Iran Petroleum Industry; 2016 Performance, 2017 Horizon

Iran's petroleum industry experienced one of the toughest and of course most successful years of its history in 2016. A series of developments and achievements in this sector opened a new horizon for the industry and subsequently for Iran's economy, a horizon that could give rise to major economic and development changes in the country.

Iran will always remember year 2016 with the implementation of its nuclear deal with six world powers and the ensuing removal of tough economic sanctions on Iran. As the Joint Comprehensive Plan of Action (JCPOA) entered into force, the way was cleared for Iran to return to normal political and economic conditions and reengage its ties with the global community. Undoubtedly, the petroleum industry has had the most important contribution to this issue. This contributory role did not happen all of a sudden; rather it was the outcome of the oil industry managers' planning alongside proper diplomacy of President Hassan Rouhani's administration. In the post-sanctions era, notwithstanding external pressure and political and economic bottlenecks, Iran's oil managers pushed ahead with their plans.

The efforts made in the oil sector not only did boost the maneuvering power of Iran's diplomacy team during nuclear negotiators, but also led to the improvement of Iran's economy whose main driver engine is  oil.

Over four months after the removal of sanctions, given the planning made, Iran's oil output jumped back to the pre-sanctions levels of 3.9 mb/d.

The hike in output and exports came against the backdrop of increased political pressure by certain petrostates in the region, particularly Saudi Arabia and its allies, on Iran in order to prevent Iran's oil production hike. These countries were determined to corner in Iran and prevent its political and economic maneuvering across the region and world.

But Iran, with a proper understanding of regional rivals' plot and a good knowledge of oil market requirements, insisted on its quick return to global oil markets. To that end, Iran revived its oil fields; erected oil transfer facilities and practiced marketing in order to tempt back its traditional customers and win new buyers.

The important point was that Iran's return to the oil market did not disrupt the market, nor did it drive prices further down. Rather, it paved the ground for price boost and reduction of psychological challenges.

Along with Iran's quick return to normal oil production and exports level, Iran's oil diplomacy was activated to help prop up falling prices. Iran refused to play in the oil rivals' camp rather than that it took the initiative to become an instrumental factor in the market. Some instances of this active diplomacy were Iran's well thought out refusal to take part in the Qatar oil freeze meeting in April 2016,despite domestic and foreign criticisms, interaction and consultation with OPEC member states in its 169th ministerial meeting in June 2016 for the election of a new secretary general after a long impasse, effective presence in the Algeria meeting in late September and finally contribution to the historic agreement reached in the 171st ministerial meeting of OPEC on 30 November 2016 for an output cut.

These developments made Iran the big victor of oil market in 2016, leading to a $55 oil despite all forecasts made by market analysts and oil producing countries.

In coincidence with oil industry developments in the world markets, international fora, and in line with strengthening bilateral and multilateral relationships, in 2016 Iran took unique measures to attract foreign investment and encourage foreign companies to invest in the oil sector in the country. After the 11th administration took office, the necessary preparations were immediately made, and Iran's Minister of Petroleum Bijan Zangeneh set up a committee to restructure oil contracts to facilitate signature of contracts with major IOCs. After the removal of sanctions and finalization of the new model of oil contracts, negotiations with both foreign and domestic companies were stepped up for the development of oil fields, particularly those  fields shared with neighboring countries. These talks have so far led to the signature of 12 heads of agreement with international companies, while 10 to 12 more HOAs are set to be signed with oil majors in the upstream sector.

Such conditions, while leading to unprecedented movements in Iran's oil industry   motivated the petroleum industry and lay the foundation for the activity of national economy. According to official data, Iran's economic growth rate stood at 6.5% during the last nine months of 2016 with oil industry accounting for a 50% share. This relevant share is indicative of the high level of efforts in the petroleum industry, as endorsed by economic bodies like the International Monetary Fund (IMF).

Apart from that, the petroleum industry has been the only sector to have helped guarantee the survival of the implementation of the JCPOA. The petroleum industry has helped remove obstacles to Iran's return to global economy and led to restoration of self-confidence in Iran's economy. This is an important issue which should not be disregarded.

Iran's petroleum industry and subsequently its economy stepped into the New Year with hope, bright perspective and high self-confidence. In 2017, in light of oil price at $55-$60 a barrel, the petroleum industry has had more room to maneuver with regard to investment and qualitative development. A number of contracts with foreign companies aimed at development of Iran's upstream oil sector are expected to be finalized in early 2017. That would accelerate the development of jointly owned oil and gas fields, particularly oil fields in the West Karoun area, and will also facilitate oil recovery enhancement through transfer of cutting edge technology into Iran under the aegis of new contractual frameworks.

Pushing domestic companies to team up with foreign companies would be a big step that would be taken this year. Furthermore, Iran will bring its gas recovery from South Pars to the level of Qatar and the country will become an exporter of gasoline. These two breakthroughs would set the stage for industrial and economic jump and national development in the country.

Last but not least, Iran's petroleum industry is currently shouldering the burden for the period of Iran's economic transition and is determined to benefit from all domestic and international potentialities in a bid to pave the ground for low-cost economic development. Undoubtedly, year 2017 is a very important and determining year for realization of the country objectives.

Shell Back to Iran

As the US Senate was close to voting in favor of the extension of the Iran Sanctions Act (ISA), National Iranian Oil Company (NIOC) signed an agreement with Royal Dutch Shell. It was not the first contract with an oil giant. One month before that, France's total formally started work in Iran. Although analysts cast doubt on the continued presence of big oil companies in Iran, the agreement with Shell proved once more that Iran's petroleum industry is still endowed with myriads opportunities for investment.

The provisional agreement was signed between Noureddin Shahnazi-Zadeh, CEO of Iran's Petroleum Engineering and Development Company (PEDEC) on behalf of National Iranian Oil Company (NIOC), and Hans Nijkamp, Shell's vice president for Iran. The signing ceremony was attended by Ali Kardor, CEO of NIOC, and Gholam-Reza Manouchehri, deputy managing director of NIOC for development and engineering.

The agreement requires Shell to conduct studies on Azadegan and Yadavaran oil fields as well as Kish gas field before submitting its findings to NIOC.

These three fields are among priorities of the Iranian Ministry of Petroleum for development.

Iran Sanction Relief, Chance for Shell

Shell is no stranger to Iran. It was operating projects in Iran like the development of Sorous and Norouz oil fields before it pulled out due to the toughening of sanctions against Iran's oil sector. Shell was also a buyer of Iran's heavy crude oil. It purchased between 150,000 and 200,000 b/d of oil from Iran.

After the European Union (EU) tightened its sanctions against Iran's petroleum industry, Shell faced problems with regard to oil purchase from Iran. When Iran was disconnected from SWIFT, Shell could no longer pay for its Iran oil imports. Iran's oil export to Shell was reduced to 100,000 b/d.

However, after sanctions were lifted on Iran, Shell settled its debts to Iran and paved the way for renewed cooperation with Iran.

New Chapter in Ties

“We’re happy to resume working in Iran,” said Nijkamp at the ceremony. “We are hoping to have a fruitful cooperation with NIOC on these fields.”

He said that the agreement signed between PEDEC and Shell would be for conducting preliminary studies on the fields, adding that both sides would then sit together for further cooperation.

Nijkamp praised Iran's performance during years of sanctions.

The world oil market is waiting for Iran's return to international scene as international sanctions have been removed.

Nijkamp also referred to the new model of Iran's oil contracts, describing it as a significant step for creating a win-win situation in trading.

He said that Shell was seeking to find more effective ways for cooperation with NIOC.

Nijkamp said Iran has made significant progress in certain sectors, particularly natural gas production. He noted that Iran has managed to meet its domestic gas demand and also preserve its industry in the global sphere.

However, he noted, that would not be enough for maximum recovery from oil fields because enhanced oil recovery is a very important issue after exploration.

Shell, which enjoys high potential in oil and gas field development and has good experience of working in the Middle East region, is now ready to share its technology and achievements with NIOC.

Nijkamp went on to highlight the willingness of Shell for long-term cooperation in different countries.

He noted that Shell's activities would positively affect job creation, science and technology, skill levels and development. He said Shell's activities will leave behind a legacy much more important than revenues a host country would earn.

Europeans Vying for Return to Iran

International media were quick to react to the news of Shell's return to Iran.

Gary Ashton, oil and gas financial consultant, wrote in Investopedia: "Royal Dutch Shell is the second major global oil and gas company returning to Iran to develop Iran’s oil and gas fields…Shell’s investment decision comes despite U.S. President Elect Trump’s threat to scrap the nuclear energy deal with Iran that ended decade old economic sanctions and paved the way for Shell’s development deal."

"European companies have been quick to establish links with Tehran in a bid to re-establish old relationships. American companies are more reluctant to return to the Islamic Republic. U.S. energy companies have been slow to return to Iranian oil fields because of lingering concerns that the U.S. economic sanctions against the country have not been fully lifted despite assurances from U.S. Secretary of State John Kerry that sanctions no longer apply," he wrote.

The Financial Times also wrote: "The deal comes a month after a consortium led by Total of France signed a provisional agreement to develop a new phase of the South Pars gas field, the first such commitment by a western oil major since the partial lifting of sanctions. However, that was before the election of Trump, and analysts have been waiting to see if others would risk following Total’s lead, given the risks of a renewed freeze in US-Iran relations."

According to Reuters, analysts said the agreement underscored major oil companies' willingness to keep doing business with Iran despite the risk that Trump could scrap the nuclear deal that ended the sanctions earlier this year.

"These preliminary agreements could mark a strong sign of confidence towards the sustainability of the nuclear deal," said Homayoun Falakshahi, Middle East research analyst at Wood Mackenzie.

"These preliminary agreements come at the right time for President (Hassan) Rouhani, who can leverage on the nuclear deal bearing fruits for Iran's economy despite Trump's election," Falakshahi said.

The Wall Street Journal said Shell was "signaling that giant energy companies are unlikely to be deterred by President-elect Donald Trump’s pledge to undo the Iran nuclear deal."

Fields in Question

North Azadegan oil field, with an area of around 460 square kilometers, is located west of the oil-rich city of Ahvaz in Khuzestan province in southwestern Iran. It is shared with neighboring Iraq's Majnoun. The development of Azadegan would be conducted in two phases, each with a capacity of 75,000 b/d. After the planned two-phase development, Azadegan's output would reach 150,000 b/d.

Azadegan is specifically located in West Karoun area. It is estimated to hold 25.34 billion barrels of oil in place, 2 billion barrels of which would be recoverable with a recovery rate of around 8.2%.

Yadavaran, which is situated southeast of Azadegan, is shared with Iraq's Sindbad.

This field is planned to be developed in three phases. In the first phase, recovery from this field must reach 85,000 b/d. It is planned to reach 180,000 b/d in the second phase and 300,000 b/d in the third phase.

Development of Kish gas field involves wellhead installations in Kish Island, offshore platforms for gas production and onshore refining facilities in mainland in Hormuzgan Province in southern Iran. The development plan is required to inflict minimum damage on the environment in Kish Island.

Gazprom Wins Toehold in Iran Oil

Last autumn was a new season for Iran's oil and gas sector. Despite the extension of the Iran Sanctions Act (ISA) by the United States, Iran has signed three heads of agreement (HOA) with oil giants.

After signing HOA with France's Total and Royal Dutch Shell, National Iranian Oil Company (NIOC) signed a deal with Russia's giant Gazprom.

An agreement was signed with the Russian company to conduct studies on two oil fields in Iran. Russia has now seven fields under study in Iran.

The ground became more prepared for cooperation between Tehran and Moscow following a meeting between Iranian President Hassan Rouhani and Russia's President Vladimir Putin. The two countries had already cooperated in different sectors, but the level of cooperation had never been to such an extent.

The last agreement signed between Iran and Russia pertained to Cheshmehkhosh and Changouleh oil fields. The agreements were signed in the presence of Iran's Minister of Petroleum Bijan Zangeneh and Russia's Energy Minister Alexander Novak.

Salb-Ali Karimi, CEO of Iranian Central Oil Fields Company (ICOFC), signed the deal on behalf of NIOC, while Alexander Dyukov, CEO of Gazprom Neft, was representing the Russian side.

Lukoil, Zarubezhneft in Iran

Iran's Minister Zangeneh said a number of Russian companies have held talks with NIOC with a view to developing oil fields and recovering oil.

"Lukoil has signed HOA for conducting studies on Ab Teimour and Mansouri fields, Zarubezhneft for Aban and Paydar Gharb fields, and Tatneft for the development of Dehloran field," he said.

HOA in Gas Sector

The HOAs were not limited to oil projects. Hamid-Reza Araqi, CEO of National Iranian Gas Company (NIGC), signed an HOA with Alexander Medvedev, deputy CEO of Gazprom.

The signature of this HOA was a result of last year's visit to Iran of a 30-member business delegation from Gazprom to discuss grounds for cooperation.

Due to the extent of work in the gas sector, five working groups were agreed to be set up. These working groups specialized in gas trading, research and development, production and joint project, gas utility, etc.

Now more than one year after the first meeting was held between NIGC and Gazprom, an HOA was signed based on the outcome of meetings held throughout working groups over the past year.

As two owners of huge gas reserves, Iran and Russia are often seen as rivals. But Araqi said Iran and Russia enjoy potential to create joint international gas market in the light of their abundant gas deposits.

"Iran-Russia joint markets created conditions to let us feel that we share interests with Gazprom. We will have regular expert-level meeting between our working groups and we hope that this HOA will turn into a contract," he said.

Araqi also said that Iran and Russia had potential to cooperate in gas swap projects.

"Since [our] gas production capacity will reach 1 bcm up to next year we will need to store gas in order to ensure a stable gas supply in all seasons. When we want to guarantee sustained gas supply to various sectors we have to take into consideration storage. Russia has had good achievements in underground gas storage and we can cooperate in this sector," he added.

Gazprom Welcomes Iran Gas Projects

Medvedev also voiced his company's interest in cooperating with Iran throughout the gas value chain.

"This company is interested in cooperating with Iran in exploration, gas production, liquefied natural gas (LNG) production and pipeline gas supply, including to India. We welcome presence in big projects in Iran's gas industry although they might be difficult," he said.

Medvedev said joint cooperation between NIGC and Gazprom would be based on common rules and regulations so that both sides would be content with the outcome.

"This company can cooperate with Iran in storage, even in other countries. We have already created 60 bcm of storage capacity in Russia and 5 bcm in other countries," he added.

"Currently, investment in storage in other countries with different geographical conditions is also under way," he said. "Expert working groups set up by NIGC and Gazprom will start their work within months."

Medvedev also referred to cooperation between the two countries in gas refinery construction, saying: "Gazprom is cooperating with Commonwealth of Independent States (CIS) in gas refinery building and it can have such cooperation with Iran, too."

"Russia and Iran are two countries able to cooperate in the gas sector and even drafting laws," he said.

Greece Keen to Buy Iran Gas

Hossein Esmaeili, general manager of Europe, America and Caspian Sea States Affairs at Iran's Ministry of Petroleum, has announced Greece's willingness to purchase gas from Iran.

In this regard, Iran's deputy minister of petroleum for international affairs and commerce Amir-Hossein Zamani-Nia recently met with Greece's Alternate Foreign Minister for European Affairs George Katrougalos to discuss cooperation between Tehran and Athens in energy sector.

"Greek companies are interested in presence in Iran's refining and gas industry, and they have expressed willingness to purchase gas from Iran," said Esmaeili.

Hellenic Petroleum, which is the largest refiner in Greece, is a European buyer of Iran's oil.

Katrougalos said Greece attaches great importance to its relations with Iran, noting that Athens is willing to broaden its cooperation with Iran in various domains.

Greek Prime Minister Alexis Tsipras visited Tehran in February. Following that visit, Iran and Greece have been seeking to enhance their economic cooperation.

Indonesia to Buy Iran LPG

Iran and Indonesia have signed a heads of agreement for oil and gas cooperation. One of them was signed between Iran's MAPNA and Indonesia's PNL.

After meeting with Iranian President Hassan Rouhani, Indonesian President Joko Widodo said his country had agreed to purchase more than 500,000 metric tons of liquefied petroleum gas (LPG) from Iran.

"We reached agreement with Iran to invest in refinery construction in East Java," he said.

Widodo said Iran had also agreed to build power plants in Indonesia in order to raise the power generation capacity of this country by up to 5,000 MW.

He added that Indonesia's state oil company planned to enhance recovery from Ab Teymour and Mansouri oil fields in Iran.

During his visit to Tehran, the Indonesian president was accompanied by 60 senior managers of private entities and different industries. In Tehran, they met and discussed with their Iranian counterparts about how to boost exchanges.

Hossein Ali-Morad, director of investment at National Petrochemical Company, has said that the NPC and an Indonesian company had reached an agreement for direct investment in four petrochemical projects in Iran.

"Based on studies which are planned to be conducted, one or two commercially viable projects would be chosen," he said.

Ali-Morad also said that the Indonesian company was willing to invest in Chabahar Port in southeastern Iran.

VW to Manufacture Gas-Fueled Cars in Iran

German auto giant Volkswagen plans to manufacture gas combustion motorcars in Iran.

Director of CNG project in the National Iranian Oil Products Distribution Company (NIOPDC) Ali Mehrabi said the contract envisaged a ban on import of CNG equipment when the German company initiates the production line of gas combustion motor-cars.

He said that foreign companies have welcomed manufacturing equipment and gas combustion vehicles in Iran. “Foreign companies should set up factory in Iran to produce and sell equipment in the country,” he added.

He noted that 70% of the CNG equipment is secured by Iranian manufacturers.

“The CNG equipment are mostly imported from European states: Italy, Germany, Russia, and South Korea and Argentina and the equipment imported from South Korea has been indigenized and Russia has called for production of equipment in Iran,” he added.

Belarus, Iran Discuss Oil Equipment

Iran's Minister of Petroleum Bijan Zangeneh has said Tehran is willing to broaden its cooperation with Minsk in different sectors so as to benefit the long-term interests of both parties.

Zangeneh said he had discussed with Belarusian Minister of Industry VitalyVovk a host of issues including oil equipment manufacturing, as well as oil and petroleum products trade.

In a separate meeting with Iran's First Vice President Es'haq Jahangiri, Vovk reaffirmed Poland's interest in further cooperation with Iran in oil sector.

"Belarus is ready to cooperate with Iran about oil refining and petrochemical products' exports," he said.

Before that, Belarusian President Alexander Lukashenko had told Iran's outgoing ambassador to Minsk Mohammad-Reza Sabouri that Iran could benefit from Belarus's railway and road capacities, as well as its oil refineries for the production and transit of products to Europe and broadening of cooperation.

Noting that Iran and Belarus had to significantly enhance the level of their ties and highlighting the significance of measures undertaken so far for broader ties between Iran and Belarus during Sabouri's tenure, Lukashenko said: "The year 2017 will be decisive for our relations. We will announce everywhere that Tehran and Minsk are strategic partners. There are no problems between us; we are ready to cooperate in all sectors because there is no restriction."

Enhanced Recovery from Persian Gulf Reservoirs

Hamid Bovard, CEO of Iranian Offshore Oil Company (IOOC) has announced the company’s plan to enhance its oil production next calendar year which begins in March 2017.

"A daily increase of 30,000 to 60,000 b/d of crude oil is on the agenda," said Bovard.

He referred to development operations in some fields like Salman and Forouzan and the possibility of oil production enhancement in Doroud and Abouzar fields, saying: "In line with the objectives and under implementation projects of the company, we use different methods of investment."

IOOC was established in September 1980 in order to administer oil and gas fields in the Persian Gulf waters. Known as one of the largest producers of offshore oil, IOOC runs oil fields sprawling on more than 1,200 square kilometers in the Persian Gulf.

The IOOC-run reservoirs are estimated to hold 100 billion barrels of oil and 180 tcf of gas in place.

Japan Starts Buying Parsian Condensate

Japan has become an importer of Iran’s gas condensates, following in the footsteps of its neighbor South Korea, the managing director of Parsian Gas Refining Company has said.

Farshid Ebdali Dehdezi said several cargoes of gas condensates, produced by Parsian Gas Refinery in Fars Province, have been exported to the two buyers in East Asia.

He said domestic petrochemical companies are also among Parsian’s customers for gas condensate, a type of ultra-light crude found in the Persian Gulf’s gas reservoirs.

“On average, Parsian produces 32,000 barrels of gas condensates per day and sends it to Assaluyeh (in Bushehr province) for export,” Ebdali said, adding that the refinery’s total gas condensate output in the past eight months reached 6.5 million barrels.

Output is projected at 10 million barrels by March 2017, which marks the end of the current Iranian fiscal year.

The daily gas processing capacity of the refinery is 75 million cubic meters, which is injected into the fourth phase of the national gas grid, known as IGAT-4, transferring South Pars gas to the central Fars and Isfahan provinces.

Parsian Gas Refinery reportedly processes 13% of Iran’s total gas output.

NIOC, Petronas Sign HOA

National Iranian Oil Company (NIOC) and Malaysian's Petronas have signed a heads of agreement (HOA) to conduct studies on Cheshmeh Khosh and South Azadegan oil fields, NIOC deputy chief for development and engineering Gholam-Reza Manouchehri has said.

"In the post-sanctions era, numerous requests have been submitted by international companies for cooperation with Iran's petroleum industry in the upstream, mid-stream and downstream sectors," he said.

"Since the study of these fields has also been assigned to other foreign companies and a competitive atmosphere is dominating a comprehensive development plan, that would offer the highest rate of recovery from the field would be prioritized," he added.

Manouchehri said tender bids would be held before making decisions about the development of the fields. He added that the companies that had signed HOA for studies would have more time to make assessments.

He cited a 5.5% rate of recovery from South Azadegan oil field, saying: "This rate of recovery should increase to around 20% and the production from this field should reach 600,000 b/d in coming years."

Mustapa bin Mohamed, the Malaysian minister of international trade and industry, has said that the removal of sanctions on Iran has created a good opportunity for Malaysia to return to Iran's oil sector.

Director of upstream affairs at Petronas Muhammad Anwar Bin Tayib said the signature of the HOA was a turning point in cooperation between NIOC and Petronas. He expressed hope that the two companies would continue cooperation in other sectors including liquefied natural gas (LNG).

Petronas has already cooperated with Iran in the development of Phases 2 and 3 of the giant South Pars gas field.

Foreign Investment in Iran Petchem Sector

Foreign investors from France, Germany, Japan, South Korea and the Netherlands have signed memorandums of understanding for operating petrochemical projects in Iran. These developments came in the wake of the implementation of Iran's nuclear deal with world powers, dubbed the Joint Comprehensive Plan of Action (JCPOA).

Marzieh Shahdaei, CEO of National Petrochemical Company of Iran (NPC), said the relative advantage of Iran's petrochemical industry was access to oil and gas feedstock, unique geographical position, access to high seas and a large-scale market.

Shahdaei, who is also deputy Minister of Petroleum for petrochemical affairs, said the NPC's main field of activity was its development, adding: "At present, 20 petrochemical plants are operating in Mahshahr, 12 in Assaluyeh and 18 others in other parts of the country."

She put at 64 million tons the annual production capacity of Iran's petrochemical sector.

Shahdaei said petrochemicals constituted the bulk of sale of domestic products, adding: "The highest value-added, the highest profitability and the highest levels of exports belong to petrochemical products."

She said that Iran's petrochemical industry was determined to enhance its installed capacity, adding: "To that end, we are looking for the attraction of foreign investment and development of investment in petrochemical industry."

12 MOUs Signed with Foreign Firms

National Iranian Oil Company (NIOC) deputy chief for development and engineering Gholam-Reza Manouchehri has said that 12 memorandums of understanding have been signed with foreign companies in the petroleum industry.

"Soon, 10 to 12 more memos are to be signed," he said.

Manouchehri said that NIOC had already signed heads of agreement with Royal Dutch Shell, France's Total, Japan's Inpex and Russia' Gazprom Neft for studies on Iranian fields.

He said that low oil and gas production costs and risks in Iran were among major factors for attracting investment.

"Given the current level of oil price, investment in upstream oil industry projects in the world will have no economic justification," he added.

Manouchehri said NIOC has always respected "investment security" in Iran's oil and gas industry. "In the operating sector as well, investment in the upstream oil and gas sector is of high security," he said.

He said that international tender bids are to be signed for the second phase development of Yadavaran and North Azadegan oil fields, adding that Chinese companies need to bid for these projects in order to be able to continue cooperation.

"China's CNPC is willing to go ahead with the development of North Azadegan field, but Iran has announced that it has to continue within the framework of a new contract and bid for the project. The Chinese finally accepted this proposal," said Manouchehri.

Regarding China's future presence in the development of Yadavaran field, he said: "Talks have been held with China's Sinopec in this regard and an international tender is to be held for the development of this field," he said.

Manouchehri said NIOC preferred a competitive atmosphere for the development of West Karoun area oil fields.

He also said that several companies have shown willingness to develop Esfandiyar oil field. Talks are under way with NIOC, he added.

Doroud Up for Investment

Iran's nuclear deal with six world powers was one of significant events in the oil sector in recent years. The historic agreement, known as the Joint Comprehensive Plan of Action (JCPOA), capped ten years of intensive diplomatic talks and opened the way for the return of Iran's oil to global markets.

Iran is taking advantage of post-JCPOA opportunities to enhance recovery from its ageing oil and gas fields and upgrade its petroleum industry infrastructure by attracting foreign investment.

Iran plans to raise its oil production to around 5 mb/d by the end of its 20-Year Vision Plan. Ageing offshore and onshore fields would be instrumental in helping Iran reach that objective.

Doroud oil field, located in Kharg Island in the Persian Gulf, is among developed oil fields which Iranian Offshore Oil Company (IOOC) recently offered to foreign investors for development under new-style oil contracts.

According to a National Iranian Oil Company (NIOC) office in charge of reviewing the economic feasibility of projects, the investment needed for the development of Doroud oil field during a four-year period has been specified. This amount of investment will be provided through financing contracts, EPCF and EPFF depending on the operation of the project. Regarding remuneration, 50 percent of the value of enhanced oil output would be paid over a six-year period.

Doroud oil field is run by the IOOC. This company was the first in Iran to carry out water injection, using ESP in wells and gas lifting. The IOOC is a leading company in enhanced recovery projects and is serious about improved recovery from the fields it has offered for investment.

Doroud oil field is located on a region measuring five kilometers wide and 25 kilometers long. It is one of the largest oil fields in Iran. It has been developed twice over the past 40 years and its third phase of development is nearing its end.

Doroud is estimated to hold around 7.6 billion barrels of oil. Due to 33 years of production (from 1964 to 1997) and untimely injection of water and gas, only 1.5 billion barrels of Doroud's reserves were recoverable. But after development, it has had 2.5 billion barrels of recoverable oil.

At present, Doroud is currently producing on average 15,431 b/d of oil from its offshore wells and 36,500 b/d from its onshore wells. In 1997, 42 wells were drilled in this oil reservoir, including 18 offshore wells.

Crude oil processing facilities in Kharg Island, under the names of Doroud Facility I and Doroud Facility II have been designed and become operational with a capacity of 100,000 b/d and 110,000 b/d, respectively.

Around 1.6 billion barrels of crude oil has been extracted from Doroud over a 40-year period. Production was halted during eight years of imposed war (1980-1988).

The first step for enhancing production from Doroud was taken in April 2002 when the field's output stood at 15,000 to 16,000 b/d. In the following years, new wells were spudded in the field. Now, production from Doroud 1, Doroud 2 and Doroud 3 fields has reached 43,000, 52,000 and 57,000 b/d.

When a contract was being signed with France's Total in 1999 for the development of Doroud, oil was at $20 a barrel. Total purchased the shares of France's Elf and teamed up with Italy's Agip to develop Doroud field. That was a significant step in attracting foreign investment by that time. Total failed to honor its part of the contract for gas production and pulled out mid-way. However, the IOOC has extracted a high amount of oil from this field over recent years. This project has proven profitable for Iran as its initial investment returned during the first years of enhanced production.

Before the gas injection section of Doroud field was launched many Iranian petroleum industry experts held out the possibility that due to the lack of experience in high-pressure gas injection (6,000 psi) into this field and unknown consequences the gas injection section would become ready later than the water and oil injection sections.

Furthermore, the existence of a sophisticated geological structure at Doroud field and the location of this oil field beneath Kharg Island slowed down the development of this field in the first years because it was difficult to do onshore and offshore work at the same time.

At Doroud field, there are 12 water injection wells, two gas injection wells, and 15 oil injection wells to be developed.

There are a total of 40 wells at Doroud, including 25 offshore ones.

Investment Opportunity in Reshadat Field

Iran's petroleum industry has offered 50 oil and gas projects worth $185 billion. Iran hopes to sign agreements for these projects by 2020. One of projects in the list is Reshadat oil field located in the Persian Gulf.

Reshadat development is one of important projects introduced after the implementation of Iran's nuclear agreement with six world powers last January. Development of Reshadat would bring its output to 80,000 b/d.

Reshadat which is situated 110 kilometers southwest of Lavan area is among Iran's old offshore fields. Discovered in 1965, it started production four years after exploration drilling and installation of three platforms. The field is currently facing many problems due to pressure fall-off. The key to resolving this problem is to use cutting edge technology for enhanced oil recovery.

Geologically speaking, this oil field is made up of three oil layers known as Shouaiba, Arab and Mishreef. The bulk of Reshadat's oil is accumulated in Shouaiba layer. However, the three layers are all producing crude oil with a high percentage of water and low percentage of gas.

With the drilling of 33 wells and the construction of Reshadat 3, Reshadat 4 and Reshadat 7 platforms, light crude oil production started from this field in 1968. The high-quality oil produced from this field has an API of 36 and has many international customers. That could be one of the most important attractions of working in this field for foreign companies.

The platforms of Reshadat field were serving as the frontlines of resistance during eight years of imposed war. These platforms were bombed frequently. With the full restoration of Reshadat field installations, the last remaining installations are restored by the IOOC.

Currently, new processing platforms (P4 and Q4) for the development of Reshadat field are under construction by Iran Marine Industrial Company. Moreover, two wellhead drilling platforms (W0 and W4) have been installed and most of new wells have been spudded. Development of this field currently needs more than ever foreign investment and technology.

A total of 28 wells have been drilled within the framework of Reshadat development. Of these 28, five wells have been spudded. The remaining wells are being drilled.

Recently, within the framework of second-phase early production, a separator has been installed in the old platform on three other wells in this field. That would bring Reshadat output to more than 20,000 b/d.

Due to damage inflicted on the subsea structures of the platforms of this field during the imposed war, drilling operations, transfer to and installation of separator in the specified spot were postponed to after the reinforcement of the structure. In the last Iranian calendar year, the separator was successfully moved to the platform after subsea structures were retrofitted.

Once the field is fully developed and all wells are drilled, production from Reshadat will enhance significantly. However, completion of this project and the start of production from this field would depend on financing and clarifications about its domestic contractor.

Iranian-Italian Oil Company (IMINICO) first discovered Reshadat in 1965. The same company developed it. This field has 33 wells in three platforms known as R-3, R-4 and R-7.

Currently, oil extraction and production is limited to Platform R4. Other platforms are non-operational. R4 will be also phased out after new wells would be completed.

Development of Reshadat started in the late 1980s to bring its production to 75,000 b/d. Therefore, drilling of 30 wells, construction of a storage tank with a capacity of 500,000 b/d and building of a 185-kilometer pipeline topped the agenda. Based on future plans, recovery from this field is expected to increase by 5,000 to 7,000 b/d.

Operators of this field have mobilized logistics units and offshore reconstruction group under tough weather conditions in southern Iran have handled the pipe laying, installation and testing of separator equipment. After the end of pre-commissioning and commissioning operators last September, the new separator led oil and gas into the field and significantly reduced oil in the water. After the end of development operations, the output of this field will increase from the current 8,000 b/d to more than 75,000 b/d.

The new development project for this field is being carried out in five phases for the output of 78,000 b/d. The five phases are drilling, jacket installation, and installation of equipment on the platform, pipe laying and construction of a 500,000-barrel storage tank in Lavan Island.

In the Reshadat development project, the drilling phase is behind other phases in terms of meeting the deadline. After problems of this sector have been resolved, drilling and completion of wells will last between two and two-and-a-half years starting from the date of installation of two drilling rigs in the field.

IOPTC Ready for Oil Swap

None of Iran's neighbors have pipeline grid as long as its 70,000-kilometer one. But only 14,000 kilometers of this network are serving the transmission of oil and petroleum products. This network is handling 2.22 mb/d of products and a total of 350 million liters a day of crude oil and petroleum products.

Abbas-Ali Jaafari-Nasab, CEO of Iranian Oil Pipelines and Telecommunication Company (IOPTC), says such activity requires round the clock work by this company. IOPTC is serving as a link tying upstream sector to downstream and distribution sectors.

In an interview with Iran Petroleum, Jaafari-Nasab outlines the activities of IOPTC.

Q: Would you please first highlight the field of activity of IOPTC?

A: The pipeline network feeds seven refineries, except for Bandar Abbas and Lavan which are not connected to the grid. Furthermore, the products of seven refineries, except for Shiraz and Lavan, are transmitted through the pipelines. In total, around 67% of crude oil and petroleum products delivery is handled by our company and would cost one-fourth to one-fifth of road and railroad transportation. Of course it noteworthy that their share of petroleum product transmission is less than that of crude oil. At present, 45% of products and 55% of crude oil is transmitted by IOPTC.

Q: In order to be able to continue its activities, IOPTC is required to conduct maintenance regularly. How has it been done in recent years when Iran was under sanctions?

A: The activities of our company are divided into pipelines, pump stations and terminals. Pipelines and transmission sectors need maintenance of equipment and parts. All devices must be in optimal conditions, ranging from pressure gauges to sophisticated equipment like gas turbines.

Maintenance of these sectors is not easy, particularly when most projects are fitted with foreign-made machinery. For the maintenance of this machinery we will need the support of their manufacturers. Gas turbine is a case in point. Airplane engines are like gas turbines. Now imagine that the challenges that have been faced by the country's aviation industry were posed to gas turbines, too. However, in the wake of the 1979 Islamic Revolution, we decided at the Ministry of Petroleum and our company to manufacture the necessary equipment domestically in cooperation with domestic manufacturers and scientific centers. This trend of self-sufficiency started from smaller parts and reached more sophisticated ones like mechanical seals which are necessary for the pumps. At present, more than 80% of the turbines' parts is manufactured domestically.

Domestic manufacturers have recently announced that they are able to produce a complete gas turbine. They have built one or two prototypes which are being commissioned in oil fields. These turbines are working properly.

Q: Do you have any plans to assign equipment manufacturing to domestic companies?

A: In the domestic manufacturing sector, our latest contract pertains to the overhaul of 10 turbines. Our condition for cooperation was that the manufacturing of equipment would start from 30% to reach 70% in the tenth turbine. After the tenth turbine was made, they were able to manufacture 80% of parts needed for a turbine. These turbines have been tested and are now working properly.

Q: So this company contributed to domestic manufacturing during years of sanctions?

A: Yes. Over recent years as sanctions were tightened and relations with foreign suppliers of equipment were reduced, domestic manufacturers were the only ones to be of help. Despite technical complexities, we did not face serious problems like other sectors. There are a total of 164 gas turbines of 16 types in Iran. They are all supported by domestic manufacturers and have been maintained in good conditions.

Q: Is there any specific project to be under way with foreign investment?

A:  Sure. A project is defined to substitute electromotors for six pumping facilities and 18 turbines need 65 to 70 million dollars in investment.

Q: Is IOPTC ready to resume oil swap with northern neighbors?

A: Yes, we are fully ready to transfer crude oil from Caspian Sea states. A pipeline built for that purpose could handle 320,000 b/d of crude oil that could be upgraded to 500,000 b/d.

Q: In addition to equipment what other activities have been done with regard to pipelines?

A: We carried out projects for rebuilding and renovating the pipelines. One of them was internal inspection of the pipelines through smart pigging. In this method, after an intelligent examination of the pipeline and submission of relevant reports and analyses, decisions are made about sectors in need of renovation or repair. Then, relevant repair plans are defined for each sector. As you know, Iran's pipelines are ageing and they need reconstruction and renovation. By applying this smart method, the pipelines are inspected on a regular basis so that they would be preserved for optimal operating conditions. This is how we have preserved a pipeline which is 60 years old. This pipeline stretches from Ahvaz to Tehran. Its functioning shows that our activities have been proper.

the pipelines are inspected on a regular basis so that they would be preserved for optimal operating conditions. This is how we have preserved a pipeline which is 60 years old. This pipeline stretches from Ahvaz to Tehran. Its functioning shows that our activities have been proper.

Q: How often are periodical overhauls done in pipelines?

A: Periodical repairs differ for different equipment. At present we plan to carry out preventive maintenance or repair.

Q: What do you mean by preventive repair?

A: In the past, the focus was on periodical repairs. It means that we used to repair or rebuild equipment annually based on a specific calendar. But in the new systems, repair and renovation are done based on the detection of the working condition. In other words, every functioning device is regularly controlled and monitored. In fact, by monitoring the operation conditions, the timeframe for repair and renovation could be determined. By applying this method, the costs are reduced and the interval between repairs would be different. Furthermore, when this method is used, before an equipment fully stops working to bring about the closure of activities it would be repaired and put back in operation. Therefore, costs will be saved significantly. On the other hand, it is estimated that each machine would need to undergo overhaul after 20,000 hours of work. But intelligent monitoring may indicate that this machine would need an overhaul after 40,000 hours of running. That would also save costs.

Q: What is the name of this project and where is it being operated?

A: This new issue which was launched two years ago and it has covered various areas, is known as IPCmms. All activities related to maintenance are done in this way.

Q: How has been the feedback of this project?

A: Naturally, the activities become more regular as this project is implemented and officials will be able to make plans more comfortably. This project has become operational in collaboration with Imam Hussein University and is being pursued at the National Iranian Oil Refining and Distribution Company (NIORDC). Different advanced countries have been using similar projects for their maintenance planning.

Q: How many kilometers of pipeline are replaced in Iran every year?

A: Maintenance may require replacement of some segments of the pipelines. Every year, around 200 kilometers of pipeline are replaced. Last year, we replaced around 104 kilometers of pipeline stretching from Sabz Ab to Tangeh Fanni. Of course the issue of overhaul and replacement is regularly under discussion and planning in our company. This year we plan to replace around 65 kilometers of Maroun-Isfahan pipeline. Reconstruction and renovation, as well as rehabilitation of pipelines is among our activities. Changing the coating of pipelines is some sort of rehabilitation project. Pipelines are coated in order to be protected against corrosion. That is the vulnerable point of pipelines.

Q: Now that liquid fuel consumption has fallen while gas consumption has risen, the surplus of these products need to be exported. What has been done to that effect?

A: Under the present circumstances, the refineries have around 45 million liters of fuel oil and 25 million liters of gas oil in excess that must be exported. Instead of delivering products to destinations, we have to return it to export spots. In this regard, a plan which is under review is to reverse the route of delivery of products. So far, the direction of Ahvaz-Shazand pipeline has been reversed. In the next step, the direction of the pipeline as far away as Abadan and Mahshahr will be also reversed. For that purpose, we will have to make some changes in the pipelines and of course the pumping facilities. We have planned to change the direction of flow towards Ahvaz, Abadan and Mahshahr.

Q: What measures have been undertaken with regard to the protection of the environment and the safety of pipelines?

A: We use new automatic leakage detection systems. This new technology would be applied to Tabriz-Miyandoab pipeline on a trial basis. In case of success, it will apply to all other places. Leakage detection systems will help explore possible problems sooner. Therefore, the danger of environment pollution will be averted, while the safety of pipelines will be boosted. Of course, this is not the only environment protection project. Over recent years, we have tried to control industrial wastes in oil delivery centers. Of course, we used to control wastewater in order to spare the environment any harm. We recently built certain evaporation pools where surplus water flows in. The bed of these pools is fully covered in order to avoid absorption of any pollutant. Then, the water in the pools evaporates and no pollution will flow into running water. Furthermore, absorbent pads are used in order to prevent contaminated water. Arrangements have been also made for preventing the contamination of soil. For instance, we envisaged certain places where special substances are added to wastes. These substances might be bacteria that would help remove contamination from soil. These projects have won the approval of the Department of the Environment.

West Karoun Area Infographics

West Karoun are is among oil-rich areas in Iran. It is home to five oil fields: North Azadegan, South Azadegan, North Yaran, South Yaran and Yadavaran. West Karoun is estimated to hold more than 67 billion barrels of oil.

Most oil fields in this area are shared with Iraq.

So far, the first development phase of North Azadegan and Yadavaran fields as well as development of North Yaran have become operational.

Hassan Rouhani, President of the Islamic Republic of Iran:

Three years after the 11th administration took office, with the startup of the first phase of North Azadegan and Yadavaran and full development of North Yaran, more than 250,000 b/d of oil is being recovered from West Karoun area.

Bijan Zangeneh, Minister of Petroleum of the Islamic Republic of Iran:

The West Karoun fields have capacity to produce 1 mb/d and to reach this level of production and sustainability we will need $18 billion to $20 billion in investment in coming years.

North Azadegan Oil Field

Oil Reserves in Place: 6.5 billion barrels

Shared Field in Neighboring Country: Iraq's Majnoun

Current Output: 75,000 b/d in Phase 1

Potential Output Capacity in Phase 1: 85,000 b/d

Phase 1 Startup: December 16, 2016

Investment Made So Far: $2.55 billion

Developer of Phase 1: China's CNPCI

Yadavaran Oil Field

Oil Reserves in Place: 34 billion barrels

Shared Field in Neighboring Country: Iraq's Nahr Umar

Current Output:85,000 b/d in Phase 1

Potential Output Capacity in Phase 1: 135,000 b/d

Production Perspective: 180,000 b/d in Phase 2, 300,000 b/d in Phase 3

Phase 1 Startup: December 16, 2016

Investment Made So Far: $2.9 billion

Developer of Phase 1: China's Sinopec

North Yaran Oil Field

Oil Reserves in Place: 1 billion barrels

Shared Field in Neighboring Country: Iraq's Majnoun

Current Output: 30,000 b/d (final output)

Potential Output Capacity: 35,000 b/d

Phase 1 Startup: December 16, 2016

Investment Made So Far: $585 million

Developer of Phase 1: Persia Oil and Gas Industry Development Company

Countdown for South Pars 550mcm/d Output

Iran is set to enhance recovery from the supergiant offshore South Pars gas field to 550 mcm/d by 19 March which marks the end of Iran's calendar year. Once this target achieved, Iran would be only 50 mcm/d behind Qatar, with which it shares the reservoir. This difference is expected to be compensated for during next calendar year and then Iran will be able to outdo Qatar in gas recovery from the gas field located in the Persian Gulf.

Iranian oil service workers have been working hard this year to materialize another 100 mcm/d annual output hike for the third year in a row. To that end, they are working round the clock in the toughest climatic and geographical conditions, busy with installing necessary installations deep underwater for extraction, transfer, refining and injection of gas to national trunklines. It might be difficult to imagine working under searing sun with temperature hovering at 40 degrees Centigrade and humidity of 95%.

They work hard so that Iran would not face any gas supply shortage during winter.

This year, with the launch of six offshore platforms, more than 140 mcm/d of sour gas is added to the gas field's output. Therefore, Iran is largely expected to experience a sustainable gas supply in winter. In case this objective is achieved the South Pars output would exceed 540 mcm/d.

Mohammad Meshkinfam, the CEO of Pars Oil and Gas Company (POGC), said recently that the gas recovery record in South Pars gas field would be smashed this year.

"By year-end, 140 mcm/d would be added to the capacity of gas recovery from this field," he said.

The volume of gas recovery from South Pars gas field stood at 282 mcm/d from 10 phases in the calendar year to March 2014. This figure has now reached 500 mcm/d, which is expected to rise to 515 mcm/d soon, as the second train of the refinery of Phase 20 is coming online.

Full development of South Pars gas field would need $91 billion in investment. Since development work started in South Pars in 1998, $70 billion has been spent there. Remaining phases would be allocated $21 billion in investment in the future.

Iran had recovered around 879 bcm of gas from South Pars up to last March, earning the country $378 billion in revenue. That would be four times the total investment to be made in the gas field development. Once fully developed, South Pars would provide 1 mb/d of gas condensate, 9 million tons a year of ethane, 10 million tons a day of liquefied petroleum gas (LPG) and 5,000 tons a day of sulfur.

Phases 20/21 Eye Maximum Output

The platform of Phase 21 of South Pars, which weighs 2,700 tons, was installed last August. It recently started producing 28 mcm/d of sour gas. The platform designed for Phase 20 was recently loaded out and will be soon moved for installation. POGC officials say the platform of Phase 20 is expected to become operational before next March. The refinery of these phases is already converting sour gas supplied from phases 6 to 8 to sweet gas.

The manager of Phases 20-21 development project has said that the second sweetening train in the refinery of these phases is receiving its feedstock from offshore facilities.

The platforms of phases 20 and 21 of South Pars have each capacity to process 1 bcf/d of gas. The development projected envisaged

The platforms of phases 20 and 21 of South Pars have each capacity to process 1 bcf/d of gas. The development projected envisaged for Phases 20 and 21 was recently reported to be complete at 90%. The two phases are expected to produce 50 mcm/d of sweet gas for domestic consumption, recover 1 million tons a year of ethane for feeding petrochemical industries, recover 1.05 million tons of liquefied petroleum gas (LPG) for export, produce 75,000 b/d of desulfurized and stabilized gas condensate for exports and recover 400 tons a day of sulfur for export.

Phases 17&18 Running at Full Capacity

Phases 17&18 of South Pars, whose main platforms and refinery became operational last year, is set to reach its maximum production capacity this year as its satellite platforms, constructed by Iran Marine Industrial Company (known as Sadra), are to be installed. Platform 18B was loaded out in Bandar Abbas Yard last July, and was installed the following month. This platform became operational in December with a capacity of 500 mcf/d.

Platform 17B, which is the second and the last platform in Phases 17&18, was loaded out in October. Once it becomes operational next March, 300 mcf/d of sour gas would be added to the South Pars output.

Chain completion in Phases 17/18 of South Pars was done under the aegis of senior oil industry managers. Sadra was initially supposed to build satellite platforms for these phases, but the project was halted due to certain problems. Since the construction of platforms of Phase 14 at ISOICO yard was ahead of refinery construction, it was decided that two satellite platforms of Phase 14 replace Sadra's two satellite platforms. Sadra is building two substitute platforms for Phase 14. Phases 17&18 came partly into operation in January 2015 and currently all four trains of gas treatment at the refinery are functioning. The third and the fourth trains receive their gas from sea and Platforms A17 and A18. The first and the second trains would keep receiving gas from phases 6 to 8 before 17B and 18B have been launched. With the construction of Phases 17 and 18 of South pars, 56 mcm/d of gas, 80,000 b/d of gas condensate, 400 tons a day of sulfur as well as one million tons a year of ethane and 1.05 million tons a year of LPG (propane and butane) would be produced.

Phase 19 Output Crosses 49 mcm/d

Hamid-Reza Masoudi, manager of Phase 19 development of South Pars, announced enhanced gas recovery from this phase, saying: "By commissioning Platform 19A, gas recovery from this phase has reached 42 mcm/d."

Currently, around 42 mcm/d of rich sour gas is being recovered from South Pars through SPD2, 19A and 19C platforms before being sent to the refinery of Phase 19. So far more than five million barrels of gas condensate has been produced at Phase 19.

Three sweetening trains, as well as four refineries are running at full capacity at Phase 19. After refining process is over, 37 mcm/d of sweet gas would be injected into Iran Gas Trunkline 6 (IGAT-6). The record has been smashed for duration of installation, startup and gas production from Platform 19A during 70 days. Three sweetening trains also came on-stream over seven months. Such records were unprecedented ever since South Pars underwent development.

According to plans, the last platform at Phase 19, with a capacity of recovery of 14 mcm/d (500 mcf/d) is to be loaded out in January at Iran Offshore Engineering and Construction Company (IOEC) Yard in Khorramshahr. It would be installed in March and one week after installation arrangements would be ready for operation.

When the administration of President Hassan Rouhani took office in August 2013, South Pars was producing 240 mcm/d of gas. This figure reached 360 mcm/d last March as phases 12, 15 and 16&17 came online.

Five phases of South Pars - phase 19 which is equivalent to two standard phases, Phases 20 and 21 and remaining parts of Phases 17 and 18, are to come on-stream this year. With the completion of these projects by year-end, total gas production from South Pars gas field would reach 530 mcm/d to 550 mcm/d. In addition to generating revenue, that amount of output would feed refineries and petrochemical plants across the country.

The current capacity of gas recovery from South Pars gas field has exceeded 500 mcm/d. The five aforesaid phases have a capacity of 140 mcm/d.

All these phases are expected to become operational before presidential elections next year. Phases 11, 13, 14 and 22-24 would be assigned to the next administration for full development. Except for Phase 11, the others are more than 75% complete.

All phases, except for Phase 11, are expected to become operational by March 2018. A heads of agreement (HOA) was recently signed with a consortium of France's Total, China's CNPC and Iran's Petropars for the development of Phase 11.

If gas price is set at 25 cents and gas condensate at $50, full development of South Pars would earn the country $272 million a year in revenue, or $90 billion a year.

WOGPC Investment Opportunities

West Oil and Gas Production Company (WOGPC) which is one of the three subsidiaries of Iranian Central Oil Fields Company (ICOFC) officially launched its activities by producing, processing and shipping oil and gas to consumer spots in March 1999. WOGPC is mainly operating in Kermanshah, Ilam and Lorestan provinces, all located in western Iran. In the future, any oil and gas field that becomes operational in western provinces would be under administration of WOGPC.

WOGPC has currently a production capacity of 180,000 b/d of crude oil and 7 mcm/d of gas. The company plans to enhance its production capacity to 440,000 b/d of oil and 15 mcm/d of gas in 10 years.

Saeed Nasseripour, CEO of WOGPC, says it is the only company that has managed to meet its production target set by the National Iranian Oil Company (NIOC) in the current calendar year (started in March).

He said that WOGPC was forced by international sanctions to reduce below expectations last year, adding that the company totally has been meeting its targets in all of its hydrocarbon fields, particularly the jointly owned ones, since April.

Nasseripour said since its very establishment, WOGPC has been seeking to work for the completion of half-finished projects and provide necessary facilities for maintaining its oil and gas production ceiling in parallel with growth in the oil and gas consumption in the housing and industrial sectors. WOGPC has devised plans to develop other oil and gas fields.

WOGPC Makes Up 90% of ICOFC Output

Nasseripour said WOGPC accounts for 90% of ICOFC's production, adding: "This company is currently producing around 180,000 b/d of oil from 11 fields."

Regarding production from jointly owned oil fields, he said: "From 11 oil fields operating under authority of WOGPC, the four oil fields of Naft Shahr, Aban, Dehloran and Paydar Gharb are jointly owned. Under the present circumstances, given the importance of maximum production from the jointly fields, production from these fields is seriously pursued."

He noted that Paydar Gharb and Aban were producing more than their obligations.

Nasseripour said that WOGPC administers more than 12 oil fields and 7 gas fields in its five operating areas of Tang Bijar, Naft Shahr, Cheshmeh Khosh, Serkan and Dehloran. The oil and gas fields are located in Ilam, Lorestan, Kermanshah, Qom and Khuzestan provinces.

According to Nasseripour, WOGPC is currently operating 102 wells, including 5 gas and 97 oil wells. He added that six more wells are to become operational by the end of the current calendar year in March 2017. He expressed hope that WOGPC would be able to meet its production targets by completing Well No. 18 in Cheshmeh Khosh, Wells No. 30, 31 and 32 in Paydar Gharb, Well No. 11 in Aban and Well No. 34 in Dehloran.

Nasseripour said development of Naft Shahr field, which is a shared one, started in 2008 within the framework of a production and a desalting unit. Furthermore, a gas pressure booster station is currently in the stage of assigning following engineering studies.

Naft Shahr production unit is located 220 kilometers west of Kermanshah and 60 kilometers from Qasr-e Shirin. With a nominal capacity of 15,000 b/d, it delivers processed and desalted oil to a pumping facility before being sent to feed Kermanshah refinery. Since Iran shares this field with neighboring Iraq, it is of high significance.

Tang Bijar, WOGPC Sole Operating Gas Field

Nasseripour said Tang Bijar which is producing 7 mcm/d of gas was the only operating gas field run by WOGPC.

Regarding planning for gas production in winter, he added: "Necessary overhauls started in Tang Bijar production unit in June. Thanks to precise planning there would be no halt in the winter gas supply."

Nasseripour said the gas produced in Tang Bijar is injected into national gas trunkline through Ilam refinery.

"To avoid pressure fall-off in the national gas trunkline in winter and in the light of the necessity of steady production of 7 mcm/d of gas, two slug catchers have been built in Tang Bijar production unit. In case of any problem or corrosion in one unit, the second one will be used as alternative. Periodic and annual overhaul is done when it is hot," he added.

Tang Bijar & Kaman Kouh production center is located 70 kilometers from the city of Ilam. The first unit of this center came on-stream in 2007. The capacity of this processing center stands at 7 mcm/d of gas, which is gathered and sent to Ilam gas treatment facility. Gas condensate produced in this center is also sent to Ilam gas treatment facility through a pipeline measuring 6 inches in diameter.

OMV Ready to Operate Cheshmeh Khosh

Cheshmeh Khosh oil field is one of the ageing oil fields located in the area run by WOGPC. Production from this field, which was discovered in 1964, started in 1975. It is currently producing 18,000 b/d of oil. This field is located in Dasht Abbas area in Ilam Province, more precisely 52 kilometers

of the city of Dehloran and 70 kilometers west of the city of Andimeshk.

The oil produced by this field is processed at a production unit before being delivered to Ahvaz III production complex via a 153-kilometer pipeline. This oil will finally go to refineries as feedstock or to Kharg Island to be exported.

At present, in order to preserve and enhance this field's output, investment and state-of-the-art technology are needed. That is why this field was introduced among others to a Tehran conference on new-style oil contracts.

Cheshmeh Khosh is so attractive that Austria's OMV has expressed willingness to develop it. Iran will put this field out to tender under newly developed oil contracts.

Cheshmeh Khosh production unit is located 52 kilometers from the city of Dehloran in Ilam Province. With a nominal capacity of 130,000 b/d (75,000 barrels of sweet oil and 55,000 barrels of salty oil), it processed the oil produced by Aban, Cheshmeh Khosh, Paydar, Paydar Gharb and Dalpari to be sent through two pipelines, measuring 18 and 20 inches in diameter and 153 meters in length, to Ahvaz III production unit and Shahid Chamran pumping facility.

The oil processed at Cheshmeh Khosh production unit will be either sent to Kharg oil terminal for exports or sent to refineries as feedstock.

The desalting unit of Cheshmeh Khosh was launched in 2006 with the nominal capacity of 75,000 b/d. The desalting unit is fed by Dehloran, Danan, Aban, Paydar and Paydar Gharb oil fields, as well as the salty wells of Cheshmeh Khosh field.

Danan Waiting for Foreign Investment

Among dozens of oil fields introduced during the Tehran conference for foreign investment, some fields need less investment than offshore fields as they are less sophisticated. One of them is Danan oil field in Ilam Province and near the border with Iraq.

Run by WOGPC, Danan is currently producing 26,000 b/d of oil, which is sent to Dehloran production center via a pipeline.

Dehloran production center is located 20 kilometers southwest of the city of Dehloran in Ilam Province. With a nominal capacity of 55,000 b/d, it processes and sweetens the oil produced by Dehloran and Danan fields before being delivered to Cheshmeh Khosh desalting unit via a 52-kilometer pipeline of 16-inch diameter.

NIOC has so far examined a variety of scenarios for the development of Danan oil field, including natural depletion, water and gas injection. Experts have submitted their views about more accurate study of this field. According to studies, the best scenario for the development of Danan is natural depletion including drilling directional wells.

WOGPC Development Plans

The projects for the development of Cheshmeh Khosh, Dehloran, Danan, Paydar Gharb, Serkan, Maleh Kouh, Shakheh, Aban and Tang Bijar fields are among oil and gas field development projects of ICOFC. They are currently under way with a view to boosting output. Other development projects include the development of Cheshmeh Khosh oil field by drilling five new wells and developing its production unit, gas gathering and gas injection into Cheshmeh Khosh oil field, construction of Cheshmeh Khosh NGL 3100 plant, construction of Dehloran production unit, development of Danan field by installing a collection of transmission pumps and separators in the field, development of Aban and Shakheh oil fields for production, installation and operation of wellhead pumps and two-phase mobile transmission pumps in Paydar Sharq field, construction of pipeline for transfer of oil from Cheshmeh Khosh production unit to export spots in the south and refineries in the north, establishment of Serkan and Maleh Kouh desalting unit, drilling several new wells in Serkan and Maleh Kouh fields and the second phase development of Tang Bijar gas production unit.

WOGPC Ready to Process Azar Oil

Nasseripour said WOGPC is fully ready to receive oil from Azar field for processing in 6 months.

"The prematurely produced oil of Azar field will go to Dehloran production unit for processing before being transferred to Cheshmeh Khosh. After processing, it will go to refineries and export terminals," he said.

Noting that Dehloran desalting unit recently came online and that the volume of salty oil processing has increased at Cheshmeh Khosh production unit, he said: "This company has no problem with processing salty oil."

He expressed hope that WOGPC would be able to receive oil from Azar oil field for processing

PSEEZ Runs Dozens Petchem Plants, Refineries

Pars Special Economic Energy Zone (PSEEZ) is well known to everyone in Iran and abroad. This zone, which has high potential for investment, has won fame due to supergiant offshore South Pars gas field which Iran shares with Qatar. The zone is able to guarantee energy supply security for industrialized countries in coming years.

Until 1990s, PSEEZ and Assaluyeh were totally unknown and there were several sparsely-populated villages on the map. But today, owning to petroleum industry activity in Assaluyeh, this zone has turned into a county. PSEEZ is also a source of wealth for Iran.

In order to learn about the latest developments in this zone, Iran Petroleum has interviewed Mehdi Yousefi, CEO of PSEEZ.

Q: To begin, would you please tell us when PSEEZ was established and what activities are currently under way there?

A: As a body tasked with providing the infrastructure for the development of the country's largest gas field, PSEEZ is experiencing its 18th year of establishment. A total of 24 standard phases of South Pars as well as dozens of petrochemical plants in phases 1 and 2 are under construction or in operational here. In Phases 2 and 3, gas and gas condensate refineries as well as petrochemical plants are under construction or in operation. In phases 1 and 2, 31 petrochemical plants are active. Of them, 15 are producing products and the rest are in different stages of design, construction and operation. For instance, Marjan, Takht-e Jamshid and Bushehr petrochemical plants are set to come online soon.

Q: Over the past years, and specifically during the three years since the 11th administration took office, how much investment has this zone attracted?

A: Over the past three years, major investment projects have been under way in this zone. One of the most significant ones is Siraf refining park which would convert 480,000 b/d of gas condensate to naphtha. Kangan Petrorefinery Plant, which separates ethane in Phase 12, is another one. A total of $4 billion is estimated to be invested in these two projects.

Q: What about investment in downstream and petrochemical sectors?

A: Investment has been done in other projects at this zone over the past two years. A point in the Resilient Economy is to distance ourselves from selling raw materials and supplying products of low value-added. Gas and gas condensate prices do not stand high and petrochemical products are categorized under middle distillate products whose value-added is not high. For this reason, we have allotted more than 1,000 ha of land to projects which would convert petrochemicals to downstream products. In this sector, 11 projects have been approved and allotted land. Construction operations have begun for some of them including ethylene-glycol to PET conversion and production of propylene derivatives. They are valued at IRR 110,000 billion.

Q: What has PSEEZ done so far to speed up the activity of companies operating in the zone?

A: One of costly and time-consuming issues regarding overhaul of refinery and petrochemical equipment in the zone has been the absence of skilled repair posts. In order to save time and costs for reparation of equipment and subsequently supplying more products in the zone, we will soon launch in collaboration with the private sector a repair complex for rotary equipment. Fresh water supply to the zone is also of high significance. That is why in cooperation with the Ministry of Energy and under the aegis of the Ministry of Petroleum we are seeking to enhance fresh water production capacity.

Q: A major cause of concern in this zone has been the pollution of air. What have you done in this regard?

A: Today in this zone, no development project is envisaged without considering people and the environment. Today, the major cause of concern shared by us and people in PSEEZ is the issue of the environment. That is why we have tried our best to reduce gas flaring in the zone. In 2008, more than 56 mcm of flare gas was burnt per week at PSEEZ. Now, this figure has been cut to 5 mcm due to modifications in the refining and petrochemical systems and also operation of steam recovery units. These activities along with others are pursued and monitored at the Supreme Committee of the Environment. Due to regular monitoring, the flow of flare gas has been halved in these phases and is set to fall further in the near future. Meantime, we are looking for sustainable development in the zone in order to return the flare gases to the refining cycle. Mechanized storage of sulfur produced at refining plants in South Pars is a significant step towards containing air pollution in the zone. The mechanized storage site in the zone has capacity to stockpile 120,000 tons of sulfur. Sulfur is transferred by conveyor for exports.

Q: How many people are active at PSEEZ?

A: Currently, there are more than 61,000 people working at PSEEZ. They include 10,000 in gas refineries, 20,000 in refining plants and more than 30,000 in under-construction projects. Thirty percent, equaling 18,000 people, are local residents. This is the case while three years ago local residents had a 22% share in PSEEZ employment. Plans are under way to raise the share of local manpower in the zone to more than 50%. In order to reach this figure, there has been sufficient cooperation with the provincial Technical and Vocational Organization in order to boost the skills of local manpower.

Q: A plan under way by the Iranian Ministry of Petroleum for oil and gas zones is to provide welfare and social services to local residents. What plans have so far been implemented or are to be implemented in this regard?

A: Increasing welfare for manpower working at this zone and their family has been taken into consideration by the Iranian government and Ministry of Petroleum. According to the latest conclusions of joint meetings with relevant officials at Iran's Ministry of Petroleum, it has been decided to build residential parks in cooperation with the Ministry of Roads and Urban Development and the private sector in the zones abandoned in phases 1 and 2 of South Pars. For instance, construction of 7,000 housing units and related infrastructure will soon begin with the Ministry of Petroleum guarantee. In cooperation with the Ministry of Health, the Ministry of Petroleum recently launched the MRI ward of Kangan Hospital. Furthermore, a hospital in the city of Dayer was inaugurated during a provincial visit by President [Hasan Rouhani]. It cost IRR 110 billion. During provincial visits to Bushehr Province by President, more than IRR 6,500 billion has been earmarked for the petroleum ministry infrastructure projects.

This zone also enjoys good tourism potential. We are currently building a tourism and recreational complex in cooperation with Pasargad Non-Industrial Operations Company. There have been arrangements so that this complex would be connected to Kish Island and Bushehr County via sea.

Q: Would you please provide data about oil and non-oil exports from this zone over the first seven months of the current calendar year (which started in March)?

A: During the past seven months, we exported around 20 million tones of commodities worth $9 billion from PSEEZ, which showed 37% growth in weight and 19% growth in value from the year before. Exports in the calendar year 1393 (March 2014-March 2015) totaled 21 million tones. We also witnessed a 65% growth in gas condensate exports and an 18% growth in non-oil products' exports. Furthermore, 10,000 tons of commodities worth $62 million are imported into the zone per month. Compared with previous years, this figure has been on the decline.

OPEC, Non-OPEC Close Ranks

Over the past one month, OPEC and non-OPEC oil producers have made key decisions about oil production. These decisions will definitely influence oil prices in the global energy markets. The most important agenda of the 171st ministerial meeting of the Organization of the Petroleum Exporting Countries in Vienna was to curb oil output. The decision adopted on November 30 was in continuation of earlier talks held in Algiers in September.

In the Algeria meeting, OPEC member states offered to bring their output down from 33.64 mb/d to 32.2 mb/d. During the November meeting, OPEC agreed to slash 1.76 mb/d from its output in a bid to prop up prices. Some non-OPEC countries followed suit. The OPEC agreement was described as historic.

A review of details of these meetings and their outcomes in the market is of high significance.

OPEC Revival

Since its establishment in 1960, OPEC has faced ups and downs during its 56 years of work. It has sometimes been instrumental in the oil market developments and has helped restore oil producers' rights. But due to internal differences or other factors, OPEC has also seen its role decline. But the 171st meeting was one of the most important OPEC meetings in terms of influence on world markets. Before the November meeting, leading global investment banking, securities and investment management firm Goldman Sachs Group had predicted that oil prices would jump to $55 a barrel in case OPEC members agreed to reduce output to 32.5 mb/d.

The US-based firm had also predicted that lack of agreement among OPEC members on production cut would push down the prices to below $45 a barrel.

It was a big challenge to reach agreement on quota cuts within OPEC, particularly because differences between members on quota cuts were intertwined with political tensions. Moreover, OPEC experts' talks on the details of oil production cut had ended inconclusively. Furthermore, Russia that was a key supporter of oil production cut was not present in the OPEC meeting and Moscow's absence was delaying an agreement.

Under circumstances where expectations were low about the achievement of a result as discrepancies between member states had been exacerbated, OPEC oil ministers managed to reach agreement on oil production ceiling rollover for the first time since 2008. During the Vienna ministerial meeting, OPEC ministers agreed to reduce the oil producer group's output from 33.64 mb/d to 32.5 mb/d. Following this agreement, Saudi Arabia accepted to cut half a million barrels of oil from its daily output. Iran's request to bring its output to pre-sanctions levels was accepted. For its part, Russia said it would cut its output by 300,000 b/d in a bid to join the OPEC decision.

The 4.5% decline, which equals 1.2 mb/d, in OPEC's oil output would boost crude oil sales in international markets and would also help revive the body. In recent years, many imagined that OPEC had turned into a toothless body that had fallen prey to differences between its member states. But OPEC's recent agreement is indicative of the revival of this organization and its renewed influence on global markets. OPEC, which is currently producing one-third of world oil and makes up some 53% of the world markets, is regaining its important and influential status in the energy sector.

Victory for All

Before the OPEC meeting, speculation was rife about the positions of OPEC member states particularly Iran and Saudi Arabia. It was imagined that acceptance of demands by either party would mean the failure of other. Iran and Saudi Arabia remained divided on two major issues. One was the amount at which Saudi Arabia was expected to reduce its output and the other was the amount at which Iran's output level was authorized to increase. There were conflicting figures, but what was finally agreed upon was a 486,000 b/d cut in Saudi output to 10.058 mb/d. Iran was agreed to be the only country whose production would not fall over the coming six months and would keep raising its output by up to 90,000 b/d. Saudi Arabia was opposed to Iran's request of exemption from the OPEC cut, but Iran's insistence on its rightful demand convinced Saudi Arabia to show flexibility and modify its stance.

This issue is described as a big victory for Iran's oil diplomacy; however, Saudi Arabia's flexibility could not be interpreted as failure for this country. In appearance, Saudi Arabia and its fellow OPEC members have had to reduce their output, leading to a decline in their petrodollars. But a more precise study of the affair indicates that their decline in oil production will be compensated by oil price hikes. In other words, the number of barrels cut from output by each country would be regained through selling oil at higher prices. Therefore, oil producing countries will not suffer any financial loss in the long-term and they will even be able to gain more revenues by selling less oil. Therefore, all OPEC member states could be seen as winner in the oil output reduction scheme. In addition to OPEC member states, other oil producers achieved success through their agreement with OPEC states. Although they are not OPEC members, they are also victims of the oil price slump. At a time when striking a balance to the world oil market could not be handled by OPEC alone, non-OPEC countries reached a historic agreement and took a significant step for reducing their output and boosting oil prices.

In addition to improvement in oil prices which are expected to reach $60 to $70 in coming months, other sectors of energy would be also revamped. For instance, after the historic agreement between OPEC and non-OPEC states, oil companies have shown willingness for the first time since 2014 to invest in new sources of crude oil in order to boost the market by 2020.

In case OPEC and non-OPEC producers remain committed to their agreements one can be optimistic about the formation of a framework for cooperation between them. Such a framework for cooperation would draw faster reaction to oil market fluctuations in the future.             

Iran Oil Ministry Questions – Oliver Klaus, Energy Intelligence Answers

Which countries first raised the issue of oil production freeze? Why?

Venezuela led the charge within OPEC to reduce the group’s total oil production since prices went on a steep decline in mid-2014. The rationale behind the initiative was to stabilize the oil market and bolster prices. Venezuela’s efforts led to an initial agreement by Saudi Arabia, Qatar, Venezuela and non-OPEC Russia in February 2016 to freeze production at January levels, provided that other major producers followed suit.

How did OPEC and non-OPEC producers initially react to the oil freeze idea?

By early 2016, talk of a “grand bargain” between OPEC and non-OPEC on a coordinated production cut had been going on for months with Venezuela, which faced with serious economic problems due to the sharp fall in oil revenues, pushing the hardest for a deal. Due to the fast rate of non-OPEC supply growth, non-OPEC participation in a coordinated cut gained currency as a means to begin to rebalance markets and push prices higher. It was therefore critical to get non-OPEC producers, notably Russia, on board to join a potential deal.The agreement for a big freeze, even though it would have been based on January 2016’s record-high levels, hammered out in Doha in February behind closed doors by Saudi Arabia, Venezuela, Qatar and Russia,was meant to be a first step in that direction.

How do you assess developments since the oil freeze idea was raised until the Algiers meeting? How were OPEC countries, particularly Iran, instrumental in this regard?

Algeria marked an unexpected turning point after the OPEC/non-OPEC Doha meeting’s disappointment in April. Saudi Arabia, while sticking to its previous conditions, brought a more cooperative approach to the meeting, including an offer to cut Saudi production back to January levels if others did likewise - with the exemption of Iran, Libya and Nigeria, who were given special status. Iran showed more flexibility too, saying it would accept a deal to freeze production at “close to 4 million b/d”, which represented a small, but significant, shift. In general, the mood in Algeria among all OPEC members was more urgent than at other meetings, given that market forces were taking longer to rebalance fundamentals than expected, leading to heightened fears of another price slide.

What do you think of Iran-Saudi cooperation for an OPEC agreement despite political tensions?

Iran and Saudi Arabia adopting more flexible positions helped reach a deal that is ultimately both in their own and OPEC’s interests. The deal should accelerate market rebalancing and bolster prices. OPEC members in the past overcame political disagreements to make market-related critical decisions and the group has shown that it can still find consensus if conditions necessitate it – OPEC can only function if decision making isn’t constrained by political considerations. It is noteworthy, however, that a deal wouldn’t have been possible without the explicit support of non-OPEC producers and Russia in particular.

What do you think of Iran's insistence on reaching its pre-sanctions levels of oil production?

Iran’s position is understandable.

How do you assess Russia's role in the OPEC's oil production cut deal?

Russian diplomacy played an important role in bringing OPEC members together ahead of the group’s landmark deal in November, and it was essential to pulling off the first non-OPEC cut in 15 years.  There wouldn’t have been a deal without Russia’s support. It remains to be seen whether Russia will live up to its commitment to take out a total of 300,000 b/d of oil production in 2017.

What do you think of Iran-Russia cooperation for an OPEC-non OPEC agreement, especially in the last 2 meetings in Vienna?

As mentioned above, cooperation between Russia and OPEC members in general and between Russia and key OPEC producers such as Iran was important both because it opened an important diplomatic channel and established the foundations for a joint agreement.

In your view, why did non-OPEC oil producers joined OPEC producers in production cut?

Economic pressures focused minds on finding common grounds. Producers realized that any meaningful market initiative would only succeed if OPEC and major non-OPEC producers acted jointly to give any production cuts sufficient weight.

How do you assess the oil market after the recent deal?

The market has got over the initial surprise of the accord, and now the focus is on whether thegroup of OPEC and non-OPEC producers can and will actually deliver. 

Petrobras Starts Up Deepwater Lapa Field

Petrobras and its partners in the BM-S-9 consortium have started oil and natural gas production at the Lapa field in the Santos basin presalt layer through the FPSO Cidade de Caraguatatuba.

This is the third unit to enter operation in the presalt this year, Petrobras said, claiming the 11th largest definitive system operating in this layer. In addition, Lapa is the third presalt field of the Santos basin to start production, after Lula and Sapinhoá. 

Located approximately 270 km (168 mi) offshore São Paulo state, in 2,140 m (7,021 ft) water depth, this FPSO has the capacity to process 100,000 b/d of oil, compress 5 MMcm/d of gas, and has an oil storage capacity of 1.6 MMbbl. It is interconnected to the Lapa field through production well 7-LPA-1D.

The Lapa field is located in the BM-S-9 concession, operated by Petrobras (45%), in partnership with BG E&P Brasil, a subsidiary company of Royal Dutch Shell plc (30%), and Repsol Sinopec Brasil (25%).

Petrobras said its operated oil production in the presalt has exceeded 1.2 MMb/d.

In November, it reached the historical mark of 1 Bbbl of oil produced in the layer, thanks to the start-up of 10 large production systems in six years.

-PSA Norway Approves Eni Exploratory Drilling

Eni Norge AS has received consent from Petroleum Safety Authority (PSA) Norway to drill well 7318/12-11 in the Barents Sea Boné-Bigorna prospect. The well is to be drilled using Saipem SpA’s Scarabeo 8 ultra-deepwater semisubmersible.

Eni is the operator of production license 716, in blocks 7318/11 and 7318/12.

The PSA said that the drilling location is around 320 km (199 mi) northwest of Hammerfest. Water depth at the site is 418 m (1,371 ft). The drilling work is scheduled to take 55 days.

The Scarabeo 8 was issued with an Acknowledgement of Compliance from the agency earlier in May 2012.

Meantime, Centrica has awarded Subsea 7 S.A. an EPCIC contract for the Oda field in the Norwegian North Sea.

The contract scope consists of engineering, procurement, construction, installation, and commissioning of subsea umbilicals, risers, and flowlines including the production pipeline, water injection line, umbilical, and related subsea services.

Discovered in 2011, Oda (ex-Butch) is about 14 km (9 mi) east of the BP-operated Ula complex.

Project management and engineering will begin immediately from Subsea 7’s office in Stavanger, Norway, with offshore operations scheduled to start in 2018.

Indonesia Plans Contracts Shakeup

Indonesia plans to change future production sharing contracts in its upstream oil and gas sector so that contractors shoulder the cost of exploration and production, rather than be reimbursed by the government.

Energy Minister Ignasius Jonan said the government plans to issue a new regulation in January so that such costs would be reflected by a more flexible split in revenue from production.

Such a system, instead of the existing cost-recovery system, would be fairer and more efficient, and likely to increase proven reserves, he said.

Big global resource firms such as Chevron, Exxon Mobil and Total operate in Indonesia, but the country has struggled to attract fresh investment and to develop new fields.

Indonesia's chamber of commerce said it was waiting for more clarity on the plans and the Indonesian Petroleum Association said it was still in discussions with the government.

"It will be applied for future PSCs (production sharing contracts), and it will not disturb existing PSCs," Jonan told a conference.

Arcandra Tahar, the deputy energy minister, said Indonesia would determine a base split in revenue between the government and contractors, but this could be tweaked to act as an incentive for companies.

The split could vary according to criteria such as whether a field being exploited was offshore or lay in deep water making work on it more difficult and expensive.

In addition, it could change depending on the amount of local content used by a contractor in a project.

Indonesia's crude oil output peaked at around 1.7 million barrels per day in the mid-1990s. But with few significant oil discoveries in Western Indonesia in the past 10 years, production has fallen to roughly half that as old fields have matured and died.

The industry is a vital part of the Indonesian economy, but its contribution to state revenue has dropped from around 25 percent in 2006 to an expected 3.4 percent this year, according to data compiled by consulting firm PricewaterhouseCoopers.

8--Iraq Gets New World Bank Loan

The World Bank has approved a new loan of $1.485 billion to help Iraq lessen the impact of low oil prices on its economy and shoulder the cost of the war on Daesh, the international lender said in a statement.

The new loan brings the World Bank’s engagement in Iraq to nearly $3.4 billion, it said.

The Bank provided $1.2 billion and $350 million in support to Iraq in 2015, a year after Daesh seized about a third of the country's territory.

The lightning advance of Daesh happened as oil prices collapsed, drastically reducing the government's income, which comes almost exclusively from crude sales.

Iraq is OPEC's second-largest oil producer after Saudi Arabia.

The new loan aims to support government efforts to rationalize spending, improve energy efficiency and enhance governance at state-owned companies, the World Bank said.

In Iraq, "we are looking at a unique case, frankly," said World Bank Director for the Middle East Ferid Belhaj.

The country is "engaging in structural, deep, far-reaching reforms at the same time as fighting a brutal war against a destructive force," he told Reuters in a telephone interview.

The International Monetary Fund in July approved a new three-year, $5.34 billion standby arrangement to support Baghdad's efforts to deal with lower oil prices and ensure debt sustainability.

The country's oil and gas wealth constitute a solid loan repayment guarantee, said Belhaj.

"Iraq is one of the richest countries on the face of the earth. Iraq has huge potential and Iraq has the capacity to repay its debt," he said.

"It has the capacity to leverage its resources to engage in a total new era of diversification" away from the oil industry, he said.

Russia Expects 10bcm Gas Export Growth

Russia's gas exports are expected to grow by 10 billion cubic meters to reach 202.3 billion cubic meters this year, Russian Energy Minister Alexander Novak said.

"Exports will increase by 10 billion cubic meters of gas to 202.3 billion cubic meters," Novak told reporters.

"Oil export [in 2016] will reach 253.5 million tonnes which constitutes a 4.8-percent increase."

"Oil production is expected at 547.5 million tonnes, the growth is 2.5 percent," Novak said of the anticipated 2016 results.

Russia is offering to hold an OPEC and non-OPEC committee meeting to monitor oil production cuts sometime between January 20-29, Novak said.

"Work, an exchange of views is underway. We believe that we need to convene sometime after January 20, but we do not yet know the position of other countries," Novak told reporters.

He noted that Russia's monitoring group has met national producers and plans to meet once before this year, with an anticipated biweekly schedule.

The monitoring group includes 12 of Russia's largest oil producers.

Obama Bans Arctic, Atlantic Offshore Drilling

After establishing a partnership in March, US President Barack Obama and Canadian Prime Minister Justin Trudeau coordinated on Dec. 20, to launch a drilling ban in Arctic waters.

The decision cited the “important, irreplaceable values” of Arctic waters to native cultures, wildlife, and scientific research; “the vulnerability of these ecosystems to an oil spill; and the unique logistical, operational, safety, and scientific challenges and risks of oil extraction and spill response in Arctic waters.”

According to a statement released by the White House, the two North American leaders moved to designate the majority of US waters in the Chukchi and Beaufort seas as indefinitely off limits to offshore oil and gas leasing.

Canada will designate all Arctic Canadian waters as indefinitely off limits to future offshore Arctic oil and gas licensing, to be reviewed every five years through a climate and marine science-based life-cycle assessment, the statement continued.

US Secretary of the Interior Sally Jewell released a statement to applaud the announcement.

“The president’s bold action recognizes the vulnerable marine environments in the Arctic and Atlantic oceans, their critical and irreplaceable ecological value, as well as the unique role that commercial fishing and subsistence use plays in the regions’ economies and cultures,” Jewell said.

Jewell said that the withdrawal areas announced today encompass 3.8 million acres in the north and mid-Atlantic Ocean off the east coast and 115 million acres in the US Arctic Ocean.

“Including previous presidential withdrawals, today’s action protects nearly 125 million acres in the offshore Arctic from future oil and gas activity,” Jewell said, while noting that the withdrawal does not restrict other uses of these federal waters on the outer continental shelf.

The withdrawal also does not affect a nearshore area of the Beaufort Sea, totaling about 2.8 million acres, that has high oil and gas potential and is adjacent to existing state oil and gas activity and infrastructure.

While there are significant concerns about oil and gas activity occurring in this area, it will be subject to additional evaluation and study to determine if new leasing could be appropriate at some point in the future. Interior’s five-year offshore leasing program for 2017-2022 does not include lease sales in this area or in the withdrawn areas.

While Jewell was pleased, other industry bodies did not express such positive reactions.

“The administration has always justified a ban on Arctic development because of an alleged lack of local support or industry interest,” said a spokesperson from The Arctic Energy Center. “The Arctic Energy Center’s research categorically shows that that is simply not true, with almost three quarters of Native respondents supporting offshore energy.

“Taken with last week’s news that sales of Beaufort Sea and North Slope leases generated $18 million, it is hard to avoid the conclusion that the Obama administration is playing politics with the future of Alaska.”

In addition, some news outlets have been reporting that by invoking the Outer Continental Shelf Land Act, the action cannot be reversed by the incoming Trump administration, which also spurred some reaction across the industry.

“President Obama’s short sighted, unilateral withdrawal of Atlantic and Arctic Ocean areas from future oil and gas leasing not only risks the long-term energy security and energy leadership position of the United States, it violates the letter and spirit of the law,” said National Ocean Industries Association President Randall Luthi.

“Such an expansive withdrawal, particularly when argued as being ’permanent’, is clearly inconsistent with the Outer Continental Shelf Land Act’s steadfast declaration that ‘... the outer continental shelf is a vital national resource reserve held by the federal government for the public, which should be made available for expeditious and orderly development, subject to environmental safeguards, in a manner which is consistent with the maintenance of competition and other national needs ...’”

Luthi also continued by saying that Obama “has benched the United States, dismissing his own advisors who have argued that energy development, particularly in the Arctic, is imperative to our national security.”

Similarly, US Chamber of Commerce Energy Institute’s Christopher Guith said that the ban is not binding for the next administration and “must be undone in order to work towards a commonsense offshore energy plan.”

Crude Exports Resume at Libya's Es Sider

An oil tanker docked at the east Libyan port of Es Sider to load the first cargo of crude since the terminal reopened following a two-year closure, port officials said.

Es Sider, Libya's biggest export terminal, had been shut due to a blockade by a military faction since 2014. It reopened in mid-September, but repairs were needed before tankers could load at the port, and its capacity remains far below its pre-conflict level of 350,000 barrels per day (bpd).

Es Sider is one of four ports seized in September by forces loyal to east Libyan commander Khalifa Haftar, which allowed Libya's National Oil Corporation (NOC) to reopen them, doubling national production to about 600,000 barrels per day (bpd).

Libya's oil production has been slashed by political disputes and armed conflict in recent years, and is one of two members of the Organization of the Petroleum Exporting Countries (OPEC) that is not bound by the bloc's pledge to cut oil production by about 1.2 billion bpd during the first half of 2017.

The North African country's output remains well below the more than 1.6 million bpd it was producing before a 2011 uprising.

Es Sider was badly damaged in several rounds of fighting and by attacks by Daesh. In recent weeks the NOC has been loading the Es Sider crude grade, produced by joint venture Waha Oil Co, from the neighbouring port of Ras Lanuf.

The return of oil tankers to Es Sider comes after claims of a deal to reopen a pipeline leading from two major fields in western Libya last week failed to result in any restart of production.

The NOC has not commented officially on the claims, which came after long negotiations to end a two-year blockade. It is unclear if factions around the western town of Rayana are prepared to allow oil to flow through the pipeline, or whether armed groups present at the southern Sharara and El Feel fields will allow pumping to resume.

Libya Expects 270,000 b/d Boost

Libya's National Oil Corporation said pipelines leading from the western fields of Sharara and El Feel had been reopened after a two-year blockade, paving the way for a major boost to production.

The NOC said in a statement that it expected to add 175,000 barrels per day (bpd) to national production in the next month, and 270,000 bpd over the next three months.

Libya's oil production has been hit by conflict and political disputes over the past three years. National output recently doubled to 600,000 bpd but remains far below the more than 1.6 million bpd the OPEC member was producing before the 2011 uprising.

Any speedy recovery in Libyan output could slow OPEC efforts to rebalance the market and ease a global supply glut. Libya and Nigeria were exempted from a recent OPEC pledge to cut oil production by around 1.8 million bpd.

A rise of 270,000 bpd in Libya's crude production would more than outweigh production cuts that Iraq and Algeria collectively pledged.

However, Libyan production remains vulnerable to the North African country's continuing political turmoil, and blockades by local groups.

"This is the first time for three years that all our oil will flow freely, and I hope that this will be the end of the use of closure tactics in our country," NOC Chairman Mustafa Sanalla said in the statement. However, he did not say whether agreements had been struck with armed groups that control Sharara and El Feel and have in the past halted production.

The deal to reopen valves on pipelines from Sharara and El Feel in the northern town of Rayana had initially been announced last week by a local faction of Libya's Petroleum Facilities Guard (PFG). But officials at El Feel said a separate group of guards, from the Tebu ethnic group, were preventing a restart there.

Sanalla said the NOC "did not pay any money and there are no deals behind the scenes" to secure the reopening at Rayana. He said the expected production boost would earn $4.5 billion next year for Libya's economy, which is facing collapse because of conflict and the loss of oil revenue.

The NOC put the production capacity of Sharara at about 330,000 bpd, and El Feel at around 90,000 bpd. Sharara is run by the NOC, Repsol, Total, OMV and Statoil. El Feel is operated by the NOC and Italy's ENI.

Libya's output has already risen by more than 300,000 bpd since September, after forces loyal to eastern commander Khalifa Haftar seized several major ports in Libya's Oil Crescent from a rival faction and allowed the NOC to reopen them.

OPEC had used a conservative 351,000 bpd "reference production level" for Libyan oil output even when output in the country was near 600,000 bpd.

Global Oil and Asian Product Market, December 2016

Oil prices in December rallied by 16 percent compared to November on the back of OPEC and non-OPEC meetings.  Following the ‘Vienna Agreement’ decided upon at the 171st Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) on 30th November, 2016, Ministers from OPEC met with a number of Ministers from non-OPEC oil producing countries on Saturday, 10th December, at the OPEC Secretariat in Vienna.

On 30th November, OPEC delegates agreed to cut output from October levels by 1.2 mn b/d to 32.5 mn b/d for an initial six months from 1 January, subject to non-OPEC production agreeing to cut by around 600,000 b/d. After that, additional cuts in support of OPEC were agreed by non-OPEC countries, led by Russia. A group of 11 non-OPEC countries have said they will cut production by 558,000 b/d. In this regard, Russia plans to curb output by “up to 300,000 b/d” from November’s 11.2 mn b/d, but other producers in the group already experiencing declines and their offers confirm the trend. 

If all the OPEC pledges and Russia’s promised cuts materialize, oil market would reach to the new balance in the second quarter of this year, supporting prices.

Asian Product Markets

Light Distillates (gasoline, naphtha)

During November the naphtha market was bullish and reached to positive territory which the market did not face since April 2016. While starting December, the product started to wane sharply. The average of Naphtha crack during December – differential between naphtha prices and Dubai crude prices- fell back into negative territory on a barrel basis amid ample supplies and high arbitrage volumes over this month. Meanwhile, the M1 versus M2 market structure has shifted into contango, reflecting weaker fundamentals. Looking forward, Middle East exports should rebound in January as several refiners return from maintenance. Additionally, the Ras Laffan 2 condensate splitter will start up again in January, and with its gasoline units not expected to be completed until late 2017, elevated naphtha exports should be expected from Qatar if the restart is successful. However, with the West/East arbitrage spread already narrowing, February should see lower western volumes once again potentially helping to offset higher Middle Eastern exports.  

During December, gasoline cracks declined slowly. The fundamentals are not as weak as the other light distillate product – naphtha-. This was mostly due to strengthening crude prices. Looking ahead, seasonal factors dictate limited support from the product side over the next month, although reasonably strong gasoline demand may provide a floor.

Middle Distillates (gasoil)

Gasoil market remained weak despite the higher arbitrage volumes from Asia to Europe. During November, the market reached to its peak in the year 2016. However, starting December, the market fell sharply. Looking forward, gasoil/diesel demand to increase further, supported in early 2017 by heating oil and by transportation demand over the summer.

Jet fuel market was on the downward trend but slightly compared to gasoil market. The rising heating demand continued to provide support. Meanwhile, the strength in the US market has attracted higher flows from Asia as imports of jet fuel into the West Coast increased.

Fuel Oil

The December fuel oil market was likely to remain almost balanced amid steady demand from both the end-user bunker market and for fuel oil cargoes within the region. On the supply side, the market sources said they expected between 4.5 million mt and 5 million mt of Western arbitrage fuel oil to arrive in Singapore in December.

In other market news, high sulphur fuel oil (HSFO) stocks rose 1.1% to 8.59 million barrels, while low sulphur fuel oil (LSFO) stocks remained unchanged at 3.21 million barrels.

Outlook for Products Market

According to the JBC report, it is expected a significant shake-up of product demand dynamics next year, with gas oil/diesel reclaiming a sizeable share of total demand growth. While 86% of total 2016 oil demand growth was from light ends (incl. LPG, naphtha, and gasoline.

Global Oil and Asian Product Market, December 2016

Oil prices in December rallied by 16 percent compared to November on the back of OPEC and non-OPEC meetings.  Following the ‘Vienna Agreement’ decided upon at the 171st Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) on 30th November, 2016, Ministers from OPEC met with a number of Ministers from non-OPEC oil producing countries on Saturday, 10th December, at the OPEC Secretariat in Vienna.

On 30th November, OPEC delegates agreed to cut output from October levels by 1.2 mn b/d to 32.5 mn b/d for an initial six months from 1 January, subject to non-OPEC production agreeing to cut by around 600,000 b/d. After that, additional cuts in support of OPEC were agreed by non-OPEC countries, led by Russia. A group of 11 non-OPEC countries have said they will cut production by 558,000 b/d. In this regard, Russia plans to curb output by “up to 300,000 b/d” from November’s 11.2 mn b/d, but other producers in the group already experiencing declines and their offers confirm the trend. 

If all the OPEC pledges and Russia’s promised cuts materialize, oil market would reach to the new balance in the second quarter of this year, supporting prices.

Asian Product Markets

Light Distillates (gasoline, naphtha)

During November the naphtha market was bullish and reached to positive territory which the market did not face since April 2016. While starting December, the product started to wane sharply. The average of Naphtha crack during December – differential between naphtha prices and Dubai crude prices- fell back into negative territory on a barrel basis amid ample supplies and high arbitrage volumes over this month. Meanwhile, the M1 versus M2 market structure has shifted into contango, reflecting weaker fundamentals. Looking forward, Middle East exports should rebound in January as several refiners return from maintenance. Additionally, the Ras Laffan 2 condensate splitter will start up again in January, and with its gasoline units not expected to be completed until late 2017, elevated naphtha exports should be expected from Qatar if the restart is successful. However, with the West/East arbitrage spread already narrowing, February should see lower western volumes once again potentially helping to offset higher Middle Eastern exports.  

During December, gasoline cracks declined slowly. The fundamentals are not as weak as the other light distillate product – naphtha-. This was mostly due to strengthening crude prices. Looking ahead, seasonal factors dictate limited support from the product side over the next month, although reasonably strong gasoline demand may provide a floor.

Middle Distillates (gasoil)

Gasoil market remained weak despite the higher arbitrage volumes from Asia to Europe. During November, the market reached to its peak in the year 2016. However, starting December, the market fell sharply. Looking forward, gasoil/diesel demand to increase further, supported in early 2017 by heating oil and by transportation demand over the summer.

Jet fuel market was on the downward trend but slightly compared to gasoil market. The rising heating demand continued to provide support. Meanwhile, the strength in the US market has attracted higher flows from Asia as imports of jet fuel into the West Coast increased.

The December fuel oil market was likely to remain almost balanced amid steady demand from both the end-user bunker market and for fuel oil cargoes within the region. On the supply side, the market sources said they expected between 4.5 million mt and 5 million mt of Western arbitrage fuel oil to arrive in Singapore in December.

In other market news, high sulphur fuel oil (HSFO) stocks rose 1.1% to 8.59 million barrels, while low sulphur fuel oil (LSFO) stocks remained unchanged at 3.21 million barrels.

Outlook for Products Market

According to the JBC report, it is expected a significant shake-up of product demand dynamics next year, with gas oil/diesel reclaiming a sizeable share of total demand growth. While 86% of total 2016 oil demand growth was from light ends (incl. LPG, naphtha, and gasoline.

Hitachi at Fajr-e Jam Refinery

One of significant and valuable achievements of Fajr-e Jam refinery that was made following the implementation of Iran's nuclear agreement with world powers was the construction of a new power plant in this area. Construction of a power plant to produce 82.5 megawatts/hour of electricity has been another activity of this refinery. Construction of this refinery started in 2006, but it was halted as sanctions were imposed on Iran.

Now, the conditions have changed as the nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), has taken effect.

"With the implementation of the JCPOA, we made maximum use of [the deal] and we managed to complete our power plant and launch its first phase last calendar year. This year, we launched its second phase," Hashemzadeh said.

"This project is not a partnership one. We cooperated with Petrotexan which is a domestic contractor. But for the turbines which needed to be installed, Japan's Hitachi stepped in and undertook to operate this part of the project so that we would witness the materialization of the JCPOA at Fajr-e Jam refining company," he added.

Flaring Cut

An issue that has been insisted upon over recent years has been to reduce flaring gases. In order to deal with this issue, a section has been designed for the production of LPG, butane and propane from flare gases emitting from the top of the gas condensate stabilization tower, before they are burnt.

Abdossamad Najafi, head of operation at Fajr-e Jam gas refinery, said the facility treated 65 mcm/d of gas during the first half of the current calendar year. He added that this amount would reach 80 to 90 mcm/d.

Furthermore, 75 mcm/d of liquefied gas, 200 tons of LPG, 4,000 cubic meters of gas condensate have been produced over this time.

That is the case, while Fajr-e Jam refinery has carried out certain measures in order to reduce flaring at refineries.

After the launch of the LPG unit, flaring has been reduced to 0.02 mcm/d. In addition, the sulfur production project of this refinery has been under way as studies are being conducted for receiving 50 mcm from the South Pars reservoir.

Feasibility for South Pars Gas Delivery

Fajr-e Jam refinery is ready to expand its activities. Hossein Ardeshiri, head of Fajr-e Jam gas refining company's overhaul and renovation section, said when the refinery was being overhauled, feasibility studies were conducted for the receipt of 50/d mcm of gas from South Pars gas field.

"This refinery has currently capacity to receive 25 mcm/d of gas from South Pars reservoir and according to plans envisaged for it this amount will soon increase to 50 mcm/d," he said.

"So far, the receipt of record 27 mcm/d of gas from South Pars reservoir has been registered in this refinery," said Ardeshiri.

Parsian, 2nd Largest Refinery in Iran

Parsian refinery is located between the cities of Lamerd and Mohr in Fars Province in southern Iran. It is the second largest gas refinery in Iran. The first section of this refinery started work in September 2003 with an output capacity of 21 mcm/d of gas and 12,000 b/d of gas condensate. The facility's nominal capacity currently stands at 78.2 mcm/d.

Parsian gas refining company, with an output of 75 mcm/d pf gas, is supplying 13% of Iran's gas needs. It comes second to South Pars refinery.

Parsian refinery produced more than 25 bcm of gas in the last calendar year. Farshid Ebdali, CEO of the refinery, said the refinery has been supplying 75 mcm/d of gas this year.

Parsian produces gas condensate of very high quality, which amounts to 5,000 cubic meters a day or 32,000 barrels. It would be no surprise to see Japan and South Korea being among the main customers of this refinery. In addition to foreign companies, domestic petrochemical plants are among leading buyers of products from this facility.

Ebdali said on average 32,000 b/d of gas condensate is being produced at this refinery, which is exported abroad.

Referring to this refinery's output during the first eight months of the current calendar year, he said: "Some 17.1 bcm of gas has been produced at this refinery. We hope to bring this output to above 25 bcm by the end of the year, which would be beyond our obligations. During the same period of time, we produced 2.176 bcm, equivalent to 6.5 million barrels of gas condensate, which would reach 10 million barrels by the end of the year."

Ebdali said overhaul is one of the most important projects this company has on the agenda. Its last overhaul lasted one month, five days ahead of schedule.

"That helped us have safe and sustainable gas production without any problem," he added.

Modern and Green Refinery 

The superiority of Parsian refinery is not limited to its output and quality of products. It has managed to win the "Green Industry" award of the Department of the Environment.

According to Ebdali, the treatment facility has allotted 20% to green space, which is double the standard set by the DOE. Furthermore, this refinery has one of the most modern industrial waste treatment facilities in the province. Due to the existence of adsorbent towers, flaring in this refinery is nearly zero.

He said that Parsian refinery stands in a higher position than other refineries in terms of standards and other indices.

"The consequences of pollution in this refinery stand at almost zero and this company is making serous efforts to spread the correct culture of the environment," he added.

Ebdali said the refinery has had more than 15 million persons-hours of activity without accident, a rare case compared with other refineries.

He cited other outstanding activities as fire alarm and extinction systems, industrial medicine for staff based on timeframe, upgrading firewater system and HSE training courses for young managers and educated staff of the refinery.

Int'l Firms to Invest in Iran Gas HSE

The International Gas Union (IGU) is one of the most important international bodies involved in the gas industry. This union draws up short, mid and long-term strategies for this industry. Established in 1931, the IGU is registered in Switzerland's Vevey. Its secretariat is located in Oslo, Norway.

The idea behind the establishment of the IGU was to upgrade the level of technology and boost economic growth in the gas sector. To that end, the IGU is involved in a variety of activities related to the economy, technology, safety, environment, global gas trading, legality, customer relationship management, as well as effective and active communications between its members and subsidiaries.

The IGU is a worldwide non-profit organization aimed at promoting the political, technical and economic progress of the gas industry. The Union has more than 140 members worldwide on all continents, representing approximately 97% of the world gas market. The members of the IGU are national associations and corporations within the gas industry worldwide. The IGU organizes the World Gas Conference (WGC) every three years, with the forthcoming WGC taking place in Washington D.C, USA, in June 2018. The IGU's working organization covers all aspects of the gas industry including exploration and production, storage, LNG, distribution and natural gas utilization in all market segments. Iran will be hosting the IGU 2020 conference.

Mohammad-Reza Yousefipour, the head of HSE department of National Iranian Gas Company (NIGC), told Iran Petroleum that in the recent IGU conference in India, the US and Iran were the only countries that delivered presentations about plans to contain methane emissions.

"Moreover, there was a tight competition between Iran and other countries like Germany for hosting the 2020 conference. Iran was finally selected to host the event. This achievement has been made at a time while the US has been heading this union for years," he said.

He added: "Our country's bargaining chip in the IGU conference was investment in and operation of projects for curbing methane emissions. For instance, gas production and transmission companies in Iran have been operating gas pipeline leakage detection projects for years. At present, Iran is ahead of many countries in the world with regard to research projects for preventing methane emission."  

Zero-Accident Project

Yousefipour said the NIGC has been operating a zero-accident project in collaboration with international companies including Germany's IBS, Britain's KBC, France's Sofregas, Sofren and ADDEP and Dutch Gasunie.

"For more than five years, refineries, pipelines, provincial gas companies and operating zones are under review within the framework of this project. Relying on their experience, these companies are helping us minimize accidents in this industry to zero. A memorandum has been signed with IBS to that effect. Each of these companies study a specific aspect of accidents occurring in the gas industry," he added.

Yousefipour referred to political twists and turns in the relations between Iran and Western countries over recent years, saying: "Implementation of HSE projects in Iran's gas industry is especially attractive to European firms because working for the NIGC of Iran which holds the largest gas reserves in the world would be a winning card for these companies. Meantime, we have been examining the quantitative and qualitative aspects of cooperation with private international firms."

173mn Tons of Pollutants Contained

Yousefipour stressed that gas is an environmentally friendly fuel.

"Over the past 20 years, the emission of more than 173 million tons of pollutants has been checked thanks to replacement of liquid fuels with gas. Today, in the country, replacing fuel oil with gas to feed power plants has become a priority."

"Everywhere in the world, in the gas industry, the issue of methane emission is of high significance because this issue is very influential in safeguarding the environment and delaying global warming," he said.

He added: "From 2014 to 2040, the world population would increase by 1.7 billion while the global economic growth rate would be 3.1 percent. These forecasts are indicative of rapid consumption of energy, particularly gas. Therefore, the most widely consumed source of energy in the world would be natural gas after nuclear energy. The share of gas in the world energy mix currently stands at 20%, which would reach 50% in 25 years."

Citing fundamental changes in the global market of oil, gas and coal, and the increased production and consumption of shale gas as a clean fuel, Yousefipour said: "Those involved in liquid fuels and coal believe that notwithstanding its myriads advantages, gas has one disadvantage that is leakage of methane as a greenhouse gas. Of course, Iran has been investing in methane gas emission capping for years."

Carbon Management Strategy

The HSE chief of the NIGC said that the gas company was considered as a leading one in carbon management.

"In the final years of the previous decade, a carbon management working group was established in the company. In this working group, a research project was defined involving all directorates of the gas industry. A variety of projects including drawing up a strategy for carbon management were proposed. Some subprojects are then defined for providing the necessary infrastructure," said Yousefipour.

He added: "One of these projects was to develop specific software to be installed on the NIGC systems. According to data registered on this software by specialists from across the country, this software would indicate any possible methane emission across the country. This software is being developed locally in cooperation with the Research Institute of Petroleum Industry (RIPI)."

Regarding clean development mechanism (CDM) projects by the NIGC, Yousefipour said: "So far, a number of projects regarding identification of potentialities for the implementation of CDM projects in the gas industry have been implemented. In one of these projects that involved the recovery of flare gases at Sarkhoun and Qeshm gas treatment facility, a methodology was obtained in collaboration with the RIPI. It was the first time such a project was being implemented in the Middle East."

"Companies willing to apply for Iranian gas industry bids are required to have scored at least 10 points in HSE. Furthermore, in case contractors fail to respect the HSE regulations we will be able to impose penalties on them," he said.

Referring to the existence of 1,018 cities and villages connected to gas distribution network in the country, he said: "This extent of gas distribution coverage in the country requires us to comply with certain international obligations in this sector."

Investment Attractions in Iran New Petchem Hubs

Owing to abundant attractions like venue, sufficient feedstock and access to high seas, Iran’s petrochemical industry has tempted both domestic and foreign investors. After Iran’s landmark nuclear deal with six world powers entered into force, international companies from Asia and Europe expressed willingness to invest in this sector. Many rounds of talks have been held for that purpose. These talks are expected to yield results in coming months.

Iran’s petroleum industry hopes to become the top producer of petrochemicals in terms of value-added in the West Asian region and become the most effective development organization in the region by 2025.

To that end, attracting investment for developing this industry within the framework of establishment of petrochemical hubs like in Parsian Special Zone, Lavan Island, Qeshm Island, Jask Port and Chabahar Port would be of help. In choosing the aforesaid hubs, such factors as proximity to sources of feedstock, access to abundant water as well as infrastructure for exporting petrochemicals have been taken into consideration.

The main points highlighted in the mission assigned to Iran’s National Petrochemical Company (NPC) which has a sovereign role, are development of strategies and plans for the development of petrochemical industry, providing more financing for development, participation in the development of infrastructure needed for development plans, boosting and supporting industry through establishment and activation of service-providing entities and working out reasonable mechanisms for the management of interactions between projects.

Farnaz Alavi, director of planning and development at NPC, says the company’s services include planning and policymaking for the development of industry, preparing the ground for the development of the infrastructure for this industry by the private sector or through its contribution, attracting investors and supporting them, offering proposals for drawing up or amending rules, regulations and standards for this industry, as well as regulations.

“The plans made in the petrochemical industry have been aimed at avoiding selling raw materials and completing the value chain and converting basic and middle products to products of high value-added,” she said, adding: “The projects so far introduced or awarded to investors have been assigned within an integrated framework, starting from the beginning of the chain up to final products.”

20mt Exports

Alavi said Iran’s petrochemical exports would climb to 20 million tonnes by next March which marks the end of Iranian current calendar year.

She referred to Iran’s rated petrochemical production capacity of 64 million tonnes in the current calendar year, saying: “Last [calendar] year, the country’s petrochemical production totaled 46.5 million tonnes. The petrochemical output stood at 29 million tonnes during the [first] seven months of the current [calendar] year, which is forecast to hit 50 to 51 million tonnes by the end of the year.”

She also touched on the supply of petrochemical products on domestic and foreign markets and said: “Petrochemical exports have been at 18.8 to 19 million tonnes and 14 million tonnes have been supplied on domestic market. Over the seven months, exports were at 11.6 million tonnes, while domestic supply was about 8.5 million tonnes. Therefore, one can expect that the exports would reach 20 million tonnes by year-end.”

Alavi put at $9.6 million the value of petrochemical exports last calendar year, adding that this figure reached $4.8 billion during the first seven months of the current year and would go to $9 billion.

Alavi said the value of petrochemical products was affected by feedstock price and energy market developments, adding: “Since mid-2014, we have faced a price decline. In this regard, the price of naphtha, as the main feedstock for ethylene production, has been in harmony with crude oil price in international markets and experienced a downward trend.”

She elaborated on the reasons behind the decline in petrochemical exports this year from a year ago, saying: “This year, petrochemical products saw the sharpest decline in price and the price has been falling all throughout the eight months of the year. Due to the delay in harmony between petrochemical and oil prices and given the oil price hike, one cannot expect a gradual price growth in the last months of the year to make up for the decline in prices over the past months.”

She said that Iran accounts for around 10% of global trading of methanol, adding: “In the light of its development plans, Iran will be playing a more prominent role in international markets, specifically in polymer products, in the coming years and we can expect a significant growth in this sector.”

Alavi said that the average price of petrochemicals saw a decline from the calendar year 1390 to 1394 which ended in March 2016. Meantime, exports have seen a 50% decline while domestic market supply has dropped 40%.

Polymer products have seen 20 to 55% decline in prices, while basic and chemical products like methanol and ethyl-glycol have seen 40 to 55% decline in prices over the same period.

Iran’s petrochemical sector has experienced a quite sharp increase in prices over the past five years due to inflation, global decline in petrochemical prices and a relative increase in the price of gas feedstock.

“At this juncture, given the increased costs, the profits from revenues have increased around three percent during the 90-94 period and more than 80% of the profits of the industry belonged to 13 companies consuming a variety of feedstock,” she said.

Petrochemical Sector Roadmap

To achieve its objectives, Iran’s petrochemical industry has drawn a roadmap whose main elements include development of petrochemical industry with the purpose of boosting output from existing plants to their rated output capacity, construction and completion of projects that remained unfinished during the 4th and 5th development plans, launching new projects in order to make up for delays, clearing the way for balanced development in downstream petrochemical industry with the objective of completing the value chain following Petroleum Law and in collaboration with Ministry of Industry, Mine and Trade.

Alavi also said that new petrochemical projects are aimed at converting natural gas to olefin (through methanol chain) and its derivatives, converting propane to propylene and its derivatives, using liquid feedstock in the production of olefin, aromatics and its derivatives as well as supply of feedstock to new petrochemical facilities.

Missing Links in Oil Refineries

Iranian oil refineries are ageing and the technology applied for their construction is outdated. Renovation and reconstruction of these refineries require attraction of investment and application of state-of-the-art technology.

In order to deal with this issue, the Iranian government has offered to grant up to $14 billion in loans to the private sector to renovate oil refineries in Iran. This offer was welcomed warmly after Iran and six world powers started implementing in January a landmark nuclear deal they signed last year. The agreement is officially referred to as the Joint Comprehensive Plan of Action (JCPOA). Companies from South Korea and Japan have expressed their interest for investing in these projects.

Under the present circumstances, the most important factor contributing to the high margin of oil refineries in the world is the high potential for supplying products with high-value-added like gasoil, gasoline and to some extent aviation fuel. Iran is currently the biggest exporter of fuel oil because of the high production capacity of this middle distillate product. However, fuel oil is of less value than gasoil and gasoline. As new records are set in the production and export of fuel oil, one of important oil refining policies pursued in the post-JCPOA era has been the signature of contracts with proprietors of technology with a view to reducing fuel oil production capacity and lowering the share of this oil product to 10% of the country's oil products' mix.

Ali Shirazizadeh, director of research and technology at the National Iranian Oil Refining and Distribution Company (NIORDC), has told Iran Petroleum that the company is following a roadmap to identity and achieve modern technologies including technical knowhow for the development of widely consumed catalysts and chemicals as well as refinery industry equipment for the purpose of self-sufficiency.

"To that effect, 25 research agreements have been signed in recent years by the Directorate of Research and Development and the R&D units of subsidiaries," he said in an interview.

He said that 13% of the research agreements are related to conducting research on cutting edge technologies, 22% to domestic manufacturing of catalysts, materials and equipment needed by this industry and the rest to the issue of quantitative and qualitative enhancement of petroleum products, removal of operating bottlenecks, the environment as well as energy management.

"Projects for developing desulfurization and demetallization catalysts from heavy oil cuts and developing hydrocracking catalysts have made progress up to the lab scale phase. Moreover, the project for detecting the efficacy of corrosion containing material designed for commercialization has reached the industrial production stage," he said.

Shirazizadeh underlined the necessity of updating technology applied to Iranian oil refineries now aged more than 35 years, saying: "Among countries in the Middle East, Iran enjoys vast oil resources, widespread domestic capabilities and high capacity in the production of refined products. The persistence of these issues requires taking proper steps for upgrading the level of efficient technologies."

"Over recent years, this issue has been taken into consideration with a research-oriented view towards identifying and attaining modern technologies, building new refineries like Persian Gulf Star by applying new technologies and launching such projects as Siraf refining park," he said.

It is noteworthy that the NIORDC's plans are based on strategic plans envisaged by the Iranian Ministry of Petroleum within the framework of the country's Vision Plan for mastering cutting edge technology in all sectors in order to reach the top scientific and technological spot in the region.

Currently, given the NIORDC approach aimed at using heavy and ultra-heavy crude oil reserves and the significance of development of lighter and more usable products, it is inevitable to design new technologies for the refining sector. In fact, the main objective behind the application of these technologies has been to convert heavy oil feedstock and refinery residues to products of higher value, particularly gasoline and middle-distillate products in accordance with euro-4 and euro-5 standards.

In order to achieve the latest technologies in the world, research institutes are being established through collaboration between the Directorate of Research and Technology and the Ministry of Science, Research and Technology. The most important institutes envisaged to be established, focus on residual fluid catalytic cracking (RFCC), delayed cracking unit (DCU), residue cracking (RCD), naphtha and middle distillate desulfurization (HDS) with the objective of developing technical knowhow for catalysts, naphtha catalytic conversion (CCR), isomerization and hydrocracking.

"Based on the 5th Five-Year Economic Development Plan, one percent of the budget earmarked for investment projects of this company is allocated to projects of technology upgrade and energy consumption containment," he said Shirazizadeh.

"All policymakings of this company with regard to research and technology are focused upon spreading fundamental, practical and development research projects, creating attractive potentialities, developing technology, exporting technical knowhow and technical and energy engineering services at international level and boosting technology in different fields of oil, gas, refining and petrochemical industries," he added.

"Regarding establishment of research institutes and acquisition of the latest technologies of refining process, memorandums of understanding have been signed with Ministry of Science, Research and Technology to benefit from the potentialities of domestic universities including University of Tehran, Sharif University of Technology, Amir-Kabir University of Technology, Isfahan University of Technology and University of Shiraz," he said.

"Based on these MoUs, cooperation with the private sector at home and abroad, has been insisted upon for the implementation of agreements. Such cooperation will take place after being approved by universities and NIORDC.

"With regard to other projects already implemented or under way, the Directorate of Research and Technology as well as R&D departments of subsidiary companies, we can name Petroleum University of Technology, Research Institute of Petroleum Industry, Institute for International Energy Studies, Oil and Gas Enhanced Recovery Research Center and Petrochemical Research and Technology Company as project managers and knowledge-based companies, technology parks and universities outside the petroleum industry."

Reuter's Iran Petroleum Concession

Since 17^th century, visitors to Iran had seen races of petroleum in southwestern Iran, northern Iran as well as around Baku. After that, the first geologically oil-rich layers along Iran-Ottoman border were studied seriously and geologists provided reports about deposits hidden underground. English archeologist William Kennett Loftus released a report in August 1855 about the existence of petroleum in Iran. The release of such reports attracted investors from across the globe. Then Iranian government granted concessions to foreigners to exploit these valuable resources. But everyone has to take into consideration Iran's conditions during the reign of Nasser ad-Din Shah Qajar.

The five-decade-old rule by Nasser ad-Din Shah Qajar must be viewed as the zenith of autocracy in Iran. His extensive relations with the West likened his rule to post-revolution European monarchies. But meantime, that was when Iranians and Europeans got to know each other.

This mutual familiarity led to exchanges between the two sides and helped foreigners win concessions in Iran. That period started under Nasser ad-Din Shah and continued into the rule of his son and successor Muzaffar ad-Din Shah. The important point is the Qajar king's insistence on "concession" instead of "contract".

Under Nasser ad-Din Shah, Iran granted concessions for exploitation of mines and deposits as well as establishment of banks and construction of roads. There was no contract to be beneficial to both sides. The concessions were one-sided and in favor of the foreign party.

The important point with all these concessions is that all of them had been awarded after the dismissal of Mirza Taqi Khan Amir-Kabir, then chief minister. Little-known Jewish financier Reuter, who was a Briton of German origin, had won a concession in Iran. At that time he was not famous in the world, but his establishment of what we know today as Reuters news agency helped him shoot into prominence.

Paul Julius Freiherr von Reuter was an entrepreneur and pioneer of telegraphy and news reporting.

In Göttingen, Reuter met Carl Friedrich Gauss, who was experimenting with the transmission of electrical signals via wire.

On 29 October 1845, he moved to London, calling himself Julius Josaphat. On 16 November 1845, he converted to Christianity, in a ceremony at St. George's German Lutheran Chapel in London and changed his name to Paul Julius Reuter. One week later, in the same chapel, he married Ida Maria Elizabeth Clementine Magnus of Berlin, daughter of a Lutheran pastor.

A former bank clerk, in 1847 he became a partner in Reuter and Stargardt, a Berlin book-publishing firm. The distribution of radical pamphlets by the firm at the beginning of the 1848 Revolution may have focused official scrutiny on Reuter. Later that year he left for Paris and worked in Charles-Louis Havas' news agency, the future Agence France Presse. As telegraphy evolved, Reuter founded his own news agency in Aachen transferring messages between Brussels and Aachen using carrier pigeons, thus linking Berlin and Paris. Speedier than the post train, pigeons gave Reuter faster access to financial news from the Paris stock exchange. Eventually pigeons were replaced by a direct telegraph link. A telegraph line was under construction between Britain and Europe and so Reuter moved to London, renting an office near the Stock Exchange. In 1863 he privately erected a telegraph link to Crookhaven, the farthest south-west point of Ireland. On nearing Crookhaven, ships from America threw canisters containing news into the sea. These were retrieved by Reuters and telegraphed directly to London, arriving long before the ships reached Cork.

In 1872, Naseer al-Din Shah, the Shah of Iran, signed an agreement with Reuter, a concession selling him all railroads, canals, most of the mines, all the government's forests, and all future industries of Iran. George Nathaniel Curzon called it "The most complete and extraordinary surrender of the entire industrial resources of a kingdom into foreign hands that has ever been dreamed of".

The Reuter concession was immediately denounced by all ranks of businessmen, clergy, and nationalists of Persia, and was quickly forced into cancellation.

For a period of seventy years, he was to have the sole right to exploit most of Persia’s natural resources; to build dams, bridges, roads, railways, and factories; to farm the customs; and to exercise the first option should the government decide to establish a national bank. Owing to popular opposition in Persia and to lack of British government support for Reuter, however, the Shah canceled this concession in 1873. Later on, it came out that Mirza Hossein Khan Sepah Salar had received 50,000 liras, Mirza Malkom Khan 20,000 liras, Moein al-Molk 20,000 liras and Iqbal al-Molk a similar sum in kickbacks from Reuter for their contribution to the signature of this concession.

The concession was signed between Iran's king and Reuter in 24 articles. By virtue of Article 1, the Iranian monarch gave Baron de Reuter full authority to establish one or several companies abroad under whatever name and under whatever conditions he desired in order to carry out projects on Iran's territory.

Article 11 was about petroleum. According to this article, the Iranian government authorized the foreign party to extract coal, iron, copper, lead, petroleum or any other resources in Iran as long as the concession was in effect. This article did not include mines owned by natural persons. This article authorized the Iranian mine owners to sell their mines to Reuter's companies.

It stipulated that no government or religious official, nor any Iranian or foreign national would be entitled to claim ownership of a mine unless he had already worked there for five years in an endorsable manner. Apart from that, the article pointed out, any mine explored by the Company would be regarded as simple land which would be bought by the Company at a customary and reasonable price. If need be, the government would force the owner or owners of that piece of land to sell it to Company at a customary price.

This concession, which is described as the biggest betrayal by Mirza Hossein Khan Sepah Salar, the prime minister of Nasser ad-Din Shah, brought the political and economic life of all Iranians under Reuter's yoke for 70 years. However, it did not take effect due to objection by the Russians as well as domestic protest led by the clergy like Mirza Saleh Damad and Molla Ali Kani. No specific operations were conducted for exploration and recovery of oil under this concession; however, the issue of oil deposits commanded headlines across the globe.

Reuter did not relent. In order to receive damages from Iran because of the annulment of the concession, Reuter was awarded another concession about banking. Reuter never managed to get his hand on oil resources in Iran.

As the CEO of Reuters news agency, he got retired in 1878 and died in France's Nice in 1899. At that time, Reuters news agency was reporting news of oil concessions in Burma and Iran.

NIDC, Asia Weightlifting Champion

The Physical Exercises Department of the Iranian Ministry of Petroleum has always prioritized investing in weightlifting. In last year’s weightlifting league which was held with the participation of eight teams, the Ministry of Petroleum was represented by the teams of National Iranian Drilling Company (NIDC) and the National Iranian South Oil Company (NISOC). These two teams were of great help to this discipline.

The NIDC team has been more instrumental in promoting and improving weightlifting in Iran over recent years. It has introduced many weightlifters to national team. A case in point is Kianoush Rostami who won the gold medal in the Rio de Janeiro Olympics after setting record.

Having finished runner-up in last year weightlifting league competitions, the NIDC club made its way into the Asian matches and won a third championship title.

From Begging Up to Now

NIDC moved to form a team ever since weightlifting league took shape in Iran. Following policies set out by the Iranian Ministry of Petroleum and pursuant to planning by the club managers, this team has always run on a strong note.

Over recent years, national weightlifting team members have often been present in the NIDC composition and made significant success. In last year’s league, the NIDC club finished runner-up after losing only three points to "Zob Ahan". But it is eying championship in the current year’s league.

3rd Asian Championship

NIDC has a brilliant background in Asian games. This team which was representing Iran in the Asian club competitions had already experienced two championships in the continent. As the champion of the previous round, the NIDC team flew to Qatar to take part in the matches. The NIDC weightlifters ranked the first.

Good Performance

Three Iranian teams attended the Qatar competitions in late December. They were NIDC, Army Ground Forces and Zob Ahan. They managed to leave behind their rivals from other countries. The NIDC club, which was managed by Faraz Ramhormozi, comprised many young and experienced weightlifters. Majid Asgari in the 63kg category and Sajjad Behrouzi in the 69kg category each bagged three gold medals for the NIDC. In the 85kg category, Ali Makvandi won two silver medals and one bronze medal, while Vahid Makvandi was awarded one silver and two bronze in the same category. Moreover, Reza Dehdar, in the 94kg category, received three silver, Ali-Reza Dehgan, in the 105kg category, bagged one bronze while Mohsen Bahramzadeh won one gold, one silver and one bronze in the super-heavy category. The points scored by the NIDC weightlifters added up to 592, winning the Ahvaz club its third championship in Asia.

Most Honored in Iran

The NIDC has been regularly present in the first days of the activity of the weightlifting league. Having won its third Asian championship title, it is now holding record for championship in Iran. The NIDC is only one championship behind the Chinese team to become the most honored team in Asia. That could be achieved in coming years thanks to the firm will of the club managers and efforts undertaken to that end.

Interview with Faraz Ramhormozi, NIDC weightlifting chief trainer

Iranian Weightlifters Top Asia

Faraz Ramhormozi, the trainer of the NIDC team, has given a good impression of his team. Since taking over the NIDC weightlifting team four years ago, he has earned the team two championship titles in Asia and one runner-up title in Iran. These performances show that he has been exceptionally successful in his job.

He believes that his team did a lot in the run-up to the Qatar games, adding that championship was the result he expected.

"Iran Petroleum" has conducted an interview with Ramhormozi.

Q: Congratulations! Winning the Asian championship title is of great value.

A: Thanks to God, we have managed to satisfy our friendly people in the south of the country, particularly the people of Khuzestan. We had made plans for a strong presence in the Asian competitions and this championship title was the result of several months of endeavors.

Q: How do you assess the level of matches?

A: Compared with previous years, the matches were held at a much higher level. All three Iranian teams joined the matches with their full capacity and of course other countries had sent powerful teams. Zob Ahan had brought in its Olympic weightlifters, so had other countries. Fortunately, our weightlifters fared well and they managed to hold atop the trophy.

Q: Was it not strange that three Iranian teams won the first to third titles?

A: No, that wasn’t so that only Iranian teams were struggling for championship. There were also teams from Kazakhstan and Turkmenistan, two hubs of weightlifting. Their performance was good. Kazakhstan had sent two Olympic-level weightlifters to Qatar and they put on a strong performance. You should not forget the fact that Iranian weightlifters are the best in Asia and our record bears proof to this fact. That is why the three Iranian teams performed so strongly and they got engaged in a rivalry among themselves.

Q: Did you expect to win the championship title?

A: That was our goal from the very beginning. We spent some four months in training camps to prepare for these Asian competitions. The NIDC club tried its best so that there would be no shortcomings. Huge efforts were made in this regard and weightlifters responded positively to such trust. Of eight weightlifters dispatched to Qatar, seven won medals. It proves the extent of our endeavors. The weightlifter who failed to win any medal was ill. His sickness prevented him from winning a medal. However, he scored a good point. I have to say that all of our weightlifters did perfectly and I am satisfied with them.

Q: You talked about the NIDC club officials’ assistance. Everyone is apparently happy, right?

A: That’s definitely so. Not only the club managers but also the NIDC directors did their best for us. Over the past years they have firmly supported us and I offer my special gratitude to them. We received whatever facilities we needed in the run-up to the Asian matches and this championship would be impossible without such support.

Q: Anything else you would like to add?

A: I would like to highlight this point that half of our team in the Asian games was local weightlifters. It shows that we pay attention to the talents in Khuzestan Province and the NIDC club and give these people to national teams. If you pay attention you will see that local weightlifters did pretty well and this is a valuable issue. I hope that we will be able to have better days in the future and satisfy people and the weightlifting society by winning more cups.

Land of Red Gold

Iran is currently accounting for 75% of saffron exports worldwide. The Iranian city of Torbat-e Heydarieh is the hub of saffron cultivation in Iran. The northeastern city has 8,000 ha of land under cultivation of red gold. Torbat-e Heydarieh exports saffron to 45 countries across the globe. It also accounts for more than 90% of silk production in Iran. These two valuable products have turned Torbat-e Heydarieh into one of strategic cities in Iran.

Cultivation and harvest of saffron, as well as silk production in this city have always attracted tourists.

Weather Conditions

Saffron grows in places with moderate climatic conditions. Wherever summers are hot and dry while autumns and winters are quite mild, saffron grows appropriately. The saffron root is not active in the summer and it goes into hibernation as the hot season starts, rendering its leaves yellow. Saffron is mainly active from mid-autumn to mid-spring.

Cultivation

After spring has started and precipitations have ended the land is plowed twice with a one-week interval. Then, manure is mixed with soil before being abandoned until the time of harvest. Several days before cultivation, the land is irrigated and plowed for a third time. The land must be in a sunny area away from the shadow of the trees and devoid of any pebble or herbs.

Saffron cultivation period starts in mid-summer and ends in early autumn. That can be productive for eight to ten years; therefore no new cultivation would be needed in the following years.

Harvest

Saffron fields are not productive enough in the first year. Violet flowers burgeon in mid-autumn and as soon as the first burgeon appear harvest starts and continues for around three weeks. The flowers must be picked before the field receives the sun’s orange rays. Daily harvest ends at 9 am. Flower picking continues between 15 and 25 days.

Sort-Out

After the flowers are picked they are piled up in the shadow and their red strings are extended. Then the flowers are bundled together with thread and spread out in the shadow to dry. The strings turn purple after drying, giving an eye-catching color. These fragrant strings are saffron.

Folkloric Dance

Folkloric music and dance play a pivotal role in promoting local and national identity as they recount the story of an ethnic group from a historical and cultural point of view. Folkloric music in Khorasan and Torbat-e Heydarieh is a case in point. One local dance is the one with sticks. It is difficult to practice and requires physical flexibility. This dance may be conducted by groups of two or more people. It resembles fencing and martial arts. Musical instruments are also played during this dance.

Sericulture

Sericulture, or silk farming, is the rearing of silkworms for the production of silk. Although there are several commercial species of silkworms, Bombyx mori (the caterpillar of the domesticated silk moth) is the most widely used and intensively studied silkworm. Sericulture, which is 4,500 years old, existed in Iran since ancient time. According to official data, around 20,000 ha of berry farms exist in Iran, including 3,400 ha in Khorasan Razavi Province. Torbat-e Heydarieh has a share of 1,230 ha. More than 3,000 people are engaged in sericulture in the province, including 1,000 in Torbat-e Heydarieh.

Agriculture, Energy Investment Opportunities

Torbat-e Heydarieh which is famous for saffron farming is a tourism attraction in Iran and comprises four areas known as Markazi (central), Bay, Kadkan and Jolge-Rokh.

Hamid Nirouei, head of Torbat-e Heydarieh local council and member of Khorasan Razavi provincial council, told "Iran Petroleum" that the county is home to more than 250,000 people.

"Of them, 140,000 are living in four cities of this province. This area has won fame in the Middle East and the world due to the cultivation and harvest of red gold, i.e. Iranian saffron," he said.

"Every year many local ceremonies are held in this area for introducing saffron. This year also, a major photography festival was held on the same occasion. In this festival, Iranian and foreign journalists and photographers help introduce opportunities for investment in agriculture" to potential Iranian and foreign investors, he added.

Nirouei stressed that Torbat-e Heydarieh is the hub of saffron production in the world, adding: "Every year, 33,600 kilograms of dry saffron is produced [here] which accounts for 40% of Iran's total saffron production. Furthermore, this county has the largest area under saffron cultivation with 11,000 ha of land. In this season, more than 75,000 people are directly involved in farming and harvest, transporting and packing of this plant."

He said Iran's current administration has been providing support for the country's agriculture sector over the past three years. He singled out the Iranian government's granting of IRR 200 billion in low-interest loan to agriculture sector in Khorasan Province.

"If this sum is invested in the conversion and packing industries that could create jobs and multiply the value-added in the saffron industry," said Nirouei. "Currently, the saffron produced in Torbat-e Heydarieh is exported to the countries in the region and the world before being fully processed. If packing industry is established, we will witness a big change in this sector."

He stressed the necessity of investment in the agriculture and irrigation sectors in Torbat-e Heydarieh, saying: "Due to irrigation and unbridled use of underground resources, the deserts in this area have collapsed 80 centimeters. Saffron cultivation needs too much water and 92% of water used in this county is consumed in the agriculture sector."

Nirouei referred to 117 centers dealing with saffron in Torbat-e Heydarieh, saying: "This County is also among top counties in the country in the production of silkworm cocoons and their transformation into silk thread. In the city of Bay, there are more than 1,200 plants for transforming cocoons into silk thread. They make up more than 70% of the country's total plants."

Nirouei also said that Torbat-e Heydarieh local council was in talks with a German consulting company for generating energy from urban and rural wastes.

"Officials in this county are seriously determined to use renewable energies. So far many villages have been equipped with solar water heaters with the support of government and the Housing and Urban Development Foundation," he said.

"In tourism sector, the recognition of Pishgou area as a tourism site in Torbat-e Heydarieh has inspired hope for the materialization of tourism plans in this county. All arrangements have been envisaged and investors could make contribution with the support of government and domestic and foreign banks," he added.

Nirouei referred to the proximity of oil and oil products storage sites to urban areas in Torbat-e Heydarieh, saying: "There is currently big capacity for cooperation between the affiliates of the Iranian Ministry of Petroleum and [Torbat-e Heydarieh] local council in civil defense. The oil storage facility is located in the heart of the city."

He also said that feasibility studies are under way in cooperation with the Ministry of Petroleum for the establishment of a GTPP (gas to propylene) unit and construction of single-pump fuel stations in Torbat-e Heydarieh.