Vella added that Eni was involved in the development of Iran’s South Pars gas field and was also involved in several petrochemical projects in the country before sanctions forced it to leave.

He emphasized that Eni always used the modern technology in all the projects which implemented in Iran.

The official further said increasing the efficiency of projects is one of the key advantages of Eni, adding that the company wants to use this expertise in its future projects in Iran, as well.

“Prior to the sanctions, Eni was active in the development of South Pars field’s phases as well as in the petrochemical projects,” he said.

Vella stressed the role of technology in the development of Iran’s oil industry, and said Eni has been using the latest know-how in the Islamic Republic and will follow the policy in its future joint projects.

“Employment of the modern technology, carrying out the oil industry projects and developing oil and gas fields is top on the company’s agenda,” he added.

Vella said Eni has mastered advanced technology for deepwater drilling; adding that application of these technologies would significantly cut production costs.

Iran; Safe for Investment

At the end of the meeting, Emadi said: “That’s true that the Middle East region is in crisis and it is not as stable as ever, but Iran, as a major player in this region, enjoys full security and stability, and is a safe place for oil and energy investors.”

He said that the prospective lifting of sanctions and Iran’s energy potential provide a good chance for countries and companies with technology and capital to contribute to oil production hike in Iran and create a competitive atmosphere in collaboration with Iranian companies in the light of oil price slump.

Exclusive Question

Asked exclusively by Iran Petroleum to explain about Total’s stance on remarks by Iranian Minister of Petroleum Bijan Zangeneh that Iran Petroleum Contract (IPC) would require foreign parties to transfer technology to Iran, Michel said: “There are different options for the transfer of technology. For example, we can choose local residents in a region and engage them in the management of operations alongside Total staff. That is what we did in Abu Dhabi. Another option could be training the petroleum industry staff in order to improve their skills.”  

LNG; Iran Gas Investment Opportunity

The second panel discussion on the first day of the Iranian Petroleum and Energy Club Congress and Exhibition was focused upon liquefied natural gas (LNG) industry, technology and leading countries involved in this industry. Wolfgang Buchele, Chairman of the Executive Board of Linde AG from Germany, Hamid-Reza Araqi, CEO of National Iranian Gas Company (NIGC), Akira Kunimatsu, the LNG director of Japan’s Mitsui Group, Fereydoun Fesharaki, CEO of global energy consultancy firm FGE and Azizollah Ramezani, director for international affairs of NIGC, exchanged views about LNG.

Araqi, who is also Iranian deputy minister of petroleum for gas affairs, said NIGC has defined 10 long-term strategies as part of its long-term mission.

“One of these strategies is to acquire LNG and mini-LNG technologies,” he said.

Araqi said NIGC invites all foreign companies and countries equiped with this valuable technology for cooperation, adding that NIGC is envisaging signature of contracts with universities and launching pilot plants.

He said Iran intends to have a more prominent role in the global gas trade and the export of this valuable commodity through pipeline and in LNG form.

Araqi said Iran is exporting gas to Turkey and Armenia and plans to start gas delivery to Iraq soon, adding: “Gas exports to Pakistan have not yet started and negotiations for exports to Oman and Kuwait are still under way.”

LNG Market Growing

Buchele of Linde AG said LNG markets are growing, adding that LNG consumption makes great contribution to enhancing energy efficiency.

He said that the current LNG share of global gas consumption stands at 10%, adding that one-third of exports of this clean fuel is done through LNG.

Buchele said LNG markets are growing. He said 75% of LNG supplies on the world markets is based on long-term contracts and LNG single cargoes make up 25% of the market.

Referring to challenges facing LNG market, he said: “LNG applications in different sectors help complete the LNG value chain and boost energy efficiency.”

Buchele presented a report on the activities of Linde AG in LNG and its presence in world markets and underscored the significance and pivotal role of technology in LNG.

He said that Linde is ready to resume its legal presence in Iran as soon as Western sanctions are lifted on Iran.

Iran Rival LNG Markets

Kunimatsu of Mitsui Group said Iran would be able to compete with Japan, Australia and the US in LNG markets.

He said that Japan is currently the top exporter of LNG through oceans, followed by South Korea.

Kunimatsu said Mitsui Group, established in 1884, enjoys more than 130 years of background in oil and gas cargo transfer. He said the company accounts for 90% of LNG cargo carriages across the globe.

He also pointed to growing LNG consumption in the world, saying China and India are among the LNG consumers in emerging markets.

Kunimatsu said each LNG carrying ship costs around $200 million.

He said that although an LNG vessel is costly, it can carry LNG to remote spots in the world and find new and diverse markets.

Pipe Gas Exports

Fesharaki of FGE said the best option for Iran to export natural gas to neighboring countries and the Persian Gulf region would be pipeline.

“Iran has a long background in production, sale and presence in crude oil global markets, but gas and LNG market is a new experience for this country,” he said.

Fesharaki said in global crude oil markets, production to marketing and sale does not take too much time. He added that in LNG markets, there must be a long-term look and decision-making.

Fesharaki said LNG prices are regional and that finding destination markets takes too much time.

“At present, Japan’s LNG demand which was recently following an upward trend is declining; however, demand in China and India is growing,” he said.

Fesharaki said: “As far as LNG production is concerned, the market must be first identified because 75% of LNG sale contracts are long-term; therefore, LNG sale is a long-term trade.”

He said he believed that LNG markets are oversupplied and LNG prices depend on crude oil prices in the world.

Fesharaki said the best destination markets for Iran’s gas are the Persian Gulf countries including Kuwait, United Arab Emirates, Bahrain and Oman.

“Entrance into Europe’s gas market where Russia is present has its own complexities,” he said.

Investment Opportunities in Refining/Petchem Sectors

On the second day of the Iranian Petroleum and Energy Club 2015 Congress and Exhibition, a panel discussion was held reviewing petrochemical and refining industries. The participants in the panel included Jean-Marc de Royere, Senior Vice President of Air Liquide, Hiroshi Ogawa, Senior Executive Vice President of Chiyoda Group, Marzieh Shah-Daei, director of projects at National Petrochemical Company (NPC), Abbas Kazemi, managing director of National Iranian Refining and Distribution Company (NIORDC), and Mohammad Hassan Peyvandi, deputy head of NPC.

Kazemi, who is also deputy minister of petroleum for refining affairs, highlighted enhanced gas supply to power plants and major industries over the past two years, saying: “This important measure saved 50% of kerosene consumption, 50% of fuel oil consumption and 20% of gasoil consumption in the country for exports.”

Noting that oil refineries in Iran are of low efficiency, and generate losses, he said: “There are many capacities for investment in this sector and domestic and foreign potential investors would be granted 5-10% discount in feedstock price for new oil refinery construction.”

Kazemi pointed to legal obligation for cut in fuel oil production in Iran's oil refineries.

“By 2025, production of this product in the country’s refineries must be cut from the current 28% to 10%,” he said.

Petchem Technology Development

Jean-Marc de Royere, Senior Vice President of Air Liquide, said the French company has been active in 80 countries.

He said that German’s Lurgi is cooperating with Air Liquide in supplying technology for petrochemical cooperation.

Noting that the company is Franco-German, Royere said: “This company is charged with supplying gas and we have to make sure about supplies.”

He said Air Liquide is involved in upgrading technology, adding that the important factor would be to improve technology, no matter what kind of product is being supplied.

Chiyoda Eyes Iran Petchem Sector

Hiroshi Ogawa, Senior Executive Vice President of Chiyoda Group said this company has been operating in Iran since 1991.

He said Chiyoda has been involved in converting methanol to propylene and olefin.

Ogawa said the Japanese company is now working in 60 countries and is one of major players in liquefied natural gas (LNG) industry.

He said that Chiyoda has representative offices in Baghdad, Basra, London and Houston.

Ogawa expressed hope that Chiyoda would resume work in Iran’s petrochemical industry. Chiyoda used to operate in Bandar Imam.

Propylene Production

Marzieh Shah-Daei, director of projects at National Petrochemical Company (NPC), said Iran has so far used liquid feedstock, adding that the current projects are fed on ammoniac, urea and methanol.

She referred to growing plastic consumption in Iran and its lucrative market for investors and said Iran has, over the past ten years, switched to production of propylene from methanol.

Shah-Daei said Iran’s propylene production will soon reach 5.5 million tons.

“A review of global statistics shows that 66% of propylene consumption was spent on propylene production in 2014. In 2019, that would reach 67%. Therefore, production projects in Iran should move towards propylene production,” she said.

Refining Industry

Yutaka Yamazaki, president of Japan’s JGC corporation, said the company is operating in more than 80 countries with an annual revenue of $6.6 million.

He said that Petropars and NPC were very cooperative with JGC during its presence in Iran.

Yamazaki said JGC was involved in building a BPSD unit in Iran since 1994 and that it is now operating 76 projects in the Middle East, worth $29 billion.

He said that JGC is ready to bring about major changes in Iran’s refining industry and help cut fuel oil production at Iranian refineries.

KEPCO Eyes Deepwater Technology

The big depth of water in Iran’s sector of the Caspian Sea, changing climatic and ecological conditions, complexity and high risk of operations, prevention management and fight on possible crises, tough logistics due to long distance from coasts, the landlocked status of the Caspian Sea and its lack of access to high seas and other operating restrictions are among issues that have required the Khazar Exploration and Production Company (KEPCO) to conduct research projects.

In the meantime, observing environmental obligations and carrying out safe operations particularly in the offshore sector are among the KEPCO priorities. Therefore, concentration on research activities and interaction with scientific and research centers in the country on deepwater technologies is inevitable. In order to review the latest conditions of research projects at KEPCO, Iran Petroleum has conducted an interview with Ali Osouli, its CEO.

Q: To begin the interview, would you please tell us about KEPCO’s research and technology activities?

A: KEPCO’s research activities have existed since the very establishment of the company in order to orientate and constantly improve its activities in research and technology and also in geological studies, exploration as well as deepwater production and drilling. But these activities became serious in 2009 and all research activities have since been concentrated in this unit. The perspective pursued by this unit is to reach the top spot in the management of research and technology in deepwater exploration and drilling as well as transfer, development and indigenization of these technologies. To that effect, certain strategies have been defined and implemented.

Q: What has the R&D department of KEPCO done in deep waters so far?

A: In a bid to achieve its objectives and strategies and with focus on its main activity (deepwater), the R&D unit of KEPCO moved to define the roadmap for deepwater technologies in the Iranian calendar year 1393 in collaboration with universities from across the country. The objective of compilation of this roadmap has been to acquire the required technologies for operation in deep waters, identifying countries and leading technologies in this sector, identifying technologies related to this activity, assessing the country’s status quo in terms of deepwater technologies and identifying training facilities in the country. This comprehensive plan is currently under implementation, and is in its final stages.

Q: What kind of research activities are done in this unit?

A: Research activities in KEPCO are defined and pursued in view of realizing objectives and carrying out missions assigned with regard to two infrastructural sectors (potential building of research centers in technology research and designing and development of deepwater operation equipment). Furthermore, hubs have been set up for research in deepwater as part of infrastructural measures for creating potential in scientific and research centers. To that effect, I can point to Sahand University of Technology in Tabriz, Isfahan University of Technology, Sharif University of Technology, Ferdowsi University of Mashhad, Research Institute of Petroleum Industry (RIPI), University of Golestan, University of Zanjan and Iranian National Institute for Oceanography and Atmospheric Science.

In order to conduct studies, exploration, drilling and production in the Caspian Sea and the three northern coastal provinces (Guilan, Mazandaran and Golestan), the R&D section of KEPCO supports demand-based research projects like enhanced recovery from hydrocarbon reservoirs, application of latest technologies, defining a model for enhanced production, resource studies, establishment of industrial research centers at universities and domestic and foreign institutes, preventing environmental pollution and application of international standards for improving research projects.

Q: Could you tell us about research projects that have so far been conducted at KEPCO?

A: Conducting drilling platform model tests by Amir Kabir vessel, examining mooring circumstances and environmental conditions, seismic testing, zoning of earthquake and possibility of tsunami and crisis in the three provinces of Guilan, Mazandaran and Golestan and the southern section of the Caspian Sea, drawing up zoning map, studying and examining sustainability software, loading and offloading of storage tanks, balancing load on Amir Kabir vessel and offering solutions for building storage facilities are among the most important research projects which have been concluded. They have been realized thanks to efforts by Iranian specialists and under supervision and management of KEPCO. A comprehensive project for gathering and combating oil pollutants in the Caspian Sea is the last completed project with the objective of risk management and fighting the spread of oil pollutants in the Caspian Sea.

Numerical modeling of oil pollution spread with the objective of developing a system for simulating how the oil pollutants spread across the Caspian Sea are among the most important objectives envisaged in this project. It has been done based on gathering and classification of hydrodynamic data including meteorology and defining the regime of dominant winds in the southern part of the Caspian Sea and the waves created by wind and storm in the southern part of the Caspian Sea based on climate data gathered on the Caspian Sea for 32 years and finally after the data is fed into the aforesaid system, 72 different scenarios have been defined for the spread of oil pollution and examination of the behavior of the spread of pollution. Laying the foundation for conducting other management and preventive studies under conditions of crisis and establishing a GIS database are among the most significant findings of this project.

Since Iran and National Iranian Oil Company (NIOC) have constantly demanded that oil and gas contractors operating in neighboring countries respect environmental standards, implementation of these projects can present a new definition of research and operating projects in the Caspian Sea and also help set up a rich databank for a better risk management under conditions of crisis as well as accurate, scientific and timely decision-making for combating spread of oil pollution in the Caspian Sea.

Some of the past and present research projects of KEPCO are tabled below:   

Iran Petroleum Ministry Pins Hope in Weightlifting

As part of its extensive sports activities, Iranian Ministry of Petroleum is investing in weightlifting in the hope of winning the Asian championship. There are only seven teams present in Iran’s weightlifting league that is to say 30% of professional weightlifters in Iran are members of Ministry of Petroleum clubs. National Iranian Drilling Company (NIDC) and National Iranian South Oil Company (NISOC) clubs are the two clubs with years of professional background in weightlifting. They have also won international awards over recent years.

Background

Since the very establishment of weightlifting league, the two clubs affiliated with Iranian petroleum ministry moved to train teams. According to planning by the Iranian Ministry of Petroleum, the NIDC team has always proven to be stronger than NISOC team in matches. Thanks to the measures taken by NIDC, famous weightlifters like Kianoush Rostami, Behdad Salimi, Navab Nasir Shalal and Rasoul Taqian joined this club. Meantime, strong weightlifters with bright future also joined NISOC team.

The background of these two clubs shows that they have been successful in fulfilling their missions. Last year, NIDC only needed 3 scores to outmatch Zob Ahan team and that stemmed from bad luck. NISOC came in the sixth place.

Asia Championship

The NIDC team has represented Iran in Asian championship games over recent years. Last year, the weightlifters of this team bagged eight gold and 13 silver medals to become champion for the second time. The competitions were held with the participation of 19 teams from Asian countries. NIDC’s lineup comprised young and veteran weightlifters to win Iran the trophy. The first championship title was gained by NIDC in Asia in 2011. The NIDC team had won the youth trophy of Asian games in 2007 and 2009, too.

Localism/Nativism

The current round of championship league competitions has started and the two main teams of Iranian petroleum ministry are attending the matches with a different line-up. NIDC is spending its budget further on training weightlifting talents and help enlarge this quite small community. The NIDC line-up for the current league includes Hassan Gol-Parvar, Mohammad Feyzollahi, Arman Qorbani, Mohammad Amin Alipour, Hossein Hassanzadeh, Iman Mohebbi, Hadi Razavi, Jalal Qoreishi, Yasin Baqeri, Yasin Shirzad, Ali-Reza Dehqan, Majid Golabvand, Navab Nasir Shalal, Reza Askhveh, Mohammad Karamzadeh, Ahoura Jahangiri and Mohammad Sheini. Except for Nasir Shalal, who won the silver medal of the 2012 London Olympic matches is from the southwestern Khuzestan province; no other prominent weightlifter is seen in this line-up.

The conditions are not much different for the NISOC line-up. Milad Pour-Rashno, Vahid Khodadadi, Sajjad Lalehzar, Ali Chasbavi, Javad Naderi, Ali-Reza Kazeminejad, Mohsen Bahmani, Abolfazl Jomepour, Sina Hajipour, Yaqoub Pashoutani, Rahman Urameh, Ayoub Mousavi, Ali Makvandi, Reza Dehdar, Mohammad-Reza Tayebi and Afshin Taheri are the NISOC weightlifters in the current season of weightlifting in Iran.

Record Breaking

Something interesting happened throughout the competitions of the second week of the weightlifting league. That was a result of painstaking efforts by the NISOC weightlifting team. Javad Naderi managed to lift a 193-kg weight, breaking his own record of 190 kg. Still more interestingly, Naderi smashed the records of Hossein Tavakoli, the current head-coach of national weightlifting team. This record breaking may explain why the technical committee of the national weightlifting team agreed to let youths joint the petroleum ministry clubs.

Sport for All

In addition to championship sport, NIDC and NISOC have also taken effective steps with regard to sport for all. Nearly 5,000 employees of the petroleum ministry or their families are now members of various sports clubs.

Iranian petroleum ministry believes that physical and mental health contributes greatly to the efficiency and productivity of its staff and that is why it has taken numerous measures for promoting sport for all.

Faraz Ramhomrozi: NIDC to Win Asia Championship

Faraz Rahmhormozi, the head coach of NIDC weightlifting team, was born in the city of Masjed Soleyman in Khuzestan province. In recent years, he has fared well and managed to catch everyone’s attention. Due to his brilliant performance, he has joined the technical committee of national weightlifting teams. He is credited with two championships in national pro league in the past three years, as well as a championship in Asian clubs. He has recently appointed as assistant to Sajjad Anoshirvani, the head coach of national youth weightlifting team. Ramhormozi’s team for this year’s games comprises local weightlifters.

Q: Unlike the previous years, you don’t have any star-studded team this year. Why?

A: The NIDC clubs policy for the current year’s weightlifting league has been to recruit local people and talented youths from Khuzestan province. Of course, we adopted our policy of youth-orientation last year and we continued it this year. In the current line-up, there is only one non-local weightlifter.

Q: How hopeful are you in the future?

A: I believe that a bright future is awaiting these youths. We have weightlifters like Navab Nasir Shalal whom youths can follow to make progress. Furthermore, the NIDC team of youths is in good conditions and it has trained talented youths, some of whom have joined the adults’ team. There is no doubt that we will become the springboard for many weightlifters this year.

Q: Do you mean that you don’t think of championship?

A: That’s not so. We will be looking to win the championship title, but our main objective is not to win the trophy. However, I believe that the young members of my team are trained for tough days and can do great job.

Q: Do you think that the NIDC’s previous success in Asia could be repeated?

A: Definitely! When in the past a combination of young and veteran weightlifters helped the NIDC national team teach the trophy that could repeat itself. I think that we can have good days with these youths in the future.

Q: As the last question, are you happy with the facilities available at your club?

A: I have to offer my gratitude to Iranian petroleum ministry officials over the past years for their good investment in weightlifting. Few organs would be ready to invest in the championship league, but it has happened thanks to petroleum ministry officials. As far as facilities are concerned, the conditions are ok.

Firsts in Iran Petroleum Industry

George Reynolds was the first drilling chief in Iran. William Knox D’Arcy owes his oil extraction in Iran to relentless efforts by Reynolds.

Reynolds came to Tehran in 1901 following the signature of the D’Arcy Concession. He first started his drilling operations in west of Iran, but after Chah Sorkh (red well) ran dry, he moved his drilling equipment to southern Iran in Masjed Soleyman. D’Arcy had lost hope of finding oil in Iran, but Reynolds did not stop. Several days had remained before the 7-year D’Arcy agreement expires, but no oil was there.

Reynolds was ordered by his boss to halt drilling and return to Britain, but he ignored these instructions and continued his drilling operations. Finally on May 26, 1908, oil gushed out of the depth of 1,180 feet.

Reynolds was dismissed although he earned his company big money. He left Iran for London and then moved to Venezuela where he started drilling wells.

Other Firsts

Iran’s first exploration activity started in 1901 under D’Arcy agreement in some regions in the southwestern Khuzestan province. Seven years after, oil was found in Masjed Soleyman.

The first offshore oil field in Iran is Bahregansar, explored in the 1950s.

The first oil well that was drilled in the real sense of the word reached oil at the depth of 21 meters.

The first oil fleet in Iran was established in September 1955 under the name of National Iranian Tanker Company.

The first use of natural gas outside south oil-rich regions was to feed the newly established chemical fertilizer plant in Shiraz. It was set up by ministry of industry and mine in 1965.

The first well that produced gas in Iran was Pazanan located in southeast Aghajari. It was supposed to produce oil.

Iran first exported gas to former Soviet Union in 1970.

The first pipeline in Iran was constructed in 1970.

National Petrochemical Company was the first company to use sour gas supplied by Masjed Soleyman in its facilities.

Iran’s chemical industry was launched in 1957 by setting up a chemical fertilizer enterprise.

Iran’s first oil pipeline, measuring 130 kilometers in length and stretching from Masjed Soleyman to Abadan Refinery, became operational in 1911.

Iran’s first oil refinery – Abadan oil refinery – came on-stream in 1912.

The first oil well that produced oil in Iran had been drilled in Masjed Soleyman.

Shiraz Petrochemical Plant is Iran’s first petrochemical facility. It was set up in 1963 to produce chemical fertilizer in the city of Marvdasht.

The first petroleum industry higher education institute, affiliated with Anglo-Iranian Oil Company, was set up in 1939 under the name of Abadan Technical School. In 1962, it was renamed Abadan Petroleum Engineering College and in 1989 it became Petroleum University of Technology.

Iran first delivered its oil cargo abroad in 1911.

Oil was first supplied on Iran’s market in 1925.

Iran’s first oil storage facility was established in Nazi-Abad near Tehran and in Qazvin.

The first gas station in Iran was built in 15 Khordad and Vahdat Esmaeili Street of Tehran.

Abadan, Iran’s 1st Oil Refinery

Construction of Abadan oil refinery started in 1909, 12 kilometers from the city of Khorramshahr. At the same time, a pipeline with a capacity of 8,000 b/d was stretched from Masjed Soleyman oil field to Abadan.

The refinery came on-stream in 1911 with an initial capacity of 2,500 b/d. Nine years later its output reached 45,000 b/d and in 1937, Abadan output hit 200,000 b/d.

During World War II, more attention was focused on Abadan refinery. The facility was known as the largest refinery in the world in 1945. With a daily production of 25,000 barrels of jet fuel and supplying fuel to British forces, Abadan refinery made great contribution to the victory of Allied forces.

Development of the refinery continued after the end of WWII. The refinery’s production came to a halt after foreign engineers left Iran following nationalization of petroleum industry in 1950. But Iranian experts soon reactivated it.

Chabahar, Ever-Spring Land

Chabahar coastal city, located in Iran’s southeast region, is known as ever-spring city. The sun rises and sets in Chabahar sooner than any other spots in Iran. On the one hand, Chabahar protects Iran’s maritime borders and it also borders Pakistan. What makes this port international is its access to oceans and high seas.

Makran

Makran is a semi-desert coastal strip in the south of Sindh and Balochistan, in Pakistan and Iran, along the coast of the Persian Gulf and the Gulf of Oman. The name Makran derives from Maka, borne by an overlapping satrapy of the Achaemenid Empire. Another, older derivation is from the Makar, or sea dragon.

Anyone going to this spot in Iran would love to be beaten by rising tides. Most residents of Chabahar and tourists stay in the coasts in the evenings in order to enjoy spring breeze, known as “monsoon”, and watch waves lashing the rocks. Of course, these coasts become very dangerous when gale force winds blow. Foreign visitors have chosen to travel to Chabahar to enjoy surfing.

Kurdestan, Land of Natural Beauties

Iran's Kurdestan Province, with an area of more than 29,000 square kilometers, is located in in a mountainous area with an altitude of 2,000 meters in western Iran, near the border with Iraq.

The province shares border with East Azarbaijan Province and part of Zanjan Province in the north, Hamedan Province and part of Zanjan Province in the east, Kermanshah Province in the south and the Iraqi Kurdish province of Sulaimaniya in the west.

According to the latest official data, Kurdestan Province is home to 10 counties, 25 cities, 23 districts, 79 sub-districts and 1,767 villages.

Sanandaj is the center of Kurdestan province. Other important cities in the province are Baneh, Bijar, Divandareh, Sarvabad, Saqez, Qorveh, Kamyaran, Marivan and Dehgolan.

Asef Mansion

Asef Mansion, known as the “Kurd house” in Sanandaj, is among the most ancient edifices in Sanandaj. The mansion dates back to the Safavid Dynasty due to its architecture. However, under the Qajar and Pahlavi dynasties, the mansion has undergone some restoration work.

Sprawling on around 4,000 square meters, the building has four yards. It is expected to become a cultural complex. In the first phase, its anthropology museum has been completed and other sections like the museum of archeology, museum of handicrafts, documents center and traditional arts workshop are expected to open soon.