South Pars, Realization of National Demand

Bijan Zangeneh, Minister of Petroleum

South Pars, which is the largest jointly owned gas field in the world, is instrumental in energy supply in Iran. The discovery of this gas field, holding 50% of Iran's total gas reserves and 8% of world's total, dates back to the 1980s; however, its development under 28 phases just started in 1997. South Pars started producing gas in early 2003 when its development phases 2 and 3 came on-stream. Three more phases became operational until the end of the tenure of the 8th administration in 2005.

When I left the Ministry of Petroleum in 2005, five development phases of South Pars were fully operational and as many other phases were more than 60% complete. When I visited South Pars again in August 2013, only those five incomplete phases had been completed to reach production stage and no new phase had become operational.

In a first step, it was decided to classify the South Pars phases based on their degree of priority. Implementation and application of professional management to the projects and establishment of project management system were among the most important tools that were envisaged.

Under the aegis of relentless endeavors by staff and oil service workers, the first step was taken firmly to make arrangements for the implementation of projects to develop South Pars. The Ministry of Petroleum staff were mobilized in those days for the development of South Pars development phases. Despite tough conditions, everything went ahead smoothly and after one year and a half, Phase 12 of South Pars, the largest gas production project, became operational in March 2015. That was celebrated by Iranians who were poised to start the Persian New Year. Supreme Leader Ayatollah Ali Khamenei hailed this great achievement thereby relieving the staff boosting motivations for more work.

What has changed South Pars once more in recent years has been the use of project management knowhow as the missing link in the South Pars development. To that effect, supervision on such parameters as price, quality and timeframe were taken into consideration in contracts. Unbridled project cost hikes and unjustified delays were prevented.

As a result of such management, despite restrictions in access to financial resources, development of South Pars went ahead on schedule and gas production from this supergiant reservoir more than doubled from 240 mcm/d in 2013 to more than 500 mcm/d now. As new development phases are becoming operational, Iran hopes to outdo Qatar in terms of recovering gas from the offshore field they share.

Enhanced recovery from jointly owned fields and protection of this national asset has turned into realization of national demand. We are doing our utmost to respond to this demand. That is just happening in South Pars and God willing we will in the near future outperform our neighbors in operating other oil and gas fields we share with them.

Gas Supply to Sistan Baluchestan

Iran's rich gas reserves are no secret to anybody. Ever since Iran started extracting gas it was eying exports. But in the aftermath of the 1979 Islamic Revolution, Iran faced myriads events that forced it to turn to gas supply to cities and villages instead of exports. Some of them were eight years of destructive war by Iraq, international embargo, population growth, and policies of administrations and parliaments.

In its latest move, National Iranian Gas Company (NIGC) has finished its project for gas deliver from Iranshahr to Zahedan in Sistan Baluchestan Province in southeastern Iran. On March 1, President Hassan Rouhani inaugurated the gas project.

Addressing the event, President Rouhani said development of eastern provinces was important for Iran because of neighbors like Pakistan.

"One of the government's promises in this area was to supply gas to Sistan Baluchestan Province and I feel happy that this promise has come true and gas has entered Iran's easternmost province. In addition to bringing welfare for people, it will clear the way for the development of other industries and sectors in this province," said the president.

Rouhani said Sistan Baluchestan has turned into a safe zone for development and investment.

"In the near future, we will witness a major change in Makran coasts and Chabahar Port. Gas supply could significantly help this region be developed," he added.

He referred to a trilateral document for cooperation, signed between Iran, India and Afghanistan, saying Chabahar was of strategic importance.

"When this document was being signed, the Indian prime minister maintained that the world would understand a century later how this document of cooperation changed the region and the world," he said.

Rouhani said after his administration's promise for gas supply to this area came true major projects would be developed one after another there.

He cited the plan to increase Chabahar Port's capacity from 2.5 million tons to 8.5 million tons.

IRR 7.5 tn Investment

Iran's Minister of Petroleum Bijan Zangeneh said the provincial gas network in Sistan Baluchestan was one of pledges President Rouhani had made during his tour of the province in 2014.

He said gas supply to Zahedan was the main part of the project, adding that more than IRR 7,500 billion had been invested in the 262-kilometer pipeline.

According to Minister Zangeneh, the investment made in this project had been provided via saving fuel. "It was an initiative of the 11th administration and the parliament contributed to its implementation," he added.

Zangeneh said after Zahedan, Zabol would be in line to receive gas, adding that construction of a pipeline connecting Iranshahr to Konarak and Chabahar would have started.

"Khash and Saravan are next in the line and they must receive gas soon. The remaining projects will continue until this province is fully covered [by gas supply network]," the minister added.

Zangeneh noted that gas supply to Sistan Baluchestan would open a big gate for the province to undergo development.

IGAT-7 Review

NIGC agreed on the issue of gas supply to eastern and southeastern parts of the country in early 2016. This project was known under Iran Gas Trunkline 7 (IGAT-7).

IGAT-7 aims to supply gas to power plants, petrochemical plants, industrial units, cities and villages located on its route.

IGAT-7 is fed by South Pars gas field. In the first stage, 60 mcm/d of gas was envisaged for the provinces of Kerman, Hormuzgan and Sistan Baluchestan.

The first phase of this project, connecting South Pars to Iranshahr, is 907 kilometers. It crosses the provinces of Bushehr (45 km), Fars (75 km), Hormuzgan (435 km), Kerman (150 km) and Sistan Baluchestan (202 km). The pipes used in this project have a diameter of 56 inches.

Construction of this phase started in 2006. It finally became operational in 2010 with a credit of IRR 17,300 billion. It allowed gas supply to households and industrial units and power plants in Iranshahr and its surroundings.

After the first phase was launched, construction of the second phase of IGAT-7 was put on the agenda. In line with the policy of maximum gas supply to cities and villages in Sistan Baluchestan and gas supply to power plants and industries in this province, a tender bid was held as required in Iran's budget bill for 2014.

The objective sought in this project was to supply gas to some 300,000 urban and rural households in the cities of Zahedan, Chabahar, Khash and Zabol, also feed thermal and gas-fuelled power plants in Iranshahr, Zahedan and Chabahar, as well as industrial units in the province.

The power plants in the province consume nearly $2 billion worth of products a year. By supplying gas to these units, fuel could be saved.

This project will save Iran $660 million as liquid fuels would be replaced with gas. By launching this project, the ground will be prepared for economic development and prosperity, job creation, national and regional security, and more social welfare in the province.

IGAT-7 also involves seven valves, five cathodic protection stations, one transmission station, and a pressure control station and telecom system.

World's 4th Largest Gas Network in Iran

One can argue that 95% of Iran's gas reserves lie in the southern parts of the country. Therefore, over recent decades gas supply to the northern parts of the country has required the construction of high-pressure pipelines. According to experts every year the length of low and high-pressure pipelines grows by around 10% as the country's gas output rises and gas supply networks in villages and cities expand.

National Iranian Gas Company (NIGC) recently moved to expand its network in southeast Iran and the city of Zahedan with a length of 262 kilometers. Iran has currently more than 37,000 kilometers of gas pipeline and 78 pressure booster stations. Every year, 2,500 kilometers of high-pressure pipeline for gas delivery and seven to eight gas pressure booster stations are built in Iran.

Today energy is a key issue in global economy. Therefore, countries with a higher share of production, transmission and distribution will have more to say with regard to economy and employment. Meantime, one-third of total gas produced in the world (1,000 bcm) is traded between countries and more than two-thirds (68%) is transferred via pipeline and the remaining one-third carried to farther spots in the form of liquefied natural gas (LNG) on special ships.

Building long gas pipelines in the world indicates the significance of pipes for the transfer of gas in the world. Laying out pipelines for the delivery of gas is currently a good option for transferring this energy commodity across the world.

So far more than 1.535 million kilometers of pipeline has been launched in the world to carry 3,276 mcm/d of gas. Iran has a share of around 37,000 kilometers in this network. Therefore, Iran stands in the fourth position in terms of gas supply network. Iran comes fourth just behind the United States, Russia and Canada.

A major policy pursued in Iran is a more active role for the private sector in projects related to development, maintenance and steering of new gas pipelines. The growth of downstream gas sector is estimated at 1 to 1.5% in the world. But natural gas transmission has seen an annual 10% growth rate in Iran in recent years. It indicates the jump in this industry in the country. Up to 2025, Iran's gas transmission network is expected to expand to around 7,000 kilometers with the number of gas pressure booster stations estimated to reach 140.

By the end of Iran's 7th Five-Year Development Plan in 2025, high-pressure gas transmission lines will increase from the current 37,000 km to more than 64,000 km. According to projections, the number of pressure booster stations will also rise from the current 67 to 150. That will place Iran among the countries with extended gas transmission networks in the world.

Gas development in Iran has a decade-old history, but gas supply to cities and villages gathered momentum in 1986. Currently 88% of households in Iran are connected to natural gas. Gas consumption in Iran currently stands at 700 mcm/d, which is equivalent to 4.5 million barrels of oil products. Natural gas also makes up around 70% of the country's fuel mix, which is the highest share among other sources of energy. Natural gas is the strategic pivot for economic development in the country. Last calendar year to March 2016, more than 158 bcm of natural gas was produced, transmitted and distributed all across the country. During the first three quarters of last calendar year, 143 bcm of gas was transmitted across the country. This year, this figure has been up 12% year-on-year.

Megaprojects in High-Pressure Gas Pipelines

Despite having more than 37,000 kilometers of high-pressure gas pipeline, Iran is determined to launch new projects in coming years in a bid to preserve its fourth position in gas supply in the world.

A case in point is Iran Gas Trunkline 6 (IGAT-6) stretching from Assaluyeh to Bidboland and Ahvaz. The 625-kilometer-long pipeline has a capacity to carry 95 mcm/d of natural gas. The $1.1bn pipeline is fitted with five gas pressure booster stations. It is one of the most important high-pressure pipeline projects in Iran.

Other projects are as follows:

IGAT-7 (under construction): stretching from Assaluyeh to Sarkhoun and Iranshahr. It measures 902 kilometers long with a capacity of transferring 110 mcm/d of gas. The $2.2 bn pipeline is fitted with 10 gas pressure booster stations.

IGAT-8 (under construction): stretching from Assaluyeh to Naein and Tehran. It is 1,050 km long with a capacity of carrying 100 mcm/d of gas. The $3.3 bn project is fitted with 10 gas pressure booster stations.

IGAT-9 (under design): stretching from Assaluyeh to Ahvaz, Dehgolan and Bazargan. It is 1,860 km long with a capacity of carrying 110 mcm/d of gas. The $8bn project is fitted with 117 gas pressure booster stations.

IGAT-10 (soon to become operational): stretching from Kangan to Pahaveh and Tiran. It is 590 kilometers in length with a capacity of transmitting 65 mcm/d of gas. The $635mn project is fitted with four gas pressure booster stations.

IGAT-11: stretching from Assaluyeh to Naein and Mayami. It is 1,320 kilometers in length with a capacity of 110 mcm/d. It is fitted with 12 gas pressure booster stations.

IGAT-2: stretches from northwest of Parachin to Mayami and Sangbast. It is 900 kilometers in length and fitted with six gas pressure booster stations. It is estimated to cost $1.5 billion.

IGAT-3: covers Azarbaijan, Saveh, Hamedan, Bijar and Miandoab. It is 470 kilometers long and is fitted with three gas pressure booster stations. The $800 mn project is expected to become operational.

Iran's gas pipeline network is currently 37,000 kilometers long and is expected to go beyond 64,000 kilometers over a 10-year period. Under the current circumstances, 67 gas pressure booster stations are becoming operational. But by 2025, the number of booster stations is projected to reach 150.

Tehran-Jakarta to Broaden Oil Ties

Indonesia is a longtime buyer of Iran's liquefied petroleum gas (LPG) and crude oil. For the first time since the removal of sanctions on Iran, an Iranian oil tanker recently headed to Indonesia for the delivery of an oil cargo.

Indonesia's deputy minister of energy and mineral resources Arcandra Tahar and Indonesia's Pertamina upstream director Syamsu Alam met with Iran's Minister of Petroleum Bijan Zangeneh in Tehran in late February. They stressed the need for oil cooperation in the two sectors of crude oil and petroleum products trading and the Indonesians' possible contribution to the development of oil fields in Iran.

After the meeting in his office, Zangeneh told reporters that Iran and Indonesia had been broadening their relations particularly in the energy sector following the implementation of the Joint Comprehensive Plan of Action (JCPOA), the official name of Iran's nuclear deal with six world powers.

The Iranian minister said Indonesia was among big markets in Southeast Asia in crude oil and LPG, noting that this issue could not be ignored by producers of oil and oil products.

Zangeneh said Indonesia had started buying crude oil and LPG from Iran for the first time since the sanctions were lifted, adding that each phase of South Pars gas field could produce 500,000 tons of LPG to be exported.

Currently, more than 90% of Iran's population is covered by gas supply network; therefore, LPG is no longer profitable on domestic market. That indicates shift to exports.

Regarding the volume of oil Indonesia had purchased from Iran, Zangeneh said: "For the time being, Indonesia has not made any commitment about the volume of oil purchase. They have now imported a one-million-barrel cargo from Iran and as they say if they see it proper to their refineries they will keep purchasing from Iran."

"Although Indonesia is a producer it is a net importer of oil and LPG. Therefore, this country can be a new oil market for Iran," said the minister.

Indonesia Willing to Develop Iran Oil Fields

But the grounds for cooperation between Iran and Indonesia are not limited to the purchase of oil cargoes. Zangeneh said Iran was willing to see Indonesian companies contribute to the development of oil fields particularly in enhancing their recovery rate.

Recently, National Iranian Oil Company (NIOC) and Pertamina signed a memorandum of understanding to study development of two operating fields – Ab Teimour and Mansouri – in southern Iran. To that effect, Zangeneh said: "Pertamina has submitted its technical proposals on manner of enhancing the recovery rate and crude oil production capacity in these two fields along with initial estimates about costs based on data it has received from Iran."

A team of experts from Pertamina is expected to visit Iran in the near future, Zangeneh said, adding: "Until that time, Iran will be studying Pertamina's proposal for the development of Ab Teimour and Mansouri fields. After the conclusion of technical issues we will enter financial issues."

Pertamina Completes Studies

Gholam-Reza Manouchehri, deputy managing director of NIOC, who was also present in the meeting, told reporters that Pertamina had accepted to be involved in the development of oil fields in Iran under 20-year new-style oil contracts.

"Six months after signing the MoU and receiving information from National Iranian South Oil Company (NISOC), this Indonesian company conducted good studies on Ab Teimour and Mansouri fields and it has presented its pre-MDP in two books," he said.

According to this pre-master development plan, the number of wells in Mansouri field will rise from the current 81 to 365, while its recovery rate will jump to 14% from the current 2.35%.

Moreover, oil production will rise from the current 65,000 b/d to 365,000 b/d over a 13-year period.

Regarding the plan for the development of Ab Teimour field, Manouchehri said: "The number of wells in this field will increase from the current 50 to 257 and the field's total output which has now reached 334 million barrels will reach 1.696 billion barrels. The rate of recovery will rise from 2.27% to 12%."

In that event, oil production capacity in Ab Teimour field will reach 300,000 b/d, he said, adding that the field would have an output of 205,000 b/d during an eight-year period.

Manouchehri referred to the use of electric submersible pumps (ESP) for artificial lifting, downhole measures like acid fracturing and water injection as methods which Pertamina would apply to enhance the rate of recovery in Mansouri and Ab Teimour fields.

According to Manouchehri, Pertamina's technical and economic analysis including proposals for investment and operation costs about Ab Teimour and Mansouri fields would be assessed by NIOC, Reservoir Engineering Committee and Technical Review Committee.

"In the light of good relations between Tehran and Jakarta, in case these proposals turn out to be attractive, negotiations with Pertamina will continue," said Manouchehri.

He highlighted Pertamina's willingness to operate projects in Iran's upstream oil industry and its endowment with improved oil recovery (IOR) and enhanced oil recovery (EOR) technologies, saying: "All these issues encourage us to push ahead with our negotiations with Pertamina. But the final decision for signing an agreement lies with the Ministry of Petroleum and the government."

Manouchehri said even under new-style oil contracts, oil fields would be put out to tender.

"However, it is possible that we award one of these fields through negotiations," he said.

Foreign Firms Bidding for Ab Teimour, Mansouri

In addition to Pertamina, Russia's Lukoil has also signed an MoU with NIOC to conduct studies on the development of Ab Teimour and Mansouri fields.

"Therefore, in order to choose one or two international companies to develop these two fields there is a competitive environment," said Zangeneh.

He said that Denmark's Maersk has offered to develop Ab Teimour, adding: "We cannot tell companies that want to develop these fields to form partnership because their proposals are often basically different. Therefore, there must be competition."

Talks with Total Continue

Regarding claims by some foreign companies about slowed negotiations with Iran, Zangeneh said: "No company has slowed down the talks, but the French company Total has said it will make its final decision when the fate of contracts would be decided from the viewpoint of sanctions or the European Union's way of support."

He said that negotiations were still under way with Total for the development of Phase 11 of South Pars gas field.

"Of course Total is currently conducting preliminary activities for the construction of jacket and the platform jackups," he added.

Asked when Iran would hold a tender for oil projects, Zangeneh said: "The tender for Azadegan oil field has almost started, but our tenders are limited and they will not be public and we will invite only a limited number of companies."

Two Petchem Projects Come Online

 

Mahshahr Special Economic Petrochemical Zone houses 20 petrochemical plants with a total rated capacity of 26.3 million tons a year. This zone produces a variety of petrochemicals to be supplied on both domestic and foreign markets. Recently, the second phase of Karoun Petrochemical Plant and the first phase of Takht-e Jamshid Petrochemical Plant became operational in the presence of First Vice-President Es'haq Jahangiri, Minister of Petroleum Bijan Zangeneh and CEO of National Petrochemical Company (NPC) Marzieh Shahdaei. These new projects helped complete the value chain of petrochemicals and contributed to an increase in the earnings from exports.

In early February, Jahangiri, Zangeneh and Shahdaei inaugurated the two petrochemical projects which have been operated by the private sector.

 

Iran, Most Secure for Investment

 

Addressing the event, Jahangiri said Iran was the most secure country in the region for investment, adding that this issue was of great significance to investors.

Noting that petrochemical industry is among industries that prevent the sale of raw materials while creating the highest value-added for the country, he said: "Development of petrochemical industry is like a train pulling dozens of other sectors behind itself."

Jahangiri referred to Iran's export of 19 million tons of petrochemicals in the Iranian year to March 2016 for more than $12 billion, saying: "Currently, many foreign companies are interested in investing in Iran's petrochemical industry. At the present juncture, Iran could be a center for development."

He put Iran's investment capacity at several hundred billion dollars and said: "The operation of 12 petrochemical projects in the current calendar year was among top priorities in the country. A number of these projects have become operational and the rest will be inaugurated soon."

Jahangiri, who also visited some petrochemical plants at Mahshahr zone, said: "The petrochemical industry is benefitting from domestic capacities in the country in the real sense of the word. At Takht-e Jamshid Petchem Plant, the technical savvy applied to the project is totally domestic while most of equipment used in the facility has been manufactured domestically."

 

$6bn Income in 4 Years

 

Minister Zangeneh said the calendar year 1395 to March 2017 was an exceptional year for petrochemical industry because many petrochemical projects came on-stream. He said that enhanced petrochemical production in the country reinforced Iran's position, generated value-added and positively affected people's life.

Some of projects that have become operational this calendar year are as follows: linear polyethylene with a capacity of 330,000 tons, "Urmia" sulfuric acid with a capacity of 50,000 tons, "Mahabad" linear polyethylene with a capacity of 330,000 tons and "Marvdasht's Shohada" urea/ammoniac project with a capacity of 1.8 million tons.

Meantime, Phase 2 of Kavian Petrochemical Zone with a capacity of 1.1 million tons, Entekhab polystyrene with a capacity of 250,000 tons and Kurdistan low-density polyethylene with a capacity of 300,000 tons are ready to go online. Phase 3 of Pardis Petrochemical Plant with a capacity of 1.7 million tons of ammonia and urea and Kaveh methanol project with a capacity of 2.3 million tons are also set to become operational soon. Kaveh is the largest methanol project in the world.

Zangeneh pointed to Takht-e Jamshid polystyrene project with a capacity of 70,000 tons and Phase 2 of Karoun Petchem Plant, saying: "These projects are clear indicators of completion of production chain. By converting feedstock received from different units into products of higher value-added, they empower the country and serve other industries."

He said projects, with a capacity of 9 million tons, are expected to become operational before next presidential elections. The minister said that these projects would cost $5.5 billion.

Due to its investments in 1997 and 1998, Iran's petrochemical industry experienced a big jump in production and the value of its products has increased sharply from $1 billion to $20 billion a year over recent years.

Zangeneh said the same jump must take place now, adding: "In order to realize this objective, the value of petrochemical products has increased by around $6 billion over the past four years."

Iran's access to rich hydrocarbon reserves has provided the country with a major

a major advantage in the petrochemical industry in terms of supplying feedstock to these units. Meantime, over the past three years, Iran has seen its oil production and exports increase.

Zangeneh said Iran's Ministry of Petroleum was considering a plan to allocate a share of these fields' output to petrochemical plants in order to feed them.

"In the past, the petrochemicals' feedstock was a byproduct of [oil] fields, but today some fields are providing feedstock to petrochemical plants," he added.

The minister said assigning liquefied natural gas (LNG) projects to the private sector was one of approaches to accelerate petrochemical feedstock production and prevent the flaring of associated petroleum gas.

"NGL 3100, NGL 3200, NGL 2400 and Bidboland are all among the Ministry of Petroleum's plans for feeding petrochemical plants," he added.

 

70 Downstream Petchem Projects

 

Shahdaei, who is also deputy minister of petroleum for petrochemical affairs, said Iran's rated capacity of petrochemical production stood at 60 million tons a year after half a century of growth.

"Iran's share of major petrochemicals reached 2.3% in the world and 22.6% in the Middle East" in the calendar year to March 2016, she said.

According to Shahdaei, 20 petrochemical plants with a rated capacity of 26.3 million tons a year plus a company providing utility services in Mahshahr were producing a variety of petrochemicals.

She pointed to the two projects that were inaugurated at the ceremony, saying: "These projects have become operational in line with the completion of value chain, generation of more value-added and preventing sale of raw materials."

Shahdaei said planning to offer products of higher value-added was one of approaches of Iran's petrochemical industry, adding: "The products of [the projects] that were operated are used mainly in making tires, cable and wire cover. I hope that implementation of these projects would help make downstream industries prosperous in order to help increase the country's exports."

Regarding future plans of NPC in Mahshahr, she said: "Currently 22 mid-stream, upstream and downstream petrochemical projects are under way in the zone with a capacity of around 1.5 million tons and an investment of $1.3 billion. That will help create 2,500 direct and 4,700 indirect jobs, to be added to the current 30,000 jobs."

According to Shahdaei, plans for upstream industries envisage implementation of seven projects in Mahshahr with a capacity of 5.5 million tons and investment of $4.5 billion. She added that these figures could increase with more feedstock and demand for more investment.

Shahdaei said feasibility studies are under way on 70 projects with an investment of around IRR 5,000 billion to be offered to potential investors. So far, she added, 14 memorandums of understanding have been signed between Mahshahr special zone and companies willing for investment. Five of them have been turned into contracts.

 

Mideast's 1st MDI Production

 

Karoun Petrochemical Plant has for the first time managed to produce two sophisticated products: Toluene Diisocyanate (TDI) and Methylene Diphenyl Diisocyanate (MDI). The first phase of this plant was launched in cooperation with a Swedish company several years ago to produce 40,000 tons of TDI. The second phase of this plant has now become operational to produce 40,000 tons a year of MDI. The product (MDI) is being supplied for the first time in the Middle East and West Asia. Its commercial production is expected to start next calendar year.

MDI is used for different purposes. It is the raw material for flexible and inflexible sponges. It is also used in different industries like upholstery, chair making, car production, thermal industries, insulation, hard foam and sponge, refrigerator parts, shoe industry, etc.

A total of 350 million euros has been invested in designing, building and launching both phases of Karoun Petrochemical Plant. Furthermore, the second phase of this plant has been launched largely without the presence of foreign experts.

Companies like Royal Dutch Shell and BASF are among the most important rivals of Iran in the MDI and TDI markets. Many Asian countries, particularly in the Middle East and West Asia, and several European, African and American countries are among buyers of Karoun's products. Some of them are Italy, Germany, Sweden, Russia, Greece, India, Turkey, Pakistan, Iraq, Kenya, Nigeria and Peru.

Ali-Reza Seddiqizadeh, CEO of Karoun Petrochemical Plant, has said that domestic manufacturing of these products would save the country $300 million every year.

 

Knowhow Indigenized

Takht-e Jamshid Petrochemical Plant is a polymer project which is being developed in two phases by receiving such feedstock as butadiene and styrene from other petrochemical plants. The first phase of this plant was launched on a trial basis in July 2014 and has now become operational with a production capacity of 70,000 tons a year.

The main products supplied in the first phase of this project are styrene butadiene rubber (SBR) and polybutadiene rubber (PBR), which are widely used in tire industry, part manufacturing and shoemaking.

Implementation of this phase has cost $100 million plus IRR 4,000 billion. Furthermore, 90% of equipment used in this part of Takht-e Jamshid Petrochemical Plant is domestically manufactured and the job has been done without any foreign company involved.

Takht-e Jamshid is currently exporting SBR and PBR to China, Turkey, India, Malaysia, Thailand, Pakistan and several European countries. Asia still remains the main destination of products of this plant.

The second phase of this project has a capacity of 80,000 tons a year. It has two PBR units plus a solvent production unit. The investment made in this phase equals that of the first phase.

Parviz Hamidi, CEO of Takht-e Jamshid Petrochemical Plant, said that the technical savvy applied to the second phase of this project has been indigenized. He added that this plant has been developed without contribution of any foreign consultant.

Mahshahr Special Economic Petrochemical Zone, located in southern Iran, has an area of 2,600 ha. Upstream, mid-stream and downstream plants as well as five petrochemical sites measuring 12 kilometers in length are located in this zone. Given Iran's development plans for boosting petrochemical production, development of the Mahshahr zone is under study.

China to Lift Abadan Refinery Output

Iran’s petroleum industry history is intertwined with Abadan oil refinery. It is the oldest treatment facility in Iran with a history dating from a century. Over recent years, due to some certain reasons, this refinery which used to be the hub of Iran’s oil refining industry is no longer profitable. Therefore, the Iranian Ministry of Petroleum has signed an agreement for boosting the production capacity of Abadan refinery with the objective of profitability, standardization of products and stabilizing the refinery’s capacity through setting up new sections to replace older ones. In this regard, a consortium comprising China’s Sinopec and Iran’s Oil Design and Construction Company (ODCC) was set up in a step towards renovation of this refinery thanks to the implementation of Iran’s nuclear agreement with six world powers, known as the Joint Comprehensive Plan of Action (JCPOA).

The operation for boosting the capacity of Abadan refinery started in early February in the presence of Es’haq Jahangiri, Iran’s first vice-president, and Bijan Zangeneh, minister of petroleum.

Based on its financing sources, this project has been defined in two phases. The letter of credit (LC) for the first phase of the project was opened in February and the LC for the second phase is expected to be opened next Iranian year which starts in March.

Addressing the ceremony, Jahangiri said China would contribute to increasing the refinery’s production capacity, adding: “I hope that this project would turn into the symbol of Iran-China cooperation.”

Jahangiri underscored the significance of picking qualified foreign partners to operate the projects. Referring to an agreement signed between Iranian and Chinese presidents for strategic cooperation, he said: “Establishment of strategic relations between Iran and China is a serious issue and economic relations between the two sides have been expanding even post-JCPOA.”

He said that development and renovation of Abadan refinery was high on the agenda ever since the administration of President Hassan Rouhani took office because this refinery is the symbol of industrialization of Iran. At a time life in Iran was traditional, he added, Abadan was the center of entry of new industries and technology into Iran.

Stressing that Abadan refinery must be equipped with state-of-the-art technologies, Jahangiri said: “Investment in this project is a big figure and many foreign parties are willing to invest in such major projects.”

$2.7bn Investment

Zangeneh said some products of Abadan refinery are of low value and 40% of crude oil fed into this refinery is converted into fuel oil which is sold at a price much lower than crude oil.

“Based on this $2.7-billion contract between Iran and China, in the first phase of the plan for Abadan oil refinery output development, construction of a modern unit with a refining capacity of 210,000 b/d will be implemented,” he said.

Zangeneh said the Chinese company is tasked with financing the project, adding: “The 210,000 b/d capacity which is to be created based on this contract will be added to the current 150,000-barrel capacity of new units at the Abadan refinery. In other words, after completion of this project we will have a modern refinery with a capacity of 360,000 barrels.”

“In the new refinery, products of high quality will be produced. Production of gasoline and jet fuel will increase, while fuel oil production will decline. Abadan refinery will turn from a loss-making refinery into a profitable refinery. Meantime, job creation particularly for local residents of this region is another advantage of this project,” he added.

Zangeneh said that after the implementation of the second phase of the aforesaid project, fuel oil production would sharply decline at the refinery and lighter products like gasoline and gasoil of standardized quality will replace it.

The minister said the Ministry of Petroleum’s main approach was to increase oil product exports, adding: “Given the supply of the bulk of the country’s energy need through gas, our main approach is to raise oil product exports.”

Zangeneh said Iran’s sixth five-year economic development plan envisages a refining capacity of over 3 mb/d, adding that Persian Gulf Star Refinery would account for 360,000 b/d and Siraf refining park for 1.7 mb/d.

He cited Shiraz, Jask and Anhita refineries as other treatment facilities which are expected to contribute to increasing the country’s refining capacity to 3 mb/d.

The project for the development and stability of Abadan refinery’s capacity is aimed at stabilizing the refining capacity of Abadan refinery, supplying products based on euro-5 standard, reducing environmental pollutants, increasing the percentage of gasoil and gasoline production by improving production technology, reducing fuel oil production and phasing out decrepit storage tanks and installations.

Abadan refinery has currently a refining capacity of 400,000 b/d of crude oil, 250,000 b/d of which is refined in three distillation units which are more than 70 years old.

Since the technology and equipment are outdated, these three distillation units are of very low efficiency, while operations are high-risk and overhaul costs too much. Under the new project a distillation unit with a capacity of 210,000 b/d will replace older distillation units.

Since a new distillation unit was launched in 2006 with a capacity of 150,000 b/d, the total refining capacity was stabilized at 360,000 b/d.

All products acquired from the 360,000 b/d capacity will be refined at hydrogen treatment units.

 

South Africa Willing to Build GTL Plant in Iran

South Africa's minister of energy has expressed her country's willingness to help build a gas-to-liquid (GTL) plant in Iran.

Tina Joemat-Pettersson, who met with Iran's Minister of Petroleum Bijan Zangeneh in Tehran on March 4, said South Africa would like to buy crude oil and petroleum products from Iran.

Joemat-Pettersson headed a delegation to Tehran ahead of Iranian President Hassan Rouhani's planned visit to South Africa.

She discussed with Zangeneh investment by South African companies in Iran.

After their meeting, Zangeneh said: "In case there is will in Pretoria, purchase of cargoes of crude oil and oil products could come to fruition sooner than other affairs because South Africa meets all its needs through imports."

He said that South Africa may need to import 100,000 b/d of crude oil.

Noting that South Africa is willing to provide its required crude oil via its state-run oil firm, Zangeneh said: "South Africa must use the oil purchased from Iran where it would not be subject to decision-making by foreign companies."

He said that South Africa's PetroSA and Iran's National Petrochemical Company (NPC) had held direct talks.

"South Africa owns GTL technology and we held talks with them to that effect in previous years, but due to lack of agreement on the price of gas we failed to reach any conclusion," said Zangeneh.

"In case of agreement on the price, we are willing to cooperate. If there is a favorable perspective for investment it will be possible for Iranian companies to build partnership with them, and we will supply them their required gas at an agreed price," he added.

Joemat-Pettersson also met with NPC managing director Marzieh Shahdaei and spoke about South Africa's potentialities for cooperation with Iran in the petrochemical industry.

On the sidelines of the meeting, Shahdaei said: "Fruitful talks were held on investment and the South African private sector's cooperation with Iran's petrochemical industry. We talked about construction of a GTL unit by this country."

"Earlier, [Iran's] Research Institute of Petroleum Industry and a South African company had reached agreement about the construction of a GTL unit,and studies had started for building such a unit, and today it was agreed to finalize the [plan for the] construction of the unit utilizing the technology of the South African company and to draw up a draft agreement," she added.

For her part, Joemat-Pettersson expressed hope that Iran and South Africa would sign an agreement for GTL plant construction during President Rouhani's future visit to South Africa.

She said South Africa's private companies were willing to cooperate with Iran and conduct joint venture deals with Iran's private entities.

IOOC Starts Installing Cyrus FPSO

The managing director of Iranian Offshore Oil Co. (IOOC) has announced the start of operation to install CYRUS Floating Production, Storage and Offloading Vessel (CYRUS FPSO) in the South Pars oil layer.

"As soon as the vessel is anchored to the seabed, the unit will start extracting hydrocarbon from subsea wells via pipelines," Hamid Bovard said.

FPSOs is a ship-shaped vessel, with processing equipment aboard the vessel's deck as well as hydrocarbon storage units. After processing, an FPSO stores oil or gas before offloading periodically to shuttle tankers or transmitting processed petroleum via pipelines.

According to Bovard, FPSOs can be disconnected from their moorings, thus they are optimal for areas that experience adverse weather conditions. One of the main advantages of an FPSO is in deep waters where laying a pipeline is usually not cost effective or even practical.

"Several wells have been drilled in the oil layer of South Pars and grounds are ready to extract crude oil from the jointly owned field," he said, noting that 25,000 b/d to 30,000 b/d of oil would be produced in the first production phase.

"It is expected that connecting the wells to the vessel via pipelines would take one month and as soon as the piping operation is complete, extraction will begin."

Bovard said the oil layer of South Pars contained more than 14 billion barrels of oil in place.

"The start of production from the oil layer of South Pars is of significance from several aspects, most importantly because of competition with the Qatari rival," he said.

Bovard said the FPSO lacked gears, which make its docking difficult. However, he added, IOOC staff could handle it with precision.

Countdown in Persian Gulf Star Refinery

 

Mohammad-Hossein Peyvandi, CEO of Tamin Petroleum & Petrochemical Investment Co. (TAPPICO) has said that Persian Gulf Star Refinery is set to come on-stream in March.

He referred to Minister of Petroleum Bijan Zangeneh’s efforts made for the completion of the refinery, saying: “We hope that the first phase of this refinery will start producing gasoline by the end of this [calendar] year and the second and third phases will be completed by the end of the [calendar] year 1396 (in March 2018).”

Peyvandi highlighted TAPPICO’s 49% share in the giant project, saying once this national project has come online, Iran will become self-sufficient in euro-grade gasoline production.

He added that the products of this project would first help meet domestic needs before entering foreign markets in two years’ time from now.

Peyvandi went on to say that Marjan methanol project would be completed next calendar year, adding: “By operating this project, some 500,000 tons will be added to the production capacity of this company.”

He said that Ilam petrochemical project would come online in March or April 2018, adding that TAPPICO would see its production capacity increase significantly in one year.

Peyvandi said construction of Fanavaran petroolefin and Siraf petroolefin projects would start simultaneously.

“Having enough feedstock – including one million tons from Fanavaran methanol and 500,000 tons from Marjan petrochemical plant – TAPPICO is fully ready to operate the second phase of Fanavaran petroolefin project to convert methanol to propylene with a view to boosting the country’s propylene production capacity,” he said.  TAPPICO possesses a 60% share in Fanavaran petroolefin project in Mahshahr.

Regarding the production process in Siraf petroolefin project, he said this project would be designed so that naphtha would be directly inserted into olefin furnace for polyolefin production or conversion of naphtha to euro-5 gasoline.

“With the implementation of Fanavaran petroolefin project, 5.3 million tons will be added to the country’s methanol production capacity over two coming years and the country’s methanol production will rise to 10 million tons,” said Peyvandi.

25 Studies Submitted to NIOC

A deputy head of National Iranian Oil Company (NIOC) has said that foreign companies have started submitting the results of their studies on Iranian oil and gas fields to this company.

"NIOC has so far received the results of 25 studies conducted by the relevant international companies," Gholam-Reza Manouchehri said.

Addressing Iran-Norway conference on upstream oil and gas technology and development cooperation, he said Norwegian oil companies can cooperate with Iran’s oil industry in various areas including investment, and implementing methods of enhanced oil recovery (EOR) and improved oil recovery (IOR).

Manouchehri said Iran's nuclear deal with six world powers created appropriate conditions for international companies to get involved in Iran's oil industry.

"We have had good negotiations with oil companies in Europe, China, Russia and East Asia in the upstream oil sector," he added.

"We do not want to be merely a buyer of foreign commodities and equipment," said Manouchehri.

Reiterating NIOC's intention to transfer cutting edge technologies into the country, he said: "Manufacturing equipment jointly [with Norway] could be also on the agenda."

Manouchehri said after the nuclear deal took effect in January 2016, international companies, including Norwegians, voiced readiness to operate offshore drilling, ECP and equipment manufacturing projects in Iran.

He cited South Azadegan, oil layer of South Pars, Phase 3 of Darkhoein, Sohrab, Band Karkheh and Arvand as examples of such opportunities for investme

Azadegan Tender to Include North and South Sections

Azadegan oil field is to be put out to tender for development in an integrated form which will include both its northern and southern sections, a senior official said.

Nouroddin Shahnazizadeh, CEO of Petroleum Engineering and Development Company (PEDEC), said the integrated tender for Azadegan would be held in the near future within the framework of new-style oil contracts.

He said that five memorandums of understanding had been signed with Iranian and foreign companies for the development of this field.

"National Iranian Oil Company has signed MoUs with Japan's Inpex, France's Total, Malaysia' Petronas, [Royal Dutch] Shell and Iran's Toseh Energy Naft Novin Afagh Kish Company. The results of studies conducted by Inpex and Total have been submitted," he said.

Shahnazizadeh said South Azadegan's output would reach 85,000 b/d by March, up from the current 51,000 b/d. He added that Azadegan would be producing 110,000 b/d of oil by May.

Regarding the second phase of development of Yadavaran oil field, he said: "Iran is currently recovering 115,000 b/d of oil from Yadavaran and the second phase of this field will be put to tender."

Shahnazizadeh said production from oil fields located in the West Karoun area would exceed 300,000 b/d by March. He broke down the figure as follows: South Azadegan (85,000 b/d), North Azadegan (75,000 b/d), North Yaran (30,000 b/d) and Yadavaran (115,000 b/d).

He said that Azar oil field, a jointly owned reservoir, would start supplying 15,000 b/d in March, which would reach 30,000 b/d in May and 65,000 b/d in 2018.

"Therefore, we will be recovering 320,000 b/d from jointly owned oil fields" by March, said Shahnazizadeh.

He said that plans were under way to recover 25,000 b/d of oil from South Yaran oil field, adding: "In the first stage, 10,000 b/d will be extracted from this field."

"Given an output hike of 15,000 b/d from Azar field, 25,000 b/d from South Azadegan field and 10,000 b/d from South Yaran field, total oil production from Azadegan, Yaran, Yadavaran and Azar will reach 370,000 b/d next spring," said Shahnazizadeh.

 

13 Oil/Gas Finds

With the discovery of 11 gas fields and two gas reservoirs as well as 10 oil fields and two oil reservoirs since 2011, Iran's hydrocarbon reserves have increased 30 billion barrels in place, while the country's gas reserves have increased 128 tcf in place. Furthermore, discovery of 30 billion barrels of oil and 70 tcf of gas in place is envisaged in Iran's 6th Five-Year Economic Development Plan.

Whereas Iran is rich in hydrocarbon reserves, exploration activities never stop in the country. That is because of these exploration activities that Iran has become the top holder of hydrocarbon reserves in the world. According to the latest statistics, 1,140.2 billion barrels of oil equivalent (boe) in Iran includes oil, gas, liquids and gas condensate. Of this, 345.52 billion barrels are recoverable. However, an important point that must be taken into consideration is that exploration, which is the first step in upstream activities, takes time and that is why figures about exploration are announced on the long-term.

Saleh Hendi, director of exploration at NIOC, said recently that the chance of success in exploration wells in Iran is 60%. "Despite the growth and development of technology in the world, the rate of success in exploration wells in the world is on average 30%."

In other words, of every three wells spudded in Iran, two wells prove to contain oil or gas.

However, Hendi, said the success of a well did not necessarily mean that recovery from that well would be economical.

Chief among other indices of examining the rate of success in exploration activities is the replacement coefficient that could help explain to what extent the new explorations could replace oil and gas recovered in the country over a certain period. The figure considered in this context is the amount of recoverable hydrocarbon reserves and not reserves in place.

"Based on the aforesaid index, explorations in the oil sector in the 5th Development Plan equal 80% of total oil recovered over this time. Moreover, something like 190% of total gas recovered over these years has been registered as new gas discoveries," said Hendi.

He maintained that in the future the chance of making gas finds in Iran would be higher than finding oil. New reservoirs in already discovered hydrocarbon fields after drilling extension wells are announced as new discoveries.

 

Latest H/C Reserves in Iran

 

Since 2011, 11 gas fields and two gas reservoirs as well as 10 oil fields and two oil reservoirs have been discovered. After drilling extension wells in some old fields, the country's in-situ oil and gas reserves have increased. Drilling extension wells in four oil fields has resulted in a big increase in the in-place deposits of these fields.

Hendi said discovery of 30 billion barrels of oil in place as well as 70 tcf of in-place gas was envisaged in the 6th Five-Year Economic Development Plan.

"Over this period, by drilling 37 exploration and extension wells, more than 30 billion barrels of oil in place has been discovered, 4.7 billion barrels of which is recoverable. In the gas section, 128 tcf of gas has been discovered, 83.8 tcf of which is recoverable," he added.

 

5 New Fields

 

Hendi said that the new oil and gas discoveries have added 6.5 billion barrels to Iran's oil in place and 62.5 tcf to the country's gas in place.

He went on to introduce five fields discovered under the administration of President Hassan Rouhani, saying: "Pazan gas field with gas reserves of 19.05 tcf in place and condensate reserves of 436 million

in place contains high-quality gas."

  Pazan which is 65 kilometers north of Assaluyeh  located 170 kilometers south of Shiraz in Fars Province was discovered in 2015. Technical experts at NIOC Exploration Directorate believe that drilling a single well in the northwestern section of this field and other horizons will significantly boost the field's total deposits. That is why an extension well is planned to be spudded.

The second field referred to by Hendi was Khartanak which holds 164.4 tcf of gas in place plus 261 million barrels of gas condensate.

Drilling in Khartanak field ended in 2013. This field is situated 120 kilometers east of Bushehr in southern Iran and 60 kilometers east of Khour Mowj. Given the magnitude of this field, more extension wells are likely to be drilled in this field in the future.

Hendi also mentioned Charak as the third gas field discovered under the Rouhani administration.

He said the field held 17.38 tcf of gas in place and 174 million barrels of condensate in place.

Geologically speaking, Charak is located in Fars Province, but according to administrative division it belongs to Hormuzgan Province. Among the advantages of this field are its situation in the vicinity of sea and north of Charak Port.

The fourth field described by Hendi was Yadman which holds 2.8 billion barrels of oil in place.

Yadman is a border reservoir located in Abadan Plain. Located 65 kilometers west of the oil-rich city of Ahvaz, Yadman is a stratigraphic trap.

The fifth one was South Sepehr oil field with 2.2 billion barrels of oil in place. Discovered in 2015in Abadan Plain, it is located 65 kilometers from Ahvaz. Like Yadman, it is also in the group of stratigraphic traps.

Of course, Farzad A, Sepand, Yadavaran, Sepehr, Sohrab, Dehloran, Azadegan, Soumar, Delavaran, Mehr, Saman, Bistoun and Khosro are among reservoirs whose deposits are known to have increased, leading to a jump in the country's oil and gas reserve estimates.

40 Offshore/Onshore Wells

Hendi also talked about exploration plans under Iran's 6th Five-Year Plan, saying: "It has been decided that during this plan, 35 onshore wells and five offshore wells be drilled in the Persian Gulf."

He added that over the same period 7,000 square kilometers would undergo 2D seismic test and 6,000 square kilometers would be put to 3D seismic test.

The NIOC Exploration Directorate currently owns 6 onshore and 1 offshore drilling rigs.

Hendi said that the Directorate of Exploration had promised the discovery of 30 billion barrels of oil in place as well as 70 tcf of gas during the Sixth Development Plan.

Exploration Priorities

NIOC Exploration Directorate used to fulfil its obligations based on its assignments. But pursuant to an instruction by Minister of Petroleum Bijan Zangeneh, this Directorate carries out its activities based on projects. In other words, the place of exploration and the category of exploration are prioritized over the volume of oil and gas exploration.

To that effect, Hendi said: "Exploration drillings in five sedimentary areas of Iran are among priorities of the Directorate of Exploration."

He named prioritized areas as Persian Gulf with priority given to oil exploration, Abadan Plain with priority given to oil exploration in the southern section, Kopeh Dagh for gas exploration in northeastern Iran and North Dezful and South Dezful with focus on gas exploration for injection into oil fields as well as jointly owned hydrocarbon fields in western Iran.

"Of course this prioritization does not mean sidelining basic exploration activities in other areas in the country. Rather, it means that exploration well drilling will be focused on in the aforesaid areas," said Hendi.

80% Progress in Shale Gas Discovery

Hendi also referred to projects pertaining to unconventional oil and gas reserves, saying: "Currently, activities in this sector are limited to study and identification. Identification of shale oil deposits in Kavir Kouh and Qali Kouh are over, gas hydrate identification in the Sea of Oman is set to enter its second phase soon, while gas shale identification project is 80% complete."

He said that the contract for the second phase of studying gas hydrates of the Sea of Oman is to be signed soon.

Gas hydrate resources are found in the sea sediments and at a depth of more than 2,000 meters. The first phase of this project yielded good results about the existence of gas hydrates in the sea.

"In light of estimates on the volume of gas hydrates in the Sea of Oman, drilling one well in Oman's deep waters in coming years could help increase information about resources existing in this region," said Hendi.

Iran has conducted various activities with regard to shale oil and gas identification in the western province of Lorestan and it has reached hopeful results. However, studies have been the only activity to have been done with regard to unconventional resources.

Hendi said shale oil extraction costs too much, adding: "Under the current circumstances, this issue is not economically justified."

Regarding exploration potential in northern Iran, he said: "It is more likely to find hydrocarbon resources in northeast towards Gorgan and Koppeh Dagh plains than in other northern regions. Furthermore, given the existence of known oil reserves in Moghan area, development activities for this region must top the agenda in the future."

Cooperation with Int'l Firms

The activities of NIOC Directorate of Exploration also include joint studies with universities and international companies. In certain cases, the companies have shown willingness to conduct studies on their own on certain areas of Iran in a bid to know about the geology of Iran. Hendi said memorandums of understanding had been signed between the NIOC Directorate of Exploration and foreign companies for such activities.

He cited Austria's OMV, Russia's Lukoil, University of Barcelona and Italy's Naples University as parties to agreements.

"Recently we have held talks with a European company and Malaysia's Petronas. We will soon start two joint studies in cooperation with these companies about analysis of sedimentary areas and oil systems," said Hendi.

He said among joint studies to be carried out between NIOC Directorate of Exploration and international universities and companies include two studies that would examine reservoirs located near salt domes.

Hendi said a new approach pursued by NIOC Exploration Directorate was to study stratigraphic traps, adding: "We have taken into consideration the issue of risk analysis in all sectors and we are determined to have close cooperation with operating companies."

in place contains high-quality gas."

  Pazan which is 65 kilometers north of Assaluyeh  located 170 kilometers south of Shiraz in Fars Province was discovered in 2015. Technical experts at NIOC Exploration Directorate believe that drilling a single well in the northwestern section of this field and other horizons will significantly boost the field's total deposits. That is why an extension well is planned to be spudded.

The second field referred to by Hendi was Khartanak which holds 164.4 tcf of gas in place plus 261 million barrels of gas condensate.

Drilling in Khartanak field ended in 2013. This field is situated 120 kilometers east of Bushehr in southern Iran and 60 kilometers east of Khour Mowj. Given the magnitude of this field, more extension wells are likely to be drilled in this field in the future.

Hendi also mentioned Charak as the third gas field discovered under the Rouhani administration.

He said the field held 17.38 tcf of gas in place and 174 million barrels of condensate in place.

Geologically speaking, Charak is located in Fars Province, but according to administrative division it belongs to Hormuzgan Province. Among the advantages of this field are its situation in the vicinity of sea and north of Charak Port.

The fourth field described by Hendi was Yadman which holds 2.8 billion barrels of oil in place.

Yadman is a border reservoir located in Abadan Plain. Located 65 kilometers west of the oil-rich city of Ahvaz, Yadman is a stratigraphic trap.

The fifth one was South Sepehr oil field with 2.2 billion barrels of oil in place. Discovered in 2015in Abadan Plain, it is located 65 kilometers from Ahvaz. Like Yadman, it is also in the group of stratigraphic traps.

Of course, Farzad A, Sepand, Yadavaran, Sepehr, Sohrab, Dehloran, Azadegan, Soumar, Delavaran, Mehr, Saman, Bistoun and Khosro are among reservoirs whose deposits are known to have increased, leading to a jump in the country's oil and gas reserve estimates.

 

40 Offshore/Onshore Wells

 

Hendi also talked about exploration plans under Iran's 6th Five-Year Plan, saying: "It has been decided that during this plan, 35 onshore wells and five offshore wells be drilled in the Persian Gulf."

He added that over the same period 7,000 square kilometers would undergo 2D seismic test and 6,000 square kilometers would be put to 3D seismic test.

The NIOC Exploration Directorate currently owns 6 onshore and 1 offshore drilling rigs.

Hendi said that the Directorate of Exploration had promised the discovery of 30 billion barrels of oil in place as well as 70 tcf of gas during the Sixth Development Plan.

 

Exploration Priorities

 

NIOC Exploration Directorate used to fulfil its obligations based on its assignments. But pursuant to an instruction by Minister of Petroleum Bijan Zangeneh, this Directorate carries out its activities based on projects. In other words, the place of exploration and the category of exploration are prioritized over the volume of oil and gas exploration.

To that effect, Hendi said: "Exploration drillings in five sedimentary areas of Iran are among priorities of the Directorate of Exploration."

He named prioritized areas as Persian Gulf with priority given to oil exploration, Abadan Plain with priority given to oil exploration in the southern section, Kopeh Dagh for gas exploration in northeastern Iran and North Dezful and South Dezful with focus on gas exploration for injection into oil fields as well as jointly owned hydrocarbon fields in western Iran.

"Of course this prioritization does not mean sidelining basic exploration activities in other areas in the country. Rather, it means that exploration well drilling will be focused on in the aforesaid areas," said Hendi.

 

80% Progress in Shale Gas Discovery

 

Hendi also referred to projects pertaining to unconventional oil and gas reserves, saying: "Currently, activities in this sector are limited to study and identification. Identification of shale oil deposits in Kavir Kouh and Qali Kouh are over, gas hydrate identification in the Sea of Oman is set to enter its second phase soon, while gas shale identification project is 80% complete."

He said that the contract for the second phase of studying gas hydrates of the Sea of Oman is to be signed soon.

Gas hydrate resources are found in the sea sediments and at a depth of more than 2,000 meters. The first phase of this project yielded good results about the existence of gas hydrates in the sea.

"In light of estimates on the volume of gas hydrates in the Sea of Oman, drilling one well in Oman's deep waters in coming years could help increase information about resources existing in this region," said Hendi.

Iran has conducted various activities with regard to shale oil and gas identification in the western province of Lorestan and it has reached hopeful results. However, studies have been the only activity to have been done with regard to unconventional resources.

Hendi said shale oil extraction costs too much, adding: "Under the current circumstances, this issue is not economically justified."

Regarding exploration potential in northern Iran, he said: "It is more likely to find hydrocarbon resources in northeast towards Gorgan and Koppeh Dagh plains than in other northern regions. Furthermore, given the existence of known oil reserves in Moghan area, development activities for this region must top the agenda in the future."

 

Cooperation with Int'l Firms

 

The activities of NIOC Directorate of Exploration also include joint studies with universities and international companies. In certain cases, the companies have shown willingness to conduct studies on their own on certain areas of Iran in a bid to know about the geology of Iran. Hendi said memorandums of understanding had been signed between the NIOC Directorate of Exploration and foreign companies for such activities.

He cited Austria's OMV, Russia's Lukoil, University of Barcelona and Italy's Naples University as parties to agreements.

"Recently we have held talks with a European company and Malaysia's Petronas. We will soon start two joint studies in cooperation with these companies about analysis of sedimentary areas and oil systems," said Hendi.

He said among joint studies to be carried out between NIOC Directorate of Exploration and international universities and companies include two studies that would examine reservoirs located near salt domes.

Hendi said a new approach pursued by NIOC Exploration Directorate was to study stratigraphic traps, adding: "We have taken into consideration the issue of risk analysis in all sectors and we are determined to have close cooperation with operating companies."

South Pars Output at 500mcm/d

Until 2013, Iran was recovering only 280 mcm/d of gas from South Pars gas field which it shares with Qatar in the Persian Gulf. After three years, this output has surpassed 500 mcm/d. The giant reservoir will see its output grow a further 150 mcm/d after six more phases – 17, 18, 19, 20 and 21 – would become operational. Then Iran will be outperforming Qatar.

In order to know more about South Pars gas production, "Iran Petroleum" has conducted an interview with Mohammad Meshkinfam, CEO of Pars Oil and Gas Company (POGC) which administers South Pars.

 

Q: Since start of work at South Pars up to 2013, we have seen 10 phases come online. But over the past three years, each year one phase has come on-stream. How come these development phases are coming online after a 10-year hiatus?

A: First of all, I would like to mention that Phase 11 became operational under the 11th administration, while production from South Pars had not exceeded 280 mcm/d before 2013. No other project had come online. Iran's oil industry faced tough sanctions in 2010 and due to mismanagement and simultaneous implementation of several projects and engagement of all contractors; the South Pars development was disrupted. Meantime, procurement of commodities turned into one of our main challenges due to sanctions. But policies adopted under Minister Zangeneh at the Ministry of Petroleum for prioritizing projects and allocation of resources to projects with a higher degree of progress resulted in the materialization of this plan. Megaprojects in South Pars came on-stream one after another against the backdrop of gas consumption overweighing gas production. In the absence of South Pars development phases we would have definitely faced many difficulties.

Without exaggeration, South Pars has regained its prosperity. When the 11th administration took office, 280 mcm/d of gas was being recovered from 10 phases of South Pars. But after three years we have managed to bring the recovery capacity of this field to more than 500 mcm/d and inject 480 mcm/d from this field into national gas network. Pars Oil and Gas Company is currently supplying over 60% of Iran's gas. In other words, each phase is serving a province in the country in terms of gas supply. Until three years ago, we were facing serious gas shortages in winter. But since then, we have not faced any gas cut even with the expansion of gas supply network in the country and Turkmenistan halting gas supply to Iran. After several other phases of South Pars, i.e.  phases 17-18, 19-20 and 21 come online, 150 mcm/d will be added to the South Pars gas production capacity. Then we can claim that Iran is outdoing Qatar in gas recovery [from the field they share].

Q: What happened in the management of projects to give rise to a two-fold increase in the production capacity of this joint field?

A: Experience and efficacy are of high significance in management. Without a powerful management of projects and an all-out view of development of megaprojects like South Pars we would have definitely not seen such development. In fact, I believe that a qualified client can save the project. But an incompetent client who does not know how to manage a project will push the project towards debacle. We were totally disappointed with phases 17 and 18 of South Pars because the client and the contractor were not fully aware of the issue. There was no idea and no real planning to be acceptable by the client and the contractor. But since 2013, a cohesive management structure took shape at the Ministry of Petroleum, NIOC and POGC in order to deal with the South Pars projects. That was when projects started coming online one after another.

 

Q: How effective were the sanctions on the implementation of projects?

A: There is no doubt that the sanctions led to numerous problems for the procurement of commodities needed for the implementation of projects because we had to purchase some equipment via intermediaries and even at much higher prices. That increased the price of implementation of projects for us and prolonged implementation. That is the case while the contract for phases 17 and 18 of South Pars was signed in 2006 and this phase was to become operational before international sanctions were imposed. We could finish phases 12, 15, 16, 17 and 18 before the sanctions were imposed, but implementation of these projects was delayed due to the absence of cohesive management and when the 11th administration prioritized the implementation of these projects financial shortcomings and subsequently shortage of commodities and equipment was resolved. Undoubtedly, management of South Pars should be dynamic due to Iran's special conditions in the region. But that was not the case at that time; therefore, a heavy financial burden was imposed on the country. That widened the distance between us and the Qataris in terms of recovery from this field. Even European countries did not imagine that we, Iranians, would be able to implement megaprojects in South Pars because they know quite well the difficulty of implementation of these projects. However, we did so.

 

Q: How did the JCPOA implementation affect the projects?

A: Thanks to the JCPOA implementation, we had no longer to receive our needed commodities through intermediaries. Moreover, the problem regarding commodities that had been purchased in the past but were blocked due to sanctions was also resolved. Commodity procurement plays a fundamental role in the implementation of oil projects specifically because some of commodities need to be installed before others and coincidentally these basic commodities had been blacklisted. Imagine that we had paid for propane refrigeration compressors to be installed at refineries, but importing them coincided with the imposition of sanctions. This equipment was blocked for six years, but today we have them. I can say that the way has been cleared after the JCPOA implementation.

 

Q: How has the presence of contractors in South Pars affected their capabilities?

A: Twenty years ago, when Iranian contractors started their work in South Pars they were facing incredible difficulties for launching offshore and onshore projects. In many cases, even the implementation of Phase 1 of South Pars by Iranian contractors was more of a dream. But today you can see that our contractors are easily active in the offshore sector of all activities, ranging from the construction of gas platforms for South Pars to offshore installation, implementation and pipe-laying. Today Iranian companies can easily launch a subsea 2,500-km-long pipeline without any concern. Domestic contractors gained valuable experiences during years of sanctions and today they are able to carry out $5 billion projects in South Pars. Implementation of projects in South Pars gas field has boosted the level of activity of Iranian contractors and placed them among the small group of contractors capable of conducting such megaprojects. Of course they need to upgrade themselves in other sectors like transfer of technology and project management. That would be possible by picking innovative foreign consultants.

 

Q: Many South Pars contractors are currently worried about their own future because all development phases have been finalized and no more contracts are to be signed for South Pars.

A: As you now, except for Phase 11 and part of Phase 14, all other phases of South Pars will come online by March 2018. But we have many development projects at South Pars. Construction of gas pressure booster platforms is one of them. For this purpose we need $20 billion in offshore investment. Platforms are planned to be constructed for boosting gas pressure at South Pars. They will be weighing 20,000 tons and their conceptual design is currently in the final stages. In the future, their basic design will start and then contractors can bid for constructing these platforms.

 

Q: Is this the second phase of South Pars development?

A: Yes, the second phase of development of South Pars will begin in March 2018. This development is aimed at preserving production at South Pars. Therefore, offshore sector contractors will have work to do and that would be much more than before. The platforms built so far for South Pars weighed between 2,500 and 2,700 tons, but now we eye 20,000-ton platforms. We predict to see significant job creation in the country over the next three years.

Furthermore, I think that contractors in this sector will be able to work for ten more years because development of Farzad A, Farzad B, Golshan and Ferdowsi fields is to start soon. Meanwhile, we are planning to develop North Pars in a bid to compensate for pressure fall-off at South Pars gas delivery. Therefore, up to the end of the 20-year Vision Plan, South Pars will be open to development

and we are bracing for a new era of prosperity in this field.

SP 17&18 Operational

After the operation of the last platform of Phases 17 & 18 of South Pars gas field on location B17 in February, the construction activity of another megaproject of South Pars drew to a close under the administration of President Hassan Rouhani. After the installation of the 2,300-ton platform, the phases would see their offshore output increase from 46 mcm/d to 56 mcm/d.

Ten years ago, Iranian media announced the signature of a $2 billion contract for the development of Phases 17&18. The agreement was signed between National Iranian Oil Company (NIOC) and a consortium of Petropars (29%), Oil Industries Engineering and Construction (OIEC) with a 50% share and Iranian Offshore Engineering and Construction Company (IOEC) with a 21% share. The consortium was led by Petropars.

This project saw ups and downs as companies involved in the development project were replaced and it was awarded to a consortium of Iran's Industrial Development and Renovation Organization (IDRO), OIEC and IOEC. However, changes in the management structure and the slow pace of work prevented the project from becoming operational under the previous administration.

The development of Phases 17&18, which lasted a decade, involved two sections prioritized by the government. The first stage included construction of two platforms, erection of a refinery and drilling of 22 wells. The first stage ended last September. Since then, 10 bcm of sweet gas has been injected into national network, more than 6 million barrels of gas condensate have been produced, more than 4 million barrels of which having been exported. Furthermore, more than 82,000 tons of ethane, more than 86,000 tons of butane and more than 135,000 tons of propane have been also produced, earning the country around $2.5 billion in revenue.

 

Platform Contractor Replaced

 

Given the fact that after the launch of platforms B17 and B18, the South Pars output would have increased to 56 mcm/d and due to the fact that Iran Marine Industrial Company SADRA's handling of platform construction was disappointing, authorities thought of a remedy. In March 2015, the project was assigned to Iran Shipbuilding & Offshore Industries Complex (ISOICO) which led to satisfactory performance.

 

4 Trains of Refineries

 

The onshore section of the project is being operated by IDRO and OIEC. Production is taking place in all four trains of gas treatment sections of the refinery. The third and the fourth trains receive their gas offshore from platforms 17A and 18A. The first and the second trains will be receiving their gas from phases 6 to 8 of South Pars before platforms 17B and 18B come online.

 

65% Share of Iranians

 

The important point that needs to be taken into consideration is that Iranians account for 65% of the job. Only the remaining 35% has been handled by foreign parties. Furthermore, 90% of engineering affairs of development of Phases 17 and 18 of South Pars has been handled by IOEC, IOEC, National Iranian Drilling Company (NIDC), Dana Energy Group and SADRA. A French company is responsible for 10% only. Add to this the 106 Iranian companies' handling of 99.5% of manufacturing. Forty-one percent of equipment has been purchased from Iranian companies.

 

10 mn Person-Hours Work

 

Around ten million person-hours have been spent on the construction of each of these four platforms in phases 17&18. That indicates the amount of work by ISOICO. The construction of these four platforms has required 40 people to work 120 years so that they would be able to construct such platforms.

 

Export Targets

 

One of Iran's major objectives at international level has been to acquire a proper trade balance in global gas markets through encouraging investors to contribute to gas projects and invest in them as the country sits atop huge gas reserves. Over the past three years, thanks to efforts made by government officials for positive international developments, the aforesaid objective has been achieved. Relying on its huge gas reserves and holding a positive view of its nuclear agreement with six world powers, Iran is seriously following up on gas export projects. Relying on this policy of government, the Iranian Ministry of Petroleum is prioritizing gas delivery to neighboring countries before developing its liquefied natural gas (LNG) industry in order to win a foothold in other markets.

Iran is set to keep increasing gas production over the coming three years. Once its gas output reaches 1 bcm/d by 2019, it would be possible for Iran to export a significant portion of this production increase.

 

$5bn Annual Revenue

 

Like previous year, this year's recovery from South Pars will surpass 100 mcm/d from phases under development. Phases 17&18, with an output of over 56 mcm/d, are instrumental for gas projection in Iran.

These phases, whose startup will not be after March 21 in the presence of President Rouhani, will give Iran more than $5 billion in annual revenue.

 

Facilities & Utilities

 

In the Phases 17&18 development, four 2,300-ton platforms, two 105-kilometer-long pipelines for transferring fluid from platform to Assaluyeh refinery, a 4.5-inch-diamater pipeline for carrying chemicals in order to prevent corrosion and freezing in pipelines, joint flood dams, gas sweetening and dehydration units, ethane production unit, gas liquid separation unit, demercaptanization from propane and butane removal of CO2 from ethane, increasing gas pressure for transfer to national network, gas condensate stability, sulfur recovery, liquid sulfur refrigeration, liquefied petroleum gas (LPG) storage tanks, liquefied gas transmission pumping facilities, as well as necessary utilities except for electricity are among onshore and offshore facilities of this project.

The objectives set for the development of Phases 17&18 are production of 50 mcm/d of refined gas to be injected into national network, 70 mcf/d of ethane for delivery to National Petrochemical Company (NPC) to feed ethylene unit, 1 million tons a year of LPG and 27 million barrels a year of condensate for exports as well as 40 tons a day of sulfur as a byproduct.

 

Refinery Installations

 

The onshore refinery of this project, which sprawls on 155 ha, includes 4 gas sweetening units, gas condensate stability unit and its storage tanks, gas sweetening and dehydration unit, gas refrigeration and ethane separation, propane and butane, sulfur unit, demercaptanization and gas accumulation before being exported, sulfur recovery and granulation and monoethylene glycol recovery unit. Steam and fresh water needed for cooling the refinery are supplied by a power plant serving South Pars projects.

 

Phase 19, Symbol of Iranian Contractors

Following the Iranian Ministry of Petroleum's decision to prioritize development phases of South Pars gas field, development of Phase 19 of this field hit the agenda after phases 12, 15&16 and 17&18 of the giant reservoir were developed. Production from this phase started in March 2016. Once fully operational, this phase will be producing 56 mcm/d of sour gas. According to official data, since the start of sour gas recovery from phase 19 of South Pars, $1 billion in revenue has been generated for the country.

The meaningful relationship between South Pars and development of economic, social and political infrastructure in the country is no secret to anyone. Regarding the significance of its quick development it would be enough to know that according to estimates, Iran's South Pars gas deposits are valued currently at $4,400 billion. Iran is earning less than $25 billion in revenue from crude oil exports.

 

Prioritization and SP19 Development

 

Politicization of South Pars affairs and incomplete implementation of defined plans for various reasons including financial shortcomings, sanctions-related restrictions and crisis mismanagement under the previous administration delayed the implementation of Phase 19 of South Pars by 70 months after the expiry of contract. Ministry of Petroleum in the 11th administration prioritized this project and allocated financial resources to it so that Phase 19 could come on-stream.

Initially, the project was supposed to come online 35 months after its agreement was signed in June 2010. The EPC project was assigned to a consortium of Petropars Limited and Petropars Iran for offshore installations and drilling operations, and IOEC for constructing offshore platforms and laying subsea pipelines. The project was valued at $4.8 billion and led by Petropars.

 

First Recovery

 

In June 2015, i.e. five years after the official expiry of the contract, drilling operations at this phase ended. It was March 2016 that Phase 19 started production thanks to the 11th administration's support for this development project. A few months later, the first and the fourth trains of sweetening at this refinery became operational with a capacity of 1 bcf/d via SPD2 and 19C platforms. In September, the third and the fourth trains of the refinery of Phase 19 came on-stream.

A major difference between Phase 19 and other phases of South Pars is that unlike other phases, Phase 19 was the first South Pars phase whose development was pursued without dependence on the gas of other phases. The offshore and onshore sections of this phase were both developed together.

 

Domestic Companies' Share

 

According to plans, nearly all activities related to construction at Phase 19, particularly installation of equipment, were done by Iranian contractors. Purchase of equipment and materials were largely supplied by Iranian manufacturers and through domestic resources so that the objective of maximization of domestic manufacturing of projects would be met.

 

28,000km Excavation/Earthfill

 

For the construction of Phase 19 of South Pars, more than 14 mcm of excavation and earthfill has been carried out on 216 ha of land in Tonbak region, which is 20 kilometers east of Kangan city in the southern Iranian province of Bushehr. In order to make it easier to understand, we had better say that we would need 2.8 million 10-ton trucks to be able to move this amount of soil. Now imagine that this volume of soil will be sprawled on a length of 28,000 kilometers.

 

Cement Pouring

 

More than 4,000 cubic meters of cement has been poured for the construction of this refinery. According to official data, the construction of Milad Tower in Tehran needed around 21,000 cubic meters of concrete. That means that the amount of cement used in Phase 19 of South Pars was nearly 20 times higher than in Milad Tower.

 

11,000 Jobs

 

So far, more than 127 million person-hours have been spent in the onshore section of Phase 19 of South Pars gas field. More than 11,000 people have been hired in development activities there. At peak, 12,000 were working.

 

Iranian Contractors Strengthened

 

Given the fact that Petropars, IOEC and Petropars Iran have joined international bids for this project, considerable amount of hard currency has been saved. The familiarity of Petropars and IOEC with such projects and their maximum use of domestic resources will break the monopoly of big oil companies in gas projects of South Pars zone. It is a big achievement of this project which has also enhanced the country's production capacity.

 

Geographical Position

 

Phase 19 is located in the western section of South Pars reservoir and its onshore installations are in Tonbak. This phase which measures 218 ha is situated between the refineries of phases 11 and 12 and lies in the Pars Special Economic Energy Zone (PSEEZ).

Phase 19 has a capacity equivalent to two standard phases. In this phase, around 56 mcm/d of blended sour gas, gas condensate, water and other impurities is produced from offshore installations before being refined to achieve consumable products.

SP 20&21 to Yield $6bn

Phases 20 & 21 of South Pars gas field were initially planned to start early production in June 2013. But due to certain restrictions including toughened sanctions, financial shortages and past mismanagement, development of these phases was delayed. They are expected to come online by the end of the current calendar year in March. Once these phases become fully operational, they will be producing 56 mcm/d of sour gas. Iran has gained $200 million from selling total sour gas produced by these phases since beginning.

Notwithstanding sanctions and low oil prices in world markets, the administration of President Hassan Rouhani has managed to operate its gas megaprojects in recent years. Senior officials of Iran's petroleum industry have prioritized South Pars development phases and managed to make big achievements. For instance, under-development phases of South Pars added more than 100 mcm/d of gas to the jointly owned reservoir's output. According to plans for South Pars, which Iran and Qatar share, the supergiant gas field is to see its output increase by 100 mcm/d this calendar year. Phases 20 and 21 account for around 28 mcm/d of gas output.

 

History

 

The contract for the development of Phases 20&21 of South Pars was awarded in 2010 to Offshore Oil Industries and Construction (OIEC) and Iranian Offshore Engineering and Construction Company (IOEC). The deal was valued at $5.332 billion. The development of these phases included offshore platforms, laying out offshore pipelines, the onshore section as well as drilling of appraisal and production wells.

Under the contract signed during the tenure of President Rouhani's predecessor, production from these phases had to start in 2013, but these two phases managed in September that year to inject sweet gas into national network after processing sour gas supplied by Iran Gas Trunkline 5 (IGAT5). IGAT5 receives sour gas from phases 6, 7 and 8 of South Pars.

 

420km Pipeline

 

In order to deliver gas from the platform of phases 20&21 of South Pars, more than 34,000 branches of pipeline, measuring more than 420 kilometers in length, have been installed offshore. This length is remarkable and is the same as distance between Tehran and Isfahan in central Iran. Add to this pipeline length such affairs as construction, coating, loading and installation at sea. Other work like flattening the surface, identifying subsurface complications, loading and transferring onshore pipeline has been done at the best quality.

 

Replacement with 50ml Products

 

Calculations indicate that with the development of Phases 20 and 21 of South Pars, the country will be earning $6 billion in revenue. Estimates also show that this amount of gas will replace 50 million liters of oil products.

 

Hiring Locals

 

The construction of platforms in phases 20 and 21 has required more than 3.6 million persons-hours of work without any accident. That created 600 direct jobs for mostly local people. That job, which included contracting, construction and supervision, was done under undesirable weather conditions and is indicative of resilient economy.

 

Some Equipment Made 1st Time

 

Maximum use of the capacity of domestic manufacturers in the platform for phases 20 and 21 resulted in the designing, construction and installation of control systems of these platforms which include ACD, DCS and F&G, which function like the heart of the platform, for the first time by Iranian companies.

 

Astronomic Figures

 

The giant structures in Phase 20 include 1,300-ton metallic structure, pipelines totaling 42,000 inches in diameter, 600 tons of mechanical equipment, 90 kilometers of cable laying, 900 instruments and electrical devices. Moreover, the four-legged jacket and piles weigh 3,200 tons, whose construction has cost 467,000 person-hours. In the offshore sector, the project for the construction of two offshore platforms included a total of 22 wells, two pipelines to carry gas from the main platforms to the onshore refinery with a total length of 210 kilometers, two pipelines for carrying glycol with a total length of 210 kilometers, as well as 26 kilometers of fiber optic for connecting offshore platforms to SPIFON1.

 

Environmental Units

 

While offshore operations in Phases 20&21 are nearing their end, the refinery section of these phases is making arrangements to receive gas from offshore facilities. The important point with the refining section of phases 20&21 is that environmental units, including sulfur recovery, have made significant progress. Efforts are under way to make them operational before offshore sour gas is injected. Construction of these units requires time due to the need for using sensitive equipment and sufficient time; however, their timely operation will make contribution to preventing the spill of contaminants into the South Pars area.

 

1mn Trucks

 

The total soil dug in Phases 20&21 of South Pars amounts to 3.8 mcm, while 1.2 mcm has been spread. In total, 5 mcm of soil has been displaced. That requires one million 10-ton trucks.

 

Iranian Drilling

 

In phases 20&21, for the first time, fully Iranian owned rigs have been used for drilling. Iranian companies have been hired to provide logistical services to drilling. A total of 88,000 meters of drilling has been done in 22 wells. That has been done without any problem or need for reparation.

 

Selling Gas Condensate

 

With the implementation of phases 20 and 21 of South Pars which would bring Iran's total gas output to 2 bcf, Iran would be gaining good revenue. Furthermore, 50 ml/d of oil products would be replaced with natural gas and Iran would be able to sell gas condensate in favor of its trade balance.

 

Gas Injection into National Network

 

Based on day and night efforts made by petroleum ministry, phases 20 and 21 of South pars are ready to come online. Since one of their platforms was installed last July, they have been producing 28 mcm/d of gas, used for boosting gas supply during winter. Moreover, 18 mcm/d of gas is being delivered via pipeline to the refinery of phases 15&16 for treatment. The remaining 9 mcm/d is injected into national network to be sweetened in phases 20 and 21.

 

$200mn Income

 

Since the platform of Phase 21 came on-stream, half a million cubic meters of sweet gas plus 800,000 b/d of condensate have been produced at the onshore refinery of this phase. They have so far yielded $200 million in revenue.                

      

 

Japan Eyes Iran Oil

Japan, as a leading country in different sectors of industry and technology, is facing a daily growing need for energy, particularly oil. That comes against the backdrop of Japan's limited energy resources. This Asian state can meet only 16% of its energy needs; therefore, its industries heavily depend on oil imports from other countries. That is why Japan is the third largest importer of crude oil in the world, just behind the United States and China.

Although the Japanese government's energy strategy is based on energy saving and efficient energy use and this country has managed to manage energy consumption in many sectors including household consumption, its industries continue to remain dependent on petroleum industry.

Japan's oil reserves, which are mainly located in its western coasts, are very limited. Due to its territorial disputes with China, Japan is not able to extract oil from some of these reservoirs. That leaves Japan no other option but to import energy. However, Japan which heavily depends on oil imports to supply its needs has moved to build oil storage facilities in a bid to deal with possible oil price fluctuations. These storage facilities are either state-owned or run by private entities.   

Oil price decline in the past two years has been of significance for Japan's economy in terms of consumption. However, persistence of this trend could affect the output of some industries in Japan and reduce their sales to oil producing countries, in particular in the Middle East. Meanwhile, in case oil prices remain low for a long period of time Japanese companies operating in the energy sector will face consequences as they will not be eager to invest in new projects.

Where Does Iran Stand in Japan Strategy?

Japan imported 3,311 mb/d of oil from Iran in 2016, down 1.9% year-on-year. OPEC member states' average oil export to Japan stood at 2.906 mb/d last year when oil accounted for 87.7% of Japan's imports. Furthermore, Middle East nations' oil exports to Japan stood at 2.86 mb/d or 86.6% of Japan's crude oil imports in that year.

Saudi Arabia is currently selling more than 1 mb/d of crude oil to Japan. That makes up 33% of Japan's total oil imports. Saudi Arabia is followed by the United Arab Emirates with 800,000 b/d of oil delivery to Japan. Qatar comes third with 300,000 b/d of oil exports to Japan. And then comes Iran in the fourth position.

Iran-Japan energy ties could be discussed from two aspects:

Oil Purchase from Iran: Iran and Japan have long had interaction in the energy sector. Over recent years, this interaction was clouded by tough economic sanctions against Iran. However, the relations were never cut. After Iran's nuclear deal with six world powers, known as the Joint Comprehensive Plan of Action (JCPOA), was signed and took effect, Iran regained its share in Japan's market. In 2016, Iran became again the fourth supplier of oil to Japan after a 33% increase in its oil exports to that country.
Investment in Iran Oil Sector: Despite the fact that Japan lacks extensive and rich sources of energy, Japanese companies operating in the energy sector have won foothold in international markets. Most of these companies have been active in engineering projects, advanced technology, investment and management of oil and gas projects across the globe. Japanese oil companies are eager to invest in Iran's energy projects. These companies have seen their operation in Iran decline due to sanctions which were lifted in 2016. After the JCPOA entered into force in early 2016, Japanese companies renewed their interest for investment in Iran. For example, Japan's Inpex had to pull out of Azadegan oil field in 2010 under pressure from Western governments. But now it is seeking to develop oil fields in Iran and it has signed a memorandum of understanding for the development of Azadegan. Japanese companies are willing to get involved in different sectors of energy industry in Iran. For instance, due to the profitability of petrochemical projects, these companies are keen to finance petrochemical projects. Last but not least, the Japanese pay due attention to Iran in their energy strategies.

Iran is a longtime supplier of oil to Japan and it would be very important for Tokyo to continue its ties with Iran as a major producer of crude oil. In the eyes of the Japanese, Iran's return to oil market following the lifting of sanctions could help Japan experience a further balance vis-à-vis Arab states. During years of sanctions, Japan had to receive its oil from Arab countries particularly Saudi Arabia. However, importing oil from Iran is so important for the Japanese that even when international sanctions were tightened against Iran, the Japanese government announced its intention to go ahead with its crude oil imports from Iran. To that effect, insurance companies in Japan offered maritime insurance cover in a bid to let more tankers carry crude oil from Iran.

In the meantime, it is important for Iran to have good ties with Japan. In the pre-sanctions era, Japan was the third buyer of crude oil from Iran and Tehran hopes to regain its previous share in Japan's oil market. Generally speaking, expansion of ties with Asian countries, particularly a country like Japan which refused to join the West-engineered sanctions against Iran and continued to buy oil from Iran, is of high significance for Tehran. Even before this and after nationalization of oil industry in Iran in the 1950s and the ensuing embargo on Iran's oil, Japan was still buying oil from Iran. This history of cooperation between Iran and Japan is indicative of strong energy bonds between the two sides. In the light of serious efforts made by the two countries to broaden their ties, Iran's oil exports to Japan are set to increase in the future. Furthermore, Japanese companies operating in the oil, gas and petrochemical sector are widely expected to make investment in Iran.

 

1-Senegal Appraisal Well in Testing Phase

The latest appraisal well on the deepwater SNE oil discovery offshore Senegal has reached TD of 2,852 m (9,357 ft) below the mudline.

According to partner FAR, wireline logging and sampling have finished and a drillstem test (DST) will follow on the primary reservoir target at this location.

After completing operations, the drillship Stena DrillMAX will spud SNE-6 well. As with SNE-5, the aims are to evaluate connectivity and deliverability of the upper SNE reservoir units, via oil flow tests, including interference testing.

Operator Cairn Energy and its partners are seeking to improve their understanding of the characteristics of the upper SNE reservoir units and ensure optimal placement of potential development wells in terms of oil recovery.

SNE-5 is in the southern part of the SNE field around 2 km (1.2 mi) southeast of SNE-3.

2-India to Invest $66mn in Offshore Complex

ONGC plans to invest $66.05 million in developing the North West B-173A field to enhance production from its Western Offshore facilities off India.

The NW-B-173A field is 5 km (3.1 mi) northwest of the B-173A field, in turn around 25 km (15.5 mi) north of the Neelam field, in an average water depth of 55 m (180 ft).

In April 2014, the B-173A-8 exploratory well on NW B-173A flowed 2,246 b/d of oil during a conventional test from Mukta pay.

Development involves installation of a wellhead platform, associated pipelines, and drilling of three wells. ONGC expects the field to come on-stream in February 2019, with production reaching a peak of 2,870 b/d of oil and 56.3 MMcf/d during 2019-20.

Both oil and gas will be evacuated through the existing Neelam process facilities.

ONGC has discovered more oil and gas in the Western offshore basin on a shallow-water structure in the Panna formation.

The B154N-1 (B-154N-A) was drilled in the Bombay Offshore seven-year PML license to a depth of 3,417 m (11,210 ft), flowing around 72 b/d of oil and 16 MMcf/d through a ¼-in. choke.

The result has opened up the potential for further exploration in the area north of B154, and should facilitate conversion of the seven-year PML to a long-term regular license.

3- Chevron Secures Exploration Permit Offshore Western Australia

Chevron has paid AUD$3 million ($2.3 million) for a cash bid permit for an area offshore Western Australia, Australia’s Minister for Resources and Northern Australia Senator Matt Canavan said. The new permit number is WA-526-P, and secures that area’s exploration rights for the next six years.

The cash-bid auction for the 2016 Offshore Petroleum Exploration Acreage Release was held on 2 Feb 2017. Two companies prequalified for the auction, according to information from the Australian government’s Department of Industry, Innovation and Science.

Chevron was the sole bid received for release area W16-17, located in the Exmouth Plateau, Northern Carnarvon basin. No bids were received over release areas W16-22 and W16-25, located in the Northern Carnarvon basin’s Dampier sub-basin and Exmouth sub-basin, respectively. Those two areas have reverted to vacant acreage.

This was the first cash bid permit to be awarded since the process was re-introduced in 2014, Canavan said.

“The new permit is in a gas-rich part of the Northern Carnarvon basin very close to the Gorgon gas project and Pluto LNG, offshore of Western Australia between Onslow and Dampier,” Minister Canavan said. “The awarding of this permit is an important milestone and shows that Australia remains an attractive petroleum exploration investment destination.

“The acreage release process, where petroleum companies are awarded offshore areas for exploration based on the quality and thoroughness of their proposed work plans, has long underpinned successful exploration in Australia.

“However, the 2014 introduction of the cash-bidding system to allocate offshore petroleum exploration permits in mature areas or areas known to contain petroleum accumulations has provided an extra option for industry and immediate returns to the Australian people.”

The Department of Industry, Innovation and Science noted that after “disappointing cash bid auctions as part of the 2014 and 2015 acreage releases, it is encouraging to see an area successfully awarded this year.”

Bidding closes on March 23 for 12 areas released for Round Two work program bidding and 12 re-release areas from Round One as part of the 2016 Offshore Petroleum Exploration Acreage Release. Round 2 marks the 2016 program’s final round.

4-Excavation Tool Adapted for Offshore Mexico Pipe Trenching

James Fisher Subsea Excavation (JFSE) claims to have developed the world’s most powerful mass/controlled flow excavation tool for trenching large-diameter pipelines in a single pass.

The Twin T8000 was developed to support SapuraKencana Mexicana, which needed more than 14 km (8.7 mi) of a 36-in. pipeline with concrete coating to be trenched 1 m (3.3 ft) on top of the pipe.

JFSE applied its patented T8000 technology to devise a solution that it involved combining two units.

The Twin T8000 has a total maximum output of 16,000 liters/s and had to provide 0 mm to + 300 mm accuracy of trench on this project, with 15 crossings to negotiate.

Tomas Valdes Aldama, technical engineer at SapuraKencana Mexicana, said: “Due to there being a tight window, we required this pipeline to be trenched in a single pass.

“The results from the Twin T8000’s inaugural project have been great and it is certainly a technology we will consider utilizing again in the future.”

The Twin T8000 equipment spread was mobilized on board the offshore supply vessel, Ocean Carrier, in the Gulf of Mexico as part of SapuraKencana Mexicana’s contract for procurement and construction of a sour gas pipeline for PEMEX covering five fields.

5-Norway Petroleum Resources Largely in North Sea

The Norwegian Petroleum Directorate estimates Norway’s total proven and unproven petroleum resources at around 14.3 bcmoe.

Of this, 6.9 bcmoe (48%) have been sold and delivered, and of the 7.4 bcmoe remaining, 4.6 bcmoe are proven resources.

Unproven resources, estimated at 2.9 bcmoe, account for around 39% of remaining resources.

The North Sea contains roughly 51% of what remains, with the rest spread equally across the Norwegian Sea and Barents Sea.

Much of the anticipated resources in the Barents Sea have not yet been proven.

At the end of last year, Norway had 62 producing fields in the North Sea, 16 in the Norwegian Sea, and two in the Barents Sea.

Azerbaijan Faces Gas Shortfall

Ex-Soviet Union Azerbaijan is on track to send gas to Western Europe by the end of the decade, but is having to import supplies to use at home, compounding economic hardship that prompted protests last year.

The country contains one of the world's biggest gas fields, Shah Deniz on the Caspian Sea, but it has presold the next stage of output, due by 2020, to Greece, Italy, Turkey and other states keen to reduce their dependence on Russian gas.

At the end of last year, as construction of the pipeline to deliver the gas passed the halfway mark, Azerbaijan's state-run energy company SOCAR said it had begun importing gas from Iran.

Two industry sources told Reuters the gas actually came from Turkmenistan, another ex-Soviet Union republic with prices more affordable for the Azeris, but that supplies had stalled due to a pricing dispute between Iran and Turkmenistan.

Pricing had also stalled talks on possible imports of Russian gas to Azerbaijan to make up the shortfall, they said.

Officials have expressed optimism that projected increases in production from other Azeri gas fields will fill the gap in due course, citing Umid, Bulla Deniz and Absheron, which will be developed under a deal with Total signed in November.

In the meantime, the issue poses a dilemma for Azerbaijan's longtime president Ilham Aliyev, who faces a sharp slide in the manat currency due to the slump in global oil prices and a balancing act between Russia and the West.

In January, SOCAR announced big gas price hikes for Azeris already paying more for staples like bread because wheat and many other food items are imported. One of the company's vice presidents, Suleiman Gasymov, said they may not be the last.

"If the manat were to continue falling, SOCAR would  propose revising the price of gas," he said.

Matanat Kasumova, who works in a shop in Baku, said she had cut back on heating after the bill for her family doubled to 100 manats a month ($56), a fifth of an average salary.

Some Azeris blamed the government, rare in a country where complaints are normally kept among friends. "I don't know how I will pay my bills. Tariffs have been increased, prices rise and the government doesn't do anything to help us," a citizen of Azerbaijan Republic said.

Aliyev, who succeeded his father, Heydar, as president in 2003, tightened his grip on power this week by appointing his wife, Mehriban, as first vice president.

Early last year, protests broke out in some Azeri towns against rising prices and unemployment. In some places, there were violent clashes with police, witnesses told Reuters. Police quickly restored order, detaining dozens of people.

South Korea's LPG Demand Revives

A shift in the use of liquefied petroleum gas (LPG) to petrochemicals and away from transport has pushed demand for the fuel to new records in South Korea, after years of slumping consumption, a change which mostly benefits U.S. suppliers.

South Korea mainly used LPG to power cars up to 2010, but sales started to spiral down as drivers of commercial vehicles, mostly taxis, began switching to other fuels such as diesel or gasoline. That forced South Korea's major LPG distributors, SK Gas and E1 Corp, to look to other sectors to offset revenue loss.

Last year strong demand for consumer plastics began to strengthen Asian petrochemical margins, and at the same time SK Gas started up a plant using LPG as a feedstock.

As petrochemical consumption in South Korea began jumping, and with LPG prices dropping to around 30 percent less than naphtha, demand recovered, shooting to its highest ever.

Analysts are expecting to see much the same this year.

"We expect petrochemical consumption to support this year's LPG demand to stay similar to that of last year," said Ong Han Wee of energy consultancy FGE.

In 2016, LPG imports rose by almost a third compared to the previous year, to a record 7 million tonnes, according to data from the Korea National Oil Corp (KNOC), while total consumption rose to a record 9.4 million tonnes.

That came as prices for LPG, a mixture of propane and butane produced as a by-product of U.S. shale gas, undercut naphtha. Both products can be broken down into the building blocks for the plastics used in packaging, toys, cars and clothing.

The average import price of naphtha in 2016 was $44.09 a barrel, whereas LPG cost $30.85 a barrel, KNOC data showed.

"As the largest single (LPG) exporting nation in the world, the U.S. should get its proportionate share of the growth," said Ted Young, chief financial officer at U.S. company Dorian LPG, which is the world's second-biggest LPG shipper.

Between 2015 and 2016, South Korea's U.S. LPG imports more than doubled to about 3.4 million tonnes, according to KNOC, making up almost half its total LPG imports.

Last year around 4.3 million tonnes of South Korea's total LPG consumption was used in the petrochemical and industrial sectors, a jump of more than 70 percent from the previous year, according to KNOC data.

South Korea's record LPG use accompanied a near doubling of its petrochemical production to 3.3 million tonnes last year, up 87.8 percent from 2015.

Analysts expect South Korea's petrochemical production to hold near that level this decade, although JBC Energy's David Wech warned that use of LPG in the system likely "maxed last year".

Apache to Spend 63.2% More This Year

Oil and gas producer Apache Corp said it would spend 63.2 percent more in 2017 than it did last year, joining a growing list of U.S. shale producers who are ramping up spending to take advantage of a recovery in oil prices.

Apache, which reported a smaller loss, plans to spend $3.1 billion in 2017, higher than the $1.9 billion it spent last year.

The company said it would spend nearly two-thirds of its budget in Texas' Permian Basin, of which $500 million is budgeted for infrastructure development in the so-called Alpine High field.

Total production was nearly unchanged at 490,376 barrels of oil equivalent per day in the fourth quarter.

Apache said last September it had amassed more than 300,000 acres in the field it calls Alpine High, most of which is in Reeves County, Texas.

U.S. crude prices, which dipped to a low of $26.05 last year, have largely traded above $50 since late November.

This has prompted producers such as Exxon Mobil and Hess Corp to boost their capital budgets for the year.

Net loss attributable to Apache's common shareholders was $182 million, or 48 cents per share, in the three months ended Dec. 31.

The company had posted a loss of $4.02 billion, or $10.62 per share, a year earlier, when it incurred one-time charges of $5.9 billion.

The Houston-based company's total revenue fell about 2 percent to $1.45 billion.

Algeria's Sonatrach Discusses Offshore Drilling

Algeria's Sonatrach wants to start offshore oil drilling and has begun discussions with U.S. operators Exxon Mobil Corp (XOM.N) and Anadarko (APC.N) as well as Italy's Eni (ENI.MI), a source at the state energy company told Reuters.

The North African OPEC member nation has struggled to attract oil investment in recent years because of tough terms that have made foreign companies wary.

Sonatrach last year began a more flexible approach to bilateral talks with foreign partners.

Low oil prices have also pressured Sonatrach, prompting it to focus on developing production at more mature fields in the southern Sahara and bringing online delayed gas projects. Offshore drilling could offer another area for growth.

"Seismic operations carried out by Sonatrach have shown an interesting potential in the areas including Bejaia and Oran," said the source, who asked not to be identified. Bejaia is an eastern port and Oran is a port city in western Algeria.

Algeria needs the know-how and expertise of major international firms to launch offshore drilling, the source said.

"Foreign partners, including Anadarko, Exxon Mobil and Eni were invited by Sonatrach to provide technical assistance given the experience they acquired in the Gulf of Mexico and deep water in Mozambique," the Sonatrach source said.

"The offshore is complementary to our operations in the south. It will also contribute to boosting our output," the source said.

The source did not give any information on the timing or scale of any offshore projects.

Such details, including when the drilling will start, are expected to be announced soon by Sonatrach's leadership, the source said.

Algeria's earnings from oil and gas fell to $27.5 billion in 2016 from $35.7 billion in 2015 and more than $60 billion in 2014.

Algeria's oil output was previously estimated at 1.1 million barrels per day (bpd) but it has cut production by 50,000 bpd under an agreement between OPEC and non-OPEC producers aimed at raising crude prices.

Kuwait Boosts Oil Capacity

Kuwait is sticking with plans to add half a million barrels a day of oil-production capacity as it prepares for the eventual expiration of the output quotas OPEC adopted to help drain a global oversupply, the head of Kuwait Oil Co. said.

State-run KOC plans to raise the Persian Gulf nation’s capacity from its current level of 3.15 million barrels a day, Chief Executive Officer Jamal Jaafar said in an interview in Kuwait City. The company, which is responsible for most of Kuwait’s domestic crude production, will add capacity even if the Organization of Petroleum Exporting Countries decides to extend the supply cuts beyond June, he said.

“We will continue to enhance production capacity because we have a five-year plan to reach 3.65 million barrels a day by 2021, so we can’t stop investing in that,” Jaafar said. “We will take advantage of the OPEC-cut deal to perform maintenance on facilities in the fields.”

OPEC agreed in November to reverse its strategy of pumping without limits to defend its market share against increased supplies, including oil from U.S. shale deposits. The group won pledges from Russia and other producers to contribute, targeting collective cuts of 1.8 million barrels a day for six months starting in January. Benchmark Brent crude, which traded at more than $115 a barrel in June 2014, has stemmed losses since the deal was announced and was trading down 11 cents at $55.86 in London at 2:41 p.m local time.

KOC has signed three service agreements with Royal Dutch Shell Plc and another with BP Plc to develop exploration and production projects, he said. The company plans to drill its first offshore exploration wells by year-end, including wells near Failaka Island in the Persian Gulf, Jaafar said. Kuwait is OPEC’s fifth-largest producer.

The company plans to shut facilities and oil fields in the east and south of the country for maintenance, while northern fields will remain open because they produce a higher-quality crude that can be used for blends that are exported, he said.

Kuwait’s state company for investing in oil production outside the country has boosted output after spending $900 million on a project in Thailand and an additional $300 million on a deal in Norway, Nawaf Saud Al Sabah, CEO of Kuwait Foreign Petroleum Exploration Co., told reporters. Both projects are providing a “very good’ return on investment, Al Sabah said, without elaborating.

Kuwait Foreign Petroleum Exploration plans further acquisitions, including in the Middle East, as the drop in crude prices in the last few years makes such deals more attractive, he said.

Chile's LNG Imports Soar in December

Chilean imports of LNG jumped to 263,000 mt in December, a threefold increase from the same month of 2015, government figures showed.

The figure also marked an increase from 171,000 mt imported in November.

As a result, imports rose 80.6% to 716,000 mt, while annual imports rose 31.8% to 4.165 mt.

Imports have risen as generation from natural gas expanded to offset limited supplies of hydroelectricity.

Trinidad and Tobago remained Chile's principle gas supplier, shipping 206,000 mt in December. But Chile also received 57,000 mt from the US during December, its first US imports since September.

Chile has become an important market for Cheniere Energy's Sabine Pass liquefaction facility since it began exporting LNG last year. Thanks to the free trade agreement between the two countries, it enters Chile without a 6% import tariff.

Figures also showed that Chile resumed exports of natural gas to neighboring Argentina, pumping 70,000 mt during December, for the first time since August.

Chile began pumping gas over the Andes in May under an agreement between state energy firm ENAP and its Argentinian counterpart ENARSA. The gas, which Chile imports as LNG, reduces Argentina's reliance on other more expensive fossil fuels.

The two companies are negotiating repeating exports during this year's Southern Hemisphere winter.

The country has two regasification terminals - Quintero in central Chile, which is controlled by Spain's Enagas, and Mejillones in the north, operated by Engie.

 

 

Saudi Arabia Debating Shape of Aramco

Saudi Arabia is considering two options for the shape of Saudi Aramco when it sells shares in the national oil giant next year: a global industrial conglomerate, and a specialized international oil company, industry and banking sources said.

The listing of Aramco, expected to be the world's biggest initial public offer and raise tens of billions of dollars, is a centerpiece of the government's ambitious plan - known as Vision 2030 - to diversify the economy beyond oil.

When the plan was publicly released in June last year, it pledged to "transform Aramco from an oil-producing company into a global industrial conglomerate".

But now Saudi officials and their advisers are debating whether to make Aramco "a Korean chaebol", as one source said, referring to sprawling South Korean conglomerates, or a specialized company focused purely on oil and gas.

A specialized company might be easier to value because of its simplicity and, since the risks in its business would be clearer, achieve a higher price for its shares.

"There are two options being studied now. Either to make Aramco a pure oil and gas company, or a conglomerate and expand its role in petrochemicals and other sectors," said a Saudi industry source, declining to be identified because the debate is being conducted in private.

An Aramco spokesperson said: "Saudi Aramco does not comment on rumor or speculation."

Other than its core oil and gas production, exploration and refining businesses, Aramco - which employs more than 55,000 people - has plans to build solar and wind power facilities.

As the Saudi's biggest company and one of its most efficient, it is being pressed into service to jump-start industrial projects that are too big or daunting for the private sector. It is developing a $5 billion ship repair and building complex on the east coast, and working with General Electric on a $400 million forging and casting venture.

It has also often been tasked with executing government projects that have social goals, such as building industrial cities, stadiums and cultural centers. It was involved in creating the King Abdullah University of Science and Technology.

The plan to sell up to 5 percent of Aramco, championed by Deputy Crown Prince Mohammed bin Salman, who oversees the country's energy and economic policies, is also running into other complexities that have not yet been resolved.

Last year, Prince Mohammed said he expected the IPO would value Aramco at a minimum of $2 trillion, and that the figure might end up being higher. But this will depend partly on the tax regime which Aramco faces.

The company currently pays a 20 percent royalty and 85 percent tax to the government

Second Pipeline in Place at China's Liwan

Gas sales volumes from the Liwan field offshore China averaged 220 MMcf/d during 3Q, says partner Husky Energy, with associated liquids production of 10,600 b/d.

Installation has been completed of the second 22-in. subsea pipeline, providing additional operating flexibility and redundancy over the lifespan of the project.

Elsewhere in the Far East, construction of facilities continues for the liquids-rich BD field in the Madura Strait offshore Indonesia, with the project now around 90% complete.

Pipeline construction continues, and all four development wells have been drilled and cased to target depth. Construction of the FPSO to process the gas and liquids is nearly finished, with preparations under way for transportation to and installation at the field location.

Husky anticipates first production from the BD field to start next year.

At the shallow water MDA-MBH fields, engineering, procurement, and construction is roughly 20% complete, and tendering is nearing a conclusion for a floating production unit.

EPCO tendering has finished at the MDK field. The fields will be developed in tandem and are due to enter production during 2018-2019.

Offshore Newfoundland, Husky’s 3Q net production averaged around 24,800 b/d, reflecting a turnaround on the SeaRose FPSO.

In mid-September first oil flowed from the Hibernia formation well at North Amethyst. At South White Rose, drilling is under way of a third infill well that should begin producing around year-end.

The partners continue to assess West White Rose, focusing on increased capital efficiency and improved resource capture.

Husky and Statoil are also planning their next steps in the Flemish Pass basin, where they have discovered the Bay du Nord, Mizzen, Harpoon, Bay de Verde, and Baccalieu oilfields.

Gabon Oil Sector Braces for Change

Gabon's oil sector is likely to see more deals this year after French oil group Total agreed to sell its stake in some oil fields and infrastructure to Perenco, while Shell has been looking to dispose of onshore assets.

Shell and Total dominate the central African country's oil sector and this is expected to have a major impact as the country seeks to reverse the decline of its oil production.

Total has agreed to sell interests in its mature oil fields in Gabon to Anglo-French company Perenco, which translates to a divestment of 13,000 b/d of oil output, the company said.

The $350 million deal includes the sale of stakes and the transfer of operatorship in various mature assets in Gabon to Perenco, which is already active in the country, including the sale of the Rabi-Coucal-Cap Lopez pipeline network.

Total said the deal came about in an environment where "reducing the breakeven of our operations is a top priority" due to oil price volatility.

"This agreement demonstrates our ability to capture value through the disposal of mature assets while benefiting from the synergies generated by the transfer of operatorship," said Arnaud Breuillac, president of Total Exploration & Production.

Total is the operator of the Cap Lopez terminal, from which the key export grades of Mandji and Rabi Light are exported.

Total Gabon's equity share of operated and non-operated oil production averaged 47,400 b/d in 2016, from 47,300 b/d the previous year.

Its revenue amounted to $745 million in 2016, down 11% from 2015 mainly due to the lower average selling price for oil, partly offset by the 6% increase in volumes sold over the period due to the lifting schedule.

Shell said recently it was in talks related to the divestment of assets in Gabon, which could affect oil output in the country.

Shell's production in Gabon is around 55,000 b/d of oil equivalent. It also operates the Gamba terminal from which a further 20,000 boe/d from other producers is exported.

Production reached a peak of 365,000 b/d in 1996 but has since steadily declined, mainly due to maturing fields and also because of a lack of any significant oil projects over the past decade.

Gabonese crude attracts a fairly broad and eclectic customer base, including refiners in Australia, France, Malaysia and Trinidad & Tobago.

Added Wells Lift Petrobras’ Presalt Oil Output

Petrobras’ production in Brazil last month averaged 2.74 MMboe/d.

Oil production was 3% lower than in December, averaging 2.23 MMb/d.

This was due mainly to the scheduled stoppage of the P-40 platform at the Marlim Sul field, and to maintenance work on a production well at Parque das Baleias. Both fields are in the Campos basin.

However, the company’s presalt oil production reached a new high of 1.34 MMb/d on Jan. 4, falling back later to average 1.28 MMb/d.

The improvement was mainly due to higher output through new wells connected to FPSOs in the Santos basin, namely Cidade de Caraguatatuba (over the Lapa field); Cidade de Saquarema, Cidade de Mangaratiba, and Cidade de Itaguaí (all serving the Lula field); and Cidade de São Paulo (Sapinhoá).

There was also an improved operating performance at the P-58 platform serving Parque das Baleias.

Petrobras’ share of oil production in fields overseas rose 13% last month to 69,000 b/d, mainly as a result of operations resuming at the deepwater Agbami field off Nigeria following a scheduled stoppage in December.

Following a pair of incidents that occurred on the Arendal Spirit maintenance and safety unit, Petrobras has suspended charter payments to Teekay Offshore Partners, while it conducts an operational review.

Teekay revealed the news in its most recent financial report. The review was initiated after the second incident, which occurred in November 2016 and was related to Arendal Spirit’s dynamic positioning system.

The first event occurred in April 2016, when the UMS’ gangway, then connected to an FPSO, suffered extensive damage. The system was declared off-hire under its charter contract.

“The partnership has completed an investigation to identify the cause of the incidents and has implemented corrective measures,” Teekay said, noting that it “had been in dialogue with Petrobras to address its concerns to bring the unit back into operations as soon as possible.”

The new-build flotel, which features Sevan Marine’s cylindrical hull design, was delivered to Teekay from the Cosco Nantong yard in 2015. It began working for Petrobras under a three-year charter the same year. The DP-3 unit can accommodate 500 people and has a deck area of more than 2,000 sq m (21,528 sq ft).

Income and cash flow from vessel operations for 4Q 2016 were impacted by the suspension of these payments, which Petrobras began in early November 2016, Teekay said.

 

Global Oil and Asian Product Market, February

OPEC and non-OPEC production cuts continued to support oil prices. Crude prices rose during February and reached to its highest since July 2015. Market players believe that OPEC and non-OPEC countries have made a strong start to lowering their oil output under the first such pact in more than a decade. Eleven out of 13 OPEC members  along with 11 non-OPEC countries have agreed to make cuts for the first half of the year. OPEC members Nigeria and Libya, both suffering setbacks in production, were given exemptions. The cuts are aimed at reducing a global glut in oil that has weighed on oil prices for around two years. OPEC adherence to November agreement is around 94 percent, while that of non-OPEC may only be around 50 percent.

The share of Iranian crude heading to the Asia Pacific region climbed in January as the main suppliers in the region are following OPEC’s November agreement to cut a combined 1.2 mb/d. Iran has steadily boosted supplies as it seeks to retake the share it lost in the global crude market in the past several years. In condensate market, Iran exported its floating storage and reached its highest South Pars Condensate sales. Looking ahead, the price of condensate in the region will rise significantly because all the unsold Iranian barrels and all the storage disappeared quickly. 

Asian Product Markets

Light Distillates (gasoline, naphtha)

Naphtha market was strong and healthy during February. Lower arbitrage volume from West to East and lower export availability from Middle East due to the recent fire at ADNOC refinery limited the supply side of the market. On the demand side, strong petchem margins caused the petrochemical units to operate at their full capacity and use more naphtha. Moreover, naphtha demand for gasoline blending purpose was high in the region. In addition, incremental switch from LPG towards naphtha as feedstock has occurred on the back of high LPG prices. Looking ahead, in the year 2017 the balance of regional naphtha is likely to tighten due to the expected increase in demand. Naphtha demand will be supported due to the Sadara and PetroRabigh.

The other light distillate product -gasoline- improved more during February. There were supporting factors on both demand and supply sides. On the supply side, Singapore onshore stocks fell. Demand in East of Suez was firm. ADNOC bought considerable volume of gasoline for delivery in March and April as its RFCC complex remains offline due to the recent fire. Adding to the demand, Indonesia which is the region’s largest importer continued to provide supports on demand side. The outlook for gasoline is bullish due to the upcoming driving season. 

Middle Distillates (gasoil)

Gasoil February cracks – the differential between gasoil prices and Dubai crude prices- improved amid strengthening regional fundamentals. Refinery maintenance is curbing supply, while demand is seeing a seasonal strengthening. Firm demand from Sri Lanka and Tanzania were supporting the market. Besides that, there was demand for the cargoes to be sent to Europe, adding more support to the market.

Fuel Oil

Fuel oil market weakened as export economics and availability from the West are improving on the back of easing demand from the power generation sector in Europe. Moreover, exports availability out of ADNOC’s Ruwais refinery, which are likely to persist into this spring, are also weighing on Asian fuel oil market. South Korea became a net fuel oil importer in January, which together with lower Chinese exports has likely prevented greater crack losses. However, with demand expected to see a seasonal easing on weaker power generation requirements, it is expected to see lower South Korea imports in the next following months.

Feedstock, Iran Petchem Advantage

Managing director of Iran's National Petrochemical Company (NPC) recently said that the country's petrochemical industry would need $55 billion in investment over the coming decade. Marzieh Shahdaei, who is also deputy minister of petroleum for petrochemical affairs, mentioned that $20 billion was needed over the coming five years in order to complete incomplete petrochemical projects. The projects have had between 2% and 30% progress and their operation would need foreign investment. Since 2008 no foreign investment has been made in Iran's petrochemical industry; therefore, completion of incomplete projects would be attractive for foreigners.

Providing the necessary investment for the completion of so many petrochemical projects by merely relying on domestic resources is impossible; therefore, foreign investment needs to be given a share therein.

Senior officials at NPC have underlined the point that domestic banks could not provide this amount of investment for the petrochemical industry in Iran. While welcoming the involvement of banks and financial institutes in this value-generating industry, they believe that Iran's petrochemical industry is ready to work with leading countries in this sector in the wake of the removal of sanctions on Iran owing to the implementation of the country's landmark nuclear deal with six world powers. Preliminary talks have been held to that effect. Several European countries that were present in Iran previously have voiced readiness to return to Iran.

In case long-term prices are set for petrochemical feedstock, investors would be able to have a more realistic assessment of projects for future cooperation. Setting long-term prices for gas and liquid feedstock consumed by petrochemical plants would help investors, producers and other groups involved in the petrochemical sector find a clear price horizon in coming years. In that case, they would have nothing to worry about with regard to the impact of market fluctuations on the price formula.

If Iran intends to motivate investors to envisage presence in the country it has to respect the following three principles: first, any formula devised for feedstock price must be for long-term and competitive with other countries; second, the government must provide infrastructure; third, rules and regulations must be stable.

Iran's petrochemical industry has currently a trans-regional role in Iran's economy owing to the abundance of gas and liquid feedstock, young and educated manpower, unique geographical position with access to high seas and proximity to target markets, government support as well as big investment made in this sector. Despite various political and trade restrictions, Iran's petrochemical sector has maintained its unique position in international markets.

Long-Term Feedstock Price

At present a new formula has been finalized for feedstock used in petrochemical plants in Iran. According to this formula, Iran's Ministry of Petroleum needs to set the price for liquid and gas feedstock for petrochemical plants in compliance with criteria worked out for the weight average of revenue from gas sales, the price of gas or liquid delivered for other instances of domestic consumption, the average price of imported gas or liquid fuel, the value of product, maintenance of competitiveness of products in international markets and improvement of economic macro-variables, creation of motivation and the possibility of attracting domestic and foreign investment. Furthermore, it was decided that a gradual discount of up to 30% be applied under long-term agreements to units that would be able to supply raw materials for petrochemical plants in the country and boost the value-added chain. Under these agreements, the enterprises that are launched in underdeveloped areas would benefit from higher discounts.

By setting long-term price of gas as feedstock for petrochemical plants, Iran has given green light to domestic and foreign investors that are willing to finance projects in Iran. This green light would be on for ten years. Up to that time, 21% of Iran's 1.4-bcm gas output would have been converted to petrochemicals.

Undoubtedly, the most important advantage for investment in and development of petrochemical industry in Iran is access to feedstock, i.e. natural gas, ethane, naphtha and gas condensate in any volume and at competitive prices. At present, the capacity of gas refining and transmission facilities in Iran stands at 800 mcm/d, which will soon reach 1 bcm/d. Furthermore, easy access to ethane as petrochemical feedstock would help Iran strengthen its competitive position regarding petrochemical production.

After completion of development phases of South Pars gas field, i.e. start-up of development phases of 12-27, 650,000 b/d of gas condensate and 6.7 million tons a year of liquefied petroleum gas (propane and butane) ,as well as 4 million tons a year of ethane would be recoverable. This amount of ethane would be fully spent in petrochemical plants, while other products would be used when needed.

Ethane, Key to Investment

Iran, which sits atop the world's largest gas reserves, is a major source of feedstock for petrochemical plants in the world. Separation and production of ethane to supply feedstock to petrochemical plants have always been a priority for petrochemical industry officials.

The competitiveness of reserves and the price of ethane are major parameters for choosing this product as feedstock in petrochemical plants. Iran enjoys myriads advantages for investment in refining and ethane exports.

Ethane is an organic chemical compound with chemical formula C2H6. At standard temperature and pressure, ethane is a colorless, odorless gas. Like many hydrocarbons, ethane is isolated on an industrial scale from natural gas and as a petrochemical byproduct of petroleum refining process. Its chief usage is as feedstock for ethylene production.

Today, ethane is an important petrochemical feedstock and is separated from the other components of natural gas in most well-developed gas fields. Ethane can also be separated from petroleum gas, a mixture of gaseous hydrocarbons produced as a byproduct of petroleum refining process. Economics of constructing and running processing plants can change, however. If the relative value of sending the unprocessed natural gas to a consumer exceeds the value of extracting ethane, ethane extraction might not be run, which could cause operational issues managing the changing quality of the gas in downstream systems.

The main usage of ethane is the production of ethene (ethylene) by steam cracking. When diluted with steam and briefly heated to very high temperatures (900 °C or more), heavy hydrocarbons break down into lighter hydrocarbons, and saturated hydrocarbons become unsaturated. Ethane is favored for ethene production because the steam cracking of ethane is fairly selective for ethene, while the steam cracking of heavier hydrocarbons yields a product mixture poorer in ethene and richer in heavier alkenes (olefins), such as propane (propylene) and butadiene, and in aromatic hydrocarbons. Ethane is a rival to naphtha, propane and butane. For each ton of ethylene, 1.2 tons of ethane must be cracked.

Following the global economic recession in 2008 and 2009, many steam cracking refineries chose to produce ethane. Gas transmission is costly and is moved only on short distances. Therefore, ethane is used in facilities near its source. Construction of petrochemical plants in the vicinity of South Pars gas field and gas refineries would be highly profitable for foreign investors.

Given the significance of ethane for polyethylene industry and its affordable price as a refinery feedstock and forecasts for increased demand for polyethylene, ethane is of high significance in the petrochemical industry. Furthermore, with the lifting of sanctions on Iran, the country has become capable of attracting foreign investment. Given its abundant resources, Iran enjoys a good position to enhance its ranking in ethane production. With good management, Iran would be able to overtake US and Saudi Arabia.

Other Advantages

In addition to the advantage of easy access to petrochemical feedstock, Iran enjoys other inevitable advantages. Some of them are a growing domestic market for petrochemical products, access to skilled and specialized manpower, extensive communications infrastructure, geographical position in sharing border with 15 countries including Central Asia and South Caucasus, establishment of special economic petrochemical zones, political stability, investment-friendly law, allocation of facilities like tax exemption to investors and the existence of a chain of operating petrochemical plants. Each of these advantages is key to upstream and downstream industrial development. Above all, facilities offered by the National Development Fund of Iran (NDFI) provide another advantage for potential investors.

At present, $33 billion in investment is needed for operating petrochemical projects with an output of 55 million tons. This amount of investment could give Iran $26 billion in annual revenue. Meantime, there are 14-15 projects under construction, which are prioritized. These projects will come on-stream within four years and will add some 10 million tons to the current production capacity of Iran's petrochemical industry. With the finalization of finance of seven methanol projects in Assaluyeh, around 10 million tons of ethanol would be supplied on markets across the world. Iran was until recently investing mainly in ethylene and due to the abundance of ethane most products were ethylene-dependent. Downstream industries also grew to some extent, but the ground must be paved for propylene production in order to facilitate the growth of these industries. Propylene creates and feeds an extended chain of downstream industries. That is why Iran plans to gain propylene from methanol in order to avoid a decline in the price of methanol in the market and prepare the ground for the production of propylene with a view to developing downstream industries in the country.

Security, Turning Point in Competitive Advantages

Domestic and foreign investors are operating projects in politically stable and secure Iran. But some 100 kilometers farther, terrorist groups are wreaking havoc in neighboring countries, blocking foreign investment.

A reduction in cost prices, safety and pace of transfer represent the most important concerns for investors for the transit of commodities. These three parameters have been observed in Iran from north to south and from west to east. Dynamism along Iran's borders with neighboring states is proof of this fact. Energy exchange, swap of oil, gas and electricity, exports and imports, transit of commodities to Turkey, Azerbaijan Republic, Turkmenistan, Iraq, Pakistan, Afghanistan and the Persian Gulf and Caspian Sea littoral states, and the planned extension of Iran's gas pipeline to China via Pakistan and India are indication of the safety of the three principles of commodity transit in Iran. The target set for increasing the volume of good transit in Iran is 15 million tons a year. This amount is likely to increase in the future as sanctions have been lifted, business transactions have expanded and top foreign companies are operating projects in Iran. Meanwhile, three million university graduates on average join labor market in Iran every four years. A large number of these graduates either contribute to technological innovations in academic and industrial environments or conduct field research projects.

Foreign business delegates visiting Iran always highlight skilled manpower in different sectors as an advantage for investment in Iran. This issue places Iran at a higher status than rival countries.

 

500 New Wells Expected in 5 Years

Iran Eyes 4.7 mb/d Oil, 1.3 bcm/d Gas Output

On 18-19 February2017, Tehran hosted a gathering of state-run and private companies attending the fourth international conference on drilling. The main theme of the event was looking into the challenges and opportunities faced by Iran's drilling industry in the new round of petroleum industry development.

Ali Kardor, CEO of National Iranian Oil Company (NIOC) said Iran would need to spud 500 new wells in order to reach its oil and gas production targets under the 6th Five-Year Economic Development Plan.

"Based on planning, during the 6th Development Plan, Iran's oil production will reach 4.7 mb/d and its gas production will hit 1.3 bcm/d. In order to realize this objective, 500 new wells need to be drilled," he said.

Kardor, who is also the deputy minister of petroleum for oil affairs, described drilling industry as an important sector in upstream oil operations.

"According to estimates, in order to reach oil and gas production targets throughout the 6th Development Plan we will need 135 drilling rigs while Iran currently owns 143 drilling rigs," he added.

Noting that old rigs, with outdated technology, may not be able to help the production objectives of the sixth development plan materialize, Kardor said: "As policymakers, we are interested in importing technologically advanced new rigs or manufacture them inside Iran. Meantime, we are seeking to change the model for the development of oil and gas fields for production."

Contractor Companies Growing

Iran has in recent years managed to enhance its oil and gas production capacity by applying the buy-back model of contracts, but Iran's development of petroleum industry was not limited to this model.

"After buyback we used the EPC model particularly in South Pars gas field and I personally believe that we have had a good growth during this time," said Kardor.

He said that applying the EPC model led to the creation of contractor and management companies in Iran in order to help operate megaprojects.

"We are making efforts to push GC (General Contractor) and MC (Management Contract) companies towards IOCs (International Oil Companies) to become independent upstream companies," he said.

Kardor stressed the point that NIOC was seeking to apply a new model of oil contracts.

"The environment for activity in the petroleum industry will keep changing and we will need to use new models. If not, we will face problems in the implementation of projects," he said.

Kardor said Iran's oil production had once reached a record 4.2 mb/d when all buyback deals had expired.

"We are now trying to bring our oil production to 4 mb/d" by April, he added.

He said that the issue of drilling is very serious and effective in the upstream oil sector, adding: "It will be very effective for us to be able to boost productivity in the upstream sector under new-style [contracts], i.e. to be able to create more activity in the country from each financial unit."

7% of World Drilling Rigs Operating in Iran

Rokneddin Javadi, the deputy minister of petroleum for supervision on hydrocarbon reserves, made an acceptable assessment of the pace of the drilling industry with regard to its missions for the development of oil and gas industry.

He said: "Around 7% of drilling rigs operating in the world are in Iran. That is while there was once a single rig operating in Iran."

The number of drilling rigs operating currently in the world is around 2,000 with Iran having a 143-rig share, he said.

Javadi said there is potential in Iran's drilling sector, calling on the Iranian Ministry of Petroleum, NIOC and both state-run and private drilling companies to make joint efforts.

Highlighting the issue of higher productivity in the drilling industry, he said: "To reach this objective we have to work at world class. This issue is envisaged by the Ministry of Petroleum."

Javadi said: "We have to make efforts to create opportunities for us in the regional market in all sectors of drilling industry. By creating a chance for overseas activity the gaps of this industry will be filled and we will be able

potential of educated youth and managers in order to get familiar with the latest standards."

End of Cheap Oil

Gholam-Reza Manouchehri, deputy CEO of NIOC for engineering and development affairs, in his address referred to the application of modern technologies in the petroleum industry and said: "We have to acknowledge that gone is the era of low-price oil and we have entered the period of expensive oil and gas production. On this way we have to take into consideration advanced technologies in order to make production more economical."

He also touched on the new contractual frameworks developed by the Iranian petroleum ministry, saying: "The new model of oil contracts is field-oriented and they target long-term field development. Under the model we have to obligate the operator or the contractor to continue production at different periods based on a curb that would be drawn for a 20-year contract."

Under buybacks, Iran focused further on the physical aspect of the fields and development of their installations and that is why 21/28 production was included in the contract for the development of South Pars, Persian Gulf and West Karoun fields. Due to such a policy, the investor was remunerated during a five to seven-year period and then the contractor had no further obligation about the level of production. But under new contracts, the contractor agrees to recover oil or gas on the long term.

"In the new oil contracts we have to see how much investment is made in the field, how much we will produce or how much will be the recovery rate at the end of the period or how much the production will cost," said Manouchehri.

He said that the new-style contracts could apply to both developed and undeveloped fields, adding that "we will have no option but to apply the new model of oil contracts in order to enhance the rate of recovery from oil fields."

He said that efforts were under way for the new type of oil contracts to have maximum contribution of Iranian companies in upstream projects.

"We are also seeking to benefit from the potential of contractors that are active in oil services," said Manouchehri.

He said that drilling makes great contribution to enhancing the rate of recovery, adding: "Therefore, we need to show quality growth in drilling. Meantime, the efficiency and the output of drilling must increase so that we will be able to work alongside foreign rivals."

He said the pace of drilling operations by Iranian companies was 50% slower than by international companies thanks to their tools. "The conventional speed of drilling has increased and we have to move towards drilling smart and horizontal wells."

Private Sector 50% Share

Salbali Karimi, CEO of Iranian Central Oil Fields Company (ICOFC) said the share of drilling sector in the development of Iran's petroleum industry was 25% to 30% despite being young.

"The annual share of the drilling industry from the $15bn cost of oil and gas production in the country is about $4bn, while 50% of the share of oil and gas wells' drilling in Iran comes from the private sector," he added.

Karimi said that the annual share of Iran's drilling industry from the world's $435 billion market is around 3% and Iran's share of world oil production is 5%.

He said Iran's Ministry of Petroleum has announced its need for 100 onshore drilling rigs and highlighted the important role of the drilling industry in both direct and indirect job creation.

Karimi said drilling industry was required to be flexible and stable, brace for participation instead of foreign trading, boost its productivity, diversify its activities and become an exploration and production (E&P) company.

"Flexibility and stability include benefiting from opportunities created with regard to resilient economy with priority given to endogeneity, integration and application of cutting edge technologies," he said.

Strategy Development

Mehdi Mir-Moezzi, CEO of Pasargad Energy Development Company (PEDC), called for the definition of specific strategies by E&P companies, saying: "Due to the end of era of low-price oil, the field of activity for Iranian E&P companies has become very restricted."

In the new model of oil contracts, he said, qualified E&P companies would be able to work alongside IOCs.

Noting that over the past ten years gas has had a bigger share in development mainly in the offshore sector, Mir-Moezzi said: "But currently 67% of fields that will be developed are onshore. This issue is of high significance for the drilling sector."

He said that companies qualified by Iran for activity in E&P sector are required to draw up their strategies to show their differences with other companies.

"Iranian E&P companies should also make clear on which scale they intend to expand and also clarify their financing and risk acceptance," said Mir-Moezzi.

Drilling Equipment Improvement

Mohammad-Reza Takayedi, deputy head of National Iranian Drilling Company (NIDC), said some challenges and issues which drilling companies must take into consideration are quality upgrade and high output of their drilling equipment in compliance with international standards, considering cost price of drilling, reducing timing for drilling rigs and boosting efficiency.

"We have to move towards international partnership in implementing the projects," he said, stressing the need for using appropriate technologies to boost output.

Takayedi referred to necessity of identifying potentialities of drilling companies and training specialized human resources as other requirements which drilling companies need to take into account.

MOP 30% Share of Iran Water Polo

Extensive activities by the Iranian Ministry of Petroleum in sports involve water polo too. As part of its contribution to national sports, the ministry has sent two teams to compete in the league of water polo teams. Iran's water polo league comprises only seven teams. It means that 30% of water polo players are members of two MOP-led clubs. Naft-e Omidieh and Naft o Gaz Gachsaran are the two clubs long involved in water polo. These two clubs have already won international awards. The following is a review of their activities.

Naft o Gaz Gachsaran, Oldest Team of Pro League

No later had water polo become famous in Iran than a group of young players from Gachsaran formed a team under the supervision of the Ministry of Petroleum and they started water polo unofficially in Iran.

Later on water polo was officially launched in Iran under the authority of Iran's Swimming Federation. The same young players of Gachsaran were the first to attend competitions under the title of Naft o Gaz Gachsaran. Run by National Iranian Oil Company, this team claims to be the oldest one in Iran.

Since its every establishment and presence in the pro league, the water polo team of Naft o Gaz Gachsaran was claimant to the title of championship. The year 2007 was the most honored year for oil and gas industry sports. This team won the championship title in the pro league and super-league and managed to win triple titles. In the same year, it was ranked the second in Asia. Naft o Gaz Gachsaran changed course later on and it has now focused on hiring local players. Over the recent years, a large number of young players from Gachsaran have joined this team. Now, more than 90% of Gachsaran team players are local ones. Such a thing may not be visible in the composition of other teams of the water polo pro league. Naft o Gaz Gachsaran is now among the top four teams vying for title this year.

Naft-e Omidieh, Reasonable Investment in Water Polo

Under circumstances where financial problems are causing problems to Iran's sport, such sports as water polo which are not prioritized by Iran's Ministry of Sport and Youth Affairs are enduring tough conditions. Despite all this, Naft-e Omidieh is making good investment in a bid to support young players.

Naft-e Omidieh, which has had brilliant performance in other sports, has fared well in water polo, too.  Hiring qualified players, it has made contribution to the materialization of objectives of Iran's federation of swimming, diving and water polo.

In the last Iranian calendar year to March 2016, Naft-e Omidieh won the third title in the pro league and it failed to reach Asian matches out of bad luck.

One for Future, One for Honor

The presence of two NIOC-run teams in water polo league would be effective for the development of this sport in Iran. Under the current circumstances, Naft-e Omidieh is in better financial conditions than Naft o Gaz Gachsaran; therefore, many famous water polo players in Iran are moving to join Omidieh. Meantime, Naft o Gaz Gachsaran has rendered great service to local players and water polo fans. Every year, this team introduces a group of players to Iran water polo team.

National Players

The good performance of the two MOP-run teams in preparing water polo players has urged the technical staff of national team to benefit from young players at these clubs. Very young players from Naft o Gaz Gachsaran and Omidieh have joined Iran's national team. In Naft o Gaz Gachsaran, Amir Parhoun, Hossein Khaledi and Peyman Asadi are all aged below 20. These three have curried favor with the team's head coach. From Omidieh also several players are invited to the national team training.

2 Runner-Up Titles in Asia

Naft-e Omidieh and Naft o Gaz Gachsaran have had good performance across Asia. Naft o Gaz Gachsaran managed to find its way into Asian games twice. One of them was its runner-up title and another one was the fourth position respectively in 2007 and 2010. Meanwhile, Naft-e Omidieh was present in three rounds of Asian matches. It finished runner-up in one round, third in another and fourth in the last one. Undoubtedly, managers of both clubs are making efforts to help this team win the Asian championship title in coming years.

It is noteworthy that Naft o Gaz Gachsaran and Naft-e Omidieh finished runner-up in Asia at a time Iran's water polo was not in appropriate conditions. Therefore, such titles are a great source of honor for this sport.

Bad Luck

Naft o Gaz Gachsaran and Naft-e Omidieh tried their best to make their way into the finale of matches in the water polo league this year. But both teams faced bad luck. They could force their way into the semi-final, but they were defeated at that stage. They had to face each other for the third title. Two MOP-run teams vied for the bronze medal.

Naft o Gaz Gachsaran Head Coach:

We Were Successful in Hiring Local Players

Pejman Barounzadeh is a successful trainer of water polo in Iran. He has been serving as head coach of Naft o Gaz Gachsaran for years. He describes his team's objective as orientation towards local players. He maintains that his team enjoys great potential; however, he complains about the level of facilities the two MOP-run clubs are enjoying.

Barounzadeh is happy with the conditions of his club and he is grateful to Ministry of Petroleum and NIOC for their support of his team.

"Our club is in good conditions. After a change in the approach of Naft o Gaz water polo team, we decided to focus on hiring local players and choose most of our players from among players inside the province. Hopefully we have been successful in this regard and we managed to allocate more than 90% of our team lineup to local players. Even with the present conditions we have achieved good results. We also managed to introduce qualified players to national teams," he said.

"We have always been among clubs that introduce a large number of players to the national team. Although we do not have famous players we train many young players every year to give to the national team. You know that we have currently three players in the national team and that is a source of happiness for us," he added.

Barounzadeh went on to say: "Working with the youth gives me energy. I have been serving as the head coach of Gachsaran for years and this issue is a valuable challenge for me. I hope that we will continue to achieve success and manage to win the trust of the club managers."

In conclusion, he said: "I offer my heartfelt gratitude to the Ministry of Petroleum, NIOC and Naft o Gaz Gachsaran Club for their support and efforts made to allay our concerns. However, I would like to complain about a minor issue. I ask the Ministry of Petroleum officials to provide equal conditions for the two teams of Naft o Gaz Gachsaran and Naft-e Omidieh so that God forbid, our youth would not feel discriminated against. We are hiring local players at a time Naft-e Omidieh has been hiring from outside the province and these conditions are not equal. However, I am quite sure that MOP officials who have done their best for us will help resolve this issue, too."

 

D'Arcy Concession

The negotiations between the representative of William Knox D'Arcy and the Iranian government came to fruition sooner than expected.

The full text of the agreement, which was signed in 1901 between D'Arcy and Muzaffar ad-Din Shah Qajar of Iran is as follows:

The d'Arcy Oil Concession

Between the Government of His Imperial Majesty the Shah of Persia, of the one part, and William Knox d'Arcy, of independent means, residing in London at No. 42, Grosvenor Square (hereinafter called "the Concessionaire") of the other part;

The following has by these presents been agreed on and arranged-viz.:

Article 1. The Government of His Imperial Majesty the Shah grants to the concessionaire by these presents a special and exclusive privilege to search for, obtain, exploit, develop, render suitable for trade, carry away and sell natural gas, petroleum, asphalt and ozokerite throughout the whole extent of the Persian Empire for a term of sixty years as from the date of these presents.

Article 2. This privilege shall comprise the exclusive right of laying the pipelines necessary from the deposits where there may be found one or several of the said products up to the Persian Gulf, as also the necessary distributing branches. It shall also comprise the right of constructing and maintaining all and any wells, reservoirs, stations, pump services, accumulation services and distribution services, factories and other works and arrangements that may be deemed necessary.

Article 3. The Imperial Persian Government grants gratuitously to the concessionaire all uncultivated lands belonging to the State which the concessionaire's engineers may deem necessary for the construction of the whole or any part of the above-mentioned works. As for cultivated lands belonging to the State, the concessionaire must purchase them at the fair and current price of the province.

The Government also grants to the concessionaire the right of acquiring all and any other lands or buildings necessary for the said purpose, with the consent of the proprietors, on such conditions as may be arranged between him and them without their being allowed to make demands of a nature to surcharge the prices ordinarily current for lands situate in their respective localities.

Holy places with all their dependencies within a radius of 200 Persian archines are formally excluded.

Article 4. As three petroleum mines situate at Shoushtar, Qasr-e Shirin, in the Province of Kermanshah, and Daleki, near Bushehr, are at present let to private persons and produce an annual revenue of two thousand tomans for the benefit of the Government, it has been agreed that the three aforesaid mines shall be comprised in the Deed of Concession in conformity with Article 1, on condition that, over and above the 16   percent mentioned in Article 10, the concessionaire shall pay every year the fixed sum of 2,000 (two thousand) tomans to the Imperial Government.

Article 5. The course of the pipe-lines shall be fixed by the concessionaire and his engineers.

Article 6. Notwithstanding what is above set forth, the privilege granted by these presents shall not extend to the provinces of Azerbaijan, Guilan, Mazandaran, Astarabad, and Khorasan, but on the express condition that the Persian Imperial Government shall not grant to any other person the right of constructing a pipeline to the southern rivers or to the South coast of Persia.

Article 7. All lands granted by these presents to the concessionaire or that may be acquired by him in the manner provided for in Articles 3 and 4 of these presents, as also all products exported, shall be free of all imposts and taxes during the term of the present concession. All material and apparatuses necessary for the exploration, working and development of the deposits, and for the construction and development of the pipelines, shall enter Persia free of all taxes and Custom-House duties.

Article 8. The concessionaire shall immediately send out to Persia and at his own cost one or several experts with a view to their exploring the region in which there exist, as he believes, the said products, and in the event of the report of the expert being in the opinion of the concessionaire of a satisfactory nature, the latter shall immediately send to Persia and at his own cost all the technical staff necessary, with the working plant and machinery required for boring and sinking wells and ascertaining the value of the property.

Article 9. The Imperial Persian Government authorizes the concessionaire to found one or several companies for the working of the concession.

The names, "statutes" and capital of the said companies shall be fixed by the concessionaire, and the directors shall be chosen by him on the express condition that, on the formation of each company, the concessionaire shall give official notice of such information to the Imperial Government, through the medium of the Imperial Commissioner, and shall forward the "statutes", with information as to the places at which such company is to operate. Such company or companies shall enjoy all the rights and privileges granted to the concessionaire, but they must assume all his engagements and responsibilities.

Article 10. It shall be stipulated in the contract between the concessionaire, of the one part, and the company, of the other part, that the latte is, within the term of one month as from the date of the formation of the first exploitation company, to pay the Imperial Persian Government the sum of 20,000 sterling in cash, and an additional sum of 20,000 sterling in paid-up shares of the first company founded by virtue of the foregoing article. It shall also pay the said Government annually a sum equal to 16 per cent of the annual net profits of any company or companies that may be formed in accordance with the said article.

Article 11. The said Government shall be free to appoint an Imperial Commissioner, who shall be consulted by the concessionaire and the directors of the companies to be formed. He shall supply all and any useful information at his disposal, and he shall inform them of the best course to be adopted in the interest of the undertaking. He shall establish, by agreement with the concessionaire, such supervision as he may deem expedient to safeguard the interests of the Imperial Government.

The aforesaid powers of the Imperial Commissioner shall be set forth in the "statutes" of the companies created.

The concessionaire shall pay the Commissioner thus appointed an annual sum of 1,000 sterling for his services as from the date of the formation of the first company.

Article 12. The workmen employed in the service of the company shall be subject to His Imperial Majesty the Shah, except the technical staff, such as the managers, engineers, borers and foremen.

Article 13. At any place in which it may be proved that the inhabitants of the country now obtain petroleum for their own use, the company must supply them gratuitously with the quantity of petroleum that they themselves got previously. Such quantity shall be fixed according to their own declarations, subject to the supervision of the local authority.

Article 14. The Imperial Government binds itself to take all and any necessary measures to secure the safety and the carrying out of the object of this concession of the plant and of the apparatuses, of which mention is made, for the purposes of the undertaking of the company, and to protect the representatives, agents and servants of the company. The Imperial Government having thus fulfilled its engagements, the concessionaire and the companies created by him shall not have power, under any pretext whatever, to claim damages from the Persian Government.

Article 15. On the expiration of the term of the present concession, all materials, buildings and apparatuses then used by the company for the exploitation of its industry shall become the property of the said Government, and the company shall have no right to any indemnity in this connection.

Article 16. If within the term of two years as from the present date the concessionaire shall not have established the first said companies authorized by Article 9 of the present agreement, the present concession shall become null and void.

Article 17. In the event of there arising between the parties to the present concession any dispute of difference in respect of its interpretation or the rights or responsibilities of one or the other of the parties therefrom resulting, such dispute or difference shall be submitted to two arbitrators at Tehran, one of whom shall be named by each of the parties, and to an umpire who shall be appointed by the arbitrators before the proceed to arbitrate. The decision of the arbitrators or, in the event of the latter disagreeing, that of the umpire shall be final.

Article 18. This Act of Concession, made in duplicate, is written in the French language and translated into Persian with the same meaning.

But, in the event of there being any dispute in relation to such meaning, the French text shall alone prevail.

Golestan Palace Museum; Legacy of Qajar Era

Golestan Palace which is located at Arg Palace of Tehran is among historical monuments in Tehran.  The buildings in this palace were erected in different periods and Golestan Palace was part of a historical royal citadel.

The Golestan buildings were built under Shah Abbas Safavid. Their form changed under Karim Khan Zand as some new buildings were added.

The importance of these buildings dates back to the era of Agha Mohammad Khan Qajar. After overpowering Karim Khan Zand, Agha Mohammad Khan was crowned at this palace. That was how Golestan royal citadel took up added significance. After him, Fath-Ali Shah and Nasser ad-Din Shah pursued the same strategy and organized crowning ceremonies at this palace.

Sections of Palace

Different sections of Golestan Palace include Takht-e Marmar (marble bed) Veranda, Khalvat Karimkhani (Karimkhani private residence), Salam Hall, Mirror Hall, Eatery Hall, Brilliant Hall, Khabgah Edifice, Shamsol Emareh Palace, Badgir (wind catcher) Edifice, Pearl Hall, White House and Chadorkhaneh (House of Tents).

Mirror Hall

Mirror Hall which was built in 1874 at the same time as Salam Hall is one of the most reputed part of Golestan Palace. Haji Abol-Hassan Memar Bashi, better known as Sani ul-Molk, was tasked with designing and decorating this hall during the reign of Nasser ad-Din Shah Qajar. Mirza Yahya Khan Motamed ul-Molk was tasked with its construction. Famous painter Kamal ol-Molk did the painting by color and oil. His painting is currently held at Salam Hall of Golestan Palace. In this painting, Nasser ad-Din Shah is sitting on a chair.

Shams ol-Emareh

Shams ol-Emareh is among tall buildings at the palace museum. After seeing skyscrapers in Western countries, Nasser ad-Din Shah orders tall buildings to be constructed on the same style in the Iranian capital so that he would be able to watch the city and its surroundings from top. This five-storey building was completed in 1867.