Iran’s Oil Diplomacy Racing Ahead

From Ex-German Chancellor to Danish, Czech and Slovakian Ministers

Undoubtedly, Germany is the most eager European country to resume trade and economic transactions with Iran, now that sanctions have been lifted on the Islamic Republic. Immediately after Iran struck a historic nuclear agreement with six world powers last July, a number of German high-ranking political and business delegations visited Iran. The first delegation that traveled to Iran was led by Germany’s vice-chancellor Sigmar Gabriel. And former German chancellor, Gerhard Schroeder, recently led a major business delegation to Iran and met with Iran’s petroleum minister Bijan Zangeneh.

Following their meeting on January 12, Zangeneh said German companies can invest in Iran’s upstream oil sector, petrochemical, refining, distribution and energy efficiency sectors.

“Iran welcomes foreign investments particularly by German companies,” said the minister.

Noting that German companies are required to have Iranian partners with themselves for presence in Iran, Zangeneh said: “It is necessary for German companies to provide necessary insurance cover for financing.”

He referred to history of Iran-Germany cooperation and said Germany has companies with high capabilities in petrochemical, refining and distribution sectors.

“Before this, German companies were not present in [Iran’s] upstream oil sector, but recently one of them expressed willingness for presence in the development of Iranian oil fields, which Iran welcomes,” said Zangeneh.

The minister said Iran is interested in cooperating with Germany, China, Russia and other countries.

He said Iran would not limit its activities to any specific country. “Iran’s projects are highly attractive and foreign companies will come to Iran for investment.”

New Chapter in Iran-Germany Cooperation

Following the meeting, Schroeder voiced his country’s readiness for cooperation with Iran in all sectors, particularly petroleum industry.

“The effect of Iran-Germany relations will soon be known in joint cooperation [between the two countries] and with the lifting of sanctions [on Iran], new doors for cooperation will open soon between the two countries,” he said.

Schroeder expressed happiness that German companies are backed by Iran, saying: “We do not look at Iran only as a trade and commercial partner, but we are ready for cooperation with Iran in all sectors including scientific sector and investment and training human resources.”

Czechs Want Iran Gas

On January 18, Iran’s petroleum minister and Czech Minister of Industry and Trade Jan Mladek met in Tehran.

Zangeneh said export and storage of gas were discussed during their discussions.

“Czech Republic is interested in importing natural gas from Iran which is not feasible currently with pipeline,” Zangeneh told reporters following the meeting.

“LNG export will be easier and both sides can cooperate in this regard,” he added.

“They can also invest in Iran’s petrochemical sector,” said the Iranian minister.

Zangeneh said that the Czech Republic is an industrial country, adding: “They can cooperate with Iran in manufacturing oil equipment, specifically building 10 domestically manufactured items with Iran.

“The Czech companies can cooperate with Iranian companies regarding transfer of technology and manufacturing of commodities and equipment required by the petroleum industry. Furthermore, they can consume the manufactured commodities in Iran or export to markets in the region,” said the Iranian minister.

Mladek, too, said that Iran and Czech Republic can cooperate in gas storage projects.

“Following the 2009 tensions regarding supply of gas and the problem of Ukraine, we can cooperate with Iran to provide for gas in winter,” he added.

“Considering the available capacities

, I think we can cooperate with Iran in LNG because of the facilities that Iran has,” said Mladek.

The Czech minister expressed hope that a joint economic cooperation committee would be established between the two sides to start activity in the current year.

“The companies in the Czech Republic are also interested in being active in the sector of energy, renewable energies, infrastructure, engineering products and other industries like petrochemical and foodstuff sectors,” he said.

Danish Companies Eye South Pars Oil Layer

Danish Foreign Minister Kristian Jensen travelled to Tehran with a delegation representing 58 companies. He met with Iran’s Zangeneh on January 5. They stressed the need for expanding bilateral cooperation in the energy sector.

Following the meeting, Zangeneh said Danish companies were interested in developing oil fields in the Caspian Sea as well asthe South Pars gas field, which also produces condensates.

Global conglomerate A.P. Moller-Maersk is in the oil industry through its Maersk Oil unit.

“We hope that these negotiations will reach conclusion for the development of several oil fields,” said Zangeneh who said he was in talks with Maersk Oil unit.

“Iran welcomes development of cooperation with Danish companies in the upstream, sector, oil servicing, petrochemicals and refining projects,” he said.

Zangeneh said Denmark has numerous qualified companies in the petroleum industry.

“These companies are invited to cooperate with big and powerful companies in Iran. In this regard, the Danish government can have a supportive role through providing insurance cover and investment by Danish companies,” he said.

Zangeneh said a letter of intent has been signed between Iran’s Ministry of Economy and Finance and the Danish delegation on export insurance.

He said the letter of intent will turn into an agreement after the removal of sanctions.

Asked if Danish companies are willing to operate liquefied natural gas (LNG) projects, Zangeneh said: “They have voiced their interest at low level for cooperation in this sector, but this proposal must be such to be attractive for both sides.”

The Iranian minister referred to history of cooperation between Iran and Danish companies in the oil sector, saying Iran has already cooperated with Tapso in the petrochemical sector for ammoniac production.

For his part, Jensen said that Danish companies are seeing long-term cooperation with Iran.

“Danish companies are ready for cooperation with Iran in infrastructure and we can find ways of such development through negotiations,” he said.

Noting that there is great potential for Iran and Denmark to cooperate in different economic sectors, the Danish minister said: “In this trip, the Danish companies are accompanying me in the hope of finding their Iranian partners for long-term cooperation.”

“Danish companies want investment [in Iran] and cooperation with Iranian companies active in the oil and gas sectors,” Jensen said.

He referred to the experience of Danish companies in operating projects in the Persian Gulf littoral states, saying: “We hope that the Danish companies will soon find their partners for cooperation in these fields and start their long-term cooperation.”

Denmark's Vestas, the world's largest wind turbine maker, said its representatives were present in Tehran and the company was looking into opportunities there, but would not elaborate on any talks.

One early Danish mover on Iran was drug maker Novo Nordisk which said in September it would build a $78 million manufacturing plant in the country, signaling what it called a "long-term commitment to Iran".

Slovakia Wants Iran Gas

Iran’s Deputy Minister of Petroleum for International Affairs and Commerce Amir-Hossein Zamani-Nia met with visiting Slovak Deputy Prime Minister and Minister of Finance Peter Kazimir on January 19 in Tehran.

Kazimiri led a 40-member business delegation to Iran.

After the meeting, Zamani-Nia said Slovakia is interested in buying natural gas from Iran as gas export to Europe is regarded a strategy by both Tehran and the green continent.

He said that Slovakia has not been a traditional customer of Iranian crude oil but has expressed the interest to import gas from Iran.

“Gas export to Europe is a strategy envisaged by both Iran and Europe,” said Zamani-Nia.

“Currently, Iran has no plans for export of gas to Europe, because pumping it by pipeline to Europe is not economical,” he said, adding, “However, in the mid- or long-term we may export LNG to Europe.”

Zamani-Nia said Europe’s market is currently facing gas oversupply, leading to decline in the gas price.

He said that Slovakia is ready to cooperate with Iran in gas storage in Iran, adding: “A [Slovak] delegation is planned to travel to Tehran soon and discuss with relevant officials.”

New South Pars Phases Operational

With the inauguration on January 11 of Phases 15&16 of development of the giant offshore South Pars gas field, 50 mcm/d of refined gas is injected into Iran’s national trunk line to serve fuel and feedstock needs of households, businesses and industries. The inauguration of this double phase by President Hassan Rouhani came just a few days before Iran’s historic nuclear deal with six world powers took effect.

This development phase will also produce 80,000 b/d of gas condensate and 400 tons a day of sulfur to be exported to world markets. Annual production of liquefied petroleum gas at 1 million tons for exports and production of 1 million tons a year of ethane for feeding petrochemical industries, particularly petrochemical plants located on West Ethylene Pipeline, are among other advantages of Phases 15&16 of South Pars. According to estimates, with the start of production of natural gas and other products at Phases 15&16 of South Pars, the country will make $6 billion in revenue.

Symbol of Coordination

Addressing the inauguration of Phases 15&16, President Rouhani said: “I feel happy that we are witnessing the inauguration of the two phases 15&16 this year, owing to endeavors and efforts of the country’s youth, officials and executives, according to a schedule given last year.”

He expressed hope that new phases of South Pars, including Phases 17&18, would come on-stream next year.

Rouhani said the inauguration of Phases 15&16 is a symbol of cooperation and coordination between different organs. He said Khatam al-Anbia Construction Base, the engineering arm of the Islamic Revolution Guards Corps (IRGC), was in charge of Phases 15&16.

Rouhani said the project symbolizes “coordination and cooperation between the administration and other organs including IRGC”.        

The Iranian president noted that the inauguration of Phases 15&16 means that the “conspiracy of sanctions” could not put any strain on the determination of the Iranian nation against big powers.

“Under conditions of tough sanctions, we inaugurated Phase 12 last year and this year still under conditions of sanctions, we are inaugurating Phases 15&16,” said Rouhani.

He said that one of promises made by his administration regarding oil, gas and petrochemical production is being delivered.

Rouhani said his administration will finish development of all phases of South Pars in the calendar year 1396 (to start in March 2018).

He said Iranians will feel happy when they see that the country is amassing wealth due to technological achievements and efforts of Iranian youths.

“To amass wealth only in the light of progress in China and India and the two-digit economic growth rates of these countries and subsequently their growing need for oil ,and oil price reaching $130 and $140 [a barrel] and then claim that we are seeing good days owing to development of others that would be of no value,” said Rouhani.

“Gas as a fuel is not only a source of generating money and capital, interacting with neighbors and world countries and self-sufficiency and independence, but gas means clean air, healthy environment and protection against pollution which has turned into a big challenge today,” he added.

Rouhani said that the remaining phases of South Pars are to be inaugurated in 1396, adding that no phase should be inaugurated before it has been completed.

Sanctions Relief to Cut Costs

Iran’s petroleum minister, Bijan Zangeneh, also said in the inauguration ceremony that the projects’ costs, which had been multiplied in the years of sanctions, will be cut by half after the lifting of sanctions on Iran.

Referring to the lifting of sanctions following the implementation of Iran’s nuclear agreement, the minister expressed hope that required equipment will be more accessible, project costs would be cut and technology would be transferred in more easily.

Zangeneh said the sanctions imposed heavy costs on the country, noting that the projects could be operated at much lower costs.

He said that Phases 15&16 of South Pars are coming on-stream less than a year after Phase 12 became operational.

Zangeneh said Iran’s Ministry of Petroleum’s objective is to inaugurate projects after completing them, adding: “We have no intention of showing off, but completion of projects is the main objective of the Ministry of Petroleum.”

He said that the Ministry of Petroleum has been honest and has worked under transparent conditions, adding: “Although Phases 17&18 are already producing, but we won’t inaugurate them because they have not been completed yet.”

Zangeneh said Iran’s refining capacity has grown by 150 mcm over the past two years, adding: “This issue has caused fuel consumption at power plants in the country to fall from 45% in the [calendar] year 1392 to around 15 to 20% in the current year.”

He noted that all development phases of South Pars, except for part of Phase 14, will come on-stream before President Rouhani’s administration ends its mandate in case the necessary finance is provided.

Zanganeh said Iran’s recovery from South Pars will equal Qatar’s after all development phases come online. Iran and Qatar share South Pars in the Persian Gulf waters.

“Before the end of the 11^th administration’s mandate, gas production from this field will reach 700 mcm/d and gas condensate output will reach 1 mb/d,” he said.

Zangeneh added that completion of South Pars phases will add 10 million tons to petrochemical feedstock.

The minister said that with the inauguration of Siraf, Persian Gulf and Pars 2 refineries, gas condensate produced at South Pars will be refined in the country’s refineries.

“Therefore, the country’s processing capacity will increase by 1 mb/d,” he said.

Zangeneh also referred to half-complete liquefied natural gas (LNG) projects in South Pars gas field, saying: “In case of sufficient investment in these projects and their completion, two full phases of South Pars will serve as feedstock supplier for these projects.”

6 Phases in Half a Year

Rokneddin Javadi, CEO of National Iranian Oil Company (NIOC) said six phases of South Pars are to be inaugurated by September.

He said that the onshore section of Phases 17&18 have reached their full capacity, adding: “After the offshore section reaches full capacity these phases will be inaugurated next [Iranian calendar] year.”

In addition to these phases, he said, Phases 19, 20&21 will be ready for inauguration next summer.

“In case of deliverance from financial crisis, the remaining phases of South Pars will become operational before the end of the 11th administration’s mandate,” said Javadi, who is also deputy minister of petroleum for oil affairs.

He said that South Pars is one of two energy production hubs in Iran, adding: “Daily production from this field currently stands at 420 mcm of rich natural gas that is instrumental in energy supply in the country.”

Javadi said the completion of all phases of South Pars will result in the production of 5.8 mb/d of oil equivalent.

“At current oil prices, revenue from this field may be higher than oil production income,” he said.

Javadi said around $5.5 billion has been spent on the development of Phases 15&16 of South Pars since an agreement was signed between NIOC and IRGC’s Khatam al-Anbia in July 2006.

Despite international sanctions, he said, the development project has made progress at a satisfactory rate.

Javadi said the share of domestic manufacturing in the implementation of this project stands at 70%, the highest in a construction project.

He added that domestic manufacturing share in Phase 12 was 67%.

Javadi said two offshore platforms of these phases were installed early last calendar year. Five months later, the platforms became operational.

Javadi said the products of these phases are valued at $3 billion with oil price at $50.

“With the completion of [production] capacity, this project will produce $6 billion in revenue, that means the return of the capital in less than a year,” he added.

Javadi also said that completion and pre-commissioning of Phases 15&16 of South Pars cost $700 million under the administration of President Rouhani.

NIOC, Total Sign Agreement

National Iranian Oil Company (NIOC) and France’s energy giant Total signed an agreement in the presence of Iranian President Hassan Rouhani and his French counterpart Francois Hollande.

The agreement was signed on January 28 at the Elysee Palace by NIOC managing director Rokneddin Javadi and Total’s CEO Patrick Pouyanne.

It was one of the main agreements signed during President Rouhani’s ground-breaking visit to France.  

Under the framework agreement, Total plans to purchase up 200,000 b/d of Iranian crude.

The deal was among the over two dozen business and trade agreements signed by a 120-member visiting Iranian delegation in Paris led by President Rouhani.

A statement from the French president's office said Total signed a letter of intent with the Iranian oil company. The deal covered: "upstream oil, gas, petrochemicals, crude trading, futures contract and crude oil purchase."

Total said the agreement will allow the company to access technical data on some oil and gas projects in Iran to assess potential developments.

The agreement also included a framework agreement for purchase of Iranian crude oil for French and European refineries.

Pouyanne told journalists after meeting Rouhani that the framework agreement will allow the firm to buy between 150,000 to 200,000 b/d of Iranian crude oil.

Rouhani said in the meeting that Total can benefit from the opportunity of cooperation with Iran in the energy sector.

“Iran is the energy hub of the region and given the background and experience of cooperation between the two sides, Iran can benefit from good opportunities that exist for cooperation in the energy sector,” he said.

For his part, Pouyanne said Total is ready to resume cooperation with Iran for developing oil and gas fields.

The agreement will be the first post-sanctions deal of its kind with a major western oil group.

Iranian economic doors to Europe have opened in the wake of the declaration that it had met the terms of a multilateral nuclear agreement brokered in July. Delegates from European energy majors were said to have been in Tehran earlier this month to review the potential for closer ties.

NIOC Strikes Exploration Deals with Europeans

NIOC's exploration director has announced the signing of new oil contracts with Spain’s Barcelona, as well as Italy’s Naples.

Following the reaching of an agreement with Russia's Lukoil on looking for hydrocarbon reserves in southern Iran, the National Iranian Oil Company (NIOC) has signed two new oil exploration deals with Barcelona of Spain and Naples of Italy.

The manager of NIOC Oil and Gas Exploration Directorate Hormoz Qalavand referred to the inking of contract between NIOC and University of Barcelona in Spain on a joint geological and geophysical exploration study; “the study area covers the southern part of the Zagros sedimentary basin located in Hormozgan Province.”

The official noted that the study entails new methods in geological and geophysical interpretations to explain the conditions of complex oil structures adjacent to salt domes.

“The heuristic methodology and technology in pursuit of hydrocarbon reserves does not exist in Iran for being limited to some of the world’s major oil companies,” said Qalvand stressing “on the basis of the new contract, the method will be applied in Iran for the first time.”

He continued that “the deal was reached in the year 2014, while the joint physical phase is 55 per cent through and the costs which amount to two million Euros will be financed by the foreign side.”

NIOC’s exploration director also pointed out the inking of a similar deal with the University of Naples Federico II located in Naples, Italy; “accordingly, the same modern method will be applied to the west of Kermanshah Province.”

He further asserted that “after preparing accurate maps, the main objectives would be proposing right spots for carrying out explorative drilling with an emphasis on shared and cross-border structures.”

Oil Terminal Mulled in Jask Port

In order to diversify country's ports capable of exporting crude oil, Iran has decided to construct the country's largest oil terminal capable of exporting 1mb/d.

Due to restrictions stemming from oil exports from a single terminal, Iranian petroleum ministry has decided to raise the number of export terminals. In this regard, new terminals are to be built in southern coasts, including one in Jask.

Iran’s largest terminal with a capacity of 1mb/d is to be built off the Sea of Oman. Once this oil terminal has been constructed, Iran’s dependence on the Strait of Hormuz would decline and it would no longer have to pass its tankers via this strait.

Another advantage of constructing this terminal would be the reduction of distance between oil tankers and consumer markets. The construction of this terminal is estimated to shorten the distance for oil tankers by 1,000 kilometers.

Construction of a 2,200-km pipeline and building storage facilities with capacity of 20 mb/d are among measures to be taken ahead of the construction of Jask terminal port.

Pirouz Mousavi, managing director of Iran Oil Terminals Company, said: “The project for the construction of the new oil refinery is being reviewed by the government and the petroleum ministry of Iran and National Iran Oil Engineering and Construction Company (NIOEC) will be implementing the project based on a timeframe set for that purpose.”

He said that Jask can accommodate 20 mb/d of crude oil, adding that in the offshore sector of this terminal, three single-point moorings (SPM) will be installed for loading oil onto the tankers for exports.

Saipem Signs Deal with Iran

Saipem has entered into a Memorandum of Understanding (MoU) concerning potential cooperation on major pipeline projects in Iran.

The MoU, signed with the National Iranian Gas Company (NIGC), envisages discussions aimed at Saipem’s potential cooperation in NIGC pipeline projects - including IGAT9 and IGAT11 - which cover 1800km.

This second agreement follows the one which was signed, January 25 2016, with the Parsian Oil & Gas Development Company, which envisages discussions aimed at Saipem’s potential cooperation in revamping and upgrading the Pars Shiraz and Tabriz refineries.

As MOUs are preliminary and non-binding agreements, they do not determine the addition of any of the potential works to the company's backlog.

The first agreement, signed on the first day of the official visit of Iranian President Hassan Rouhani to Rome, came as rights in the company's cash call started trading. Earlier this month, international sanctions were lifted on Iran following implementation of its nuclear agreement with world powers.

The 22-1 rights issue, priced at a 37 percent discount, will lead to the issue of 9.6 billion new shares, lifting the total share count to just over 10.1 billion. All the new shares are underwritten by Eni and FSI, as well as the consortium of banks that managed the rights issue. Trading in Saipem shares, halted temporarily after a 6.7 percent jump, ended the session up 18 percent.

Bank Mellat Opens Accounts to Settle Shell Debts

Iran’s Bank Mellat opened accounts in European banks to receive 2.1 billion euro oil debts from Royal Dutch Shell.

Bank Mellat said it has also opened other accounts in foreign brokers to receive cash of Iranian stakeholders in European and Asian countries.

The required process for opening an account and establishing brokering relations with foreign banks are being conducted as well. Iran has already named 12 domestic banks that have now been reportedly reconnected to SWIFT, the global provider of secure financial messaging services, after the recent removal of economic sanctions against the country. 

The Central Bank of Iran says it has conducted the required negotiations with the SWIFT – the Society for Worldwide Interbank Financial Telecommunication – for Iranian banks to use its services to do overseas financial transactions.

New South Pars Phases to Come Online

Phases 17&18 of the giant South Pars gas field are coming on-stream in June, manager of the projects said.

“Phases 17&18 of South Pars will become operational next June with the production capacity of more than 50 mcm/d,” Hassan Bovayri said.

He said that four refining terrains of these phases have become operational, adding that $5.7 billion has so far been invested in these phases, and the projects are nearly 93% complete.

Bovayri said these phases have four offshore platforms and 44 wells with a final capacity of 56 mcm/d.

“So far, two platforms and 22 wells have become operational and around 30 mcm/d of gas has been produced,” he said.

Bovayri said Iranian companies account for 65% of activities in Phases 17&18 of South Pars and that French companies have contributed the rest.

Iran, Norway Discuss Deepwater Oil Discovery

An expert meeting was held in Tehran between a visiting Norwegian delegation and executives of Khazar Exploration and Production Company (KEPCO) to explore avenues of petroleum cooperation now that the international sanctions on Tehran's nuclear program are lifted.

Norwegian ambassador to Tehran, who attended the meeting, voiced his country's interest to engage in trade cooperation with Iran, saying that a favorable opportunity has risen for restoring cooperation between the two countries.

Norheim Aud Lise said after removal of the sanctions, trade level between Iran and other countries will enhance and therefore, the coming years will be of utmost significance in terms of enhancing economic activities.

For his part, KECPO acting managing director Farhang Khatibi underlined the vast potentialities for expansion of ties between Iran and Norway in the energy sector which will be economically useful for the two countries.

Physical Progress of 84.5%  in Phases 20 &21

Iran expects to finish construction of topsides for phases 20 and 21 of the massive South Pars gas field in Persian Gulf waters by March.

Operator of phase developments 20 and 21 of the gas field said the projects have made 84.5% physical progress, while their topsides are 83.3% complete.

The platforms are being built with the total capacity of a billion cubic meters of gas per day.

Alireza Ebadi said once the topsides are ready, they will take two months to be transferred to their designated spots in the Persian Gulf.

The said Iranian developers have completed 60% of the projects so far. 10,000 individuals are directly or indirectly involved in the development projects.

Phases 20 and 21 are being developed for daily production of 50mcm of refined gas for household consumption, a million tons of ethane to feed petrochemical plants, recovery of 1.05 million tons of high quality liquefied gas for export and 75,000b/d of gas condensates, as well as 400 tons of sulfur.

Iran Ready to Endure Oil Market Mishaps

Iran’s national representative to OPEC says the Organization of the Petroleum Exporting Countries favors fair price in the long run. In an interview with Iran Petroleum, Mehdi Assali says Iran is readiest among OPEC member states to withstand bad conditions prevailing in the oil market.

The full text of the interview with Mr. Assali is as follows:      

Q: How do you see the future of OPEC amid tumultuous oil market in recent years? Do you think that new developments in diplomatic relations between OPEC member states would affect the influence of this organization?

A: Many believe that OPEC is the most successful organization active in developing countries. This organization is nearly 56 years old and has seen major development throughout these years. For instance, relations between the member states of this organization have happened to be extremely dark and strained and even war has broken out between members like the Iran-Iraq war (1980-1988) and the Iraqi invasion of Kuwait (1991). Despite all this, the organization has pushed ahead with its job and the member states’ officials have always exercised care, leaving room for joint cooperation in order to make common decisions if need be. In my view, this organization is not currently under conditions worse than that time and we hope that the erroneous behavior of some member states of this organization with Iran would be corrected. I have no doubt that OPEC will leave behind all these upheavals and will become far stronger than before because according to official data, more than 75% of the world’s conventional hydrocarbon reserves are held by the member states of this organization and oil extraction costs lower in the Middle East than in other countries (below $10 a barrel). Therefore, there is no doubt that this organization will become stronger in the future because the world’s dependence on the Middle East oil is increasing.

Q: Can oil price decline affect the OPEC influence on world oil market?

A: What affects OPEC’s decision-making power is the inability of this organization to make decision for bringing back oil market to ideal conditions. Otherwise, low oil prices are even likely to boost OPEC’s influence in the future because as I said oil production in OPEC member states cost is lower than in other countries and that can increase OPEC’s share in the oil market. Since this organization was established, oil and energy analysts were aware that a number of factors would affect OPEC’s performance. These factors are still effective. One of these factors is non-OPEC supply. In case this supply is raised, pressure will grow on the market. That will affect OPEC interests. Furthermore, on the demand side, technological advancement affects demand. For instance, there are currently 1.3 billion cars in the world. Since 92% of petroleum products in the world are consumed by the transportation sector, in case the consumption of these cars is halved due to technology progress, the demand for petroleum products will naturally be cut by half and therefore oil prices would be affected. OPEC has always sought fair price for oil to benefit producers and consumers in the long term, i.e. a price that would not negatively affect the world’s economic growth and would encourage investment in the oil and gas sectors. This price should necessarily be competitive and below OPEC rivals’ price. In that way, the OPEC’s market share will be preserved and it will not be seized by rivals. If the prices are too high we will see demand fall on the part of consumers. In the meantime, low oil prices are not beneficial to producers and consumers. Low oil price will harm consumers in the long term because investment in the petroleum industry will fall due to lower profitability. For example, investment in upstream oil and gas activities in Saudi Arabia, Iran, Iraq, North America, etc has declined. Since it takes long time to build oil installations and develop oil fields, when investment falls during a certain period of time, oil prices will make a strong jump in the future due to high consumption and low production and that would harm consumers. Therefore, OPEC believes in a fair price in the long-term.

Q: Before the recent tensions between Iran and Saudi Arabia, many experts had expressed hope that OPEC member states would reach agreement on cutting the organization’s oil production ceiling as the Saudis are running a huge budget deficit. How do you see this now?

A: The relations between Iran and Saudi Arabia [severed following the 2 January execution of top Shia cleric Sheikh Nimr al-Nimr] are likely to be restored before the next OPEC ministerial meeting. But these events are not such important to impact oil market because oil market is unfortunately facing a 2 mb/d oversupply. But one cannot predict from now whether or not OPEC countries would reach understanding in the next meeting because countries prioritize their own interests. During an OPEC Conference two years ago, Saudi Arabia and its allies argued that we should let oil prices fall so that non-OPEC producers, particularly the US whose production costs are higher than ours, would leave the market. Then we can get the market and raise oil prices at the same time. Iran and some other countries like Venezuela and Algeria believed at that time that this strategy is high-risk because oil producers in the US may resist this pressure and demand is likely to fall sharply and prices will follow suit. We are currently seeing that these forecasts have come true but to different extents. In November 2014, after member states failed to make a decision in this regard the previous decision, which was output rollover, continued. Since then, some member states like Saudi Arabia have not respected this ceiling and this organization’s production has now exceeded 32 mb/d (including Indonesia’s production after its recent adhesion). It shows that they (OPEC members) have taken 1.5 mb/d of Iran’s market, 1 mb/d of Libya’s market and have produced 1.5 mb/d above OPEC ceiling. In other words, when oil prices were more than $100 a barrel, these countries managed to buy more than 4 mb/d above their quota and pocket big profits. Now that Iran says the countries that have been making gains should reduce their production in favor of market stability and return to their previously agreed quota, they refuse to cooperate. Were it not for political motives they would have taken 2 mb/d of surplus production out of market so that prices would increase and the member states’ budget deficit would be cut. But in most of these countries, decisions are taken based on political interests. Under such circumstances, we cannot make analysis only based on economic aspects. Saudi Arabia imagined that shale oil producers in the US will be pushed out of market if oil prices are brought down to $60 but it did not happen and they are now facing the challenge of oil price plunge; however, they are not able to change their policy.

Q: Some experts believe that oil producers in the US have won the oil war which Saudi Arabia initiated. What do you think?

A: Oil production in the US is done by private companies. Therefore, even if they get only 10 cents in profits on each barrel of oil they will continue production. Therefore, they say we braced for risk and spent millions of dollars on oil production and we made gains and now if oil prices fall we will have to limit our production. The oil market structure has changed. Formerly, the oil market was such that producers tapped conventional reservoirs and they recovered from a well for up to 30 years. But in production from unconventional reservoirs, the life of a well varies between one and five years and new wells are drilled after production falls. In recent years, more than 20,000 barrels of oil well have been drilled.

This method has its own advantages and disadvantages; the advantage with unconventional oil production is that it is very flexible and anytime oil prices fall production from wells could be given up because the wells can survive on average for two years.

The flexibility of oil production from unconventional reservoirs has undermined OPEC’s contribution to balancing oil market. OPEC used to be an organization striking a balance to market and if prices went up or down it brought back balance to the market by increasing or decreasing its production. But now if oil prices exceed $60 unconventional oil producers increase their production and prices fall. Therefore, OPEC can no longer shore up prices above a specific level by cutting its production.

Currently, production from unconventional oil reservoirs in the US has fallen to 9.2 mb/d from 9.6 mb/d last summer and the number of drilling rigs operating in shale fields in this country has dropped from more than 2,000 to below 600. They have concentrated their operations on shale reservoirs in order to cut their costs by boosting production and survive the present conditions.

The costs and risk of production from unconventional reservoirs are high and therefore many companies that have taken loans from banks or financial markets for financing their projects leave the market due to insufficient profits. On the other hand, due to the oil price fall the value of unconventional oil resources has declined and therefore the banks are more cautious in granting loans to unconventional oil producers.

Under the present circumstances, what is likely to cut oil prices again is the conditions of financial markets in the US. If the trend of interest rate hike continues in this country the oil prices will keep falling because the maintenance costs of oil storage facilities increase, followed by oil supply to market. On the other hand, stock market plunge in countries like China and India would give cause for the persistence of oil price decline.

Some experts believe that economic growth in China is much less than announced by this country. Some believe that China’s economic growth is not 7%, but 4%. If true, this country will not return to its 500,000 b/d annual oil purchase. If these factors do not occur, oil price is expected to vary between $35 and $45 a barrel by the end of the [current calendar] year [in March] as oil producers continue to leave the US.

Q: How long do you think Iranian and Saudi economies would survive oil price fall?

A: Saudi Arabia is currently running a $100 billion budget deficit, which equals 15% of its gross national product (GNP). But Iran has experienced tougher conditions during the past decades. For instance, during the imposed war, our economy got accustomed to oil market challenges and it can withstand much more difficult conditions. All international bodies including the International Monetary Fund (IMF) have predicted that Iran’s economic growth will reach 4% to 5% now that international sanctions have been lifted with the implementation of the Joint Comprehensive Plan of Action (JCPOA).

The economy of Arab countries differs from Iran’s in nature because our economy is more diversified because of agricultural and industrial sectors, but the Saudi economy merely depends on oil and petrochemicals. Even its gas reserves are not as much as Iran’s and therefore I believe that given Iran’s determination to grab a bigger share of gas and petrochemical markets in the future, these resources will largely offset the budget deficit stemming from crude oil for Iran. Among OPEC member states, Iran is the readiest to endure unfavorable conditions of oil market due to its economic diversity.

Q: What do you think of the effect of liberalization of US oil exports on oil prices and OPEC in the short-term and long-term?

A: Currently, the US is the largest oil importer in the world. It imports more than 7 mb/d of oil. This country exports over 18 mb/f of petroleum products. It also produces more than 9.5 mb/d of oil and 2 mb/d of gas condensate. Due to its extent, this country may export oil to one spot and import from another. Therefore, the start of oil exports from this country after a hiatus does not seriously affect world oil market. If the US exports too much oil, the oil price will go up in this country and consequently this country’s imports from other regions will increase. Meantime, the US crude oil is light and sweet and it could not replace the Middle East heavy crude.

Q: Many oil and energy experts believe that after the removal of sanctions, countries like France, Italy and Spain will resume oil purchase from Iran. Why do you think these countries will become Iran’s oil buyers once more?

A: For the same reasons they are trying to purchase gas from Iran. Although demand for gas is falling they are seeking to purchase gas from us because they like to diversify their gas resources. Ten years ago, Russia was supplying 25% of Europe’s gas, but it has now reached 35%. Due to political differences between Europe and Russia over Ukraine, these countries are eager to reduce their dependence on Russia’s gas. Meanwhile, Iran’s oil was being exported to Europe in the pre-sanctions years and many refineries in this continent have been designed so as to process Iran’s crude oil and their renewed oil purchase from Iran would not require them to overhaul their refining systems.

Q: Iran plans to increase its oil production by 1 mb/d soon. How do you forecast the future of the market?

A: Iran’s petroleum minister and the director for international affairs of National Iranian Oil Company have repeatedly made it clear that Iran has the capacity to export 1mb/d more of oil, but it does not mean that we will flood the market with this amount of oil at the expense of a sharp decline in oil prices. Iran plans to supply this amount of oil gradually on the market in order to spare the market any shock. Moreover, Iran’s return to the market in recent months has already shown its effects and it could not have much more effects.

Q: Which countries do you expect to buy Iran’s oil after its production hike?

A: According to senior managers at the Directorate for International Affairs of NIOC, there are currently many customers for this oil in Europe and East Asia.

Q: Which issues were discussed in the last OPEC ministerial meeting?

A: Two issues were discussed in this meeting. One was reviewing Iran’s proposal for return to OPEC’s official production ceiling of 30 mb/d and production cut by countries that have raised their output. Reciprocally, Iran was opposed to further cutting its output because it has lost 1.5 mb/d of its output in recent years due to international pressures.

Saudi Arabia’s position has become weaker from a year ago because at that time it believed that six months would be enough for oil prices to fall and drive shale oil producers out of the market. Now, more than a year has since passed and unconventional oil producers are still in the market.

US Oil Exports’ Impact on Iran

US oil exports remained banned for several decades, but when oil prices hit $100 a barrel in the years following the global financial downturn many producers showed objection.

The issue of oil exports ban turned into a topic in energy discussions and even at the US Senate. But under conditions that the US domestic oil production had declined it seemed that this country was heavily dependent on foreign energy sources.

But this trend changed. Horizontal drilling and fracking technologies helped the US extract shale oil and gas from deep underground. The year 2013 was the first in which the US production exceeded its imports for the first time in two decades.

Moreover, for the first time in 2015, the US outdid Russia and Saudi Arabia in oil production and this country turned into a major oil producer in the world. Six months later, the US lifted its decades-old ban on oil exports.

“The end of the 40-year-old ban on crude oil exports should have little immediate impact on the US oil industry, but  in longer term it's likely to help US shale producers and give the United States more clout in a cut-throat, global energy arena.,” wrote CNBC.

While an end to the ban wouldn't have a massive immediate effect on oil markets, it could drastically alter some parts of the domestic and global energy industry in the longer term.     

“It's definitely an improvement, but it's not like the be-all and end-all that's going to stop the bleeding in the oil patch,” said Andrew Lipow, president of Lipow Oil Associates. “This is a small thing compared to Iran coming back to the market with a million barrels a day. … This reduces an artificial logistics impediment.”

No Short-Term Impact

USA Today wrote: “Congress’ decision to end a four-decade-old oil export ban will help stabilize global oil supplies and protect against terrorist disruptions in the Middle East, but consumers won't see any benefits in the short term.”

Lifting the ban also won't have any immediate impact on the OPEC whose refusal to sell to the USA in the 1970s had prompted the ban.

Oil prices are near an 11-year low, and the price difference between oil produced in the US and the Middle East is so small, that US producers are unlikely to ship oil overseas, says Tom Kloza, chief global analyst at the Oil Price Information Service. “Right now it has very little impact,” Kloza said. “The price of light sweet crude in the US and overseas is very similar.”

For a time, a barrel of crude was selling for $90 in the USA and $110 in Europe, and US producers were missing out on those higher prices.

US oil now sells for around $36.25 a barrel, compared to Middle East oil that sells for 50 cents more, a difference that wouldn’t justify the cost of shipping, Kloza said.

The US produces 9.2 million barrels per day, which accounts for around 10% of the world oil supply, according to the latest report by the US Energy Information Agency.

A doubling in oil prices would spur US shale producers to add another 2 million barrel-a-day to the market, which might lead to cheaper US prices and more exports, Kloza said.

But with Iranian oil expected to enter the global market as nuclear sanctions are removed, that prospect is probably several years away.

Lifting the oil export ban “could be a big deal, sometime in the next decade but not in 2016,” he said.

Job Creation

American Action Forum highlighted the coincidence of the US decision with the implementation of Iran’s nuclear deal with world powers.

A combination of different events has positioned this issue to be at the forefront of domestic policy right now; one in particular is the Iranian nuclear deal.  Under the deal brokered by the White House, Iran would be allowed to begin exporting their oil again on the world market. For the past 3 years, Iran has exported around 1.3 million barrels a day and gained over $115 billion in gross revenue, down from 2.5 million barrels in 2012. In the pre-sanctions era, Iran was grossing over $280 million a day or just over $100 billion a year.

Oil Exports Unprofitable

Forbes magazine wrote: “Last year the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, initiated an economic oil war against the United States when it refused to cut production in November of 2014, something that the country usually does when oil prices drop. This was an attempt to drive some US shale oil producers bankrupt and stem the flow of North American shale oil onto the global market.”

In fact, OPEC actually increased oil production in November, which drove oil prices down to nearly $50/bbl, the price at which many shale producers can’t even break-even. But it hasn’t quite worked out the way they wanted.

The world oil production is about 93 million bbl/day, but it is the cost to supply the last barrel needed to meet global demand that determines the marginal cost of oil. So, the marginal cost of oil is above the average production cost of that first 92.9 million barrels. The marginal cost is used by oil companies to plan long-range capital budgets and field operations and bankers value assets during acquisitions or divestiture processes. It is also the best guide to what futures prices will be.

If Iran can export oil and reap the benefits once the Iran deal is final, why can’t the US? An oil export ban for the United States is detrimental to the economy. The low price of oil is already creating tension both domestically and globally.

Using the average price of oil for the last 40 years with inflation factored in, if the U.S had been allowed to export 1 million barrels a day for the last 40 years the gross figure would be roughly $790 billion dollars since 1975. Using the same methodology, on the low end of the spectrum, 500,000 barrels per day would have generated more than $395 billion per year and assuming 1,500,000 barrels per day the US would have seen $1.2 trillion per year in gross revenue.

According to a study released by the American Petroleum Institute removing the ban would “lead to further increases in domestic oil production, resulting in lower gasoline prices while supporting nearly 1 million additional jobs at the peak . . . It would lead to a total of $746 billion in additional investment during the study period (2016-2030) and an average of 1.2 million barrels per day (M b/d) would be produced.”

Of course, exporting oil from the US is less advantageous when the price of Brent is low, as it is now.  Putting more supply on the market will lower prices, impacting the gross revenues that the US is poised to realize. Likewise, if Iran is allowed to begin exporting again on the world market, increased supply may very well push prices down. The market reacts with a lag and hence, changes in oil prices do not always happen immediately.

The data indicates that prices will drop when Iran’s oil enters the market. Some estimates indicate that it would fall by as much as $10 a barrel by next year.

No Impact on Iran Oil

Energy expert Narsi Qorban has said that the US oil exports would not affect Iran.

“Generally speaking, the US is a net importer of oil. In other words, the trade balance of this country is tied to oil imports because it needs huge energy for running its industries,” he said.

“Therefore, when this country announces that it would export its oil, it has to replace the same amount. This country definitely exports its light products too and will import heavier products,” he added.

Qorban also referred to Iran’s entry into oil market, saying: “The US oil may cause fluctuations in the oil market, but its impact will not be as much as Iran’s entry because Iran has much more oil reserves.” 

The expert said that the US and Iran are producing oil with different API and spec, noting that their presence in the market will not cause any interference.

“The US is producing sweet and light crude while Iran’s oil is heavy. Therefore they cannot affect each other’s markets,” he said.

Qorban said the US oil will rival Nigeria’s in the market. “This oil can easily enter European markets, while Iran’s oil market is located in the East.”

World to Depend on Fossil Energies for 25 Years

A specialized forum on “World Gas Market Perspective in Light of Current Challenges” was held on January 6. The conference was attended by Mohammad-Hossein Adeli, Secretary General of the Gas Exporting Countries Forum (GECF), Kamal Kharrazi, head of Iran Strategic Council for External Relations, Ebrahim Sheibani, head of the Economic Committee of Iran Strategic Council for External Relations, Mehdi Assali, Iran’s national representative to the Organization of the Petroleum Exporting Countries (OPEC), and Azizollah Ramezani, director for international affairs of National Iranian Gas Company (NIGC).

Addressing the forum, Adeli referred to the challenges of gas market, saying: “In spite of these challenges, the golden age of gas still stands. Gas [production and consumption] will increase in the future.”

He said the main challenge to energy and gas in the entire world is the global economy which plunged into turmoil in 2007 and 2008. He added that major economies in the world have since been slowing down.

Adeli said another challenge in the gas market pertains to demand, adding: “Due to the growth of global economy, demand for energy gas dropped in the world. Meantime, as the economy is making progress in countries, the two issues of energy and gas become influential in the world.”

“Economic efficacy enhancement and energy intensity reduction complement each other,” he said.

Adeli said the third challenge faced by gas market is gas trade through pipeline.

“In 2010, LNG (liquefied natural gas) made up around 10% of world gas trade, but has now reached 30%. It shows that LNG is a new phenomenon in gas markets with US LNG, which is recovered from shale gas, at the top,” he added.

Adeli said the significant point is that the gas lying in underground big rocks is extracted before reaching maturity status.

“Naturally, this gas could be recovered years later, but this product is used by applying state-of-the-art technology,” he said. “Shale gas brought up a revolution in gas in the US. At present, except for China, no country has the possibility of applying this technology.”

Adeli also said emergence of new exporters posed a challenge to the gas market, adding: “The oil price fall is another challenge faced by this market as it has cut the price of gas.”

“But another challenge that would be conducive to the maturity of gas market in the future is the re-trading market. Gas importing countries purchase gas more than their needs and create a commercial zone or a gas stock market to sell and export gas. Spain, China and South Korea are among the countries that have joined the gas trade market. Given the lack of such a mechanism, that would definitely change the market equations,” he said.

Adeli said the last challenge, which is highly significant, stems from geopolitical developments that largely affect the gas market.

“When the US started investing in shale gas for exports, most of its export interactions were with Asia, but today, the main export destination of this country is Europe,” he said.

Adeli said the aforesaid challenges would seriously affect this market in the future.

Long-Term Outlook

Adeli said the global economy will have to adapt to a 0.8% population growth from 2015 to 2040. That means that 1.7 billion people will be added to the world population that would need energy.

He also referred to urbanization, saying: “In 1990, only 43% of the world population lived in urban areas, but in 2014, that figure reached 54% of the world total population ; and in 2040 it would reach 64%.”

“Urbanization will result in energy consumption hike. The global economy will grow around 3.1% from 2015 to 2040, which shows that the energy consumption will increase in the world,” said Adeli.

“Having a look at the world map it can be noticed that energy consumption in the world will grow further. After the Middle East, i.e. the largest exporter of energy, turns into the largest consumer, the important question would be to know which of these countries would go off the export cycle. Will it have any political and international fallout?” he added.

Regarding energy mix in 2040, Adeli said: “The important point is that the world will be still dependent on fossil energy over the coming 25 years, and oil and gas will have the highest share in the world energy supply.”

He said that by 2040, fossil energies account for around 80% of the world energy with gas, oil and coal accounting respectively for 26%, 27% and 24%.

Adeli said power plants will be the largest consumer of gas in the world over the coming 25 years, adding: “The household and industrial sectors will come next.”

He said global gas reserves are estimated at 492 tcm, only 200 tcm of which is proven.

Regarding shale gas reserves, Adeli said: “The largest [shale gas] reserves belong to North America and then CIS countries, 90% of which is owned by Russia. Africa and Asia come next in line.”

“According to existing figures, 70% of the gas produced in every spot in the world is consumed by that country and the remaining 30% is exported. At present, North America, CIS (Commonwealth of Independent States) and the Middle East are supplying gas to the world,” he said.

“New players in the LNG market are emerging; US, Africa and Australia. Another important issue pertains to long-term contracts for single-consignment deals. Unlike oil, gas has no global and regional market because it is mainly transferred from one country to another through pipeline and it has its own specific conditions. In this market, the contracts are long-term, but a new phenomenon known as spot cargo deal is taking shape. LNG is the main constituent of this market because when liquefied gas is being carried by vessel to any desired spot, there will definitely be flexibility in the market and the number of buyers and sellers will increase,” Adeli said.

“Gas is an emerging source of energy and its golden age will continue to exist. At present, the world has reached agreement on how to fight climate changes. In order to mitigate greenhouse gas emissions and prevent the temperature of the planet from surpassing 2 degrees centigrade, we need to change our sources of energy and shift from coal to clean energies. Gas will be an important source of energy impacting the environment,” he said.

Phase 11 Waiting for Foreign Investment

Phase 11 of the offshore South Pars gas field was the most important gas project introduced for investment at the Tehran conference which unveiled Iran Petroleum Contract (IPC), the new version of oil contracts to replace buybacks.

Due to its location in the South Pars reservoirs, Phase 11 is of high significance. According to a new strategy developed by National Iranian Oil Company (NIOC) for this phase, investment for offshore construction will reach $2 billion.

The technical properties of this project include production of 2,000 mcf/d of gas to be processed in the refineries of phases 6 to 8 and Phase 12. Furthermore, two independent platforms each with 12 wells are destined for producing 1,000 mcf/d of gas. A three-phase separator for testing wells and two three-phase separators for dehydration, facility for treatment of water contaminated with oil substances, three-jacket flare platform for emergency relief are among offshore facilities of this phase.

For transferring gas produced in this phase, two offshore pipelines, measuring each 136 kilometers, would be needed to carry gas from platforms to the refinery. Moreover, two offshore pipelines, measuring each 136 kilometers in length, are tasked with carrying glycol solution to offshore platforms and a 5.4-kilometer pipeline for transferring gas condensate and a single buoy mooring (SBM) for condensate load-out and exports.

Ali-Akbar Shabanour, CEO of Pars Oil and Gas Company, said the objective behind gas delivery from the flare of Phase 11 to phases 6-8 and Phase 12 of South Pars is to benefit from the untapped capacities of refineries in these phases and accelerate access to the targeted production in this sector of the field.

He said technical documents for putting on tender the Phase 11 development of South Pars in two A11 and B11 phases, adding: “In the first phase of this project that involves construction of a jacket, a platform, an offshore pipeline and drilling, the gas produced from the offshore section of this phase is moved to refining installations in phases 6-8 of South Pars. The A11 and B11 are similar technically and the gas produced from B11 platform is dispatched to refining installations in Phase 12.

Phase 11 development of South Pars is expected to produce 56 mcm/d of sour gas to feed Iran LNG project and 80,000 b/d of gas condensate.

In the late 1990s, NIOC and France’s Total reached agreement for the development of the upstream sector of Phase 11 of South Pars and the construction of a 10-million-ton LNG plant. After the signature of a letter of intent between NIOC and Total; Malaysia’s Petronas also voiced readiness to join the development of Phase 11. A three-party agreement was finally signed between NIOC (50%), Total (40%) and Petronas (10%) for the upstream and downstream development of Phase 11 of South Pars.

But the signature of this deal and engineering studies coincided with international pressure on Iran over its peaceful nuclear program. From 2006 to 2008, Total dragged its feet on doing the project under the pretext of steel price hike and higher costs for the projects. NIOC turned down Total’s request for higher spending and the French company pulled out of the project.

After Total left, negotiations were held in 2009 between NIOC and China National Petroleum Corporation (CNPC) and a 5-billion-dollar agreement was signed. The Chinese company did not operate the project either and it pulled out in 2012.

After the Chinese pulled out of this project, negotiations were held between NIOC and Iranian companies like Petroiran Development Company (PEDCO), Iranian Offshore Engineering and Construction Company (IOEC) and Petropars. In the end, the development of Phase 11 of South Pars was awarded to Petropars in September 2012. But due to financial restrictions, Petropars pulled out, too.

South Azadegan Up for Development

Azadegan is the largest oil field in Iran. It is the third largest oil field in the world, just behind Saudi Arabia’s Ghawar and Kuwait’s Burgan.

Azadegan oil field, which was explored in 1997, is located 100 kilometers west of the oil-rich city of Ahvaz and lies in Azadegan Plain. The field is estimated to hold 33 billion barrels of known oil reserves. In 1999, a new oil layer with a capacity of 2.2 billion barrels was discovered in this field.

Azadegan oil field has two northern and southern sections. Oil production started from South Azadegan at a rate of 50,000 b/d in 2008.

South Azadegan is among projects on offer for development within the framework of Iran’s new version of oil contracts – Iran Petroleum Contract (IPC).

South Azadegan is planned to produce 320,000 b/d in the first phase of development. Its production ceiling in the second phase will rise to 600,000 b/d. South Azadegan oil field contains around 25.6 billion barrels of oil in place. This field, which started production in 2008, enjoys good potential for output hike and is a good opportunity for investment. According to initial estimates, the development of this field requires at least $2.5 billion in investment.

After the administration of President Hassan Rouhani took office, China’s CNPC was expelled from this project due to its feet-dragging. Since the Chinese company left, more than 40 tenders have been put out and contracts pertaining to the development packages of South Azadegan have been formulated. The Directorate of Investment at NIOC is currently reviewing financial proposals for the development of South Azadegan.

In order to accelerate production from this field, Iran has put out on separate tender the items needed for the project so that domestic manufacturers would become active. For that purpose, seven packages including separators and desalters, heaters, thermal transducers and storage facilities. Winners are being selected.

Since the designing of processing installations in this field was not done correctly by the former contractor and is far from necessary standards, this design is being revised. Given the capabilities of National Iranian Drilling Company (NIDC) and its affiliation with NIOC, and also due to the existence of NIDC’s inoperative drilling rigs in West Karoun region, drilling of 50 wells, out of an envisaged 185 wells, has been assigned to NIDC for the development of the first phase of South Azadegan oil field. Furthermore, a tender was offered for the drilling of 40 more wells within the framework of two 20-well packages. Contractors are currently working.

Past Activities

The initial master development plan (MDP) which was finalized in June 2012, defined for the production of 150,000 b/d from South Azadegan has been revised up to 320,000 b/d in the first phase and to 600,000 b/d in the second phase.

According to the revised MPD (RMDP), the activities envisaged for the first phase of the project are as follows:

Reviewing reservoir engineering studies and factoring in the results of 3D seismic testing and data achieved from early production as well as data on the drilling of five appraisal wells, construction of 40 cellar units and access roads, drilling and completion of 175 new production wells, drilling of five waste disposal wells, construction of production unit including processing unit and a unit for separating oil and gas and water, desalting unit, oil sweetening unit with a nominal capacity of 350,000 b/d, installation of desalting installations and gas booster stations, construction of 10 gathering units and two primary separating centers and oil and gas pipeline stretching to production units, construction of water recovery, transfer and treatment installations, construction of processed oil and gas pipeline for transfer to West Karoun pumping facility, gas factory and liquid gas 3200 factory, construction of administrative and recreational buildings and conducting preliminary studies related to the second phase development and studying methods of enhanced recovery from the reservoir.

South Azadegan has good potential for enhanced production and would be a good opportunity for investment.

Who Is Afraid of US Shale Oil Output Hike?

The United States, which has been commercially extracting shale oil owing to its cutting edge technology, has not only saved itself a positive economic perspective, but also it can change the global energy equations by stepping into the oil export market.

That leaves important security, political and economic impacts and can influence the US’s relations with other key players.

In this regard, US-Russia ties that have experienced serious tensions in recent years could enter a new phase after US joins oil exporters.

This article analyzes the impact of US future presence in the world oil markets on its ties with Russia.

The US Energy Information Administration (EIA) has estimated that the country’s shale oil production will reach 2.8 mb/d by 2020. Then, it will start falling and will be stabilized on 2 mb/d.

EIA has announced that the US has managed to overtake Russia as the second largest oil and gas producer in the world. The US total oil output reached 10 mb/d in 2015.

According to the International Energy Agency (IEA) data, demand for crude oil in the world will reach 7 mb/d in 2018. According to this agency, the US oil production capacity will exceed Russia’s and Saudi Arabia’s. Russia and Saudi Arabia are currently the top oil producers in the world.      What has added to the significance of US oil production hike is the US legislation lifting a decades-old ban on oil exports. The US ban on oil sales dates back to the 1973-1975 period when the US was facing a sharp decline in oil production. At that time, it decided to halt its oil exports in a bid to spare itself any harm from oil production stoppage. To that end, the US set up a strategic petroleum reserve and stopped oil exports.

The lifting of the ban on oil exports will have both internal and external consequences for the US. That is why the decision had both proponents and opponents. The proponents who were mainly Republicans and US oil giants believed that the lifting of the ban could have the following achievements for the country:

The US can join world oil markets as the seller and not remain a mere buyer of oil.
The US can benefit from its energy resources' exports for political objectives and influence at international level.
The US can compete with other producers of oil and be involved in energy pricing.
The US opening its oil market to other countries, will help its allies have a more stable trading partner.
The US presence in oil markets could blunt the power of countries like Russia, Venezuela and Middle East governments that are using oil as a tool for ramping up pressure on the US and its allies.
The lifting of the ban on US oil exports can help American oil companies that suffered heavy financial costs following slump in crude oil prices reconstruct themselves.
The lifting of the ban on US oil exports can create job opportunities. Due to more than 50% decline in the oil prices, some companies have reduced their activities in the US petroleum industry and consequently unemployment in this sector has grown.

Meantime, the opponents of this decision, who were mainly Democrats and environmentalists, believed that this decision could harm the US on different grounds as follows:

US oil sales may sharply reduce the country’s oil reserves.
Raising oil production could result in gasoline price fall, which could have both economic and environmental consequences, because people will be encouraged to drive their personal cars.
The US oil sales to other countries would encourage consumption of oil and that would be in contrast with the COP21 commitments.
The lifting of the ban on the US oil exports could cause problems for the refineries in this country, because that would make it difficult for refineries to have access to their needed crude oil, and their revenues will drop.

Unrealistic Concerns

The downward trend of oil prices which started in July 2014 has been accompanied by speculation. A variety of reasons have been bandied about to explain the causes of oil price fall. Some of them are recession in the euro zone, China’s sluggish

economy, debts pressure on the world’s strained financial system, US shale oil production hike and Saudi Arabia’s refusal to close ranks with fellow OPEC member states. Some analyses have highlighted the political motives behind this issue, particularly US-Russia rivalry because they believe that the US can benefit from oil price fall in several political fields. The fact is that Russia’s geopolitical progress in Ukraine came against the backdrop of the Americans’ failure to stop Moscow through imposing sanctions. But the oil price decline could harm Russia’s oil-dependent economy. The slump in oil prices could also influence Russia’s policy on Syria to a great extent because while Russia was continuing its support for the legal government of President Bashar al-Assad in Syria the oil price fall and consequently economic pressure on the Russians could force Moscow to reduce its military and economic support for Damascus.

But what happened in practice was the persistence of Russia’s policies and the US failure to realize its objectives. That issue led some to believe that if the US policy regarding oil price slump failed to serve Washington’s interests, the lifting of the ban on its oil exports will probably affect Russia because the US presence in the club of oil exporting countries will affect the world market, and Washington will be able to overshadow Russia’s policies by manipulating oil prices.

Despite all this speculation, Russia must not be worried over the US plan to join oil exporters. The reasons for such a view are listed below:

Available statistics shows that the US will not reach self-sufficiency in energy in 2030 and except for gas and coal; it will have to continue importing oil. In fact, its energy imports needs, will be 5 percent. Even if the US manages to supply this 5%, energy prices will still be affected due to oil, gas and coal trading. Of course it means that the US will enjoy economic superiority by reducing its dependence on imports. Therefore, despite forecasts by different energy agencies about global shale oil and gas glut and the realization of the US dream of independence of oil and gas imports, it would be important to make a distinction between energy independence and energy self-sufficiency. In this regard, the influential role of the US as an oil producer will not last long because according to estimates oil production in this country will grow in the coming decade before starting to fall. Therefore, although the US need for oil imports is falling, this country will never be able to become a major oil exporter. In fact, the US oil production growth for creating diversity in the market is favorable but will not resolve the world’s oil challenge.
Although many believe that shale oil and gas will be able to change energy equations in the world that would not be to the extent which is often being imagined. In fact, new technologies and discoveries through hydraulic fracturing are not important enough to change the prospects of energy and economy. It becomes more important when one takes into account the fact that in most analyses carried out about shale oil extraction, each barrel is estimated to cost between $60 and $80. Therefore, shale oil and gas extraction will be economical in the future in case oil prices remain above $100 a barrel. But the US shale oil’s entry into world markets will bring about “supply shock” and that would sharply slash oil prices. Therefore, despite heavy investments made in these technologies and relevant infrastructure, price declines will by no means favor the US and will result in the sudden marginalization of the costly hydraulic fracturing.
The crude oil price decline may reduce drilling activities in some oil zones in the US with less output. What strengthens this speculation is the 32% decline in the US drilling rig count from October 2014 to March 2015, which was a record fall. The scientific assumption is that the number of drilled wells and new oil fields will decline as the drilling rig count declines and in the end oil production will fall.

US Independence on Oil Imports

One should not exaggerate about the US shale oil reserves and their impact on international markets because they can at best supply the US needs. But at the same time there are other big consumers like China, Japan, India and European countries. Of course, a brief review of the US energy strategy indicates that the most important objective pursued by the US is to break dependence on oil imports. Therefore, it seems that even if shale oil extraction proves to be not economical due to price falls the Americans will continue to preserve this industry through paying subsidies and applying tax breaks. Consequently, despite the preservation of shale oil extraction industry, this oil will only supply the US domestic needs and could not meet global demand. In the long term, it is unlikely to have any significant impact on the global markets. The Americans are well aware that oil prices will change further if alternative energies’ prices change. Therefore, it seems that the US new policies will be further focused upon the development of natural gas and coal for feeding power plants and more production of petrochemicals from gas.

In conclusion, it seems that despite initial estimates by the Americans, the oil price decline did not bring Washington its desired political and economic results and could even inflict serious harms upon the US economy and international bodies and regimes trading with dollar in the long-term.

The global recession which has significantly affected the falling demand in global markets will on the long-term pose numerous challenges to the US.

Appraisal Well Eyed in Guyana

Hess Corp. expects appraisal drilling on the deepwater Liza oil field offshore Guyana to get under way during the current quarter.

Operator ExxonMobil announced the Liza #1 discovery on the Stabroek block (Hess 30%) last summer.

Currently seismic acquisition continues for a new 3D survey over the block.

In the Far East Hess says development drilling started last month on its North Malay basin project. The full-field development is expected to be completed during 2017.

Norway Offshore Gas Deliver Up

Norwegian gas trunklines operator Gassco delivered record volumes from Norway’s offshore fields to European customers last year.

Gassco dispatched 108 bcm (3.8 tcf) to receiving terminals in Germany, Belgium, France and the UK, an increase of 7 bcm (247 bcf) over 2014.

CEO Frode Leversund said: “Availability for delivering gas through the transport system exceeded 99% in 2015.

“More than 30% of Norwegian gas exports pass through our process plant at Kollsnes near Bergen, where capacity utilization was record-high last year.”

In addition, Gassco claims to have set a new delivery record for a single day of 365.3 MMcm (12.9 bcf) on Nov. 22.

Overall deliveries of natural gas liquids and condensate from the process plants at Kårstø and Kollsnes (via Vestprosess) increased last year to 9.6 MM metric tons (10.6 MM tons), up from 8.1 MM metric tons (8.9 MM tons) the previous year.

7- UAE to Cut Remaining Energy Subsidies

The UAE will extend its economic diversification strategy by removing further subsidies on energy, Suhail Al Mazrouei, the UAE’s Energy Minister, told the World Economic Forum in Davos.

In particular, Al Mazrouei said he was planning to scrap subsidies on electricity and on gas sold to power generators.

“We need to think about major reforms to make the budget less dependent on the oil price, and to build an economy that is vibrant but also taking advantage of the lower oil prices,” he said.

“We saw the opportunity to do the right thing and to get people to pay the right price for energy. We have done it with petrol and diesel, and the next is electricity. We must remove remaining subsidies from electricity generation. Most of it is not subsidized; the majority of the tariff is fair. But there are old gas contracts that are not realistic and do not reflect fair pricing,” he added.

His comments came in a wider debate about the pace of economic reform in Arab countries, dominated by concerns from oil-producing countries about the effect of falling oil prices on regional budgets.

Al Mazrouei predicted that national populations could be “persuaded” to accept and embrace economic reform even when it might affect their standard of living by increasing consumer prices. “If you have a good story and tell local people, they will be convinced

Saudi Wants Balanced Market

Saudi Arabia, the world's largest oil exporter, does not want an end to shale oil but a balanced oil market where all producers play a stabilizing role, the chairman of state oil giant Saudi Aramco said in a television interview.

"Saudi Arabia does not target to eliminate shale oil in general. What we need in the international market is a balance where additional supply every year is in balance with demand, so there is no surplus," Khalid al-Falih told Saudi-owned Al Arabiya TV in Davos, Switzerland.

"In the long run there will be a need for shale oil. There must be a contribution from shale oil and other countries, including low cost producers such as Saudi Arabia," he said.

Falih added it would take some time for the market to absorb the current crude surplus but there would be "noticeable" improvement during the second half of 2016 with demand rising by 1.2 million-1.5 million barrels per day.

Non-OPEC Urged to Help

OPEC and non-OPEC oil producers need to work together to tackle a global stocks overhang so oil prices can recover and investments in new fields begin, OPEC Secretary General Abdallah  Salem El-Badri said.

"It is vital for the market to address the issue of the stock overhang. As you can see from previous cycles, once this overhang starts falling then prices start to rise," he told a conference in London.

"Given how this developed, it should be viewed as something OPEC and non-OPEC tackle together. Yes, OPEC provided some of the additional supply last year, but majority of this has come from non-OPEC countries."

He said it was crucial that all major producers sit down to come up with a solution as the market needs to see inventories come down to levels that allow prices to recover and investments to return.

- Iraq Oil Output Hits Record in Dec.

Iraq's oil production hit a record in December, as output increased from the central and southern fields, oil ministry spokesman Asim Jihad told Reuters.

 Iraq’s crude production from fields in the central and southern region was 4.13 million barrels per day (bpd), according to the final figures announced by the ministry.

 "This level makes December a record in terms of output in the central and southern regions and for Iraq as a whole," said Jihad by phone.

 The fields in the central and southern region, located south of Baghdad, currently account for all of the production controlled by Iraq's central government in Baghdad.

Oil exports from the northern fields are under the control of the Kurdish Regional Government. The northern region is producing about 600,000 bpd.

 Iraq’s production from the central and southern region was about 3.66 million bpd in November, according to the ministry.

 OPEC’s second-largest producer, Iraq expects output from the country's southern region to increase by up to 400,000 bpd this year, Iraqi Oil Minister Adel Abdel Mahdi told Reuters.

- Russia Forecast Oil Price at $30

Global oil prices have recovery potential, Russia’s Economic Development Minister Alexey Ulyukayev said.

"As for oil prices I agree that they have recovery potential. It’s given that in 2015 the demand increased by around 1.5 million barrels.

The global economy grew by 3%, which means the demand will rise for sure," the minister said. According to Ulyukayev, the average annual oil price will be higher than $30 per barrel in 2016. "I think there will be some sort of rebalancing. Average annual oil price will differ from that of today, it will be higher," the minister said. Russia’s Economic Development Minister does not expect the Central Bank to change the key interest rate at its board meeting on January 29.

"I don’t expect them to change anything," the minister said when answering the respective question. Earlier he said there is potential for reduction of the key rate though the regulator is to take the final decision.

In mid-2015, Russia’s Central Bank took a break after lowering the key rate (the rate of weekly report)

Saudi, Russia Change Tone on Oil Deal

Saudi Arabia, one of the OPEC major producers and top non-OPEC producer Russia are showing signs of flexibility about agreeing to tackle an oil glut that has pushed prices to 12-year lows, the oil minister of Iraq said.

"We have seen some flexibility from the brothers in Saudi and a change in tone from Russia," Adel Abdel Mahdi, whose country is the second-largest producer in the Organization of the Petroleum Exporting Countries, said.

His comments, made in Kuwait, boosted Brent crude LCOc1 by 3 percent to above $31 a barrel, although such an idea has been repeatedly mooted and dismissed for more than a year.

"This should be finalized and we should hear some solid suggestions coming from all parts, from OPEC and non-OPEC, at least from OPEC," the minister said.

A day earlier, senior officials from OPEC and Russia stepped up vague talk of possible joint action to fix the supply glut.

OPEC Secretary General Abdalla  Salem El-Badri said other producers should work with the group to tackle swollen global stockpiles so prices can recover, essentially reiterating OPEC's position that it would consider cutting output only if others pitched in.

Moscow, seen as key to any agreement, has so far refused to cooperate. But Leonid Fedun, vice-president of Lukoil (LKOH.MM), Russia's second-largest oil producer, was quoted as saying Moscow needed to start working with OPEC.

OPEC is considering a request from cash-strapped member Venezuela to hold an emergency meeting to discuss steps to prop up prices, and Venezuela has called for a meeting of OPEC and non-OPEC in February.

Iraq's Madhi and Kuwaiti acting Oil Minister Anas al-Saleh said they were willing to back an emergency meeting of OPEC, but only if an agenda were agreed in advance.

"It is useless to go to a meeting without deciding up front. We said yes if others are willing to go but we have to decide before, otherwise this will backfire on us. We have to go forward, I think the market needs that, but we also look at our partners outside OPEC to do the same," Mahdi said.

OPEC's Persian Gulf members, led by Saudi Arabia, insist OPEC will not cut production by itself, as this would give up market share to rivals, and expect the market to balance itself over time.

Global Oil and Asian Product Market, January

Oil supply continued to outpace demand. Oil prices fell as oversupply continued and Iran moved closer to the removal of oil and banking sanctions on Iran.  Iran’s oil exports have been curbed by sanctions since July 2012, falling to about 1m barrels a day. Iran is the third-largest oil producer in the OPEC, pumping about 2.8m b/d.

Oil inventories are high and rising. According to the OPEC Monthly Report, non-OPEC oil supply grew by 1.00 mb/d in 2015 to average 57.51 mb/d. This represents an upward revision of 0.28 mb/d from the previous report, driven mainly by actual production data from the US, UK, Brazil, Russia and China. Non-OPEC oil production in 2016 is forecasted to decline by 0.38 mb/d to 57.14 mb/d. OPEC crude oil production rose by 1.17 mb/d in 2015 compared to 2014 reaching 31.25 mb/d on average. Nobody knows the future of oil prices; however, here are some principles regarding oil production which is released by EIA.

Oil production from non-OPEC  countries currently represents about 60 percent of world oil production. Key centers of non-OPEC production include North America, regions of the former Soviet Union, and the North Sea.

Non-OPEC production occurs largely in areas that have relatively high exploration and production costs, as most of the lower cost  of conventional oil resources are in OPEC member countries. Non-OPEC producers have therefore led the way into frontier areas such as the deepwater offshore, and pursued unconventional sources such as oil sands. As a result, non-OPEC production usually has a cost disadvantage compared to OPEC production.

Non-OPEC producers have often led to developing new production technology. While this has sometimes resulted in the development of higher-cost supplies, costs often fall as technology advances, which can ultimately put downward pressure on prices.

In addition to non-OPEC crude oil production, natural gas production provides additional supplies of liquids, called natural gas liquids (NGLs). Rising natural gas production over recent years has resulted in substantial increases in NGLs. This has contributed to total world liquids supply and helped to mitigate price increases.

While increases in non-OPEC supply contribute to lower oil prices, disruptions of non-OPEC production reduce global oil supply and can lead to higher oil prices. These unplanned outages can persist for long periods of time. The uncertainty about when the production will return to markets further adds to price volatility.

Asian Product Markets

Falling benchmark crude prices and demand fundamentals continued to support naphtha and gasoline , while gasoil and jet fuel market performed weak due to abundant supply.

 Products market fundamentals in brief

January 2016

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)

Asian naphtha market is enjoying the very strong situation which is unprecedented in the recent year. Naphtha crack continued its upward movement over January, surpassing the gas oil crack for the first time since September 2004 (on a barrel basis), benefitting from the fall in benchmark crude prices and persisting healthy demand. Major applications for naphtha include use  it as a chemical feedstock for steam cracking to produce petrochemicals and with this low crude prices, naphtha is cheap enough for petrochemical players to enjoy the high margins. This has increased naphtha demand for petrochemical purposes. On the other hand, global gasoline demand was remaining elevated, hence demand for blending grades of naphtha was supported, as well. Looking further ahead, Asian naphtha balance is expected to be tight, supporting naphtha market in February.

Gasoline market was strong during January. The strength was driven by strong seasonal demand, especially in China and Japan. Moreover, in Indonesia recent price cut for transportation fuels, motivating Indonesia’s ailing economy, increased gasoline demand more in the region.

Middle Distillates (gasoil, jet fuel)

Asian gasoil market performed weak due to abundant supply. The balance of gasoil in Asia is lengthy. An addition, there are some European Arbitrage volumes in the market. Looking ahead, the possibility of rising gasoil exports from China will add more pressures to the market. It is expected that gasoil market will continue to be weak by the end of Q1 2016.

Jet fuel market performance was healthier than gasoil. The market was weak despite of high seasonal demand for kerosene. Jet fuel market was under pressure because of  persistently high exports from China.

Fuel Oil

Over January, Asian naphtha crack improved continuously on tight supplies. Inventory levels in Singapore fell to their lowest level since May 2015 at an eight month low.

Iran Petchem Open to $10b Investment

Iran, which has huge natural gas resources, is making efforts to produce as much petrochemical products as possible and generate wealth. For that purpose, investment is the first thing needed because domestic resources in Iran are not able to finance petrochemical projects. All eyes are fixed on foreign investment and finance.

Amir-Hassan Fallah, director of investment at National Petrochemical Company (NPC), has given the following interview to Iran Petroleum:

Q: How much foreign investment has Iran’s petrochemical industry attracted in the past years?

A: The development of petrochemical industry in our country started exactly after the end of imposed war [in 1998]. At that time Mr. [Ahmad] Rahgozar was a founder of petrochemical industry development under the first [five-year economic development] plan.

During the eight years of the imposed war, the priority was to keep petrochemical units afloat. Under the first and the second development plan, we had the chance to get $2.2 billion in facilities from European banks and approximately launch some units like Bandar Imam in cooperation with Japanese companies like Mitsui. When the imposed war started, this company abandoned the project, but after the end of the war, a letter of intent was provided by this company and resources flooded Iran for the continuation of work at Bandar Imam.

After Mr. Rahgozar’s tenure ended and Mr. [Mohammad-Reza] Nematzadeh stepped into the petrochemical sector, the issue of connection with the Europeans and getting finance from them became more important.

Under the third development plan, the Central Bank of Iran arranged contracts and letters of intent with European banks. That coincided with the Reconstruction Period. These contracts were later known as CBI’s framework contracts. Beneficiaries like the National Petrochemical Company received finances from foreign banks only through negotiations with Iranian agent banks. Numerous projects were financed in this way and Iran’s annual exports increased from $500 million to more than $2 billion. By providing information about our petrochemical industry to export credit agencies (ECAs) and main European banks, we worked out a mechanism known as structure finance. These structure finances prepared the ground for us to increase our exports and boost our credit with financial institutes and banks across the world. Under the third and fourth development plans, more than $20 billion in foreign finance and facilities was attracted by the petrochemical sector.

I think that at least $30 billion was invested in this industry by 2008, excluding projects under way. Currently, 67 petrochemical

Q: Which petrochemical projects are attractive to foreign investors? Which petrochemical products are involved?

A: Foreign investors are willing to cooperate with Iran’s petrochemical industry on a wide spectrum. For instance, the Japanese are willing to invest in centralized utility units, olefin and ammoniac, the Indians favor investment in urea units, South Korea seeks investment in fuel and aromatics units and the Europeans are looking for investment in GTTP units

Q: How much is the minimum investment needed for under construction petrochemical projects? How are they being financed?

A: The minimum investment in petrochemical industry differs, depending on capacity and scale. But the important point is that small-scale petrochemical projects are not economical. Of course, it does not mean that those who want to allocate a small amount of investment would not be able to operate petrochemical projects because they can be involved in downstream or chemical park projects. Under Iran’s sixth development plan, 36 projects are envisaged, 15 of which are prioritized. These projects are mainly located in Parsian, Chabahar and Assaluyeh, and include two urea and ammoniac projects, polypropylene, olefin, aromatic and chemical projects. The minimum investment needed for these projects which are urea and ammoniac stands between $450 million and $500 million.

Q: How have Iranian banks, financial institutes and investment funds cooperated with the petrochemical sector?

A: Iranian banks have been of great help due to existing restrictions and without them our previous plans on financing could not have gone ahead.

The country’s banking system is facing capital restrictions, but the Money and Credit Council has exempted China and NDFI finance from syndicate bylaw regulations. We have offered 16 petrochemical projects, worth 16 billion Euros, to receive China’s finance. So far, 12 billion Euros worth of projects has been introduced to the CBI to receive facilities. Meanwhile, eight projects have been confirmed by China Export & Credit Insurance Corporation (SINOSURE) and LCs have been opened for five of them.

The lengthy process of China’s financing stems from administrative red tape in this country and also the structure of finance. Under an agreement reached between Iranian president [Hassan Rouhani] and Chinese president [Xi Jinping], the two sides agreed on one-to-three mechanisms for the financing of the projects. It means that China will invest thrice in petrochemical projects. Moreover, Iranian banks have shown willingness for helping transfer this finance. Domestic banks have been also cooperative with regard to the NDFI which allocated around $6 billion to petrochemical and refining projects. Definitely, after Iran rejoins SWIFT, financing through NDFI will pick up speed.

Q: What’s your approach for welcoming foreign investors in the post-sanctions era?

A: In the meetings with foreign companies willing to investment in [Iran’s] petrochemical industry, we make it clear that the NPC has a sovereign role and it cannot directly invest except for cases stipulated in the law. In fact, this company is tasked with providing transparent, complete and precise information about business conditions in the petrochemical industry to foreign companies and investors. Most foreign companies are willing to negotiate with NPC and have partnership with private companies so that they would enjoy the NPC support. The law bars the NPC from guaranteeing foreign investment or finance for the private sector and that is the responsibility resting with other organizations. We have to indentify new tools and introduce them to petrochemical companies and projects within the framework of the law.

Q: As an advisor on finance and foreign investment in the petrochemical industry, what are the obstacles on the way of foreign investment?

A: As mentioned earlier, with the full removal of banking, insurance and petrochemical transport sanctions, a major development will take place in this industry. The petrochemical sector is so extensive that the countries that imposed sanctions, desperately need its products and that blunts the impacts of sanctions in this sector.

Currently, the country’s petrochemical sector needs nearly $10 billion in investment annually. Domestic banks could by no means provide such investment; therefore, this industry needs foreign investment and technology for its future development. We have to make efforts for the revival and bolstering of the banking system. Once, we had so much financial support that we decided to sell petrochemical Eurobonds abroad.

According to international standards and regulations, domestic banks are not even able to provide the necessary resources for this industry even in the form of syndicates. Therefore, we have to lay the groundwork and provide the necessary infrastructure for the entrance of foreign capital, knowledge, technology and finance.

In this regard, transparency and stability in law is of high significance. Today, we are witnessing that investors are ready to finance projects in high-risk countries with unfavorable political and security conditions just because due to their transparent law. At present, one of restricting dissuading investors is the lack of necessary infrastructure. Foreign investors are willing to invest in regions like Assaluyeh and Mahshahr only due to infrastructure. Moreover, ways of communications are highly significant for foreign investors because Iran’s 70-million-strong market is important to them.

One of advantages of investment in Iran, which is highlighted by foreign delegates, is the existence of skilled manpower in different engineering and construction and contracting sectors, which distinguishes our country from rivals.                        

PVM Technology Developed in Iran

The current status of methanol production in Iran is such that 232,000 tons (or five percent of its total production in Iran) is consumed domestically and the remaining 95% is exported.

Iran’s private sector is currently following up on significant production hike plans for this petrochemical product.

After launching 10 methanol projects, currently under construction mainly in Assaluyeh in southern Iran, the country’s annual methanol production will increase from the current 5 million tons a year to more than 24 million tons. That would send shockwaves across methanol markets in the world. That may be why Iran’s National Petrochemical Company (NPC) will no longer give permits to Iranian and foreign investors for building methanol units and will find a solution for optimal use of methanol produced by its affiliates.

NPC officials say the methanol produced in the country must be converted into propylene by application of new technologies so that it would be more productive and more profitable. To that effect, Iranian petrochemical experts have in the past years managed to acquire technical savvy for producing propylene from methanol.

Recently, CEO of NPC, Abbas Sha'ri-Moqaddam, announced the planned construction of a 120,000-ton Propylene via Methanol (PVM) unit in the country jointly by NPC and a European bank. He said that the PVM pilot plant, developed by the Petrochemical Research and Technology Company (PRTC) is expected to grow into a larger plant with the production capacity of 120,000 tons a year.

PVM, Homegrown Knowhow

Low-density olefins, ethylene, propylene and butylenes are key elements in the petrochemical industry. They are widely used as raw materials for producing polyolefin are expected to have a more prominent role in the future of the economy. Among them, ethylene and propylene are the main feedstock for petrochemical plants and are largely used in chemical and plastic production. According to forecasts, the average annual growth of demand for propylene would be around 4% from 2015 to 2020. The pace of growth and the amount of consumption of propylene in polypropylene and acrylic acid production will be faster. Daily increasing difference between production of and demand for propylene has been a driving force for moving towards new procedures that would fill this void. (Fig. 1-1)    

Since the early 1990s, methods of low-density olefin production have changed significantly and simultaneous with the application of common procedures (steam cracking and fluid catalytic cracking), application of new and accessible technologies (propane dehydrogenization and methanol conversion to low-density olefin) have been followed up by trade companies.

Throughout the process of producing propylene from methanol, methanol is first converted into a mixture of methanol/dimethyl ether/water following an equilibrium and exothermic reaction. Then, this mixture is transformed into low-density olefin through a catalytic reaction. The distribution of products achieved throughout this process depends on the catalyst and operation conditions.

PVM Advantages

Given the feedstock needed in processes used for propylene production, PVM is the most highlighted owing to the accessibility of methanol. Methanol is easily produced by applying known and accessible technologies from coal or natural gas. Currently, five petrochemical plants in Iran are producing methanol with a total rated annual production capacity of 5.4 million tons.

Given the rapid pace of growth of petrochemical industries over the past ten years and the planned establishment of numerous methanol production units in Iran in coming years, the production of this chemical substance in Iran is growing rapidly. Therefore, one of economic solutions for using surplus methanol available in the market would be to convert it into valuable products like propylene.

At present, PRTC is one of companies holding license for technology applied to the production of propylene via methanol on industrial scale. For this reason, over the past years, this company has started research projects for acquiring technical savvy to produce catalysts required in PVM process.

PVM Catalyst

Over the past one decade, huge efforts have been undertaken for developing catalysts with high activity and stability and higher selectivity from propylene. ZSM-5 (Zeolite Socony Mobil–5) is one of the best catalysts taken into consideration in PVM reaction. The catalytic research group of PRTC started its activities for mastering ZSM-5 technical savvy in late 2006. To that end, a variety of research activities have been done. Different stages of this process are explained below:

ZSM-5 Lab-Scale Synthesis (100-600 cc)

The synthesis of ZSM-5 and optimization of effective lab-scale parameters has been carried out in Teflon-coated autoclaves by applying hydrothermal method and making a large number of catalysts. In order to choose the best catalyst and improve this stage and assess the activity of synthesized catalysts in PVM process, the synthesized catalysts reactor test was carried out in reactor systems installed at PRTC.

Scale 5

After lab-scale ZSM-5 was developed, increasing its scale was put on agenda. One of important factors that must be taken into consideration throughout stages of acquisition of technical knowhow for catalyst production is the repeatability of method of development and the capacity of boosting the scale. For that purpose, a large number of ZSM-5 catalysts were built on scale 5 under different operation conditions.

The results of catalyst reactor test showed that the method of development had an acceptable level of repeatability.

Pilot Scale

Another activity done with regard to the acquisition of technical savvy for producing ZSM-5 has been its pilot-scale synthesis. This important achievement has been made at the Tehran center of PRTC. After preparing the active powder, which involves shaping and extruding, reactor test was conducted in the lab-scale and pilot-scale reactor testing systems, which are located respectively at the Tehran center and the Mahshahr special zone center of PRTC.

In order to examine the activity and function of ZSM-5 developed by PRTC and comparing it with the function of different industrial catalysts, PVM reaction under equal conditions (temperature: 480 degrees Celsius, pressure: 1 bar ad LHSV: 0.9 ml/hgcat) was conducted on all Zeolite prototypes.

Semi-Industrial Scale

Given the results achieved for pilot scale and in order to make a final assessment of different stages of ZSM-5 technology development for PVM process, PRTC intends to launch a semi-industrial ZSM-5 production plant at its Arak center in central Iran in cooperation with qualified Iranian companies.  

Usages

ZSM-5 has been used as a support material for catalysis. In one such example, copper is deposited on the zeolite and a stream of ethanol is passed through at temperatures of 240 to 320 °C as a vapor stream, which causes the ethanol to oxidize to acetaldehyde; two hydrogens are lost by the ethanol as hydrogen gas. It appears that the specific pore size of ZSM-5 is of benefit to this process, which also functions for other alcohols and oxidations. The copper is occasionally combined with other metals, such as chromium, to fine tune the diversity and specificity of the products, as there is likely to be more than one. Acetic acid is an example of one possible byproduct from hot copper oxidation.

IRR 100,000bn Investment Potential

Hamid Sharif-Razi, managing director of National Iranian Oil Engineering and Construction Company (NIOEC), says refining projects currently on offer in Iran need more than IRR 100,000 billion in investment.

“We intend to benefit from different methods in order to provide this amount of financial resources. One of these methods is negotiating with foreign pipe constructing companies for financing pipe purchase projects because in such projects more than 60% of costs are spent on pipe purchase,” he told Iran Petroleum in an interview.

“Moreover, according to the budget law, we can finance our projects by selling petroleum products,” said Sharif-Razi.

He said that completion of incomplete projects is a priority for NIOEC, adding: “Financing is a major challenge to future projects of this company and we are seeking to use facilities like banks and domestic investment companies.”

Gasoline Output Up

Sharif-Razi said the implementation of capacity enhancement project and the ensuing petroleum products quality improvement at Bandar Abbas refinery would add 4.5 ml/d to the country’s gasoline production and the quality of 8ml/d of gasoil produced at this refinery will be upgraded to Euro-5 grade. This project will reduce Iran’s gasoline imports, he said.

“Completion and final start-up of the capacity enhancement project and improvement of petroleum products quality at Bandar Abbas refinery needs IRR 2,000 billion plus 30 million Euros,” said Sharif-Razi.

He said the project started nine years ago, blaming the delay partly on the absence of basic engineering.

Sharif-Razi also referred to Mahshahr export terminal as another renovation project under way by NIOEC.

“The offshore section of this project has been completed and in the onshore section, recovery and storage tanks are ready for operation,” he said.

China to Develop Abadan Refinery

He said that China was supposed to finance the development of Abadan refinery. “This 2.9-billion-dollar credit line has been reduced gradually. According to the latest negotiations held to that effect, the amount of this finance for the first phase is $1.1 billion,” he added.

Sharif-Razi said this project is aimed at reducing fuel oil production at the refinery and boost the quality of gasoil.

“Basic engineering studies for the development of Abadan refinery are over and its engineering design has made 18% physical progress,” he said.

“In our negotiations with the Chinese sides it has been stressed that we will not wait for their financing for the start of projects” as Iran’s nuclear deal with six world powers has been implemented.

“If they hesitate to start their activities we will choose another solution,” he said.

Sharif-Razi said the procedure for foreign financing of refining projects often takes one to two years.

“Of course if we want to negotiate with another company for finance it will have more time and costs for us. Moreover, some companies from South Korea have already offered proposals for financing similar projects,” he added.

Contribution to Projects Overseas

Sharif-Razi said NIOEC is cooperating in the construction of a 250,000-b/d refinery in Malaysia by holding a 30% share.

“The Malaysian company plans to develop the refinery in the form of a petrorefinery and this differs from our objectives. In this regard, a delegation will visit Iran for negotiations on how to continue the work,” he said.

He added that NIOEC has already held talks with other countries including Indonesia, South Africa, Sierra Leon, Brazil and India on building refineries.

“For example, we are supposed to have a 40% share in a 300,000-b/d refinery in Indonesia. Moreover, Brazil has shown willingness for Iran’s contribution to the construction of an oil refinery there,” said Sharif-Razi.

He said that one objective behind contribution to foreign refineries is to guarantee crude oil sales and import of petroleum products if needed.

Sharif-Razi touched on the status of Sabzab-Tehran pipeline, saying that 620-kilometer conduit will carry sour oil to Imam Khomeini refinery in the central Markazi province and also Tondguyan refinery of Tehran.

“This project has been introduced to the contractor and its detailed design has been done,” he said.

Sharif-Razi said the workshop is being equipped by the relevant contractor, expressing hope that the 10,000-billion-rial project will have been completed in three years.

He also said that a pumping facility in Abadan, sulfur jetty in Mahshahr Port, transfer of products from Abadan to Tehran and Bandar Abbas-Sirjan-Rafsanjan pipline are among other projects which the NIOEC hopes to finish as soon as possible.

Domestic Capabilities

Sharif-Razi said at least two to three billion dollars is needed for building a refinery. He said that nearly 60% of the value of refinery projects in the country is spent on the purchase of equipment. He added that most stationary equipment and some rotary machinery are supplied domestically.

He referred to the purchase of 42 electropumps from domestic manufacturers for increasing the capacity and quality of Bandar Abbas refinery’s products, saying: “Due to sanctions and in line with the implementation of the Economy of Resistance, half of pumps needed in this project have been ordered to domestic industrialists. Moreover, the maps of rotary equipment have been given to domestic companies for indigenization.”

“At present, all costs related to importing components of equipment are up to domestic manufacturing companies. For this reason, according to a directive by the petroleum minister, we will add customs duties to the price of foreign manufacturers before comparing domestic and foreign manufacturers,” Sharif-Razi said.

“The companies that can follow export policies will easily take over domestic market,” he added.

Sharif-Razi said the gasoline production project at Bandar Abbas refinery is around 95% complete.

“SSU units and storage tanks at this project are in the pre-commissioning stage and will be launched soon and God willing this project will become operational” by March 2017 in case financing requirements are met.

3 Big Oil Shocks

From early 1970s to the late 1980s, three important events shocked the crude oil market in the world. They are known as oil shocks. Here is a review of these shocks:

The first shock started following the Arab-Zionist Regime war on October 6, 1973. In this war, which started following the Egyptian and Syrian forces’ invasion of Zionist Regime for retaking occupied lands, the Organization of the Petroleum Exporting Countries (OPEC) and the Organization of Arab Petroleum Exporting Countries (OAPEC) closed ranks and appropriate ground was prepared for Arab oil producers to use oil as a political tool against Europe and the United States.

On October 16, 1973, OPEC member states in an extraordinary meeting in Kuwait decided to cut their output by five percent unless Zionist Regime withdrew from the occupied Arab lands. That would have convinced the West and allies of Zionist Regime to pressure it to pull out of the occupied lands. Moreover, an OPEC ministerial committee raised its oil price from $3.10 to $5.12 a barrel and divided oil consumers into three groups:

Friends: Britain, France, Spain, Lebanon, Jordan, Egypt, Tunisia, Turkey, Malaysia and African countries that had served Zionist Regime notice: These countries were not given enough oil quotas.
Neutrals: These countries did not meddle with oil affairs and they received significant oil quotas from Arab countries.
Enemies: These countries had close ties with Zionist Regime and supported the Zionist Regime. They included the US, Portugal, the Netherlands, and South Africa, Japan and member states of the European Economic Community. These countries were embargoed.

This event in late October 1973 resulted in the elimination of around 5.4 mb/d of crude oil, sharp oil price hike on open market and unprecedented anxieties among industrial countries.

In a meeting on November 19-20, 1973, OPEC announced that oil prices must become realistic. After that, OPEC member states moved to raise prices.

Iran was the only oil producer in the Middle East that continued its relations with Zionist Regime and refused to join the Arab oil embargo against Europe and the US. The Shah of Iran, in addition to supporting Zionist Regime, supplied oil to the US Navy fleet in the Mediterranean and the Indian Ocean. But he refused giving permission to Russian planes to fly over Iran to help Arabs.

OPEC finally decided on December 12, 1973 to keep oil price stable at $11.65 a barrel.

The fourth Arab- Zionist Regime war on October 25, 1973 ended in a truce brokered by the US and Russia. Although Egypt and Syria were militarily defeated they were considered as the political and economic winners of the war because OPEC managed to prove its force by raising oil prices and impose oil pricing on oil companies and industrialized Western countries. That gave rise to a major development in international trading and energy pricing, known as the first shock. In this incident, the Western countries plunged into a major economic crisis that pushed up the inflation rate and spread unemployment. Moreover, the Western countries experienced an unprecedented budget deficit.

The four-time oil price hike boosted the financial and political influence of OPEC member states, particularly Arab countries. Moreover, Iran’s revenue from selling oil, which stood at $2 billion before oil crisis in 1974, jumped to $20 billion and the oil price reached $17.40 a barrel.

Due to the fast pace of oil price hike in 1973 and 1974, industrialized nations managed to establish the International Energy Agency (IEA) upon an idea of the US. The Agency started work on November 18, 1974.

2nd Shock; Iran’s 1979 Islamic Revolution

The second oil shock struck in 1979 after Iran’s oil production was sharply cut due to oil service workers’ strike in the months leading to the victory of the Islamic Revolution. In the days leading to the revolution, Iran’s oil production came to a total halt.

From 1974 to 1978, oil prices did not made significant jump due to pressure from industrialized countries and Saudi Arabia’s actions. Therefore, the purchasing power of OPEC member states declined due to runaway inflation in industrialized nations.

In the first half of 1978, when Iran was producing 6 mb/d of oil, oil shortage in international markets was not felt and nobody imagined that the oil prices would increase significantly in the near future. OPEC member states’ crude price remained unchanged at $12.70 before the Islamic Revolution.

On October 13, 1978, public discontent in Iran picked up speed in the form of work stoppage and general strike by oil service workers. Consequently, Iran’s oil production and exports kept falling. In October that year, Iran’s oil output fell to 5.5 mb/d. In the following months, it reached 3.5 mb/d and 2.3 mb/d. Iran’s oil exports were halted when the country was in turmoil ahead of the February victory. Iran resumed oil exports in March 1979.

Iran’s oil exports halt caused an unpredicted incident in the industrialized world. Although Iran’s oil supply shortage was offset partly by Saudi production hike and Iraq and non-OPEC producers (Britain, Norway and Mexico), the market was short of more than 2 mb/d of oil in January 1979. Oil supply shortage along with anxieties about future oil shortages continued to raise oil prices at a fast pace.

OPEC member states managed to increase crude oil production on different occasions and that led to a second shock. During the extraordinary OPEC conference in March 1979 oil prices reached $14.456 a barrel, and in June they reached $23.50. Following the OPEC conference in December 1980 in Indonesia, the oil price was set at the range of $32-$41 a barrel. After that conference, Iran set oil prices at $37 a barrel in January 1981.

3rd Shock; Oil Price Fall

The third oil shock was in 1986 when oil prices dropped. The sharp decline in oil prices in 1979 and 1980 led industrialized countries to cut consumption and take effective measures for finding alternative sources of energy.

With this decline in global demand (particularly for OPEC oil) and rivalry between non-OPEC producers, the oil market was oversupplied and crude oil prices kept falling from 1983 due to a global supply glut. In 1986, the prices fell to $10, causing the third oil shock.

After the third shock and the sharp fall in oil prices and after a tumultuous year, the oil prices were set at $18 a barrel at an OPEC conference in June 1987.

MIS Golf Dreams of Asian Championship

Golf has always been considered as a sport for the rich and has not attracted many in the world due to high infrastructural costs and expensive tools. But in Iran, the ground has been prepared since several years ago for promoting golf.

Iran’s Ministry of Petroleum has invested heavily in golf and won a 25% share in the Golf Pro League. In addition to providing services to unprofessional people, the ministry is taking steps towards promotion of golf.

Pro League Teams

Iran’s golf pro league has been professionally under way for four years. Before that, the teams were amateurs. During all years of golf activity in Iran, the petroleum ministry has made contribution.

Two pro league teams of Ahvaz Drilling and Masjed Soleyman (MIS) Oil are the products of investment by the ministry in golf. Of course, MIS has been much more active. Golf pro league is held in two four-team groups and the important point is that of eight teams, two belong to the Ministry of Petroleum, which means a 25% share of Iran’s golf.

MIS Honors

MIS Golf started its activity in 1997 and ran for the highest level matches of that time. It won 12 championships before pro league matches were held in 2011. In other words, during this time, it lost the championship title only once and finished runner-up. Since the start of pro league matches during the past four rounds, the MIS team has won one championship, two runner-up title and third-place title.

This team became champion in last year’s pro league and it is now ready to join Asian games.

Experience Overseas

Iran’s most rewarded golf team ran in Asian championship matches for the first time in 2009. The matches were held in India and Iranian golf players managed to rank the 5th. That was great for Iran which was just at the beginning of the road towards Asian championship title. Moreover, during these years, due to budget restrictions at the golf federation rarely were teams dispatched abroad. However, MIS golf hopes to be able to run for Asian games in the next Iranian calendar year which starts in March. The next Asian golf games are planned to be held in South Korea and the best teams of Asian countries will be participating in the matches. Iranian petroleum ministry officials have been negotiating the second presence of MIS team in the Asian championship games.

Young Lineup

MIS golf has a young line-up. The best known golfer of this team is Saeid Barati who also serves as coach. He is the only national golf player at the MIS team. Most golfers of MIS are locals from the southwestern Khuzestan province where the oil-rich city of MIS is located.

Facilities

MIS Petroleum Club has taken certain measures in order to promote golf. A pitch has been provided to golfers so that they could exercise certain hours a day without paying. This important achievement is the result of negotiations by Iran’s Ministry of Petroleum and MIS Petroleum Club officials.

Present Conditions

MIS golf team is participating in the current year’s pro league matches. During the 5th round of pro league matches, MIS has so far has had three matches and has made three wins in rapid succession. MIS is now at the top of the table.

Saeid Barati, MIS Golf Coach:

I Hope to Respond to Managers’ Trust

Saeid Barati, the MIS golf coach, has already held post in a many positions in the club. Barati, 34, started work at the MIS Petroleum Club since he was a young adult and has played in all age groups. He took over as MIS golf coach after Mr. Qolizadeh got retired.

Barati is happy with the club’s conditions and hopes for his team to be dispatched to Asian matches in order to demonstrate its potential. Here is an interview with him:

Q: Would you please tell us about the MIS conditions?

A: We have a good team. Although some golfers are young we are a very good team and we have so far managed to obtain good results. The important point at the MIS Petroleum Club is empathy and unity and the result has been our success in the past years.

Q: This is your first year as the team coach. What do you think of your experience?

A: I started work at the MIS club when I was 16. I have so far fared well and have achieved good national rankings. I’ve been with the national golf team for eight years and I have participated in world games twice and in Asian games twice, too. The two world matches were held in Argentina and Turkey, while the Asian matches were hosted by Australia and South Korea.

This year, as the coach, I hope to be able to share my experiences with youths and win the club their desired results. I offer my gratitude to Mr. Qolizadeh who got retired because of practicing two jobs and I wish him success.

Q: You referred to world matches. How hopeful are you for the dispatch of the team to Asian matches?

A: We are optimistic and we hope that our budget allocation will increase for next year. The club officials are making huge efforts in this regard and I hope that their efforts will pay off. It would be regrettable if this team misses Asian matches. In case we are dispatched to the matches, we will be able to pass good days and make supporters of Iran’s gold happier.

Q: MIS Petroleum Club has apparently very good facilities.

A: Sure! The facilities at our club are much better than those of all other teams present in the golf pro league. As far as golf is concerned, due to financial problems, there is insufficient hardware, but the club officials have taken steps to resolve these problems. Lots of measures have been taken to enable golfers to continue their job and be useful players. The training camps have been designed appropriately and the general conditions of the club are assessed as desirable.

Q: Do you promise to win the championship for this year’s league?

A: One cannot predict anything, but as a coach I will try my best for the team to succeed. All players are highly motivated to repeat last year’s championship of MIS and lift the trophy, once more. The conditions have so far been satisfactory for us and I hope that we will be able to continue the current favorable trend.

Q: Anything more to say?

A: I feel obliged to thank Mr. Hamouleh, director of sports affairs, Mr. Shojaei, head of MIS Petroleum Club and managing director of the club, who have made significant efforts for the promotion of gold in the province. I hope that I will be able to respond to their trust by achieving good results.

Lorestan; Ancient Civilisation

Lorestan Province is located in western Iran. Lorestan’s provincial capital is Khorramabad and Boroujerd is the second most populated city in this province.

According to 2006 census, Khorramabad is the 22nd city in Iran and Boroujerd is the 28th in terms of population.

Lorestan is surrounded mainly by mountains. Oshtorankouh, 4,050 meters high, is the highest spot in this province. The lowest point is 500 meters above the sea level.

According to archeological findings, Lorestan has been home to an ancient civilization and Lorestan’s brass is archeologically famous. What comes below is a brief review of some tourist attractions in this province.

Falak-ol-Aflak Castle

Falak-ol-Aflak Castle is a castle situated on the top of a large hill with the same name within the city of Khorramabad, the regional capital of Lorestan province, Iran. This gigantic structure was built during the Sassanid era (226–651).

The Khorramabad River runs past the eastern and south-western side of the Falak-ol-Aflak hill providing the fortress some natural protection on those sides. Today, the western and northern sides of the hill are bordered by the residential districts of Khorramabad.

Brickwork Minaret

Brickwork Minaret is a monument in the city of Khorramabad, dating back to 4th century AH. With a history of nearly 900 years, this monument is erected on a pedestal near the ancient city of Shapourkhast. Measuring 30 meters high, it has a base diameter of 5.4 meters. One can reach the rooftop of the minaret by taking 99 spiraling steps. The architectural design of the monument indicates that it dates back to Daylamian rule.

Kashkan Bridge

Kashkan is a bridge whose construction dates back to the 4th century AH. This bridge which has been built over Kashkan River was built to connect the ancient route of Shapourkhast to the western regions of Lorestan province and then Kermanshah province.

The bridge is 26 meters at its highest point and 10 meters at its lowest point.

Sareban Bridge

This bridge is located on the way stretching from Shapour-Khast to Khuzestan. According to remnants, the bridge is 145 meters long with archways. The materials used in the construction of the bridge are mainly stones and riverbed pebbles.

Pol-e Dokhtar

Pol-e Dokhtar which is a historical monument built at the northern entrance of the city was probably built during the Sassanid era. Today, a transit route underpasses this monument.

The bridge used to connect Shapourkhast and Jondi Shapour and had been strategically important.

Cheshmak Caravanserai

This caravanserai which is located in Cheshmak area south of the city of Khorramabad is the second rest area on the road from Khorramabad to Khuzestan. It was built during the reign of Shah Abbas I of the Safavid Dynasty.

Kougan Cave

This cave is located south of Khorramabad. It was built during the Ashkanian Dynasty. Located in Cheshmak area, it is close to no center or facility. But it is 8 kilometers from an oil pipeline and 7 kilometers from Khorramabad-Andimeshk highway.

Lake Gahar

Lake Gahar has two sections, known as the Greater Gahar and the Lesser Gahar. The Greater Gahar is 1,700 meters long, 400 to 800 meters wide and 4 to 28 meters deep. The best time to visit this lake is the first two months of summer because the entire road leading to this lake is covered with colorful poppies and drooping tulips.

Lorestan IOPTC Handles 500,000 b/d

The provincial branch of Iranian Oil Pipelines and Telecommunications Company (IOPTC) in Lorestan province is tasked with transferring crude oil and petroleum products from south to north of the country.

There are three oil transfer centres, two oil storage facilities and eighteen telecommunications stations in this region.

Assadollah Kalantar, director of IOPTC provincial office in Lorestan, said Shohadaye Tang Fani oil transfer centre is one of the largest in the country with three input and six output lines.

“Oil transfer centres in Lorestan region transfer, on average, 500,000 b/d of crude oil and 150,000 b/d of petroleum products,” he said.

Highlighting the potentialities of IOPTC staff in Lorestan, Kalantar said: “In the past, turbines used to be repaired by foreign specialists, but currently and in a bid to counter sanctions; such jobs are done by industrious experts in Lorestan.”

He also referred to capabilities in manufacturing, repair and installation of turbines and said that two turbines that had been completely destroyed during the imposed war in 1980 have been repaired locally.

Kalantar also said that a new pipeline, measuring 20 inches in diameter, has replaced a decrepit pipeline, 16-inch diameter, in Sabzab/Tang Fani.

He said that measures have been taken for expanding green space and protecting the environment. He added that this region won awards for green services in 2014.