Moment of Truth for Oil Companies

Speculation about Iran's restructured oil contracts has subsided. Now everyone is convinced that the new type of oil contracts is not demanded by a single person or even a group of people within the Islamic Republic, rather it has won consensus in the Islamic establishment and all decision-making bodies in the country are in favor of their implementation.

 This consensus relies on a reasonable basis and conforms to the known economic and business principles.

Iran needs $100 billion in investment to develop its oil fields and enhance recovery from its ageing reservoirs. Such an investment is not available in the country and Iran has no option but to attract foreign investment. Therefore, oil contracts that secure the interests of both sides on a win-win basis were needed to be drafted. In such contracts, there must be a direct relationship between acceptance of risk and profits. It means that when an investment company accepts higher risks it would need to gain more profits.

Since Iranian Ministry of Petroleum officials believe that implementation of a contract would directly affect the success or failure of a project they took their time to develop a new model of contracts that would be comprehensive and all-inclusive. The new model of contracts, which were drafted without any hastiness or emotional interference, were designed after years of studies. There is a strong belief that even a good contract could give rise to unfavorable consequences when it is implemented in an undesirable atmosphere.

Therefore, given the significance of the petroleum industry in Iran and the fact that it is a national industry, constructive interaction was needed to take shape between relevant bodies so that the contracts would be implemented appropriately and tensions would be reduced. Some sort of mutual understanding was necessary for the implementation of the new model of contracts because Iran's petroleum industry is the main economic artery of the country's economy.

Iranian oil managers are well aware that conditions in the competitive markets, particularly in the Middle East, have changed and one-sided financial regimes that existed in Iran's buyback deals and ensured maximum benefits for the client, are no longer effective. Therefore, such contracts are no longer attractive enough for investors.

Foreign companies should take into account the fact that National Iranian Oil Company (NIOC), which safeguards Iranian oil reservoirs on behalf of the Iranian government, has to include economic, political, social and technical concerns in the contracts. Striking such a balance to the contracts is not easy, but Iranian oil managers finally managed to decide on a format of contracts that would secure the interests of all parties to a contract.

Now conditions are ripe for foreign companies and those willing to enter a win-win game that would secure their long-term interests, should not hesitate to enter the Iranian market.      

PEDCO to Team Up with Foreign Firms

The CEO of Petroiran Development Company (PEDCO) has announced agreements with international partners to operate oil projects under new-style contracts.

“We are ready to implement projects within the framework of the new model of oil contracts,” Roham Qassemi said, adding that PEDCO has already reached basic agreements with its international partners.

Regarding PEDCO’s future plans, he said: “For the time being, the focus of our activity is in offshore areas. Our strategy for the moment is not to be present in onshore projects.”

Asked about financial restrictions faced by PEDCO for operating megaprojects, he said: “Of course we are seeking to attract financial resources for operating small and medium-sized projects within the framework of new oil contracts.”

PEDCO is one of 11 companies qualified by the Iranian Ministry of Petroleum for exploration and production (E&P) activities.

National Iranian Oil Company (NIOC) offers a basket of contracts including buybacks, EPCF and new-style contracts for oil and gas projects.

Iranian companies would be authorized to steer small and medium-sized projects and have foreign partnership. Large fields would be awarded to foreign companies that will be required to have an Iranian partner.

SPM's Swivel Construction Indigenized

The Iranian Offshore Engineering and Construction Company (IOEC) has successfully built product swivel, which is a complicated and sensitive part in Single Point Mooring (SPM).

SPM is a floating buoy/jetty anchored offshore to allow handling of liquid cargo such as petroleum products for tanker ships.

The design and construction of the part was monopolized by a limited number of world companies. It was among the items needed direly by Iranian oil industry but was subject to sanctions. 

The IOEC said due to international sanctions the manufacturer of the swivel product refused to supply it to the company, while it was largely needed for the export of gas condensate.

The swivel product was manufactured domestically after a series of designing and construction procedures.

Iran, Finland to Cooperate in Oil Industry

Iran’s Deputy Minister of Petroleum for International Affairs and Commerce Amir-Hossein Zamaninia and Finnish Deputy Minister for Foreign Trade and Development Cooperation Peter Stenlund have called for bilateral cooperation in oil industry.

Zamaninia told the Finnish guest that the Dutch have favorable technology in reconstruction and renovation of refinery, gas gathering, LNG plants and offshore facilities and are ready for cooperation in the field at a competitive atmosphere.

He said Finland will receive its crude oil and natural gas from Russia, having two refineries whose combined refining capacity is 350,000 b/d.

Finnish President Sauli Niinisto visited Iran at the head of a politico-economic delegation at the invitation of President Hassan Rouhani.

Turkey, Iran Discuss Gas Cooperation

Grounds for gas cooperation between Iran and Turkey were discussed during a meeting between director for international affairs of National Iranian Gas Company (NIGC), the head of the provincial NIGC branch in West Azarbaijan Province and the Turkish embassy's consul-general. The meeting was held in the northwestern city of Urmia.

Mansour Sadeqian, CEO of NIGC branch office in West Azarbaijan, said this province connects Iran and Turkey, adding: "Given its high technical potential and valuable experiences in gas supply, the West Azarbaijan provincial branch of NIGC could play an important role in gas exchanges between Iran and Turkey."

"In case of willingness on the part of the other party, this company would be able to provide the necessary infrastructure for the supply of part of Turkey's natural gas needs particularly in border cities," he said.

For his part, Turkey's consul-general reiterated Iran's status in global energy ties, saying: "Turkey is very eager to have broad cooperation with Iran in this field."

Mehmet Bulut said the activities carried out in gas supply to remote areas of West Azarbaijan Province was appreciable, adding: "Many big cities in Turkey are deprived of natural gas while even remote areas in Iran have easy access to natural gas. That is appreciable."

He expressed hope that further positive steps would be taken for the expansion of relations between the two countries, particularly in the energy sector and the necessary grounds would paved in West Azarbaijan Province for the supply of natural gas needs of Turkey by NIGC

Tabriz Exports Petchems to 30 Countries

Official data shows 42% of polymer products of Tabriz Petrochemical Plant were exported to world markets in the first half of the current calendar year (started in March 2016).

The petrochemical plant surpassed its nominal output in the first half of the year to export products to 30 countries. It showed a 75% increase year-on-year.

The plant exported 92,000 tons of polymer products to different Asian, European and African states.

The main buyers of Tabriz products were China, India, Pakistan, Russia, Turkey, Romania, Greece, Poland, Bulgaria, Hungary, Germany, Italy, France, Czech, Romania, Belarus, Ukraine, Central Asia, Caucasus, Arab and African states.

Total to Sign $2b Olefin Deal

Managing Director of Persian Gulf Petrochemical Industries Company (PGPIC) Adel Nejad-Salim says Iran and France’s Total are to enter a $2 billion contract for an olefin project by the end of the current Iranian year of 1395 (to end on March 20).

Nejad-Salim, said contracts are to be signed with international companies.

He said seven agreements have so far been signed with international companies like Total of France.

He said by the end of the current Iranian year of 1395, two contracts, one with Total, will be signed.

Following the implementation of the Joint Comprehensive Plan of Action (JCPOA), Iran and Total signed a deal for the French company to invest in Iran’s petrochemical industry.

Total has started feasibility studies on Iranian petrochemical projects and feedstock receipt conditions.

 

 

 

 

 

 

 

 

 

 

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Iran Oil Buyers: From Asia-Pacific to Europe

Iran’s deputy minister of petroleum for refining and petroleum products distribution affairs has said that the buyers of Iran’s oil range from Asia-Pacific region, like China and Japan, to Europe.

Abbas Kazemi also referred to Iran’s sustainable export of petroleum products, saying: “For the first time in the history of petroleum industry we have achieved sustainable exports of 400,000 b/d of petroleum products. Despite this big achievement, due to restrictions in ports, we failed to increase our export of these products while there is potential in the country for exporting 500,000 b/d of petroleum products.”

He said that National Iranian Oil Refining and Distribution Company (NIORDC) would reach the 500,000 b/d target with the development of Mahshahr Port.

He added that Iran has gained a 13% share of petroleum products’ exports in the Middle East following the implementation of Iran’s nuclear deal with six world powers, dubbed the Joint Comprehensive Plan of Action (JCPOA).

“Today, with a strong presence in the regional markets of petroleum products, NIORDC which is exporting more than 60 ml/d of products like gasoil and fuel oil holds a 13.5% share in the Middle East exports. This figure reached 209 mb/d in 2015,” Kazemi said.

“Definitely, without having benefited from the JCPOA achievements in foreign relations and international trade, we could by no means imagine acquiring a 13% share of the total regional trade in the Middle East region,” he added.

Iran Open to $72bn Petchem Investment

The head of Iran’s National Petrochemical Company (NPC) says Iran is ready to attract $72 billion in foreign investment for funding 80 petrochemical projects.

Marzieh Shahdaei made the remarks during an address to K 2016 exhibition in Germany’s Dusseldorf.

“Foreign investors can contribute to 30 under-study and 50 under-implementation petrochemical projects in cooperation with Iranian companies,” she said.

“The new projects have a capacity of 49.1 million tons and need $39.8 billion investment. The 50 under implementation projects, which have a capacity of 41.3 million tons, would need $32.3 billion investment,” she added.

Shahdaei said that by 2020 there would be petrochemical projects with a total capacity of 130 million tons, which will reach 180 million tons by 2025.

“With the present capacity, the share of Iranian petrochemical industry’s production in the Middle East stands at 38% and in the world it is 4.8% which will increase as Iran boosts its share of global markets.

The diversity of petrochemical products has seen a 10.6% growth from 2000 to 2014 and the feedstock value-added has been around $9 billion.

Regarding advantages of investment in Iran’s petrochemical industry, Shahdaei said: “Economic diversity, specialized human resources, educated people, growth of domestic markets and geographical position are among the main advantages of investment in this industry.”

Iran's Foreign Investment Promotion and Protection Act (FIPPA) offers equal advantages to Iranian and foreign investors; incentives like 20-year tax exemption and 100% ownership of projects in free zones.

Gasoil/Fuel Oil Exports at 65ml/d

A deputy head of National Iranian Oil Refining and Distribution Company (NIORDC) has said that Iran has joined the exporters of petroleum products and is able to manage its refining capacity based on market demand.

Shahrokh Khosravani said: “We are currently exporting 45 to 50 million liters a day of fuel oil and around 20 million liters a day of gasoil. It means that we are exporting 400,000 of the 1.85 mb/d refining capacity in the country and we have turned into a big exporter of products in the region.”

He said that a policy pursued by the Iranian Ministry of Petroleum was to operate new phases of South Pars gas field in order to inject more gas into national gas trunkline.

“In the 11^th administration, gas injection to the country’s gas distribution network and lowering liquid fuel delivery to power plants were done. By taking these two measures we avoided the pollution of the environment due to sulfur, and promoted clean fuel in the country.”

“Given the decline in liquid fuel consumption and the lack of market for fuel oil and gasoil inside the country we moved towards exports. Since last year, we have managed to export gasoil and fuel oil at a sustainable level and given the shortages we have moved to create export infrastructure and made maximum use of export facilities in Bandar Abbas, Mahshahr and Bushehr ports,” he said.

Referring to the steady export of more than 65 ml/d of gasoil and fuel oil, Khosravani said: “In addition to gasoil and fuel, we also export kerosene and liquefied petroleum gas (LPG) and we are just importing gasoline. We hope to become an exporter of gasoline in the near future by operating Persian Gulf Star Refinery and Bandar Abbas refinery development project.”

Malaysian Firms Willing to Invest in Iran

Iran’s Minister of Petroleum Bijan Zangeneh has said Malaysian companies are willing to invest in Iran’s petroleum industry.

“Iran has welcomed investment by Malaysian companies and Petronas that has cooperated with Iran’s petroleum industry for years,” Zangeneh said following a meeting with Malaysian Minister of Foreign Trade and Industry Dato’ Seri Mustafa Muhammad.

The Iranian minister referred to Petronas’ cooperation with Iran before sanctions were imposed on the Islamic Republic, saying the Malaysian company, along with France’s Total, effectively developed phases 2 and 3 of South Pars gas field.

Noting that small-sized Malaysian companies are also willing to invest in Iran, Zangeneh said: “Of course these companies must have financial affordability and prove this capability to us. It means that they must operate projects so that their investment and remuneration will be paid back through a portion of the field’s production.”

Regarding Malaysia’s purchase of crude oil and petroleum products from Iran, he said: “This issue was raised in our meeting and we offered to start from short-term cooperation before expanding it.”

According to Zangeneh, Iranian and Malaysian companies would hold more joint studies and negotiations.

Iran Oil Imports Up

Imports of Iranian oil by four major buyers in Asia in August jumped 81 percent from a year earlier, the biggest percentage gain since April 2014, as the producer recoups market share from rivals Saudi Arabia and Iraq.

Economic sanctions targeting Iran's nuclear program were lifted in January, and it has been battling since then to regain market share lost during the previous four years that the sanctions were in force.

Iran as No. 3 OPEC producer has increased its crude oil exports in August to more than 2 mb/d, according to a source with knowledge of its tanker loading schedule, closing in on Iran's pre-sanctions shipment levels of five years ago.

The top four Asian buyers, South Korea, Japan, China and India, imported 1.84 mb/d in August, government and ship-tracking data showed. That would be the highest in at least five-and-a-half years.

Japan's trade ministry released official data showing its imports rose 31.4 percent from a year earlier to 235,612 b/d.

India's imports nearly tripled from a year earlier to 575,900 b/d, the highest in at least 15 years.

Imports by South Korea more than doubled, while Chinese imports also jumped 48 percent.

 

 

 

 

 

 

South Pars Platform 17B Loaded Out

Iranian First Vice-President Es'haq Jahangiri and Iranian Minister of Petroleum Bijan Zangeneh travelled to Bandar Abbas in southern Iran to inaugurate several industrial projects. Simultaneously, Platform 17B, which is the last platform in the development of Phases 17&18 of South Pars, was loaded out.      

The loadout operation was done by Iran Shipbuilding & Offshore Industries Complex Co. (ISOICO).

Platform 17B weighs 2,300 tons and has the capacity to recover 500 mcf/d of gas. According to Pars Oil and Gas Company (POGC) officials, this platform is projected to become operational in March next year.

ISOICO is in charge of constructing platforms for Phases 17 and 18. Gholam-Reza Manouchehri, deputy head of National Iranian Oil Company (NIOC) for development and engineering, told reporters after the loadout operation that the current year would be a unique one in terms of operating South Pars platforms.

"By the end of the [calendar] year (in March 2017), 6 platforms will become fully operational, which would add 100 mcm/d of gas and 160,000 b/d of gas condensate to the country's output," he said.

Referring to the platforms, he said: "Platform 19A with a capacity of 1 bcf recently started operation. The construction of Platform 19B is to be over in December and it will become operational by the end of the year."

"Platform 18B has already been installed and will become operational in November. Platform 17B was loaded out and will become operational by March," he said, adding: "Platform 21 has been installed to be launched in early winter and Platform 20 is ready for loadout and will come on-stream before the end of the year."

He gave a positive assessment of progress in the onshore section of phases 19, 20 & 21, saying: "The refinery section of Phases 17&18 has already become operational."

Manouchehri said Iran will be producing as much as Qatar from South Pars, which they own jointly, by the end of the current calendar year. He added that Phases 13, 14 and 22-24 are among projects on the agenda.

He said that Phase 11 will be developed within the framework of a new-style contract, adding: "For the first time in Phase 11, pressure fall-off prevention system will be used in order to protect the reservoir's production."

South Pars Oil Layer Production

Manouchehri referred to the development of the oil layer of South pars, saying it would start producing 30,000 b/d of oil by next March.

Noting that Qatar has drilled 300 wells for recovery from this oil layer, he said: "We should spud at least two-thirds of this number and manage to bring production from the oil layer to 200,000 b/d in the long run."

Manouchehri added that the second phase development of the oil layer is among priorities of the Ministry of Petroleum that would be done under a new-style oil contract.

"Currently, some companies are willing to develop the oil layer of South Pars in the second phase. Among them is the Danish firm Maersk which has the experience of activity in the Qatari section of this layer," he said.

Manouchehri highlighted complexities regarding gas pipelines and issues related to gas export via pipeline, saying liquefied natural gas (LNG) exports must be taken into consideration.

"Iran is currently in talks with Asian companies like those from South Korea and Japan and also European companies for investment in LNG, but none of these negotiations have been finalized," he said.

Output Hits 500 mcm/d

Mohammad Meshkin-Fam, managing director of POGC, said in the press conference that gas recovery from South Pars would reach 540 mcm/d by next March.

"Platform 17B is the last platform in phases 17&18, whose construction will take 31 months, excluding sanctions-related delays," he said.

He said that domestic manufacturing has had a 70% share in this platform, adding: "Only 30% of commodities whose manufacturing needed high technology and which we could not build in the country were purchased from abroad."

Asked by “Iran Petroleum” about how much Platform 17B has cost, he said: "Our contract with IOSCO for the construction and delivery of several platforms is valued at $570 million. Each platform will cost around $150 million. Since Platform 17B has a capacity of 500 mcf, will cost lower than other platforms whose capacity is 1 bcf."

"Given international norms about platform construction costs, building them inside the country even during years of sanctions was economical," he said.

Meshkin-Fam also said that development of South Pars, excluding Phase 11, would need $81 billion in investment. He broke down the figure as $67 billion for the development of phases, and $14 billion for insurance, tax and customs.

He said that around $26 billion was invested in the development of phases 1 to 10 of South Pars up to 2009.

Meshkin-Farm said Phase 11 was forecast to need $4 billion in investment after the installation of pressure booster systems.

He put at 17 the number of operating rigs in South Pars, adding that ISOCO officials have promised to launch Platform 17B in 45 days.

Meshkin-Fam said Phases 17 and 18 would be producing 34 mcm/d of gas and 40,000 b/d of condensate. "Based on the current prices, revenue from each phase of South Pars is $5 million a day, which would equal $2 billion for a year," he said.          

 

Countdown for Iran to Become Petrol Exporter

One of priorities of the Iranian Ministry of Petroleum under the present circumstances is to launch Persian Gulf Star Refinery. It is an important project for Iran as it would put an end to the country's gasoline imports.

Once operational, Persian Gulf Star Refinery will be producing 35 million liters of gasoline (Octane 95) and 14 million liters a day of gasoil a day. It might be interesting to note that gasoline consumption in Iran reached 70 million liters a day during Iran's New Year holidays in late March. Given the country's gasoline production, the startup of Persian Gulf Star would put an end to the country's imports of petrol.

On October 18, the distillation unit of this colossal refinery came on-stream in the presence of First Vice-President Es'haq Jahangiri and Minister of Petroleum Bijan Zangeneh.

At the inauguration, Jahangiri said the startup of Persian Gulf Star was one of the most important projects in Iran in the status quo, adding: "In this refinery, 360,000 b/d of gas condensate would be processed to produce jet-kero."

National Priority

Zangeneh said it was a priority for the country to put into operation Persian Gulf Star Gas Condensate Refinery. He expressed hope that the first phase would come online by next March.

"In the light of serious follow-up by the Iranian Ministry of Petroleum and all shareholders as well as the support of the government, we will soon see the operation of the first phase of the refinery with a production of 12 ml/d of euro-4 gasoline, 4.5 ml/d of euro-4 gasoil, 1ml/d of euro-4 kerosene and 1.3 ml/d of euro-4 liquefied petroleum gas (LPG)," he said. "Under the aegis of efforts made so far and finance injection and the import of equipment, the first phase of this refinery, already 93% complete, will become operational by the end of the current [calendar] year."

Noting that full operation of the Persian Gulf Star Refinery would end Iran's gasoline imports, Zangeneh said: "With a daily production capacity of 36 million liters of euro-4 and euro-5 gasoline, the country's gasoline production will total 100 ml/d."

The minister said that all products of this refinery would conform to euro-4 and euro-5 standards and the completion of the facility would make Iran an exporter of gasoline.

"The operation of this refinery will facilitate export of this product and help boost the quality of domestic fuel, in addition to ending gasoline imports," he said.

Zangeneh said the project has registered good progress, adding: "We are facing tough job ahead, over the coming three to four months for bringing the first phase of this refinery into operation. Undoubtedly, with the cooperation of all stockholders and the support of the Ministry of Petroleum we will soon see this national project come on-stream."

"Once first phase of this refinery comes online by the end of the year, the remaining phases will join the production cycle every six months and we will see the full operation of the project by the end of the [calendar] year 1396 (in March 2018) in case of sufficient financing and removal of problems," said the minister.

Phase 1 This Year

General Ebadollah Abdollahi, commander of Khatam al-Anbia Construction Headquarters that is steering this project, said: "After the startup of the distillation unit, the first phase of the refinery will come online with an output of 12 ml/d by the end of the current [calendar] year."

"By starting up the first phase of this refinery to produce 12 ml/d of euro-4 gasoline, the country will reach self-sufficiency in supplying national fuel needs. Phase 1 of Persian Gulf Star Refinery includes utilities, processing units, flares, interface and storage tanks, which cover 76% of the refinery," he said. "Phases 2 and 3 of the Persian Gulf Star Refinery will come online after a six-month interval. According to schedule, in case of timely financing, the refinery which has a capacity of 360,000 b/d of gas condensate will come online by the end of the [calendar] year 1396 with a capacity of 36 ml/d of euro-4 and euro-5 gasoline. It would be the largest gasoline production refinery in the country."

Production at Distillation Unit

Ahmad Adib, CEO of Persian Gulf Star Refinery, said the distillation unit, which came online, will keep producing until the first phase becomes operational.

He said the distillation unit produces four products, including naphtha.

He added that the distillation unit started trial run production in September and has since been supplying products.

"As from today, this unit will be regularly producing sour naphtha which is the raw material for gasoline production," said Adib. "The gasoline produced at this stage is not our final product, but due to lower sulfur content it has a higher quality than other grades of gasoil currently produced in the country."

Referring to the quality of products of this refinery, he said: "All products of this refinery, including gasoline, gasoil, kerosene and liquefied gas, will be in conformity with euro-4 and euro-5 standard."

The distillation unit accounts for half of total activity of this refinery as it brings online utilities (water, electricity, steam, air, nitrogen and fuel), processing units, flares, interface and storage tanks for gasoline production.

The first unit of this refinery is expected to become operational before the end of the calendar year. Phases 2 and 3 are scheduled to come online later in case no unexpected problems emerge and sufficient finance is provided.

Phase 1 of the refinery accounts for 76% of the total operation of the treatment facility. It would have the capacity to process 120,000 b/d of gas condensate and produce gasoline, gasoil, kerosene and liquefied petroleum gas in compliance with euro-4 standard.

Gasoline is an oil product which is considered to be strategic and highly consumed in Iran. The consumption of this energy commodity has remained unchanged after Iran removed subsidies and rationed fuel supply. Self-sufficiency in gasoline production was high on the agenda several years ago.

Over recent years, Iran has been investing $9 billion in old and new refineries in a bid to reach self-sufficiency in gasoline production and reduce sulfur content of gasoline.

Furthermore, so far, $14 billion of new projects have been defined in the aforesaid fields, $9 billion of which has become operational leading to a 1,500-ton decline in sulfur production.   

             

 

 

 

 

JCPOA, Renewed Chance for Iran Oil Sector

I am here at the Office of Deputy Minister of Petroleum for International Affairs and Commerce. In this department, policies are made about negotiations with foreign parties about selling oil and petroleum products and also investment.

Deputy Minister of Petroleum for International Affairs and Commerce Amir-Hossein Zamani-Nia tells “Iran Petroleum” that Iran's petroleum industry feels better after the implementation of the Joint Comprehensive Plan of Action (JCPOA), the official title for Iran's nuclear deal with world powers.

Here is the full text of the interview Mr. Zamani-Nia gave to “Iran Petroleum”:

Q: More than a year has passed since the JCPOA was signed. How do you assess the international standing of Iran's petroleum industry?

A: In one sentence I have to say that thanks to the JCPOA, Iran's oil and gas industry is feeling well. At present there are certain challenges on the way of development of Iran's petroleum industry, but they are domestic and need to be settled domestically. In other words, we can now make best use of our oil and gas reserves. Our crude oil and gas condensate exports reached 2,600 mb/d (during October).

I have also to note that given the country's reserves, oil and gas industry has been less developed in Iran than in neighboring countries. Of course the reason is not shortage of skilled manpower. Our petroleum industry experts are knowledgeable and experienced enough and they are at a much higher level than their counterparts in regional countries in terms of technical and engineering knowledge. Therefore, if we do not have a progressive growth over the coming 10 years and fail to make up for the past and fail to have at least several international oil companies, we would have nothing but to blame ourselves. The JCPOA has given us the chance to upgrade our scientific and technical capacities to work in a globally competitive atmosphere. We have such potential.

Regarding the effects and the outcome of the JCPOA, I have to say that over the past six months we have exported on average more than 2 mb/d of oil. For instance, in September, more than 2.175 mb/d of oil was exported and we predict to smash the record of Iran oil exports in the current year. Therefore, our conditions have improved from the days when our exports had declined to around 850,000 b/d, and our exports have now nearly tripled. We owe this success to round-the-clock efforts by the oil industry staff and the strategic management of the minister of petroleum, in person.

Meantime, equipment and commodities that had been confiscated in different ports across the world in recent years, were cleared after the JCPOA took effect. At present, big and small oil companies in the world are competing for presence in this vast industry. Add to this a 40% decline in the new equipment purchase and delivery costs, because in the past we had to spend a lot for circumventing sanctions.

Q: One of major obstacles created in the past years due to the sanctions was banking and insurance restriction in international interactions. However, these restrictions have not yet been lifted even after the JCPOA came into force. What do you think?

A: One of challenges to the implementation of the JCPOA, is that interbanking relations between Iran and the world have not yet been back to normal and the prevailing trend needs support and training ,as well as creation of a healthier environment in financial and monetary interactions. Currently there are financial transactions under way with regard to oil sales and revenue from exporting oil and condensate is received. But we have to spend time and deal with these cases one by one, before the money is received. But under normal circumstances, without spending too much energy revenue from crude oil exports is transferred.

That the Americans do not fulfill their obligations under the JCPOA, is a totally separate issue which has been explained thoroughly to our public opinion. I think that the European banks' unnecessary prudence in resuming their banking interactions with Iran has not been made clear for either party in the negotiations. Anyway, the American side is responsible for the protracted normalization of banking relations.

Regarding investment, we have not yet had any significant experience since the JCPOA took effect; therefore, it is a bit early to speak on this issue.

All small and big foreign companies like Russian, Chinese and European ones willing to invest in Ira's petroleum industry will have to find an international bank or institute to finance their projects. We do not know whether or not large or medium banks would be ready to cooperate with these companies. However, I think there would be challenges on the way. In the short-term we could not attract big investment. If we manage to attract $3bn to $4bn by the end of the current [calendar] year [in March 2017), we will be financing part of our prioritized projects in oil field development. I am very optimistic on this issue.

Iran's petroleum industry is at the beginning of the way for development, but when compared with other countries particularly in the Middle East, it is attractive enough to be able to attract foreign investment. Moreover, Iran is a secure and politically stable country. That is a very important and valuable factor for foreign investors.

Q: Since taking office, Mr. Zangeneh (the minister of petroleum) followed up on the issue of restructuring of Iran oil contracts. This issue finally came to fruition after twists and turns and the first new-style contract was signed with an Iranian company. The question here is to know why this agreement was signed with an Iranian company.

A: Advocates of buyback contracts are few both at domestic and international level. This model of contracts heavily depends on the type of the field and its development. The capital market is currently reluctant to invest in oil fields for a variety of reasons including economic recession in the world and rather low oil prices. This issue has boosted competition between hydrocarbon-rich countries for attracting international investment and finance. Therefore, the new oil contracts are more acceptable than buybacks to domestic and foreign companies. Now, when you ask why this model of contracts was started with a domestic company it is a policy adopted by the Iranian Ministry of Petroleum. But I know that negotiations have started with foreign companies since several months ago. In coming weeks we will definitely see signature of such contracts with other domestic companies and also with foreign companies.

 

Ministry of Petroleum. But I know that negotiations have started with foreign companies since several months ago. In coming weeks we will definitely see signature of such contracts with other domestic companies and also with foreign companies.

Q: Despite the approval of the new model of oil contracts and Iran's invitation to foreign companies to bid for projects, some international oil companies have announced that they cannot decide about investment in Iran, because they are unaware of details of the contracts. Is there any plan for further dissemination of information in this regard?

A: The finalization of new contracts in Iran was unfortunately tainted with political issues. In other words, building consensus on this issue lasted long. Iran is a country where there is consultation and consensus building and a single person cannot be the decision-maker. I remember well that Mr. [former IAEA chief] Mohamed ElBaradei had noted in his memoirs that Iran is not like a regional Arab country where one person orders and others obey; in Iran, political fractions express themselves and offer their proposals in a democratic procedure. Now that obstacles have been removed and the new model of oil contracts has been approved in Iran it would be enough for the National Iranian Oil Company to post the details of these contracts on its website for companies willing to cooperate. This process started on October 17 and foreign companies will have one month to register with the NIOC.

Q: One of recent important events related to OPEC was the backdown by Saudi Arabia and its allies to exempt Iran from a planned oil production freeze. What do you think of this breakthrough?

A: The issue of freeze and related policies are steered by the minister of petroleum in person. The world of petroleum industry knows quite well Zangeneh and his colleagues as oil strategists. After taking office, the Iranian minister of petroleum said he was Iran's oil chief and he would shun the issue of oil freeze before the country regains its pre-sanctions export share. He made it clear to his counterparts and we saw that his strategy was successful. In my view, the Algeria meeting was an important political understanding. The step which was taken in Algeria was necessary for striking a balance into international oil market. The practical step must be taken in November and that would be to revive the OPEC quota system. The question here is to know whether or not we should see Saudi Arabia's retreat as a political signal beyond oil. Everyone answers this question based on his view of the market and international relations.

Q: Would you please tell us about your recent negotiations with foreign parties, oil sales to Europe and also condensate sales?

A: Policymaking and the first phase of negotiations with a foreign company for any kind of activity including buying oil and petroleum products and investment in the petroleum industry are handled by the Office of Deputy Minister of Petroleum for International Affairs and Commerce. Based on talks we have so far held with foreign companies I can assure you that the Iranian petroleum industry will see its conditions improve over the coming one to two years. On one side, the Russians and the Asians and one the other side the Europeans eye their won projects in Iran's petroleum industry. Meantime, Iran has prioritized some projects like jointly owned fields, enhanced recovery, mature fields and fuel conservation. But what is interesting for us is the independence of Canadian companies. They have time and again voiced their readiness for negotiations.

We are currently exporting 600,000 b/d of oil to Europe and we recently sold 1 million barrels of gas condensate produced at South Pars [gas field] to BP. That was a big figure that could increase to 2 million barrels a month. Iran has currently around 60 million barrels of condensate stored on ships that would be reduced to zero by the end of the year. Fortunately, three condensate vessels are emptied every month. We export 600,000 b/d of condensate and consume 150,000 b/d in the country. Our production is around 500,000 b/d ; therefore, the volume of gas condensate stored on ships is declining. Many European companies are in talks to purchase gas condensate from Iran. Iran's oil exports – gas condensate included – have crossed 28 mb/d.

Q: What is the share of petrochemical sector and incomplete petrochemical projects in foreign investments?

A: Our priority is to develop jointly owned fields, but petrochemical industry, owing to its high profitability, automatically attracts investors into Iran and there is no need for more incentives like those offered in the upstream oil sector.

Q: What about Iran's collection of debts owed by foreign oil companies?

A: Iran has collected most of its oil debts, and only refineries in Greece have yet to settle their debts which are being paid back based on a memorandum of understanding.

Q: Recently a Slovenian oil and gas company established an office in Iran. Are you aware of the plans of this company?

A: Yes. Of course in East Europe, Hungary is ahead of others for activity in Iran's petroleum industry. They are willing to buy oil and sell equipment. Following Hungary, Slovenia is seeking to enhance its ties with Iran.

Bangestan Reservoir, Potential Investment Project

Iran has pinned its hopes for bringing its oil production to more than 5 mb/d under its Vision plan 2020 on enhancing recovery from ageing fields. Most oil fields in the country that have a capacity of at least 300,000 b/d are currently in the second half of their lifecycle now. But less than 30% of their reserves has been extracted with the rest needing cutting edge technologies to be recovered. It is noteworthy that by application of new technologies, the rate of recovery from different oil reservoirs could be brought to above 80%.

One of the reservoirs which Iran hopes to enhance recovery from is Bangestan in Mansouri field. Bangestan is up for grabs under Iran's new-style oil contracts. Over recent years, production from Mansouri-Bangestan has been studied by a committee of experts at the Reservoirs Directorate of National Iranian Oil Company with the objective of defining a scenario for optimal production.

According to the Corporate Planning Department of NIOC, the scenarios envisaged for enhanced recovery from this field include natural depletion, gas and water injection with the objective of examining different parameters including flow and down-hole pressure. This field enjoys very good potential for development in the future. However, Mansouri-Bangestan reservoir needs further studies which have already started. Some of these activities involve artificial lifting, hydraulic fracturing or fracking and enhanced recovery.

Iran's petroleum industry and particularly National Iranian South Oil Company (NISOC) have over recent years been working to bring crude oil production and processing capacity from 60,000 b/d to 100,000 b/d. This project has had 97.5% progress. The only remaining part of the first phase of development of Mansouri field is to complete an under-construction desalting unit which has a capacity of 75,000 b/d. It is expected to come online in the second half of the current calendar year which ends in March 2017. Conducting studies for enhancing production from this field to 150,000 b/d is another objective sought within the framework of development of this reservoir.

The high rate of recovery has created a unique opportunity for Mansouri field, thereby increasing the significance of this field. The latest surveys show that the average recovery rate in Iranian fields stands at 28%. The recovery rate of Asmari reservoir in Mansouri field is estimated at 47%, indicating the high potential of this oil field.

Mansouri field is located 60 kilometers south of the oil-rich city of Ahvaz, 50 kilometers west of Mahshahr Port and 40 kilometers east of Ab Teymour field. Discovered in 1963, the field first started production in 1973. Currently, more than 52,600 b/d of oil is being extracted from Bangestan reservoir of Mansouri field which lies within the jurisdiction of Karoun Oil and Gas Production Company.

The first well in Mansouri field was drilled in 1963, clearing the way for production from Asmari. Production from Bangestan reservoir started in 1974 after a second well was spudded to allow oil delivery to a production unit in Ahvaz.

After Mansouri production unit was built in 1980, processing of Bangestan oil was moved from the Ahvaz unit to Mansouri unit.

With a production capacity of more than 1 mb/d of oil, Karoun Oil and Gas Production Company is the largest subsidiary of National Iranian South Oil Company.

An Iranian oil official recently said that Bangestan reservoir of Mansouri field has a production unit with a nominal capacity of 75,000 b/d, a desalting unit with the nominal capacity of 35,000 b/d and a gas pressure booster station with the nominal capacity of 30 mcf/d.

This reservoir is estimated to hold 15 billion barrels of oil in place, 60,000 b/d of which is being extracted. So far, a total of 347 million barrels of oil has been produced from Bangestan which has the capacity to supply up to 79,000 b/d of oil.

Official figures show that the average oil recovery rate in Iran stands at 24%, while other countries have this figure at 48 to 65%. In Iran, the recovery rate in a field like Soroush is 7%, and in Ahvaz is around 35%.

In engineering, maximum efficient recovery has two specifications: This production could be planned for long term and should prove the maximum recovery rate. Therefore, when it is announced that 30% of gas injection in oil fields in southern Iran has not been realized it means that oil production in NISOC-run areas (3.2 mb/d) is not efficient and the reservoirs are likely to have been damaged.

This is not a new issue. In the 1940s, the average output from Iran's wells had been announced at 18,000 b/d. Now due to extraction over these years, this average production has fallen to 2,000 b/d from each well.

As oil wells are in the second half of their lifecycle, onshore wells see a drop of between 330,000 and 350,000 b/d in their output.

Therefore, realization of Vision plan 2020 objectives requires enhanced recovery from ageing reservoirs like Bangestan in Mansouri field.        

 

Iran in Talks with 16 Foreign Firms

Iran's oil contracts revision have gone through final steps and now the countdown has begun for international companies to start bidding for oil projects. Undoubtedly, the most important step for attracting foreign investment for Iran's lucrative oil projects has been the finalization of the format of new-style oil contracts.

Gholam-Reza Manouchehri, deputy managing director of National Iranian Oil Company (NIOC) for development, told a press conference on October 19: "Iran will need at least $100 billion for financing its oil projects, 40% of which must be provided through foreign investment."

He said that Iran's Ministry of Petroleum is currently in talks with 16 big international oil companies in order to reach agreement for 50 oil and natural gas projects.

Referring to remarks by Iranian Minister of Petroleum Bijan Zangeneh about the country's petroleum industry's need for $200 billion in investment for the realization of its plans under the 6th Five-Year Economic Development Plan, Manouchehri said: "A significant portion of this sum needs to be provided through foreign investment. To that effect, the new model of oil contracts provides a good instrument for international companies to invest in Iran."

Meantime, Iran's oil and gas reserves make Iran the most tempting place for investment.

"That is why NIOC prepared the new model of contracts and introduced 50 projects to Iranian and foreign companies for development," said Manouchehri.

Europe Firms Offer to Invest in Iran

Regarding the new model of oil contracts, Manouchehri said: "Of course these contracts are not so important and strange. Rather, these are the same buyback contracts and the only major difference is that in the buyback contracts, domestic and foreign investor was remunerated based on the production capacity that he created, but under new contracts, the production for a certain period of time is in question and we have tied the rate of return to long-term production of the reservoir."

"In this regard, the [production] capacity of reservoir at time of delivery does not suffice. Rather, the investor must be present in production during the contract. For example, the investor is committed to handle production for 20 years," he added.

Manouchehri noted that the new-style contracts have been designed for ageing oil fields, particularly heavy crude oil fields and oil fields whose recovery rate is around 5% "which we must bring to 40% recovery". He noted that most Iranian reservoirs are mature.

He also said Iran has already signed memorandums of understanding (MoUs) with some of international firms it is negotiating with.

Manouchehri said European and Asian delegations have offered to operate oil projects in Iran. "We have signed MoUs with some of them for feasibility studies, and many of them are willing to study a specific field and submit their proposal."

"We have provided an opportunity for top foreign companies to submit their proposals for existing fields and then we will put these proposals in a competitive environment so that we would be able to put them out to tender," he said, citing Russian, Chinese, Malaysian, Japanese, South Korean and European companies.

The projects would be categorized by NIOC based on the amount of investment and the level of specialty and technical capacity.

The projects which are more sophisticated and which need bigger investment would be envisaged to be awarded to consortiums of Iranian and foreign companies that are able to handle.

Therefore, each project will be put out to tender based on its own specifications.

"The companies that are willing to bid for a project would choose their desired ones based on economic, technical and feasibility studies," said Manouchehri, adding: "But for specific fields like South Azadegan we conduct studies to make sure which companies have already operated heavy crude oil and carbonated reservoirs like those in Iran and to see to what extent they have managed to enhance the recovery rate and along with their Iranian partners how capable they are for investment."

Manouchehri said: "So far no contract has been signed with any international company and we have only signed a HOA with Persia Oil and Gas Company which is an Iranian company for two fields in the south. We may soon sign one or two more contracts in the form of HOA without launching a tender bid."

Int'l Investment

Manouchehri also spoke about ways of cooperation between foreign firms and their Iranian partners.

"For large fields, international companies will be the main operator in the contract and Iranian companies will cooperate with them. In small and medium projects, the Iranian partner will be the main operator and it can hire service, equipment manufacturing or consulting companies," he said.

Manouchehri said 11 Iranian companies have been cleared to operate upstream projects, adding that international companies would be able to choose their partners from among them.

He also referred to the financing of the projects, saying under new contracts international firms will bring in money and they are not supposed to benefit from banking services.

"They have their own financial resources and they do not seek guarantees from the government, NIOC and Central Bank. Under the contract, they will receive their fees from the reservoir's production. Therefore, if major companies express willingness and we enter the phase of agreement, they will definitely find a way for moving their investment into Iran and the projects will go ahead without any problem."

Regarding financing by domestic companies, Manouchehri said: "For Iranian companies, apart from international banking resources, National Development Fund of Iran (NDFI) and domestic banks are forecast to make contribution in order to be able to get involved in attractive projects."

South Azadegan Welcomed

Manouchehri also spoke about South Azadegan project, saying: "South Azadegan oil field is a big and important reservoir. For this reason, it will be among our first projects to be put out to tender."

"We are very sensitive to launch good tenders, because many Western and Eastern companies are willing to bid for this project," he said.

Manouchehri said initially three consortiums were set to bid for the project, but now more consortiums have stepped in.

"Therefore, a real competition has got under way," he said.

Manouchehri said no extraordinary chance would be awarded to any specific company.

He expressed hope that the contract for South Azadegan would be signed before the end of the current calendar year in March 2017.

Golden Chance for Shell in Iran Petchem

More than 60 years have passed since Shell started its work in Iran. Over these years, Shell has been present in Iran on and off. Now after nearly two decades of absence, it plans to step into Iran's oil, gas and petrochemical industry.

Throughout decades of its presence in Iran, Shell has made great contribution to Iran's oil production and sales. Now, it is taking advantage of post-sanctions opportunities to renew its presence in Iran and get involved not only in the oil but also in the petrochemical sector directly.

Ever since it started its Iran projects by joining a consortium of Iran's oil sales in the 1950, Shell has been seeking a toehold in Iran. After Shell pulled out of Iran due to international sanctions, such projects as the development of Soroush and Norouz, and Sourena very large crude carrier (VLCC) faced serious problems for some time and Iranian petroleum industry experts were facing a Herculean task for making the oil industry self-sufficient. Of course it should be kept in mind that Shell's training courses proved to be effective and Iranian manpower trained by Shell are faring well in Soroush/Norouz platforms and the Persian Gulf VLCC. Since the very start of its presence in Iran's oil sector, Shell was interested in heavy and ultra-heavy crude oil and that is why Shell was mainly active in Iranian offshore fields.

Presence in Iran's projects and sales of Iran's heavy and ultra-heavy, over decades had strengthened its exchanges with Iran such that immediately after the imposition of international sanctions this channel of Iran's oil sales was cut off. Shell owed Iran around $2 billion. Over these years, both sides made many efforts for the return of this money to Iran.

The money was paid back to Iran in May, thanks to efforts by Iran's Minister of Petroleum Bijan Zangeneh and Iran's overture to abroad following the implementation of its nuclear deal with world powers and the ensuing removal of international sanctions.  Having done so, Shell proved its good intention for presence in Iran and it can now submit its proposal for presence in Iran's projects in a tight competition with other foreign companies.

Even before the Joint Comprehensive Plan of Action (JCPOA) had taken effect, Shell's managers had voiced their interest in broadening trade ties with Iran and made it clear that Shell was "very serious" in benefitting from opportunities presented by Iran. They said they would work with any partner based on the principle of long-term participation and generation of value-added.

The head of Iran affairs in Shell went straight to National Petrochemical Company of Iran and held face-to-face talks with Marzieh Shahdaei, managing director of NPC, and Amir-Hossein Zamani-Nia, deputy minister of petroleum for international affairs and trading. During their talks, they signed an agreement for NPC to consider Shell's presence in Iran's petrochemical market. This agreement interpreted as a new chance for Shell.

Hans Nijkamp, the head of the department for Iran affairs at Royal Dutch Shell, said the signing of the Memorandum of Understanding (MOU) came after months of negotiations between the two companies.

"We believe that we can have joint projects in the petrochemical field with the National Petrochemical Company," he said.

Referring to future plans by Shell for presence in Iran, Nijkamp said that the company is looking for investment opportunities.

He said Shell and NPC are set to launch negotiations at technical, engineering and economic levels in order to explore opportunities for investment in Iran. He said it was the main point in the Shell-NPC MOU.

Nijkamp said Shell would be pursuing a variety of projects in Iran, including the construction of ethylene cracking plant. He added that Iran has called on Shell to build a GTL plan by applying state-of-the-art technology and to market its products. There are lots of opportunities for investment in Iran, he said, adding that the important point was to find the correct path and analyze all details.

He said after Shell-NPC expert team defines a framework for cooperation, Shell would be able to announce when it would start investing in Iran.

Nijkamp said that Shell would then examine opportunities and ways of activity before signing any agreement. That could last six months or one year because any negotiations about details would need time and a final agreement would depend on the negotiations between the two sides.

The important thing for the moment, he said, is that Shell has expressed its willingness to be present in Iran's petrochemical industry. However, negotiations have to reach a conclusion.

According to him, the important thing is that Shell's investment in Iran would create jobs in the country.

Nijkamp also briefed the meeting about the history of Shell's presence in Iran, saying Iran and Shell have already cooperated on different projects and supplied products of high quality on the market.

He said international sanctions brought a halt to cooperation between Shell and Iran, but with the signature of this HOA, cooperation between Shell and NPC would be revived.

Nijkamp said old projects must be looked at as an instance of experience, but time and technology are going ahead and managers have changed. Therefore, he added, old projects could not be followed up; therefore, Shell would have to focus on new projects.

There is time for upgrading old projects, he said, adding however that Shell would prioritize new projects.

Shahdaei noted in the meeting that NPC had cohesive plans for increasing petrochemical production. She said NPC hopes to bring Iran's petrochemical output from the current 60 million tons a year to 160 million tons by 2025.

Zamani-Nia also described Shell-NOC memorandum as a very important step for Shell to start its work in Iran's petrochemical industry. He expressed hope that Shell would become active in Iran very soon.

"Thanks to the foresight of petrochemical industrialists in Iran, this company’s projects will come online sooner than other oil and gas projects. Iran is looking for contracts worth $10 billion in the oil and gas sector in the current [calendar] year," he said.

Iran-Japan MTP Cooperation 

In a separate development, NPC signed an MOU on methanol-to-propylene (MTP) with Japan's Jositz.

Hossein Alimorad, director of investment at NPC, and the representative of the Japanese firm signed the agreement in the presence of Shahdaei.

"Given abundant gas reserves in the country, implementing methanol-to-propylene project is a main policy of Iranian Ministry of Petroleum," said Shahdaei.

Propylene is used in different industries including car manufacturing and textile. As far as car manufacturing is concerned, it is used in producing injection equipment. In the textile, propylene is used for making tissues and thread for packaging, machine-woven carpet and rug.

Propylene is a low-density olefin and a major basic substance in the petrochemical industry. Global demand for propylene was around 110 million tons in 2020. The demand for this material has been growing more rapidly than demand for other polymers.

 

Potential Foreign Investors Briefed on Iran Oil Sector

With the implementation of Iran's nuclear agreement with six world powers in January and the ensuing removal of international sanctions on the country's oil sector, a new chapter opened in cooperation and interaction with foreign countries. As the agreement, dubbed the Joint Comprehensive Plan of Action (JCPOA) took effect, senior foreign officials and business delegations travelled to Tehran and international fora were held.

The first Iran Petroleum and Energy Congress (IPEC) was held in Tehran in October last year even before the JCPOA had come into force. Representatives of foreign companies attended the conference and positive results followed.

The significance of Iran's petroleum and energy industry and the existence of myriads of opportunities for investment in these two sectors prompted the Iranian Petroleum & Energy Club to hold a second IPEC. This year's conference was held on October 17 and 18. Iran's First Vice-President Es'haq Jahangiri, Minister of Petroleum Bijan Zangeneh and representatives of international majors like oil service provider Schlumberger, France's Total, Britain's BP, Russia's Rosneft, Germany's BASF and China's Petrochina were in attendance.

Addressing the inauguration, Jahangiri said Iran's Ministry of Petroleum was now ready to sign agreements with Iranian and foreign companies based on new-style contracts.

"I recommend foreign companies not to seek lobbies because transparent regulations have been drawn up by the Iranian Ministry of Petroleum in this sector and there is no need for extra costs," he said.

Jahangiri highlighted the necessity of technology transfer through these agreements for Iran, saying: "Therefore the companies that would outdo others in this regard will be prioritized for cooperation and signature of contract with us."

He also recommended foreign companies to benefit from Iran's domestic potentialities and capacities, saying: "Iran's petroleum industry enjoys high capacity in the country, particularly in the engineering and equipment manufacturing sectors. Foreign companies can benefit from these potentialities."

Noting that development of Iran is not possible without petrodollars, Jahangiri underscored the necessity of investment in the oil and gas sector. "Using new oil contracts is one of ways of investment in the oil sector."

He stressed the need for avoiding waste of time in the development of jointly owned fields and said neighboring countries which share these reservoirs with Iran, have been outperforming Iran over recent years. "For instance, Iraq is currently producing over 4.3 mb/d [of oil]."

Jahangiri said a contract is a bilateral and "win-win" issue and one side could not expect to impose all his desires on the other party, adding: "Of course, Iran enjoys a unique standing in the region and such advantages as security, young and educated manpower and political stability in our country provide sufficient attractions to [potential] foreign investors."

He referred to the recovery rate of some Iranian oil fields, which stands at around 5%, and stressed the need for investment in enhancing the recovery rate.

Asians in 21st Century

Jahangiri also said that the Iranian Ministry of Petroleum had defined the best plans in line with the objectives of Resilient Economy which was instructed by Supreme Leader Ayatollah Ali Khamenei.

"Implementing projects to avoid raw materials sales, building new refineries, producing more oil products, raising oil output and diversifying strategic customers for oil are among these activities," he said.

Jahangiri referred to the increase in Iran's oil output with the help of Iranian petroleum engineers immediately after the JCPOA took effect, saying: "Nobody imagined that Iran's oil production would increase at such a pace and in a short period of time; however, this important goal was achieved although there is need for investment and use of modern technologies for boosting oil production."

He said oil was not merely an economic issue for Iran and regional countries, adding: "Most political events in the region depend on energy and oil. I imagine that whatever happened on September 11 [2001] and after that in the Persian Gulf region was mainly related to oil."

Jahangiri also referred to daily increasing growth and development in the Asian region, saying: "Many international pundits believe that the 21st century development will be mainly in Asian countries and that these countries will be instrumental in international trade and economic growth."

Iran South Pars Output Reaches Qatar's

Iran's petroleum minister was also a keynote speaker in the inauguration ceremony. Zangeneh once more underlined the necessity of development of Iran's jointly owned oil and gas reservoirs throughout attracting investment.

He said that development of South Pars gas field, which Iran shares with Qatar, would continue to remain the country's top priority in the petroleum industry.

"With the startup of several South Pars phases by the end of the current [calendar] year [in March 2017], Iran's gas recovery from this joint gas field will equal Qatar's."

Zangeneh said phases 12, 15&16 and some sections of Phases 17&18 had already become operational, adding that Phases 17&18 would be completed this year. He also said that phases 19, 20 and 21 would also become operational this year and Iran would be reaching Qatar in terms of gas recovery from South Pars.

He expressed hope that an agreement would be signed for the Phase 11 development before the end of the current calendar year so that upstream plans at South Pars would be over by March 2018.

"This year we will have the first recovery from the oil layer of South Pars and we hope that we will be able to finalize the development of the second phase and enhanced recovery from this field within the framework of new oil contracts," said Zangeneh.

The minister said Iran's second upstream priority was to develop oil fields located in West Karoun area in southwest Iran.

"More than 200,000 b/d [of oil] is already being extracted from these fields. Enhancing the recovery rate in this area is of high significance," he added.

"As any delay in recovery from jointly owned fields could end in the other party's higher recovery, any delay in the implementation of enhanced recovery projects would lead to the loss of national assets," he said. "Furthermore, if no timely recovery is made from this field, parts of this field's reserves will become unusable or their recovery would need exorbitant costs."

Zangeneh noted that the issue of enhanced oil recovery had not been taken into consideration as it should have been, both before and after the 1979 Islamic Revolution.

"In the new format of oil contracts, the issue of enhanced recovery rate has been taken into consideration, which we hope will materialize," he said.

He said Iran's average oil production capacity stood at 3.8 mb/d in the first half of Iranian calendar year (started on 21 March 2016), which would exceed 4 mb/d by the end of 2016. Zangeneh also said that Iran's oil production would reach 4.6 mb/d by 2020.

Regarding gas condensate

Potential Foreign Investors Briefed on Iran Oil Sector

With the implementation of Iran's nuclear agreement with six world powers in January and the ensuing removal of international sanctions on the country's oil sector, a new chapter opened in cooperation and interaction with foreign countries. As the agreement, dubbed the Joint Comprehensive Plan of Action (JCPOA) took effect, senior foreign officials and business delegations travelled to Tehran and international fora were held.

The first Iran Petroleum and Energy Congress (IPEC) was held in Tehran in October last year even before the JCPOA had come into force. Representatives of foreign companies attended the conference and positive results followed.

The significance of Iran's petroleum and energy industry and the existence of myriads of opportunities for investment in these two sectors prompted the Iranian Petroleum & Energy Club to hold a second IPEC. This year's conference was held on October 17 and 18. Iran's First Vice-President Es'haq Jahangiri, Minister of Petroleum Bijan Zangeneh and representatives of international majors like oil service provider Schlumberger, France's Total, Britain's BP, Russia's Rosneft, Germany's BASF and China's Petrochina were in attendance.

Addressing the inauguration, Jahangiri said Iran's Ministry of Petroleum was now ready to sign agreements with Iranian and foreign companies based on new-style contracts.

"I recommend foreign companies not to seek lobbies because transparent regulations have been drawn up by the Iranian Ministry of Petroleum in this sector and there is no need for extra costs," he said.

Jahangiri highlighted the necessity of technology transfer through these agreements for Iran, saying: "Therefore the companies that would outdo others in this regard will be prioritized for cooperation and signature of contract with us."

He also recommended foreign companies to benefit from Iran's domestic potentialities and capacities, saying: "Iran's petroleum industry enjoys high capacity in the country, particularly in the engineering and equipment manufacturing sectors. Foreign companies can benefit from these potentialities."

Noting that development of Iran is not possible without petrodollars, Jahangiri underscored the necessity of investment in the oil and gas sector. "Using new oil contracts is one of ways of investment in the oil sector."

He stressed the need for avoiding waste of time in the development of jointly owned fields and said neighboring countries which share these reservoirs with Iran, have been outperforming Iran over recent years. "For instance, Iraq is currently producing over 4.3 mb/d [of oil]."

Jahangiri said a contract is a bilateral and "win-win" issue and one side could not expect to impose all his desires on the other party, adding: "Of course, Iran enjoys a unique standing in the region and such advantages as security, young and educated manpower and political stability in our country provide sufficient attractions to [potential] foreign investors."

He referred to the recovery rate of some Iranian oil fields, which stands at around 5%, and stressed the need for investment in enhancing the recovery rate.

 

Asians in 21st Century

 

Jahangiri also said that the Iranian Ministry of Petroleum had defined the best plans in line with the objectives of Resilient Economy which was instructed by Supreme Leader Ayatollah Ali Khamenei.

"Implementing projects to avoid raw materials sales, building new refineries, producing more oil products, raising oil output and diversifying strategic customers for oil are among these activities," he said.

Jahangiri referred to the increase in Iran's oil output with the help of Iranian petroleum engineers immediately after the JCPOA took effect, saying: "Nobody imagined that Iran's oil production would increase at such a pace and in a short period of time; however, this important goal was achieved although there is need for investment and use of modern technologies for boosting oil production."

He said oil was not merely an economic issue for Iran and regional countries, adding: "Most political events in the region depend on energy and oil. I imagine that whatever happened on September 11 [2001] and after that in the Persian Gulf region was mainly related to oil."

Jahangiri also referred to daily increasing growth and development in the Asian region, saying: "Many international pundits believe that the 21st century development will be mainly in Asian countries and that these countries will be instrumental in international trade and economic growth."

 

Iran South Pars Output Reaches Qatar's

 

Iran's petroleum minister was also a keynote speaker in the inauguration ceremony. Zangeneh once more underlined the necessity of development of Iran's jointly owned oil and gas reservoirs throughout attracting investment.

He said that development of South Pars gas field, which Iran shares with Qatar, would continue to remain the country's top priority in the petroleum industry.

"With the startup of several South Pars phases by the end of the current [calendar] year [in March 2017], Iran's gas recovery from this joint gas field will equal Qatar's."

Zangeneh said phases 12, 15&16 and some sections of Phases 17&18 had already become operational, adding that Phases 17&18 would be completed this year. He also said that phases 19, 20 and 21 would also become operational this year and Iran would be reaching Qatar in terms of gas recovery from South Pars.

He expressed hope that an agreement would be signed for the Phase 11 development before the end of the current calendar year so that upstream plans at South Pars would be over by March 2018.

"This year we will have the first recovery from the oil layer of South Pars and we hope that we will be able to finalize the development of the second phase and enhanced recovery from this field within the framework of new oil contracts," said Zangeneh.

The minister said Iran's second upstream priority was to develop oil fields located in West Karoun area in southwest Iran.

"More than 200,000 b/d [of oil] is already being extracted from these fields. Enhancing the recovery rate in this area is of high significance," he added.

"As any delay in recovery from jointly owned fields could end in the other party's higher recovery, any delay in the implementation of enhanced recovery projects would lead to the loss of national assets," he said. "Furthermore, if no timely recovery is made from this field, parts of this field's reserves will become unusable or their recovery would need exorbitant costs."

Zangeneh noted that the issue of enhanced oil recovery had not been taken into consideration as it should have been, both before and after the 1979 Islamic Revolution.

"In the new format of oil contracts, the issue of enhanced recovery rate has been taken into consideration, which we hope will materialize," he said.

He said Iran's average oil production capacity stood at 3.8 mb/d in the first half of Iranian calendar year (started on 21 March 2016), which would exceed 4 mb/d by the end of 2016. Zangeneh also said that Iran's oil production would reach 4.6 mb/d by 2020.

Regarding gas condensate

IPEC Panels; From EOR to Petchem

The second Iran Petroleum and Energy Congress (IPEC) was held in Tehran on October 17 and 18. Five panels were held during the two days of the conference. Their themes were enhanced recovery from Iranian oil and gas fields and global experiences, business models of E&P companies, domestic and foreign investment in electricity industry, future petrochemical projects and strategies for the development of downstream sector, and private sector's involvement in the oil and gas industries.

Here is a brief review of the main points highlighted in the panels by representatives of foreign companies.

Jonathan Evans, VP Iran Access & VP Exploration Technical Functions at BP Exploration, spoke about BP's experience in enhanced recovery from oil and gas fields across the globe, including fields in Azerbaijan and Tatarstan.

He said BP's activities in some fields in southwest Kuwait have led to a 75% increase in the recovery rate of these fields.

He explained about different methods of enhanced oil recovery including polymer and chemical injection, as well as gas injection.

Evans also proposed EOR methods for enhanced recovery from Yadavaran and Azadegan fields in Iran.

EOR Significance

Danielle Morel, EOR Expert at TOTAL S.A., said success of enhanced recovery methods hinges on support by research and development (R&D) departments. She said that EOR needs to be promoted in Iran so that the significance of EOR methods would be known.

Morel also highlighted the significance of research, lab and pilot activities in EOR activities, saying most EOR methods were not cost-effective with the current oil prices. She noted that these methods would be more applicable in the Middle East petrostates.

Morel also referred to challenges on the way of EOR methods and Total's experience in applying such methods and polymer and carbon dioxide injection for boosting the fields' recovery rate.

Iran Can Become Third Petchem Producer

Serge Lorek, Total's Deputy Vice President Business Development Refining & Petrochemicals Orient, referred to Iran's capabilities in the downstream sector, saying Iran enjoys the potential to become the third largest producer of petrochemicals in the world.

He said that Iran currently stood in the 8th position, in terms of petrochemicals production.

Lorek referred to Iran's huge oil and gas reserves, high technical knowhow and educated manpower as the potentialities of Iran for growth and progress, saying Iran was among the leading producers of petrochemicals in the world.

He cited Iranian engineers' handling of oil, gas, petrochemical and refining projects during years of sanctions as indicative of capabilities of Iranian companies.

Lorek highlighted the development of upstream reserves for Iran's petroleum industry and noted that the market for Iran's petrochemical feedstock must become competitive.

He said that access to state-of-the-art technologies, financing as well as cost reduction were among other necessities of Iranian petroleum industry.

Petchem Development under Sanctions

Aman Amanpour, CEO of Amanpour Consulting, said Iran managed to make progress in the petrochemical sector during years of sanctions. He said that Iran has created an acceptable value chain.

He enumerated the achievements of Iran's petroleum industry in different sectors particularly petrochemical and refining, saying that the value-added generated in this industry during years of sanctions is due to the correct management of senior petroleum industry officials.

Amanpour outlined plans by different countries for generating value-added, saying countries like China are trying to link the chains of different industries in a bid to increase value-added.

Financing, Key to Development  

Heiko Ammermann of ‎Roland Berger Strategy Consultants said that financing is key to the development of petroleum industry in Iran. He was addressing the panel on the private sector's presence in the oil and gas industry.

Ammermann noted that international firms are still facing certain problems for doing business in Iran mainly regarding registration of their company and sharing dividends with stockholders.

He expressed hope that Roland Berger would be able to return to Iran for contributing to oil projects.

Ammermann said sanctions, legal ambiguities and inaccessible financial resources were among problems that Iran's petroleum industry used to grapple with in the past.

 

Petroleum Bank a Must

Application of cutting edge technologies with a view to enhanced recovery from oil and gas fields requires well balanced contracts. In international oil contracts, the general terms and conditions are often subject to fluctuations; therefore, bidder companies have their own interpretation of the conditions. Therefore, the general conditions of the contacts must be clarified so that foreign companies and investors could make up their minds as quickly as possible. That would cut the time spent on negotiations before the contracts are signed.

In the light of the significance of the legal aspects of oil contracts and the necessity of clarifying legal, banking and insurance challenges of contracts between National Iranian Oil Company (NIOC) and foreign parties, “Iran Petroleum” has interviewed Ali-Akbar Mahrokhzad, director for legal affairs at NIOC.

Q: What are the legal, banking and insurance challenges the NIOC is facing in its negotiations with foreign parties? What are your solutions to them?

A: In this regard, I have to say that the NIOC is still grappling with post-JCPOA (Joint Comprehensive Plan of Action) problems in different sectors, particularly banking transactions. Unfortunately, major banks still refuse to offer services to NIOC and regardless of highlights at the JCPOA for the removal of sanctions related to the petroleum industry and the delisting of the NIOC, top banks and financial institutes still refuse to reestablish their ties with the NIOC for fear of [penalties by] the US Treasury's Office of Foreign Assets Control (OFAC).

As a long-term solution, it seems that regardless of political issues blocking any cooperation, the NIOC and the entire petroleum industry must think of establishing a specialized bank. Today, other sectors of the economy like industry and mine, agriculture and housing have their own banks. But the petroleum industry, which is so big in terms of financial transactions, lacks any bank.

Q: What are the legal, banking and insurance aspects of the newly drafted oil contracts?

A: As far as the legal aspects of this new model of contracts is concerned, we can refer to the preservation of the government's sovereignty over oil and gas resources and reserves, no guarantee for the contract obligations on the part of the government, the Central Bank of Iran and state-run banks, maximum use of domestic potential in different sectors related to the petroleum industry, maximum efficient recovery from hydrocarbon reservoirs, transfer and upgrade of technology and indigenization of technical knowhow in the oil and gas industry. Meantime, the banking and insurance issues in the new contracts are almost the same as those in the former buyback deals.

Q: What guarantees do foreign parties give for the implementation of projects under new oil contracts?

A: Generally speaking, under the new contracts the foreign party commits itself to financing at the scale of billion dollars. The objective is to have a contract with legally reasonable balance and equilibrium so that both parties would be assured about the balance of the contracts and mutual obligations. As the client, the NIOC will try to include transparent mechanisms in the contracts for supervision on the performance of contractors. For instance, almost all decisions of the Joint Steering Committee are referred to the NIOC and all key decisions about the project need the approval of the NIOC. There are just examples of mechanisms the NIOC would incorporate in the terms of contract for each project.

Q: Would you please explain how Iran collects oil money owed by other countries?

A: As far as the collection of crude oil buyers' debts to the NIOC is concerned, we have to highlight this issue that in long-term contracts necessary mechanisms are envisaged for the repayment of debts. In such contracts, relevant obligations are noted under take-or-pay clauses.

After international sanctions were imposed Iran, particularly after April 2012, the NIOC faced serious challenges in collecting its debts. The reason was the illegality of cooperation between foreign and Iranian banks. Of course we can pin hopes on the resolution of this problem in the wake of the implementation of the JCPOA.

Q: What is the international procedure for the settlement of legal disputes arising from oil contracts? Has Iran seen any changes in following up on its legal actions after the sanctions were lifted?

A:  International norms governing upstream petroleum industry contracts stipulate that in case of a dispute, the parties would try to resolve the issue as quickly as possible through consultation between the contractor and the client. In case such arbitration fails to yield any result, a mutually satisfactory team of experts will be consulted. In this stage, two different situations would arise depending on the parties' obedience to the view of experts and considering their views as the conclusive argument. In case both parties agree that the view of the independent expert is binding, the case will be closed off. In case the expert's view is not binding, the case will be reported to international trade arbitration.

It does not seem that anything new has happened with regard to Iran's lawsuits. Both before and after the sanctions, legal bodies file lawsuits when necessary. Of course, it must be noted that after the JCPOA, certain openings have been seen with regard to communications with foreign lawyers and law firms.

Q: What are the points of discussion in foreign contracts? What are Iran's priorities?

A: The main point in oil contracts is the "take" of parties. Other issues come next. It is natural that in every contract, each party will spare no efforts to take maximum advantage in favor of its own interests. Oil contracts are no exception to this rule. This issue has reached the point that fiscal system is the dominant aspect of oil contracts. If anyone wants to know the main points of negotiations in the oil contracts, he has first to consult financial and contract experts. Our priority in all contracts has been to maximize national interests, particularly with regard to jointly owned hydrocarbon fields which are of vital priority for NIOC and the entire country.

Q: How does the NIOC Directorate of Legal Affairs supervise NIOC's agreements and memorandums? Do all of them need the approval of this directorate?

A: The Directorate of Legal Affairs is tasked with examining the legal aspects of the draft of memorandums and agreements signed by NIOC. If necessary, it drafts them. After the draft is compiled, it is sent to relevant directorates and departments for consultation with experts with a view to completing or amending the text. The next stage would be to negotiate the terms of the agreement or the memorandum by a team of negotiators, comprising representatives of different departments including legal affairs. Therefore, the Directorate of Legal Affairs is present from beginning to end of the drafting of memorandums and agreements of the NIOC. The documents need the approval of this directorate before being finalized. However, it does not mean that the Directorate of Legal Affairs approves the agreements or memorandums because the law has made it clear which officials are competent to endorse the agreements. Depending on the type of the memorandum or agreement and its provisions, the authority competent to approve the text would be the Board of Directors of NIOC, the Economic Council, Competitive Bidding Exception Committee or other legal authorities.

Q: What strategy does the NIOC Directorate of Legal Affairs pursue with regard to providing legal consultations?

A: Generally speaking, legal consultations are classified under two groups: The first group provides advisory services regarding all contracts which are signed in compliance with Article 37 of the Bylaw Governing NIOC Transactions. On this basis, the draft of all contracts are sent to this Directorate in order to be compared with the latest regulations, bylaws, instructions, directives and decisions of the Board of Ministers, the Economic Council, the Board of Directors, etc. In the end, the advisory view of the Directorate of Legal Affairs is sought, and this directorate submits its views along with possible changes and amendments. The second group is comprised of legal advice including responding to legal questions sent by different departments affiliated by NIOC or its subsidiaries about laws, plans and bills, administrative and employment regulations, land ownership contracts, Supreme Audit Court, Administrative Court and interaction with other state-run organs.

It is clear that offering legal advice will be in full compliance with domestic and international rules and regulations governing the activity of NIOC and in line with the country and the company's interests.

Siraf, Largest Private Project in Iran Petroleum Industry

One of priorities of Iran has been to reduce sales of raw hydrocarbons, particularly gas condensate. Iran is currently exporting the bulk of its condensate without processing and converting them into other products. Iran has made plans to fully convert 1 mb/d of gas condensate produced at South Pars gas field to products destined for export. To that end, 480,000 b/d of condensate would be delivered to Siraf refineries, 360,000 b/d to Persian Gulf Star Refinery, 120,000 b/d to Nouri Petchem Plant and 120,000 b/d to Pars II Refinery, to be converted into a variety of products.

Among these treatment facilities, Siraf is clearly different because it contains 8 under-construction condensate refineries that would be all run by the private sector. Construction of these eight refineries that would treat light crude oil in southern Iran would require foreign investment in the light of insufficient domestic financial resources and the country's economic situation. The Iranian petroleum industry could not account for more than $3 billion in investment by itself.

In order to reduce raw material selling and benefit from private sector's potential in favor of the economy, Siraf refining project was proposed by the Iranian Ministry of Petroleum in 2014 with a total capacity of 480,000 b/d (eight 60,000-barrel-per-day refineries).

This project is the third and the largest gas condensate refinery in the country. Its importance hinges mainly upon Iran's plan to stop selling raw materials and offering a new model of investment by the private sector in the petroleum industry.

This project is located in Siraf area and on 250 ha of land between phases 11 and 13 of South Pars gas field.

The Iranian Ministry of Petroleum has signed contracts with eight different investors for the project and has agreed to supply 90% of feedstock for reach refining facility for 12 years starting from the date of the signature of the agreement.

Ta'min Petroleum and Petrochemical Investment Co. (TAPPICO), Petro Farayand Karkheh Engineering & Development Company, Falcon Naregan Sazeh, Tanavob Co., Namvaran Co., Energy Amin Kasra Co., and RAMPCO Group have been picked as qualified companies to operate Siraf. They are now looking for a foreign partner so that they would afford the project.

Siraf was divided into 8 projects so that each investor would be able to operate one with $300 million.

In the light of the involvement of eight private and semi-private qualified companies in this project, Siraf could portray an attractive project for foreign investors. The project is steered by Siraf Refineries Infrastructure Co (SRIC).

Another outstanding feature which distinguishes this refining project is that it is the first example of cooperation between Oil Development Fund and private investors. In other words, one can say that these refinery projects are the most important test for Iran's private sector to demonstrate its capabilities in the petroleum industry. These oil projects provide a good chance for the private sector to prove its sincerity in response to the government's trust.

Technology Supply with European License

Ali-Reza Sadeq-Abadi, managing director of SRIC, says all required land for the construction of eight Siraf refineries have been allotted to investors. Meantime, the agreement has been signed for the purchase of technology for units operating under foreign license and the package of processing design for hydrogen production, sulfur recovery and granulation, naphtha hydrogenated treatment, middle distillate products' hydrogenated treatment (jet fuel and gas oil) and liquefied gas sweetening has been finalized. These agreements have been signed with Italy's KT, Denmark's Haldor Topsoe and France's Axens. The basic design for this project has been done by Japan's Toyo in partnership with Iran's EIED.

Sadeq-Abadi said that in this project, which hinges on value engineering, intelligent planning and real-time monitoring, is meant for minimizing investment risks.

and the bright prospect that could be envisaged for it, foreign financial instruments are already ready for the financing of this national project, he added.

According to Sadeq-Abadi, small and medium European banks are ready to finance Siraf refineries within the framework of a banking syndicate, while benefiting from insurance cover. European and Asian insurance agencies have conditioned their insurance of the refineries on guarantees from Iran's Ministry of Economy and Finance.

In the implementation of Siraf project, 14 Iranian and foreign contractors are expected to be active. More than 3,000 people will be directly or indirectly employed.

Mehdi Yousefi, CEO of Pars Special Economic Energy Zone (PSEEZ) where the refineries are to be constructed, has said that the construction of these facilities would start soon as Iran's Ministry of Petroleum plans to stop selling of raw hydrocarbon.

Cost-Effectiveness

Once completed, Siraf project will be producing 24,800 b/d of liquefied petroleum gas (LPG), 128,000 b/d light naphtha, 148,000 b/d of heavy naphtha, 29,600 b/d of jet fuel and 149,000 b/d gasoil. The point here is that gas condensate production in the Asia market is around 2.5 mb/d, 1 mb/d of which is exported and the rest is converted into different products. By converting gas condensate to products like naphtha, jet fuel and gasoil in this project, it would be possible to be more active in the market of products which amount to around 50 mb/d. For instance, there is a big market for liquefied gas. Therefore, marketing for the products would be easy. Furthermore, the naphtha which is planned to be produced at Siraf refineries would be used as feedstock for the petrochemical industry; therefore, it could be widely used in this industry. The most important products planned to be produced by Siraf refineries include light and heavy naphtha (58%), gasoil (31%), LPG (5%) and kerosene (6%). Therefore, a total of 89% of products in this project are naphtha and gasoil. This is how the profitability of the project is examined.

Return of Capital in 3 Years

Sadeq-Abadi also said the area chosen for the construction of Siraf refineries has its specific advantages. Construction of refineries in Siraf is estimated to save $1.5 billion. Siraf refineries are located near South Pars gas field. Therefore, there would be no need for laying out pipelines to deliver gas condensate to Siraf refineries. Proximity to sea, no need for the storage of gas condensate and the existence of water pool are among advantages that reduce costs significantly.

Around 250 ha of land (30ha for each refinery) has been envisaged for the project.  The lands will be rented to private sectors under 20-year contracts. After expiry, the contract would be renewable upon the agreement of PSEEZ.

According to estimates, the investment made in this project would return in three and a half years. If oil price is set at $80 a barrel, Siraf refineries would give Iran around 26.5% profitability.

The products of these refineries have attractive features for investors. For example, the naphtha produced at these refineries would be fully treated to be used for gasoline production. Moreover, without purification, it could be used by olefin and aromatic production units. In fact, naphtha will be produced at Siraf refining units in compliance with international standards. The jet fuel planned to be produced at these eight refineries will be in compliance with IATA and MIL standards. Siraf's gasoil would be of low sulfur content (maximum 2,500 ppm). This type of gasoil is widely used in many countries. Of course in the development of these refineries, investors would be able to reduce the sulfur content of this type of gasoil to 10 ppm.

Since a full cycle costs too much, these projects were decided to be launched with a low amount of capital and then investors would develop the total project with the profits they gain from the refineries. Otherwise, high costs will dissuade investors from stepping into this project. That is why gasoil is not set to be treated. The first thing investors would have to do for the development of Siraf refinery complex would be to establish a working committee for the treatment of gasoil and reduction of its sulfur content to 10 ppm.

According to estimates, South Pars gas field would be supplying 1mb/d of gas condensate in ten years' time from now. Since the feedstock needed for these eight refineries would total 480,000 b/d, there would be nothing to worry about with regard to the supply of 60,000 b/d of condensate to these facilities for ten years after their startup. Iran's Ministry of Petroleum has agreed to feed the eight refineries for ten years. After that, gas condensate production in South Pars would be falling due to fall-off in the reservoir. However, investors are assured that the bulk of gas condensate produced at South Pars would be shipped to them. Moreover, new gas fields would be discovered or start operation in Iran and the world; and there would be new sources of condensate. Therefore, there is nothing to worry about.

Algeria Agreement Ramifications

OPEC member states, along with Saudi Arabia, reached agreement during the ministerial meeting in September to keep production ceiling at 32.5 to 33 mb/d.

The 14-member oil producer group produced 33.75 mb/d in September. During the upcoming OPEC Conference in Vienna, quotas are to be set for the member states.

A number of parameters have been involved in the recent historic agreement reached at the 171st (Extraordinary) meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Algeria. The decision agreed upon by OPEC member states to cut output ceiling would definitely impact energy markets in the future. In the meantime, this accord would also face certain challenges and problems that are to be discussed in this article.

It would be of high significance to study the contributing parameters.

The Algeria meeting was not the first gathering of oil producing countries for reaching an agreement on oil production reduction or freeze. But this time an agreement was reached.

The most significant factors that helped OPEC member states reached agreement are as follows:

Russia's Cooperation: Russia a non-OPEC top oil producer in the world joined the organization's initiative for reducing production. Adoption of this approach by Russia helped OPEC reach agreement that had not been achieved in the previous ministerial meetings.

Low Oil Price Impacts on Saudi Economy: Saudi Arabia's cooperation in reducing production is indicative of the destructive impacts of low oil price oil on the economy of this petrostate. The slump in oil prices slashed Saudi financial reserves from $800 billion to $450 billion, causing a big budget deficit in the Arab kingdom. Meantime, accumulation of Yemen war costs has drawn the ire of citizens in this country over austerity measures which the Saudi kingdom has imposed on people in order to make up for its budget deficit. Therefore, the decline in oil prices and its destructive impacts on the Saudi economy in recent months have forced Riyadh to reconsider its oil policy.

Saudi-US Row: When oil prices went on a sudden downward trend, many experts attribute it to an alliance between Saudi Arabia and the United States to challenge the Iranian and Russian economies and thwart regional policies of Tehran and Moscow. But at present, there is evidence of the disappearance of such an alliance. The US government has openly criticized Saudi Arabia's war on Yemen and its House of Representatives and Senate adopted "Justice Against Sponsors of Terrorism Act" which would allow American victims of the 9/11 terrorist attacks to sue Saudi citizens. These were only two examples of Saudi-US disputes that have made Riyadh think twice about its alliance with Washington. Therefore, by pursuing its oil policy, Saudi Arabia is making efforts to tell the US that it is able to challenge Washington's policies in the region if need be.

Saudi Arabia's Recognition of Iran Rightful Demand: A previous attempt in April for an agreement on oil output freeze ended in failure because of Saudi Arabia's insistence on Iran's participation in such an initiative, even before its output has reached pre-sanctions levels. But in the Algeria meeting, the Arab kingdom changed its stance with its Energy Minister Khalid al-Falih saying on the sidelines of the International Energy Forum (IEF) that Iran, Libya and Nigeria should be allowed to bring their production to a reasonable level. In previous talks, Riyadh was sticking with its position that Iran should also reduce its production. Now the Saudis seem to have been forced to recognize Iran's rightfulness in its demand for being exempted from such a freeze.

Challenges

The Algeria agreement, which was an accord between OPEC and Russia for oil production freeze, would be facing significant challenges in the future. Some of them are as follows:

Gradual Oil Price Hike: The International Energy Agency (IEA) maintains that OPEC's output has reached its highest ever level of 33.6 mb/d. In case of implementation of oil production freeze, the oil market will reach stability in 2017. That could gradually help raise oil prices in global markets.

OPEC Revival: Over recent years, OPEC has been struggling with internal disputes between its members; therefore it has failed to play an effective role in international energy markets. But the implicit agreement reached in Algeria will once more highlight the role of this organization in supporting oil producers.

Shale Oil Boom: Between October 2014 and May 2016, more than three-fourths of shale oil drilling rigs were phased out. An oil price of around $60 a barrel could give a chance to 1,200 US rigs that stopped operating to resume work. Therefore, while a decline in the oil prices had made shale oil production uneconomical in such countries as the US and Canada, a return of balance to market and higher prices could once more help upgrade the shale oil industry.

Saudi Oil Policy Shift: Saudi Arabia's oil policy has drastically changed over the past months. The shift in the Saudi oil policy bears proof to Iranian Minister of Petroleum Bijan Zangeneh’s remarks that “the oil producers that had been instrumental in the destabilization of oil markets shoulder the most responsibility for the stability of markets.” By bowing to oil production cut, the Saudi regime has realized its destructive role in global markets and now intends to make up for its past mistakes by pursuing new policies. To that effect, the Saudis would have no option but to call on some Arab countries like the United Arab Emirates and Kuwait to join the campaign for oil production cut. In a clear break from the past, the Saudis have accepted that Iran bring its output to pre-sanctions levels (around 4 mb/d), which would be a significant development in the oil policy of this country.

Iran Oil Diplomacy Victorious

By exercising professionalism and benefiting from market conditions, Iran’s oil diplomacy managed to help Iran claw back its oil market share and OPEC standing lost due to sanctions. Iran is now able to bring its oil output back to the pre-sanctions level of 4 mb/d, while it can also enjoy the advantages of oil price hike. All this comes against the backdrop of a decision by Saudi Arabia and some other Persian Gulf Arab states to reduce their production.

In general, all oil producing countries are well aware that in case oil supply does not decline sufficiently to help curb global surplus the price of this strategic commodity is likely to fall further.

The historic agreement between Russia and OPEC for cutting oil output could be viewed as a victory for oil producers and even help boost prices in the short term; however, challenges exist. For instance, OPEC member states are likely to not remain committed to the agreement, non-OPEC oil producers like Mexico, Canada and Norway may stop coordination with OPEC, some OPEC member states may have mutual mistrust, US shale oil production is likely to increase and political disputes are likely to overshadow economic benefits of these countries. In that case the hard-won agreement would face serious challenges and a stable oil price would be nothing but a dream. Meantime, it has to be noted that in case oil price is not maintained at a high level the oil output freeze plan would end in failure.

Last but not least, oil production and supply security hinges upon reasonable and fair prices and it would be recommended to both producers and consumers to strive for a stable market based on a fair price.

1----------Four Gas Fields Go Onstream in Côte d’Ivoire

Foxtrot International has completed a four-year, $850-million development program in block CI-27 offshore Côte d’Ivoire.

Two gas fields, Marlin and Manta, have come onstream following the installation of a four-legged, manned platform, related processing and pipeline facilities, and drilling of one exploration and seven production wells.

Gas production from block CI-27 increased during August to an average of 170 MMcf/d, comprising more than three-quarters of Côte d’Ivoire’s total gas output.

Production of oil and condensates from the block averaged 3,000 b/d. The gas is sold at a current price of $6 per million btu, with the liquids sold at international market prices.

According to partner RAK Petroleum, the new platform, in 110 m (361 ft) of water, doubles the block gas and liquids handling capacity and increases the reliability of gas deliveries to the Ivorian electrical sector.

The first platform on the block started operating in 1999 and processes gas and liquids from the previously developed Foxtrot and Mahi gas fields.

Since 2010, capex on block CI-27 has exceeded $1 billion, including drilling of one exploration and two production wells between 2010 and 2012.

RAK has a one-third ownership of Foxtrot International, which operates with a 24% direct stake. Other partners on the block are state oil company PETROCI (40%), SECI (24%), and ENERCI (12%).

Foxtrot International has other gas prospective gas pockets across the four producing fields, including in previously untapped lower and upper Turonian compartments in the Marlin field.

RAK expects an independent petroleum engineering firm to shortly complete a reserves assessment study.

2--------------SHI, ABS Develop New TLP Hull Concept

ABS and Samsung Heavy Industries (SHI) of South Korea have concluded a joint development project for a new tension leg platform (TLP) design.

The new TLP hull concept, the Samsung Enhanced hull for Tendon (SET) TLP, was developed using boundary conditions such as those encountered offshore West Africa. One of the objectives in the project was to decrease the number of tendons needed for the TLP. The resulting hull configuration requires fewer tendons for stability.

Concept development is nearly complete. ABS performed design review and verification from start to finish of the project.

Jong H. Youn, vice president of SHI Co. Ltd., said: “We are very satisfied with this development because the design focuses on the issues that are critical under current market circumstances.

“We strongly believe that this innovative TLP hull concept can achieve exceptional economic benefit while maintaining the same safety level and technical functionality.”

3------------Successful Well Test at Australia's Roc-2

Quadrant Energy has confirmed a successful well test from the Roc-2 appraisal well, 165 km (103 mi) north of Port Hedland in the Bedout basin offshore Western Australia.

Roc-2 flow tested at a maximum (equipment constrained) rate of 51.2 MMcf/d of gas and 2,943 b/d of condensate from a 25 m (82 ft) thick perforated interval at 4,400 m (14,436 ft) below sea level.

Quadrant Energy says the successful test result highlights the prospectivity of the Bedout basin.

The Roc-2 well is located in the WA-437-P exploration permit in the North West Shelf. Quadrant Energy is the operator with 80% equity interest, and Carnarvon Petroleum holds the remaining 20%.

Since farming into the area in 2012, the Quadrant Energy-led joint venture has achieved a 100% success rate in three exploration wells: Phoenix South-1, Roc-1, and Roc-2.

Adrian Cook, managing director of Carnarvon, said: “The Roc-2 well has provided us with a significant amount of valuable new information, and the flow test result very clearly and unequivocally demonstrates the capability of these hydrocarbons to flow from quality reservoir within the basin.

“We are very happy with the Roc-2 well flow test results which are at rates that are significant in our industry.”

4------------PEMEX Orders Subsalt Seismic Imaging

PEMEX has contracted CGG to deliver an orthogonal wide-azimuth integrated solution designed to optimize subsalt seismic imaging in the deepwater Perdido area.

A new wide-azimuth survey, covering about 10,000 sq km (3,861 sq mi), will be acquired perpendicularly over the existing wide-azimuth seismic data acquired by CGG in 2010.

Imaging of this first large-scale combined orthogonal wide-azimuth dataset for PEMEX is expected to provide enhanced subsalt imaging results due to the improved illumination of the targets beneath the complex salt canopy.

The survey will begin in early 2017 with delivery of Fast Trax pre-stack depth migration RTM results by the end of the year and full production processing results in 2018. The data will be processed in CGG’s Villahermosa and Houston subsurface imaging centers.

5-------------Norway Authorizes Ivar Aasen Startup

The Norwegian Petroleum Directorate (NPD) has granted consent for production start-up on the Aker BP-operated Ivar Aasen field in the North Sea. The operator has scheduled start-up for December.

The field was developed with a production facility resting on the seabed at a water depth of 110 m (361 ft).

Oil and gas from Ivar Aasen will undergo final processing on the Edvard Grieg field. Edvard Grieg will also cover Ivar Aasen’s power demand until a joint solution for power from shore is established for the Utsira High.

The recoverable reserves from Ivar Aasen are estimated at 23.3 MMcm of oil, 4.4 bcm of gas, and 0.9 MM metric tons of NGL.

Data from appraisal and development wells drilled after the submission of the plan for development and operation (PDO) led to an increase in the estimate of recoverable volumes and volumes in place.

NPD says the investment costs for the development amount to NOK 26.9 billion ($3.2 billion), which is in line with the estimate in the PDO.

Tove Francke, assistant director in Development and Operation in the NPD, said: “The NPD is very satisfied that both the schedule and budget are on target.”

Det norske was the operator of the development, which comprises production licenses 001 B, 242, 338 BS, and 457 BS. The company merged with BP earlier this year, becoming Aker BP.

3---Egypt Launches Record LNG Tender

Egypt launched the world's biggest tender for liquefied natural gas (LNG) as officials from top energy companies and trading houses converged on Cairo undeterred by new rules that could force them to wait for as long as six months to get paid.

After months of speculation and delay, state-run Egypt Natural Gas Holding (EGAS) released tender documents bidding to secure 96 LNG shipments in 2017 and 2018, participants in the tender told Reuters.

An additional 12 optional cargoes were included in the tender, which EGAS may decide not to award, they said.

At a price-tag of several billion dollars, it is the biggest mid-term LNG buy tender ever issued, trade sources said.

Egypt, a major importer of commodities from wheat to diesel, helped buoy global gas markets last year after emerging as the fastest-growing new LNG consumer.

Once an LNG exporter, Egypt turned into a net gas importer just as global spot prices plunged.

Commodity trade houses, led by Switzerland-based Trafigura, have vied to supply Egypt as the country looks to buy until giant new gas finds can be developed offshore.

But Egypt's worsening credit profile has tempered some enthusiasm as suppliers fret over payment difficulties given the country's sinking economy and shortage of U.S. dollars.

Under the latest tender terms, LNG suppliers may have to wait as long as six months to get paid for deliveries arriving between January and June 2017, according to two sources with knowledge of the matter.

Thereafter payments will take 120 days, the sources said. LNG shippers previously got paid 90 days after delivery.

EGAS was unavailable to comment despite repeated attempts by Reuters to contact the company.

At a meeting with energy suppliers this month Egypt discussed extending payment deadlines to as much as 120 and 180 days after delivery to give itself more breathing room, the sources said.

"The 180-day payment terms were something agreed in Cairo a couple of weeks ago across all products and is a sign of the current situation in Egypt," one trading source said.

Some firms may think twice about committing to large supply positions carrying credit risks, but the tender is still expected to draw large crowds given generally weak demand for LNG.

"It's a big short in a long market - I expect participation to be huge," a trade source said.

Some firms, though, were put off by EGAS' requirement for tender hopefuls to hand over $30,000 in cash in exchange for the bidding documents, two sources said. A third source confirmed the cash fee.

At the same time signs point to Egyptian gas import demand peaking as one of the country's two long-idle LNG export plants, at Idku, has tentatively resumed shipments at reduced levels.

EGAS also recently delayed a handful of LNG shipments due to arrive in the fourth-quarter until early next year, several trade sources said.

4-----Nigeria Oil OutputClimbs Up to 1.9 mb/d

Nigeria's oil production has risen to 1.9 million b/d, the oil ministry said, even as the government has begun moves for all-inclusive talks with Niger Delta leaders to end militancy in the region and bolster oil production.

"We have built capacity of up to 2.4 million b/d, but [we are] currently producing about 1.9 million b/d," Omar Farouk, the special adviser on international energy relations to Nigeria's oil minister of state, said on the ministry's twitter handle.

Farouk said Nigeria was in urgent need of new investments to increase its reserve base and output.

"Nigeria has produced over 10 billion barrels of oil since the year 2000. However, we have not discovered this much in the same period," he said.

Nigerian oil output plummeted to near 30-year lows of around 1.5 million-1.6 million b/d in August, according to government estimates, from 2.2 million b/d earlier in the year as attacks on oil facilities in the Niger Delta rose at an alarming pace amid resurgent militancy.

The sharp drop in oil production has severely hurt Nigeria's economy, already exacerbated by the slump in global oil prices.

Militant group Niger Delta Avengers, responsible for most of the attacks on oil facilities that cut Nigerian production by more than 700,000 b/d, said late in September it was abandoning its ceasefire announced September 2 over what it said was the Nigerian government's failure to respond to its peace overtures.

Some other militant groups, including the self-styled Greenland Justice Mandate, have been carrying out pockets of attacks on pipelines operated by state-owned Nigerian National Petroleum Corp.

A presidential aide confirmed that a government team would commence on October 31 talks with "all stakeholders in the Niger Delta region," including community leaders and youth organizations, to end the attacks on oil installations.

Nigerian President MuhammaduBuhari said on October 10 that the peace talks had not got off the ground, because the government was trying to identify the actual leaders and groups to negotiate with.

NNPC and oil ministry officials have said they expect the country's oil output to climb to around 2 million b/d by the end of this year.

5----Global Oil Demand Growth Seen Steady

Global oil demand will rise by 1.2 million barrels per day (bpd) in 2017, steady from 2016 global demand growth levels, despite gains in Chinese consumption, the chief of the International Energy Agency (IEA) said in Singapore.

Talking on the sidelines of Singapore's International Energy Week, the IEA's executive director FatihBirol said that oil demand growth could weaken, if prices kept rising.

International benchmark Brent crude oil futures have almost doubled from their January multi-year lows to over $50 per barrel.

Birol said the slowdown in demand growth, compared with the 1.8 million bpd seen in 2015, would likely mean that a re-balancing of oil markets in terms of supply and demand would not happen until the second half of 2017.

Birol also cast doubts on the effectiveness of a planned output cut by the Organization of the Petroleum Exporting Countries (OPEC) to prop up prices, as this could trigger new production elsewhere, further undermining a re-balancing of oil markets.

"If there is an increase in the prices as a result of this (OPEC-led) intervention, we may well see a response from higher cost production," Birol said, adding that at $60 per barrel, U.S. shale oil and offshore projects in Latin America could resume.

Despite an overall slowdown in demand, China - the main pillar of demand growth in recent years - will further increase its imports because of declining domestic crude production caused by lower prices.

"China continues to be an important driver of global oil demand growth," he said.

6---Iraq to Offer Oil Fields Directly to Foreign Firms

The Iraqi oil ministry will negotiate directly with international oil companies (IOCs) and consortiums in the upcoming bidding of a dozen small- to medium-sized fields located in the provinces of Central, Basra and Misan.

According to a tender document on the ministry's website and cited by Reuters, firms will be permitted to “submit their own proposals for contractual, commercial and financial terms and conditions.”

Officials pre-qualified nineteen firms from around the world to participate in the bidding process, including six from Japan and others from countries such as Russia, Italy, and the United Arab Emirates.

In addition, firms that have not been prequalified may also participate in the process after paying a US$15,000 fee as well as submitting proof of their technical and financial capabilities. To help with that process, the ministry has offered a data package with the price tag of US$50,000.

The Iraqi government’s appeal to deal directly with oil companies signaled a shift in its strategy away from prior contract offers for the country’s huge southern fields such as Rumaila and Majnoun. The oil ministry pays IOCs a fixed dollar-denominated fee for every barrel of oil produced as part of the service-based agreements reached between the parties.

The slump in the price of oil since 2014 forced Iraq to receive less revenue from the commodity while paying the same pre-2014 fees to the likes of BP, Shell, and Lukoil. Thus, the ministry has sought to renegotiate these deals to allow fees that are flexible with market fluctuations and to force IOCs to pay a greater share when prices sink.

Futures fell to their lowest point in a week over the Iraqi government’s desire to be exempt from planned Organization of the Petroleum Exporting Countries (OPEC) production limits. Oil Minister Jabbar Al-Luaibi said Iraq continues to be embroiled in clashes with extremist militants; thus, the country should not be subjected to whatever OPEC output conditions are agreed upon on November 30.

7---Angola Becomes China's Biggest Oil Supplier in Sept

Angola became China's largest crude supplier for the second time in September, taking the top position from Russia, customs data showed.

China imported 4.19 million tonnes of oil from the southern African nation last month, up 45.8 percent from a year ago. That meant Angolan shipments stood at 1.02 million barrels per day, below 1.11 million bpd seen in August, the last time the country was the top exporter to China.

The amount of crude oil heading east from ports on Africa's west coast is expected to reach a five-month high in September, partly driven by trading houses such as Trafigura and Gunvor, a Reuters survey showed in September.

Chinese demand for Angolan oil, which is cheaper and deemed to offer stable supply, is set to accelerate in October as the refinery maintenance season comes to an end.

In the first nine months of 2016, Angola was also China's third-largest supplier. Imports jumped 17.7 percent on-year to 34.39 million tonnes (916,229 bpd) in the period, data showed.

Imports from Iraq jumped 58.4 percent in September from a year earlier to 4.07 million tonnes, or 989,400 bpd. In the January to September period, imports grew 10.3 percent from a year ago to 706,155 bpd.

Imports from Russia were down 2.14 percent year-on-year in September at 962,620 bpd. Saudi Arabia supplied 949,500 bpd, down 1.29 percent.

Saudi Arabia still holds the position of top suppler year-to-date, with shipments at 1.03 million bpd.

China imported record volumes of crude oil last month, eclipsing the United States as the world's top buyer of foreign oil as Beijing's state reserves shipped in cheap crude to fill new storage tanks.

8---Iraq Lobbies for Oil Output Cut Exemption

Iraq told a top OPEC official it was ready to cooperate in reaching a deal on supply cuts to support oil prices as long as it kept its output at near current levels.

"We are prepared to cooperate on the correct basis," Prime Minister Haider al-Abadi said, commenting on the visit by OPEC Secretary General Mohammed Barkindo to Baghdad.

"We stress the need to exempt Iraq from any agreement that would lower its production," said a statement from influential Shi'ite cleric Ammar al-Hakim after a meeting with Barkindo.

Hakim is the president of the National Alliance, a coalition of the main Shi'ite political groups including Abadi'sDawa party. The Shi'ite community form a majority in Iraq.

Barkindo, who is trying to cement an accord on supply cuts that would support sagging oil prices, was in Baghdad ahead of OPEC's meeting on Nov. 30.

OPEC's second largest producer after Saudi Arabia, Iraq says it will not cut output because it needs oil money to fight Islamic State. Iraqi officials say it should get the same exemptions as Iran, Nigeria and Libya -- whose crude output has been hit by wars and sanctions.

They have also hinted that they may agree to a cut, but from a higher baseline, which would amount to preserving output at the same level. Iraq says it produces more than OPEC's estimate.

"We want oil prices to increase," Abadi told a news conference in Baghdad. "There was a misunderstanding about the figures."

Iraq puts its September output at 4.774 million bpd and its production could rise a little in October. OPEC's secondary sources put it at 4.455 million bpd.

Barkindo met Oil Minister Jabar al-Luaibi who expressed "support for the efforts of the secretary general", according to statement on the oil ministry's website.

Falah al-Amri, head of state oil marketer SOMO, said Iraq will not go back below 4.7 million barrels per day, "not for OPEC, not for anybody else".

9---North Sea Oil Developer XciteSet for Liquidation

London-listed Xcite Energy is set to go into liquidation after bondholders rejected a restructuring plan for the North Sea oil developer, the company said.

Trading of the company's AIM-listed shares was suspended after principal debt holders rejected a plan that would see the exchange of 100 percent of the outstanding bonds for 98.5 percent of the enlarged share capital of the company.

"The principal bondholders have informed the company that they are not satisfied that the transaction is capable of being implemented in a manner acceptable to them," Xcite, which is developing the Bentley heavy oilfield in the East Shetland area, said in a statement.

A sharp drop in oil prices since mid-2014 has put severe pressure on energy companies' balance sheets, forcing many to undergo restructuring.

Bond trustees are expected to petition the British Virgin Islands court within the next 10 days, requesting the appointment of a liquidator to the company "which is expected to take effect approximately four to six weeks from the filing of such request."

Ian McLelland, global head of natural resources at Edison Investment Research, said that the announcement was a blow to both the company's share and debt holders as well as to the British authorities.

"This is a big blow for everyone, and suggests that management could not broker a deal to sell its prized Bentley asset at pretty much any reasonable price," McLelland said in a statement.

"Timing could not have been worse for the UK, as the newly independent Oil & Gas Authority (OGA) attempts to drive the industry towards Maximum Economic Recovery (MER). The Bentley field was one of OGA's strategic priorities when it was formed, now its future is more uncertain than ever."

 

----Russia Ready to Help Boost Oil Prices

Energy ministers from Russia and Qatar along with OPEC's secretary general discussed possible joint action to stabilize the oil market, Russian Energy Minister Alexander Novak said ahead of OPEC's meeting next month aiming to cement a deal agreed in Algiers.

Russia is the world's largest oil producer but not a member of the Organization of the Petroleum Exporting Countries and its budget has been hit by low oil prices, the same as for many OPEC nations.

Novak, in Vienna after visiting Saudi Arabia over the weekend for talks with Saudi Energy Minister Khalid al-Falih, said sharp falls in the price of crude threatened to trigger an oil deficit and unpredictable volatility in prices.

"That's why ... (an oil output) freeze or even a cut for a certain period of time is a right decision for global energy ... Being a short-term measure, an oil output cap may help to lower volatility in the market and make it more stable," Novak said.

Last month in Algiers, OPEC agreed modest output cuts that are due to be set in stone in the coming weeks. The goal is to trim production to a range of 32.50-33.0 million barrels per day (bpd).

"We have in detail discussed ... current situation (on oil market) and different mechanisms and options of joint actions," Novak told a briefing after talks with his Qatari counterpart Mohammed al-Sada and OPEC Secretary General Mohammed Barkindo.

Russia is ramping up its oil output amid weak oil prices, as weak rouble and investments made in previous years are helping its oil sector. In September, Russian oil output hit another post-Soviet high of 11.1 million barrels per day (bpd).

Novak repeated that an oil output freeze is "an effective tool Russia is ready for (in a move) to balance the market". Yet he said that Moscow was considering "different options," but declined to provide details.

Russia plans to bring another oilfield on stream this month, Lukoil'sPyakyakhinskoye in the Yamal Arctic region, in addition to Messoyakha launched by Gazprom Neft(SIBN.MM) and Rosneftlast month.

Rosneft, the world's top listed oil producer by output, plans to launch its Suzun field in Siberia this year as well, with Lukoil planning to put its Caspian Filanovsky field in operation by the end of 2016, adding more to the global glut.

Novak declined to say at which levels Russia would be ready to cap its output, adding that lower-tier officials from OPEC and non-OPEC countries, including Russia, will be working on terms of a possible deal on Oct. 28-29 in Vienna.

OPEC's Barkindo said in opening remarks to the meeting that Russia and OPEC were "committed to stable and predictable markets".

"While there are signs that the rebalancing of the fundamentals is under way with overall non-OPEC supply contracting this year and demand ... at healthy levels, the large stock overhang continues to be a major concern," Barkindo said.

2---- U.S. Crude Drops Further Below $50

Oil settled down on, then U.S. crude slid further below $50 a barrel in post-settlement trade after an industry group reported that U.S. oil inventories grew nearly three times as much as forecast.

The American Petroleum Institute (API) reported that U.S. crude stocks rose by 4.8 million barrels in the week ended Oct. 21 versus a 1.7-million barrel build forecast by analysts polled by Reuters.

The U.S. Energy Information Administration (EIA) reports official inventory numbers. The EIA surprised the market, reporting an unexpected drawdown of 5.2 million barrels for the Oct. 14 week as a storm delayed shipments of imported oil.

"Basically, the glut continues and demand is not coming back," Phil Davis, a trader at PSW Investments in Woodland Park, New Jersey, said, referring to the API data.

"I don't want to read too much into it but the fact of the matter is it certainly doesn't support $50 oil."

U.S. West Texas Intermediate (WTI) crude settled down 56 cents, or 1.1 percent, at $49.96. After the API report, it fell as much as $1.25, or 2.5 percent, to $49.27.

Brent, the international benchmark for crude, settled down 67 cents, or 1.3 percent, at $50.79. In post-settlement trade, it sank as much as $1.24, or 2.4 percent, to $50.22.

Oil prices were also depressed by producers' verbal jockeying over planned output cuts by the Organization of the Petroleum Exporting Countries. Iraq, OPEC's second largest producer, reiterated its resistance to contributing to the cuts while data showed it had higher output for October.

Some technical analysts pegged WTI's next support at $49.15, its bottom on Oct. 10 before it rallied to a 15-month high of $51.93 on Oct. 19.

"If we snap that, in very short order we could be back down to $47," said David Thompson, technical analyst and executive vice-president at commodities-focused broker Powerhouse in Washington.

oil prices had surged about 13 percent in three weeks since OPEC announced on Sept. 27 its first planned output cut in eight years to combat the steep slump in crude prices from 2014 highs above $100 a barrel.

The production curbs are expected be finalized at OPEC's policy meeting in Vienna on Nov. 30. The group has been holding talks with members and outside producers led by Russia for weeks now to try and sustain the market's interest in its plan.

---Iraq to Offer Oil Fields Directly to Foreign Firms

The Iraqi oil ministry will negotiate directly with international oil companies (IOCs) and consortiums in the upcoming bidding of a dozen small- to medium-sized fields located in the provinces of Central, Basra and Misan.

According to a tender document on the ministry's website and cited by Reuters, firms will be permitted to “submit their own proposals for contractual, commercial and financial terms and conditions.”

Officials pre-qualified nineteen firms from around the world to participate in the bidding process, including six from Japan and others from countries such as Russia, Italy, and the United Arab Emirates.

In addition, firms that have not been prequalified may also participate in the process after paying a US$15,000 fee as well as submitting proof of their technical and financial capabilities. To help with that process, the ministry has offered a data package with the price tag of US$50,000.

The Iraqi government’s appeal to deal directly with oil companies signaled a shift in its strategy away from prior contract offers for the country’s huge southern fields such as Rumaila and Majnoun. The oil ministry pays IOCs a fixed dollar-denominated fee for every barrel of oil produced as part of the service-based agreements reached between the parties.

The slump in the price of oil since 2014 forced Iraq to receive less revenue from the commodity while paying the same pre-2014 fees to the likes of BP, Shell, and Lukoil. Thus, the ministry has sought to renegotiate these deals to allow fees that are flexible with market fluctuations and to force IOCs to pay a greater share when prices sink.

Futures fell to their lowest point in a week over the Iraqi government’s desire to be exempt from planned Organization of the Petroleum Exporting Countries (OPEC) production limits. Oil Minister Jabbar Al-Luaibi said Iraq continues to be embroiled in clashes with extremist militants; thus, the country should not be subjected to whatever OPEC output conditions are agreed upon on Novemb

Oil InvestorsPreparing for Higher Prices

The chance of an agreement to freeze or cut crude output when OPEC members meet next month might appear more distant now Iraq has joined those asking for an exemption, but investors are ramping up their bets that oil prices will rally.

The price of oil has this month risen to its highest so far this year, having gained more than 10 percent in the four weeks since the Organization of the Petroleum Exporting Countries agreed to cut production and rein excess global supply.

Since the decision at a meeting in Algiers on Sept. 28, at which OPEC said it would seek to cut output to output to a range of 32.5-33.0 million barrels per day, from its current estimate of 33.24 million bpd.

Although there are questions hanging over how much each country will cut and whether all countries will agree to it, investors have raised their bets in both futures and options at breakneck speed that oil prices will continue to rise.

Data from the U.S. Commodity Futures Trading Commission (CFTC) and the InterContinental Exchange shows money managers have added to their bets on a rising crude price at the fastest monthly pace on record in October.

Fund managers have bought nearly 218,000 lots of crude futures and options contracts in October alone, the largest monthly rise to date, as investors have taken heart from falling stockpiles.

"While much of the oil market paints a picture of a commodity struggling under the weight of a huge surplus, statistical balances suggest that conditions have improved markedly," Barclays commodities analyst Kevin Norrish said in a note."If OPEC comes up with a meaningful cut to output in November and the northern hemisphere has a reasonably cold winter, then in our view, crude oil price risk will return very much to the upside."

Total net long holdings of U.S. and Brent crude oil futures and options now stands at nearly 688,000 lots, equivalent to around 688 million barrels of oil, nearly a week's worth of total global consumption.

This position has doubled since the start of August, when Saudi Arabia first signaled the possibility of an agreement between the group and non-member Russia to temper output.

Foreign Firms Expect 'Considerable Rewards'

John M. Roberts, a senior fellow at Atlantic Council's Dinu Patriciu Eurasia Center and Global Energy Center, visited Tehran in October to attend Iran Petroleum and Energy Congress (IPEC).

On the sidelines of the conference, Mr Roberts, who specializes in energy issues in the Caucasus and Central Asia, talked to Iran Petroleum about a host of issues including Iran's petroleum industry.

Here are excerpts from the interview he gave to Iran Petroleum.

Q: What do you think about the status quoi prevailing in oil market?  Will the price recover? Could the recent agreement reached in Algeria help shore up the prices?

R: I don’t think price is most important thing. The most important thing is that the market is oversupplied. Price reflects that, it doesn’t cause it, at this stage at least. The oversupply is quite remarkable given the disasters that have hit producers like Libya and lesser producers like Syria. And still the long-term consequences of the Venezuelan oil strike in 2002, 2003, which is still not fully recovered. And indeed the long time that has taken for Iran to recover its production, which is not fully back from what it was once. So despite all negative elements which include limits to production levels in Algeria, the end of Indonesia as a major exporter. It is remarkable for the world's supplies. That is been precisely because the prices were so high, it served to encourage non-OPEC production in difficult areas like deep waters, the oil sands of Canada and shale oil. And now with prices coming down, you have a very very peculiar situation. Is a price of shall we say around $50 a barrel enough sufficiently low that it will drive some of the new oil production off the market? Or are producers in difficult areas like the Gulf of Mexico, Canadian oil sands, shale oil in the Balkan, sufficiently flexible that they can adapt to $50 oil? And my guess is they will be far more flexible than the OPEC producers assume and therefore I do not think the Algeria meeting will have much impact and if it does have an impact all it does is put price up a little which provides further encouragement for non-OPEC producers. So I tend to think we are living in a world which the most important lesson that OPEC producers must have to learn is that it is highly unlikely that a significant amount of non-OPEC production will be reduced. And it will continue to rise.

Q: So how long will the current conditions continue in your eyes?

R: I would simply say in general ‘several years’ without putting a timeframe on it. Precisely because the global economic growth is clearly not as good as it used to be. Also energy efficiency is getting much better. Non-oil forms of energy are cutting into the oil's share of the market, which means that it's going to be difficult to work out when oil might actually be …when demand will be clearly outstripping supplies. I don’t see that happening but I should say I'm not a price analyst. So there are general comments.

Q: Two conflicting policies dominate over OPEC; one is the idea of oil output freeze at the current level, promoted by Saudi Arabia and its allies, and the other one is a production curb by the entire body as Iran's petroleum minister has suggested. How do you compare these two views?

R: First of all if you freeze at current levels you have to think what other countries are going to join you. Russia has indicated it will join. But Russia is producing at record levels. The last time that OPEC had drastic impacts on the market was when Venezuela and Saudi Arabia joined forces and really did cut production massively and that prompted a change. But I don’t see that happening now because I don’t think Saudi Arabia trusts the rest of OPEC. If it cuts its production significantly, the rest of OPEC will do so as well, let alone non-OPEC nations. So although in theory we can argue that a major cut in production would impact massively… Saudi Arabia thinks that even it cuts production massively the rest of OPEC would not… not all of them, some of them.

Q: Can Iran regain its standing in the global oil market and in OPEC as well?

R: I would be very surprised if Iran did not continue to do everything it can to increase its share of the global oil market. I think we are seeing increasing competition over market share in oil and also gas. Most OPEC nations do not trust each other on such a big issue.

Q: Where does Iran stand now within OPEC?  Is Iran as vigorous as it must be? How powerful is Iran within OPEC?

R:  I don’t think it's a right question. I think the right one would be how much power OPEC have. That’s the issue. Let's assume Iran has massive power in OPEC but OPEC has no power at all. In that case what's the extent of Iran's power? Power is the wrong word. OPEC has no power at all. It's not a cartel that controls the oil market... has influence on it. But really its influence on oil market depends largely acting as a cohesive body and much of time it does not. From the point of view of all its members it's much better to have to it ... but at the same time the government of Saudi Arabia or Iran or Iraq or Venezuela or Angola increasingly put your own interest first. If you don’t it very well you stress OPEC and if you do it very well you won’t. So in the sense the pain has to be inflicted on all OPEC member countries before they act in a uniform manner. And I don’t think that’s happening. These are not particularly good time for Iran or Saudi Arabia or other producers. But they are manageable. Why they are manageable? I think oil and gas now accounts for around 45 percent of the Iranian economy. In other words, you have an economy which is important for a big part of that economy to have very low energy prices and focus on energy efficiency than it is for the industry as such to have higher prices. I believe that is Saudis are now seeking to do. They are no longer so dependent on high prices aboard.

I give you the classic example. When oil prices collapsed in summer last year I was in Texas. The Texas oil industry was saying this is terrible. The Texas secretary of state said our economy is booming because the state of Texas economy was earning more from non-oil economy which was boosting by cheap energy than the oil industry was losing from cheap energy. I think this increasingly became the case of country like Iran and I think that is the lesson that Saudis have learned. Therefore the whole attitude to pricing and to market share has changed because there is much greater focus on internal market and on the development of internal non-oil and gas industries even though they may be dependent on oil or gas feedstock or cheap energy to rival that.

 

Q: With regards to current oil prices, what will happen to shale oil and gas?

R: If a year ago you had said oil will be $50 a barrel people would have told you this would mean a big decline in the production of shale oil. If you ask them today they will say there will probably be some decline but not very big. They are adapting to new situation much faster than we ever expected. The assumption with shale was that if the cycle of price change was shorter, the impact was greater, yet it hasn’t happened quit like that. It says if the decline has been less, the willingness to continue a degree of new investment which is required for continued development of shale oil and gas will be much greater than we expected. And in this case costs would appear coming down. So if Saudis did really have an idea of driving shale out of the market, it's failed. Shale production is a factor with which all other producers have to live. At the same time of course there is more shale production in the United States. I think we sometimes forget US talks of being energy independent but it is really North America that is energy independent. And that is its balance of energy that makes it energy independent. The US still imports 5 million barrels a day from other countries. And more important although US import oil but it's not a price setter on oil. The shale gas production is one element in price making. In that regard OPEC is a far more important factor. Basically the real problem is slow growth in the global economy, the way the Chinese growth is slowing down. All of those coupled with such other drivers as a wish to promote energy efficiency for its own sake, a wish to reduce carbon emissions which means to promote renewables, all of this impacting on the place that oil has in the global energy mix. And yet production remains pretty strong and we have this very very strange situation. Ten or fifteen years ago theorists were arguing about peak oil and the world not being able provide enough oil just for supplies. We are now far more seriously looking at peak demand. The demand for oil will rise 10 percent more probably and that’s it! Because other fuels and energy efficiency are changing the energy market.

Q: In the wake of the oil slump, small and medium-sized US companies filed for bankruptcy. Meantime, banks refused to provide them with any finance. What happened to the shale oil and gas producing companies there?

R: The first thing particularly with shale oil there were fairly limited operations. It's unique to the United States because I don’t know any other places where the mineral resources belong to the landowner. Usually mineral resources belong to state. So a company wishing to develop shale oil can approach a landowner and the landowner may be owning a few hectares, and really it’s the matter of money that the landowner let the company drill in land or not… That transaction is upfront and I presume that everything happen within a period of months. So if one venture goes bankrupt it's probably because it hasn't produced as much as it was expected and therefore it's not a good bet for continuing operations in that area. But if one company goes bankrupt there are 2 or 3 more companies next door who are doing better… The big giants of the energy industry ExxonMobil and Chevron they were late to come in on it. … Smaller companies have to be leaner and have to be more efficient.

Q: New reports suggest that investment in the oil and gas sector declined $300 billion following the oil crash. What does it mean for Iran, a country which needs such investment?

R: I don’t know what precisely reaction was to IPC, but if Iran needs to attract $100bn investment then it has to offer very considerable rewards… It's about how to put the element of risk and reward in the contract that is sufficiently attractive to bring in foreign partners.

Q: Iran has many advantages like the massive amount of inexpensive feedstock, high security and a geopolitically strategic position in the region. Could these factors affect Iran's ability in attracting foreign investment?

R: Absolutely. The geopolitical position of Iran coupled with the extent of its natural resources and with its skills in the industry means you can develop a petrochemical or refining operation project. .. If Saudi Arabia feels it needs foreign partners. The Saudi needed for two reasons; 1. Cash which is the same as in Iran and 2. because it feels the need for advanced technologies. I think the same that's true in Iran. So you have to use your geographical position and your very good access to low-price feedstock. Buy you will need foreign partners for both cash and technology. To do that you have to make a good trading environment. And that brings us to the complicated issue of international sanctions, overall policy and all sort of political issues.

Q: What do you think about Iran's gas industry? Is it better for Iran to export its gas to Europe by pipeline or it should focus on LNG market?

R: I think a lot depends on the scale of project. If you have a large quantity gas to export to Europe like 30 bcm, it make sense to send it through Turkey by pipeline. I don’t think that’s realistic now but I say hypothetically. Because current market conditions are not prepared for that. If Iran develops LNG, it can go to much wider verity in market. Which means Iran can choose which market is seems to be the best market at time to sell in to.  At the other hand there is a glut in the LNG market. Australian plant are coming up and that plant will last 4 years at least. Building an LNG facility needs $5bn to $6bn for first train and $3bn or $4bn for second one. And at the other hand building a pipe line to Europe will cost around $15bn just to construct pipe line from Turkish-Georgian border to Italy. The same amount is needed to build a pipeline to Pakistan or India. So all of these cost a lot money up front at the time when there is plenty of gas on the market. So Iran's current policy to use as much as gas possible at home, to substitute for oil, using it for feedstock to petrochemical industry, seems to me make a lot of sense.

The other form is to export it indirectly as electricity. In this case the big market for Iran to export is Turkey at one side and Pakistan at the other. And there is quite possible to export Iran's electricity to Arab countries.

Q: How can Iran be a beneficiary from the current oil market situation?

R: For Iran to become a major beneficiary it is to maximize intelligent use of energy within country on the basis of moving rapidly to energy efficiency to cost efficiency. I would hope to emissions control. This is the biggest thing we can do in order to continue diversification particularly for government revenue and export away from oil and gas.

Q: Iraq is one of Iran's neighbors and also a big producer. Years ago, the government of Iraq claimed that it would be able to bring its production to 12 mb/d within six months, but Daesh thwarts its attempt. Was such an ambitious target realistic?

R:  I think Saddam first said that. If you look at the size of potential Iraq reserve base, they should be able to produce that amount proving they get the investment. They got a lot of investment but can they get more? That’s questionable. Are the companies working there operating on terms they like? That’s questionable also. Iraq's production has grown but not as much as it should be. I would take a major catastrophe in somewhere in that world turn to Iraq to produce 12 million barrels per day!

Q: Saudi Arabia and Russia had a meeting on G20 and discussed oil market stability. Can the meeting bring any change to the oil market?

R: I don’t think any single producer can affect the market that much. Even the combination of Saudi Arabia and Russia… they can't change the market unless they have a sense of backing within the rest of OPEC as well. In order to radically impact the market Saudi Arabia and Russia have to take such drastic actions that the rest of the world become worried about breaking their contract.

And as a point of view of western energy, ever since the end of Arab oil embargo in 1970s, Saudi Arabia has been a remarkably good partner for Western energy consumers. I do not believe they would put their reputation at risk. Whereas Russia has not the reputation of reliable supply source. That is a paradox because it has been a reliable supply gas for Western Europe but not for the eastern part. So to have any impact on the market OPEC needs Russia's cooperation. But it's not that they can rely on Russia or Saudi Arabia.

 

RIPI Gas Sweetening Initiative

ran's Research Institute of Petroleum Industry (RIPI) is the technological arm of the country's petroleum industry. In continuation of its breakthroughs it has managed to master technological savvy for gas sweetening.

In order to learn more, Iran Petroleum has interviewed Akbar Zamanian, head of RIPI's Department of Gas Processing and Transmission Development and Technology.

Q: Would you please first of all speak about the issue of gas sweetening?

A: Sweetening sour gas is a technology which is of high significance from the aspect of development and chemicals. Currently, Iran is heavily dependent for supplying chemical feedstock. In order to resolve this problem, development of technical knowhow is needed for processes leading to the manufacturing of chemical products and also for upgrading the potential of domestic manufacturers. At present, chemical substances are much more important than the process itself because processes are often well known and they are not complicated and their technical knowhow could be achieved sooner and more easily. But chemical materials are complicated in terms of production. Prices are also subject to tight competition and chemicals are also highly sensitive. RIPI must work on both these issues.

Q: The points you noted just now are different from whatever has already existed?

A: It includes both the past and present issues. In order to acquire new technical knowhow in the first place we have first to master basic savvy before upgrading these methods. This is what is currently under way in all other sectors.

First of all the processes, licenses and chemicals are used, all of which do not currently exist in the country. We have first try to make sure that these things materialize. If somewhere in the world a new technology or process is developed we would be able to use it in case we have basics. Therefore, our first and foremost objective is to supply the basic needs of industry. Then we can work on upgrading the processes.

Q: Is it possible to explain more details of these measures?

A: Sure. Some five years ago we started a project in collaboration with the National Iranian Gas Company (NIGC) with a view to acquiring the necessary technology for gas sweetening process. Until 8 years ago, all refineries in the country were under foreign license and those which were in our own hands had been copied. We had no technical knowledge for designing. Meantime, we had no reference in the field of analysis, technological services, modelling and simulation and lab services to serve the petroleum industry. Furthermore, we had to import all chemicals we needed. During recent years and when the sanctions had been tightened these sectors were harmed significantly and many plants had to supply their needs from second-ranked Chinese and Indian companies. For example, a new generation of solvents in the gas industry is known as activated MDEA (A-MDEA). MDEA is a commercialized solvent whose properties were improved with additives in order to cut energy consumption. In most cases of sweetening processes, our available solvents could not be effective and we had to use A-MDEA whose production was monopolized by several foreign companies including BASF.

Before the sanctions were tightened some of our petrochemical facilities and refineries had been designed to function on these solvents and they had no other option. After the [tightening of the] sanctions, this solvent was no longer sold to Iran. In-between, petrochemical plants and refineries referred to us because the systems had been designed to work on those solvents and there was no alternative. Furthermore, they could not stop production. Over these years, we removed all shortcomings and now we have managed to become a reference technological lab. We do all analyses needed for gas sweetening industry.

Q: Wasn’t any level of this process done in the country?

A: Certain lab services were provided, but there was no basic and sensitive analysis. Before this, the samples of solvents were sent overseas for analysis and examination. Each sample cost at least 5,000 euros and it took at least 3 months. Moreover, we gave all our information to foreign companies and countries and we informed them of our shortcomings and condition.

Q: When was our dependence ended?

A: Since three years ago, thanks to this research center and the assistance of NIGC all samples have been brought to RIPI. We also charge domestic industries much less and one-third of that time would be spent. No information will go abroad and we keep our own information in our databank.

Q: Are these measures in compliance with international standards?

A: Yes, of course. The certificates we issue to industries contain the same specifications noted by BASF. In the aftermath of the lifting of the sanctions, companies like Amine Experts and Sulfur Experts entered negotiations with us. They were surprised with our equipment and capabilities and they acknowledged that we had become their rivals. They were willing to become our partners because they know that we can work on our own and Iran’s market is in the hands of RIPI. We have reached an advanced stage in technological services and analysis of amine solvents and lab tests.

I recall that we started from the scratch because in order to acquire basic knowhow for the process and its identification we needed such tools as a pilot. In fact, pilot is an example of the main unit. For achieving technical knowhow we cannot conduct tests on the main unit and we had to go through an evolutionary process. We also needed simulation and modeling tools in order to examine the behavior of the process. The practical and commercial tools currently available for this purpose are refinery systems simulation software (HYSYS & ASPEN). They are very generalized and have not been developed for specific purposes.

Q: Do other countries use this software too?

A: This software is a kind of sophisticated engineering calculator which has been developed a little. When a specific technical knowhow is planned to be developed for a specific process this software is not efficient at all. Companies with technical savvy often use in-house software which is their private business and which they do by no means sell to any other country or company and which they protect seriously. We didn’t have this software and licensers refuse to sell us their software and their general software is of no help to us. Therefore, we developed Ripi Amine Package software. This software, in addition to having the features of previous tools, has compensated their shortcomings. It has data about solvency, thermodynamic and synthetic properties as well as data about amines and solvents. At present, this software is our tool for designing processes. We claim that we can design industrial pilot units by using software laser. We have tried our best to produce A-MDEA which is considered a new solvent in gas sweetening in the country. Now, a formulated solvent under the title Parsi Sol has been patented by RIPI.

Q: What are the features of this solvent?

A: This is an engineered solvent. It means that older solvents had no room for maneuvering and specific features were achieved through a specific design. Engineered solvents are common in the world today and they refuse to give Iran the knowhow. The main feature with this solvent is that it is formulated and engineered such that it would cost the least and would consume minimum energy. The equipment will be smaller in size and the price will also fall. In fact, the point with engineered solvents is their cost-saving feature.

Q: Would you please explain further about the technical knowledge of Parsi Sol solvent?

A: This technical savvy comprises the following components: technological and lab services, a pilot to carry out the rests before entering the industry, software to register information in the RIPI databank. We developed these cases and this technical knowhow was unveiled in 2014.

Q:  Where could this technical savvy be applied?

A: Last year we tested this technical knowhow at Masjed Soleyman gas refinery that had been suggested by NIGC. Masjed Soleyman gas refinery has two units operating in parallel and used DEA. According to plans, one of the units was authorized to function with the same DEA solvent and then we loaded Parsi Sol solvent in the second unit. Under these conditions, it was possible to identify this solvent and examine its performance. Therefore we managed to increase the debit by up to 50%. Not only did we manage to reach the features of the parallel unit but also we cut the amount of CO2 and H2S. This unit is still operating and this project was awarded this year by the Ministry of Petroleum.

Furthermore, we are focusing on Ilam gas refinery where mercaptan volume is high. As you know mercaptans could not be separated with old solvents and they enter the condensate unit or remain in the sweetened gas after entering the sweetening unit. They also harm the coldbox which is in the ethane recovery unit.

Q: Would you please explain about the costs and the price of this solvent?

A: The fact is that the price and costs of this solvent is much lower than its benefits. Our surveys showed that capital could be returned in 10 days. The outstanding features of the engineered solvents are that they minimize the volume of facilities, energy and costs and everything will be cost-effective. In one survey we concluded that for instance at South Pars gas field each phase would cost around $5 billion and if at least in 10 sweetening units, Parsi Sol solvent is used we could be able to increase the capacity. These figures may sound strange in expression, but they have been proven in the tests. We have offered our proposals to that effect.

Bandar Imam Petrochemical Wins 3rd Asia Title

Had the basketball team of Bandar Imam Petrochemical not seen a bad luck, the trainees of Mehran Shahin-Tab'e would have won the Asian championship title. Bandar Imam Petrochemical basketball team, which has always been one of top basketball teams sponsored by the Iranian Ministry of Petroleum, has over recent years been one of the invincible powers in Iranian and Asian basketball. They were lucky enough to win the trophy in China, as representative of Iran, but they were finally defeated in the semi-final match and returned home with third title.

The basketball team of Bandar Imam Petrochemical had defeated Naft Abadan in last year's pro league matches in the finale and had managed to make its way to West Asian championship. This win opened the way for Bandar Imam Petrochemical team to be present in the Asian Clubs cup. Of course, it was not the first time Bandar Imam Petrochemical was reaching that stage.

The Asian championship matches were held in China, while Iran has always been an option for hosting these games. Last March, representatives of Asian Basketball Confederation travelled to Iran and visited facilities in Mahshahr city and Bandar Imam Petrochemical. Although the ABC officials had expressed satisfaction with Iran's potentialities, China was chosen out of the blue for hosting the matches. Bandar Imam Petrochemical had to travel to China to run for the tournament.

Veterans and Youth Merge

Bandar Imam Petrochemical forced its way into the Asian games after combining experienced and young players. Mehrdad Atashi, Hamed Hosseinzadeh, Mohammad Hassanzadeh, Reza Lotfi, Oshin Sahakian, Behnam Yakhchali, Mehdi Esmaeili, Rouzbeh Arghavan, Mousa Nabipour, James White, Gerald Robinson and Mohammad Jamshidi were the players whom Mehran Shahin-Tab'e cleared to play. From among them, only Sahakian, Yakhchali and Jamshidi are members of national team. Although the team expenses had been reduced to minimum, the representative of Iran made significant efforts for championship in these matches.

Failure in Last Games

In the Asian basketball clubs, ten teams from Lebanon, China, Iran, United Arab Emirates, Iraq, Qatar, Kazakhstan, China Taipei, India and Malaysia were present. Bandar Imam Petrochemical travelled to China on behalf of Iran.

After taking a rest on the first day, the team of Bandar Imam Petrochemical defeated the representatives of China Taipei and India. The third match played by Bandar Imam Petrochemical was in the face of Qatar's Al Ryan which had finished runner-up in the previous championship. Bandar Imam Petrochemical went to the next round and faced China's representing team. Despite all their qualifications, they failed to win to go to the next stage.

Bandar Imam Petrochemical had travelled to China in the hope of winning the Asian championship title, but due to certain issues like the injury of some players failed to show a satisfactory performance and it failed to go into the finale. Anyway, Bandar Imam Petrochemical had no option but to make efforts for the third place.

The trainees of Shahin-Tab'e tried their last chance. They faced the UAE's Al Ahly and managed to defeat it 100-74. The Iranian team was awarded the bronze medal. In the light of problems that happened for the Iranian team, the bronze medal was a big honor. Over recent years, Iran's basketball has failed to show any good performance; therefore, the bronze medal by Bandar Imam Petrochemical would be an important issue.

Interview with Mehran Shahin-Tab'e

Injury, Inexperience Denied US Championship

Mehran Shahin-Tab'e is a hardworking basketballer. In addition to serving as assistant coach for Iran's national basketball team, he trains Bandar Imam Petrochemical's basketball team.

Over recent years, Shahin-Tab'e has been one of the most successful basketball trainers in Iran and has managed to win this sports discipline great honors.

The following is an interview with Shahin-Tab'e.

Q: Let's start with the Asian championship matches. Many expected Bandar Imam Petrochemical basketball team to win the Asian championship, but did not happen.  

A: I had mentioned even before the matches that we should not raise expectations. The fact is that our team travelled to China under certain conditions. My team had no important experience for presence in the Asian Clubs Championship. However, I think that we achieved a satisfactory result. Moreover, the quality of matches was higher than expected.

Q: Many believe that you were caught off guard in the match with big Asian teams. Do you accept such a theory?

A: No, it wasn't like that. But the face of all teams had really changed. Nothing went ahead according to our analyses. I don't want to say that I am happy with the third title, but I think that our result was not so bad. We made some mistakes that ended in our failure. We could have fared much better, but it did not happen. I also made mistakes, but we have to accept that such teams as Lebanon's Al Riyadhi or the representative of China invested a lot in these matches. We cannot have high expectations in the face of such teams.    

Q: You had several injured players, is that right?

A: Yes, our conditions in China were not so appropriate. Mohammad Jamshidi was injured and national team players joined us late. The passportsof our foreign player was issued very late and he was the last one to join us. Add to all this the fatigue of the players. We however did our best, but we failed to win championship. I hope that our conditions will improve in the future.

Q: Why were the preparatory games cancelled suddenly?

A: We had planned to play 4 preparatory matches in China, but they were cancelled suddenly and we started the matches without any preparation. It was strange for us, too. It was the first time it happened. However, I reiterate that we could have fared better.

Q: Were Bandar Imam Petrochemical Club's managers cooperative enough?

A: Sure, were they. I express my gratitude to the club managers who supported us in all sectors and they left no room for criticism. I also offer my gratitude to the Iranian Ministry of Petroleum and petrochemical groups who met all our demands. Every problem that happened was inside our team. We are thankful to the club managers.

Q: Anything else you want to add?

A: There were some problems with how the games were hosted. I think that this issue harmed our team the most. But we have to forget about everything. Our team has to prepare to play for the basketball league and we have to leave behind whatever has already happened and play our domestic rivals powerfully to repeat our championship.

Shahroud, Small Continent in Iran

An outstanding feature of Shahroud region in Iran is its vastness and ecological diversity. This city is located in a desert area, but it has not been overwhelmed by desert and its greenness is visible among adjacent cities.

Shahroud is one of historical and ancient cities in Iran, dating back to 1,000 years BC. As the largest city in Semnan Province, this city enjoys special weather conditions. It has long been referred to as the small continent or a paradise in the desert.

If one starts moving from Shahroud to south, after 15 minutes desert starts. If one takes a 50-minute distance he will reach a forest. It takes two hours to go from the center of Shahroud to Mount Shahvar, which is more than 3,000 meters tall. The shortest distance between desert and sea is also locaed in Shahroud.

Cloud Forest

Jangal-e Abr (Cloud Forest) has one of the best climate conditions in the world. Located 45 kilometers northeast of Shahroud, the jungle offers a pleasant souvenir of enjoying the nature. Due to the vicinity of a low-pressure and a high-pressure zone – Gorgan Desert and Abr area – every time the earth receives energy the clouds move.

This forest is located near Abr Village. Since most of the time, the jungle is covered with cloud (abr), it is known as Jangal-e Abr. (Jangal is jungle and Abr means cloud in Persian).

Tourists unanimously agree that Jangal-e Abr is one of the most beautiful natural perspectives in Iran and even in the world. As part of Iran’s natural heritage, it is as valuable as Persepolis and Naqsh-e Jahan Square.

Sprawling on 35,000 ha of land, Jangal-e Abr is part of ancient Hyrcanian forests.

Bayzid Bastami Tomb

The tomb of Bayzid Bastami is located at the center of the city of Bastam, near Shahroud. The tomb of this famous mystic figure is very simple and bears no adornment. It results from Bastami’s emancipation from mundane beauties. At a distance of four kilometers west of Bayzid tomb is located Bayzid Monastery.

Hamdollah Mostofi, an Iranian archeologist, in his travelogue about Bastam, has only referred to the tomb of the Sultan of Mystics. Therefore, the tomb of Bayzid Bastami is one of the most ancient remnants in this area.

A small mosque is located in the southeastern section of the Bayzid area and an adjacent space nearby is said to date from the 2nd or early 3rd century. On the western side of the tomb are located two interconnected small rooms, known as the Monastery of Bayzid. Each of these rooms has eye-catching gypsum decoration. Bayzid Mosque and nearby minarets are among other monuments there. This mosque has two separate sections for men and women. The women’s section was built during the Ilkhanid dynasty.

Sheikh Abol-Qasem Kharaqani Tomb

 

Sheikh Abol-Qasem Kharaqani was born in the village of Kharaqan in the Shahroud County in 352 AH. He is considered as one of the leading mystics of Iran. His tomb is made from brick and a marble stone covering the tomb is engraved with poems. Near this tomb is located a mosque, which some historians say, had a conic dome and was decorated with beautiful tilework. At present, only an altar remains from the mosque. Unlike other mosques, this mosque is orientated to the west. The altar is decorated with beautiful gypsum work.

 

6.5 bl/yr of Liquid Fuel

One of 12 divisions of Iran Oil Pipelines and Telecommunication Company (IOPTC) is operating in Shahroud and Semnan.

Qassem Arab Yar-Mohammadi, manager of the northeast division of IOPTC, said the Shahroud branch is tasked with transferring oil products from production to consumption points. This area manages more than 1,000 kilometers of pipelines measuring 8 to 22 inches in diameter. The pipelines used for oil products distribution are sometimes four decades old. The provinces covered by this branch of IOPTC are Golestan, Semnan, North Khorasan, Khorasan Razavi, South Khorasan and Sistan-Balouchestan.

Arab Yar-Mohammadi said more than 6.5 billion liters of oil and oil products were transferred in the last calendar year (which ended on March 19) to this area.

Petroleum products are delivered from a spot in Shahr-e Rey. Pumping stations in Semnan, Shahroud and Sabzevar handle the delivery of oil and petroleum products.

“In addition to fuel supply to minor consumers, fuel supply to Iran’s second megalopolis, i.e. Mashhad, is up to this company. The northeast division of IOPTC supplies fuel to Shahid Bakeri, Semnan and Neyshabour’s Khayyam power plants,” he said.

Transfer of oil products has made IOPTC a strategic company because a long halt in the transfer of oil products could trigger numerous crises in heating, transportation and other sectors. Therefore, experts at this company must have competent reparation teams specializing in pipelines, turbines and electro-engines.

Thanks to its reparation teams, this company has not had experienced any leak due to corrosion over the past 40 years. The pipelines and oil facilities in this area are in compliance with Sweden standards. All coating tests are also conducted. The northeast section of IOPTC has since 1998 been involved in oil pipeline extension for the distribution of oil products.

In 2006, intelligent pig-running was carried out in all pipelines, with diameters of 20 and 22 inches, in the northeast section of IOPTC.

According to plans, intelligent pig-running must be done every five years.

Arab Yar-Mohammadi said two Iranian universities are currently involved in activities for building intelligent pigs. He said that Iran would be manufacturing its own required pigs in two years.

He added that the northeast division of IOPTC has changed the coating of more than 40 kilometers of its main pipelines since the beginning of the current calendar year, noting that these operations will continue up to the end of the year.

 

Tang-e Dastan Waterfall

Tang-e Dastan Waterfall is one of the unknown tourist attractions of the city of Shahroud. It is located 7 kilometers west of Mojen in an area known as Dashan Tali. This beautiful waterfall, which is 12 meters tall, is located in a ravine known as Dastan. It flows between two colossal stones. A viewer would first think that the stones are about to fall. A marvelous atmosphere prevails in the ravine. Many tourists believe that this ravine is unique because the form of rocks and the topography of the region add to its beauty; therefore it looks like a good place for rock climbing. The sound of water echoing among rocks is such that every heart starts beating fast. The sound of water flow is so high that people standing at a distance of 5 meters from each other could not hear one another. Small drops of water are seen on the stones. Everything is beautiful there and the most important thing is the coldness of water. Few may be able to hold their hands in the water for more than one minute.