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.