Interaction and Security

Like every other economic market, international oil and gas market is affected by political actors; however, what finally forms the capital flow, and traces the path for the economy is exclusively economic indicators.

The most significant economic indicators in international oil and gas market are the volume of hydrocarbon reserves, production capacity of producing countries and the level of demand by consuming countries.

A review of energy crises triggered mainly by political events shows that on the long run, policymakers' views will be way off the mark and the economy will go down its own reasonable way.

Over recent decades, Petroleum Ministry of Islamic Republic of Iran has proved that it is well familiar with the mechanisms of market. To that effect, it has designed its behaviors based on long-term economic necessities, and focused on realistic diplomacy.

Bijan Zangeneh, one of the most experienced oil ministers in the world, has just taken over as Iran's Minister of Petroleum for another four-year term. Such appointment implies the persistence of diplomacy based on the expansion of regional and international interactions, continual enjoyment of capital and technology and refrainment from hasty and passive policies.

Based on such policies, despite political pressure exerted by certain governments, Iran has over the past four years managed to make a strong return to oil and gas market and regain its status as a leading producer and exporter.

Providing proper grounds for the signature of numerous international oil, gas and petrochemical agreements, development of a new model of oil contracts to be mutually profitable, opening doors to negotiations as well as the significant role played by Minister Zangeneh in OPEC ministerial meetings for the black gold to reach stable price have turned Iran into a point d'appui for the energy market.

Bijan Zangeneh Reinstated

Bijan Zangeneh, who served as Iran's minister of petroleum in the first administration of President Hassan Rouhani, won the Iranian parliament's vote of confidence to remain at the post for another four years in the second administration of recently reelected Rouhani.

Zangeneh has 26 years of ministerial experience. He has already served as minister of energy, minister of construction jihad and minister of petroleum under former heads of state.

Zangeneh won 230 votes of confidence in parliament, while 35 voted against him and 23 abstained. Addressing the parliament, President Rouhani described Zangeneh as a "brand for attracting foreign investment".

Zangeneh Achievements

During his four-year term in office, Zangeneh managed to enhance Iran's oil output, which had fallen to 2.7 mb/d in 2013, to 3.9 mb/d. Furthermore, Iran's crude oil export was 970,000 b/d in 2013, but it grew to 2.2 mb/d this year.

Doubling gas production from South Pars gas field, which Iran shares with Qatar, is a significant achievement in the oil sector over the past four years. Under Zangeneh, the South Pars output reached 575 mcm/d this year.

Crude oil production from jointly-owned oil fields in the West Karoun area in southwestern Iran more than quadrupled to 280,000 b/d during Zangeneh's term in office.

And in the petrochemical sector, Iran's output experienced a 24% growth to see its production go from 40.6 million tonnes a year in 2013 to 50.5 million tonnes this year. Petrochemical exports rose from 12.8 million tonnes a year to more than 20 million tonnes this year.

Priorities for 12th Administration

Minister Zangeneh has said that he will follow up on signing new oil contracts to attract foreign investment with a view to developing shared fields and enhance recovery from reservoirs.

The rate of recovery from oil reservoirs in Iran currently stands at below 30%. It means that for example if Iran owns 700 billion barrels of oil in place it could recover only 200 billion barrels.

Zangeneh has highlighted the Ab Teimour, Mansouri, Changouleh, Azar, Azadegan and Yaran oil fields as well as the South Pars Oil Layer as the most important fields which are prioritized for development under the new Rouhani administration.

After winning the vote of confidence, Zangeneh said he would push ahead with negotiations that have started for the development of some of these fields. First, technical talks are to be finalized in months. Then, financial and legal negotiations will start for the signature of agreements.

The minister has said that some agreements expected to be signed, would lie within the framework of new oil contracts. Some agreements may follow other models; however, the priority for Iran's Ministry of Petroleum is to sign contracts based on the newly developed model.

$60bn Agreements to be Finalized

Under Iran's 6th Five-Year Economic Development Plan, $200 billion is required to be invested in the upstream and downstream oil sectors, 70% of which needs to come from abroad.

Zangeneh has said efforts are under way for the finalization of contracts worth $50 billion to $60 billion by next March.

Meanwhile, renovation of oil installations particularly in the upstream sector are among Ministry of Petroleum plans. Zangeneh has said that this issue must be followed up on seriously by providing necessary financing.

Gas Production and Exports

Increasing gas exports is another plan envisaged by Zangeneh for the coming four years. To that end, the process of development of South Pars gas field must be completed.

"This [calendar] year and next year, six incomplete phases of South Pars need to come online," said the minister.

Zangeneh has also insisted on the revival of Iran LNG project which was halted under former president Mahmoud Ahmadinejad.

Iran Exporting CRA Pipes

Chief among strategic plans touted by Zangeneh are enhancing domestic manufacturing. To that effect, 10 groups of prioritized commodities of petroleum industry for domestic manufacturing were identified.

Under the 11th administration, the agreement for manufacturing corrosion-resistant alloy (CRA) pipes was signed between Spain and Iran.

On May 24, 2017, Iran signed a deal worth 556 million euros with a Spanish-Iranian consortium under which the group will provide pipes used in Iran's petroleum industry.

The consortium, which includes Spain's Tubacex S.A. and Iran's Esfahan Steel Company, will produce pipes made of a corrosion resistant alloy for a network of 600 kilometers, or about 370 miles, over three years.

Zangeneh has said that the new model of oil contracts stress the need for using domestic manufacturing.

No-Flaring

Zangeneh is also determined to devise plans for reducing gas flaring in oil facilities. In his view, gas flaring means burning Iran's national wealth and creating pollution.

Iran's petroleum ministry has $5 billion plans for reducing gas flaring. Some of them are Bidboland II, NGL 3100 and NGL 3200.

OPEC Boss Happy with Zangeneh Reappointment

Mahammad Sanusi Barkindo, the secretary general of the Organization of the Petroleum Exporting Countries (OPEC), in a letter congratulated Zangeneh for his reappointment as Iran's minister of petroleum.

The full text of Barkindo's letter of congratulation is as follows:

Excellency,

It was with great pleasure that I learned of your recent well-deserved reappointment as Minister of Petroleum by His Excellency, President Hassan Rouhani. On behalf of all of the staff at the Organization of the Petroleum Exporting Countries, please permit me, Your Excellency, to wish you ever success in this role over the coming years. I have no doubt that the constructive relationship that exists between the Islamic Republic of Iran and OPEC will continue to flourish during your tenure. I would also like to take this opportunity to thank you for the personal support that you have given to me since my appointment as Secretary General.

Currently you are the longest serving Minister in OPEC and, therefore, the most experienced, your reappointment is a vote for continuity, stability and further productive collaboration between OPEC and non-OPEC. I am delighted that OPEC will continue to benefit from your vast reservoir of knowledge and rich fountain of wisdom for many years to come.

Please accept, Your Excellency, the assurances of my highest consideration and respect.

Mohammad Sanusi Barkindo

Secretary General

After SP11, Now It's South Pars Oil Layer Turn

Ali Kardor succeeded Rokneddin Javadi as CEO of National Iranian Oil Company (NIOC) in June last year. The state-run oil company has seen numerous events since then; for the first time, recovery started from the oil layer of South Pars gas field and Azar oil field; five phases of South Pars were developed in a single day; oil production in the West Karoun area exceeded 300,000 b/d; a major deal was signed for the development of Phase 11 of South Pars.

In an interview with Iran Petroleum, Mr. Kardor said the oil layer of South Pars would be the next project to be awarded under the formula of waiver of competitive bidding.

Kardor, now 63, also referred to the resumption of crude oil swap after a five-year hiatus, export of 3 mb/d of crude oil and gas condensate last March and agreement for liquefied natural gas (LNG) production.

The NIOC chief also said that Iran would hold talks with potential foreign investors taking into consideration national interests.

Here is the full text of the interview Mr. Kardor gave to "Iran Petroleum".

Q: It seems that after the signature of the SP11 agreement, NIOC's talks are not on track as expected. Why?

A: No, that's not so at all! You need to know that the signature of agreement for Phase 11 of South Pars was the first of its kind within the framework of the new model of oil contracts. It was a first experience for both Iran and foreign parties and it lasted long. And regarding oil contracts that we had previously, I have to say that the text of the contracts needed some modifications and it required spending time. Now I can tell you that our draft oil agreements have been finalized.

Q: What changes have you made to oil sector?

A: The changes mainly applied to the development of fields. Development of fields is likely to be implemented phase by phase. Although we have insisted that we need EOR and IOR methods to increase recovery, the financial model for using enhanced recovery methods is not clear yet. In the first development phase, it is clear what the contractor would do. But after that the contractor must make it clear what enhanced recovery method it plans to utilize for developing the field. Some companies say they prefer water injection and some others gas injection. Some use downhole pumps. Therefore, it can be noticed that enhanced recovery models vary. For example, Phase 11 of South Pars is to be developed in two phases. In the first phase it is clear what we plan to do. For the second phase, which pertains to engineering, NIOC experts have made calculations. In other words, we have finalized the work in Phase 11; for example, installation of compressor on the platform. Therefore, the order of affairs is clear. But for the development of oil fields, as I noted, companies have proposed a variety of methods for enhanced recovery. For instance, some companies have said they would enhance the recovery rate but the plateau would be low.

Q: Does the reservoir's behavior vary in all oil fields?

A: Yes, that's absolutely right. Technically speaking, our oil reservoirs have certain intricacies which I think are very important. For the time being, we have presented the principles of contracts to companies willing to develop Iran's oil fields. Some companies have expressed their views and we know now what they mean and they also know what we want. Currently, technical proposals are submitted one by one to the NIOC Consulting Committee to win approval.

Q: Technical proposal has been submitted to Consulting Committee for some fields, what are they?

A: The technical proposal for the oil layer has been submitted to the committee before other fields, and was followed by Mansouri and Ab Teimour fields.

Q: What about Azadegan field?

A: It is likely that we don’t send the technical proposal of Azadegan field to the technical committee, rather than that we would wait for the tender bid to be held for the field. We have held a pre-tender bid for Azadegan and the list of bidder companies has been finalized. Around 15 companies have expressed interest to bid for the Azadegan field.

Q: Have any domestic companies offered to bid for the Azadegan tender bid?

A: I have heard conflicting remarks about the interest of domestic companies in the Azadegan tender bid; however, I don't know if they have made any official request. Nevertheless, we have announced that Azadegan is an important field for us. NIOC had even rejected the technical proposal of some famous operators. One of them is Inpex. The Japanese company is a technically powerful. After it studied the field and we had some meetings, we to conclusion that they could not serve as operator in the development of this field as envisaged by Iran.

Q: Could you tell us about the reason?

A: They believed that development of this field is very specialized and

specialized and technical, and they lack any experience in water injection in such a big volume. Working in Azadegan field is not easy at all; therefore, NIOC is trying to convince qualified companies to bid for the project.

Q: What do you think of Iranian companies' technical potential?

A: Iranian companies are expert in drilling wells, laying out pipelines, desalting and production unit. The oil company (currently NIOC and formerly Anglo-Persian Oil Company and Anglo-Iranian Oil Company) has been involved in the above tasks for a century. NIOC can do all this, but we have not done onshore water injection. Iranian companies are not experienced in that field.

Q: How much investment is estimated to be needed for the development of Azadegan field?

A: We have yet to reach an estimate in this regard because the volume of water injection for enhanced recovery is high. Furthermore, we have not yet reached a model on how to transfer water from the Persian Gulf. Of course we are hiring consultants for this purpose. We need to examine all aspects before being able to say how much capital we need to develop the field.

Q: So can we say that water injection is the model chosen for enhanced recovery in developing Azadegan field?

A: The technical proposals presented to NIOC are focused on water injection. It is even said that Ab Teimour and Mansouri fields are also hydrophilic. Water injection in onshore fields is a new experience for us. Due to abundant gas reserves we have always used gas injection for enhanced recovery from onshore fields. The development model used by NIOC has been gas injection. But some of our reservoirs are hydrophilic, while we have never applied the water injection model in our onshore oil fields. We have injected water into some of our offshore reservoirs.

Q: Which sectors do you focus on in the transfer of technology?

A: We intend to develop Azadegan field to reach maximum recovery. At present, the Azadegan recovery rate stands at 6%, which we plan to bring to 20%. Now we must wait and see which technology foreign operators will bring to reach this objective. Of course, some companies have made new statements about this field, saying for example they can increase the recovery rate of this field to more than 20%. However, their statements must be studied carefully before we can express ourselves. For example, in Changouleh field, after applicants conducted technical studies, the oil reserves of the field in place was announced two times above the previous estimate. Naturally, everything will change and technologies needed to enhance the recovery rate will also change. Of course, our expectation is to have a domestic manufacturing share in our oil contracts higher than in our gas contracts, and I think that after planned signature of oil contracts our domestic manufacturers will be flooded with big orders.

Q: Have all these studies and findings been born out of MOUs signed earlier?

A: Yes, I initiated the issue of MOUs and when I was offering my proposal I mentioned that NIOC would not pay for studying the fields. Some were opposed. I think it was a good method so that foreign companies would conduct their studies gratuitously and submit their results to us. That would also help us achieve different models for the development of fields. Except for fields that would undergo development under the new model of contracts, we are planning to hire foreign consultants to study our own independent fields. In fact I want to say that we are preparing a plan to study all oil and gas fields in Iran based on state-of-the-art technology.

Q: Haven't your fields' technical studies been updated?

A: We have always tried to update our technical studies, but our views are not updated and we are still following the same old model. Well drilling, laying out pipeline and desalting constitute our traditional methods. Some of those who have installed downhole pumps were initially opposed to using new models. I remember well when Mr. Zangeneh first raised the idea of downhole pumps in the seventh administration, opponents said it was impossible. But at the end of the 10th administration it was proven to them that Mr. Zangeneh was right and they used downhole pumps. Even now they say we have to make investment in order to use downhole pumps. We welcome this issue, but we don’t have financial resources for investment.

Q: Which field do you think will have its contract finalized sooner?

A: Given the significance of developing the South Pars Oil Layer, I think that the contract for the oil layer will be signed sooner than the Azadegan field agreement. After that, the agreement for the development of Azadegan or Ab Teimour field will be signed. I suppose within two to three months we will start multitudes of oil contracts in such a manner that we will sign contracts every one or two months.

Q: Have foreign operators chosen their Iranian partners?

A: No, they are currently gathering their information. After final approval they will have three months to choose their Iranian partners.

Q: Doesn't NIOC recommend any domestic company to foreign operators?

A: No, foreign companies will themselves choose their Iranian partners.

Q: The number of Iranian E&P companies has increased, hasn't it?

A: Yes, that's true. But I would like to highlight that the companies whose qualifications are endorsed by the Ministry of Petroleum to function as E&P companies would not benefit from the advantages of EPC contracts and everything has to be done through tender bid. Moreover, many companies cannot run for bids and they need to change their strategies and they have to become like international oil companies. For instance, Total does not lay out pipelines, nor does it drill wells. This company has knowledge of reservoirs, manages and finances projects and accepts financial risks. In fact, Total is an international operator which concentrates on three elements: reservoir, project management and financing. Iranian companies also plan to become international operators. Now our contractors that have been qualified as E&P companies can no longer bid for projects. I think that some of companies on the E&P list will even suffer losses and they had better remain EPC project operators. Every company is not supposed to be an E&P one.

Q: What about the offshoots of E&P companies. Can they compete in tender bids in which their mother company is a main partner in the project?

A: Any activity within the framework of new oil contracts will go to tender bid. Now we may tell Iranian E&P companies that their subsidiary EPC contractors should not bid for projects in which they are present.

Q: Will the oil layer be put out to tender?

A: Probably not. But as I mentioned development of Azadegan field will be put out to tender. The Ab Teimour field development will be also put out to tender if the number of bidders increases. Ab Teimour is not a jointly owned field and we are interested in putting it out to tender.

Q: Of course when the contract was signed for SP11, some started criticizing you saying NIOC has forgotten the oil layer of South Pars which is shared with Qatar and concentrated on other fields.

A: No, that's not true at all. At present eight groups are negotiating a contract and the oil layer is one of them. The difficulty of development of the field and the companies' lack of experience in developing such a field dissuaded many leading international companies from bidding for the South Pars oil layer. Maersk was the only one to come in. You must know that Maersk has already developed Qatar's al-Shaheen field and is experienced in this regard.

Q: Are you currently just in talks with Maersk?

A: Yes, that's so. Development of this field is much more difficult than development of Azadegan field. Maersk has submitted its proposal and as I mentioned it has been submitted to the Reservoir Consulting Committee.

Q: How much does the second phase forecast to produce?

A: Development of this field is on the phase by phase basis, but our figures are not yet final for output. Maersk has offered to develop two to three phases of the oil layer. In the second phase, the production is to reach 65,000 b/d. Maersk has also presented a model for enhanced recovery via water injection. It has specified the modality of work.

Q: So you have started talks for the signature of contract.

A: Yes.

Q: What technology is needed for the development of the oil layer?

A: Iranian companies are highly capable in downstream sector, drilling, platform construction and pipelaying. But the issue with the oil layer of South Pars is the drilling of wells, depending on their intention to either have extended reach drilling or make arrangements for border drilling. Furthermore, drilling in some parts of oil layer is totally new for Iranian companies.

Q: In what areas of oil layer development do Iranian contractors have expertise?

A: They are capable in drilling, construction of platform and to some extent in manufacturing equipment used in the platforms. But Iranian contractors are not capable enough when it comes to designing wells and intelligent devices that conduct drilling. For example, 12 kilometers of horizontal drilling could be done with the help of technical equipment available today, while our equipment can drill up to one kilometer horizontally.

Q: The first phase of recovery from the oil layer of South Pars was inaugurated under the 11th administration.

A: Yes, we currently have a production capacity of 30,000 b/d of oil from this field, but we are producing 25,000 b/d. Total production from this field stands at 2.5 million barrels. The reason for which we have kept the production at 25,000 b/d is that we do not want the oil specifications to change. Otherwise, we could no longer sell its oil. Therefore, we have asked them to maintain the production level within a specific range so that the oil specifications would not be modified. For the second phase, we initially planned to develop it based on the new model of oil contracts, but the oil layer of South Pars is very hard for development due to its reservoir rock. Furthermore, not many companies have applied for the development of this field.

Q: Is the oil layer to be awarded without competitive bidding?

A: Yes probably. Tender bids will be held based on requests by companies. Professional European companies are not numerous. Furthermore, there are many reservoirs in Iran to be developed based on the new model of oil contracts. Therefore, we need to strike a balance in-between.

Q: Which fields will be put out to tender?

A: Our objective is to put out to tender the development of several big fields like Azadegan and Yadavaran in order to determine the transparency of field for the market and provide more precise prices and data.

Q: NIOC signed its first HOA with Iranian companies within the framework of new oil contracts with Persia Oil and Gas Industries Development Company (POGIDC) for the development of North Yaran. Now an integrated model is envisaged for the development of Yaran field. So what would happen to POGIDC?

A: POGIDC has developed North Yaran which is currently producing 22,000 b/d of oil. Oil production from South Yaran is also expected to start at a rate of 10,000 b/d in September. Since Yaran is expected to be developed under an integrated model, POGIDC will conduct a precise seismic test in the field. We have also agreed for this company to install downhole pumps. In other words, POGIDC will continue doing what it had done in North Yaran. They are currently defining phases for the drilling of new wells and installation of downhole pumps. We will continue our negotiations after the results of seismic tests have come out. POGIDC has conducted its studies and it is in talks with a Chinese company for the financing of the project. In case it manages to get necessary financing, it will have no problem for the development of the entire field.

Q: Does NIOC consider more privileges for Iranian companies compared with foreign companies for the development of projects under the new model of oil contracts?

A: They will enjoy no advantages over foreign companies. Everything has to be done in a competitive atmosphere. It is very important for us that jointly owned fields would be developed at a high quality. But when it comes to Iranian EPC companies, the story will be different. They will enjoy a 10% advantage, which means that they will be winner even if they offer prices $10 higher than their foreign rivals in case of compliance with quality requirements.

Q: In which stage are the negotiations for the development of Azar field?

A: Early oil production from jointly owned Azar field was done in March 2017. The field is currently producing 30,000 b/d of oil. Oil Industries Engineering and Construction Company (OIEC) is the contractor for the development of this field. OIEC has signed an MOU with [Russia's] Gazprom for the second phase development of Azar. In the second phase, the field is expected to produce 100,000 b/d.

Q: How many international MOUs have you signed?

A: We have signed some 35 domestic and international MOUs. Once finalized, the proposals will be submitted to NIOC and after technical review we will start talks for agreement.

Q: In the 11th administration, the NIOC main focus was on the development of joint fields. What will you focus upon in the 12th administration?

A: Development of fields for which MOUs have been signed under the new model of oil contracts will continue during the 12th administration. Therefore, the fate of development of fields will be decided and the development of jointly owned fields will enter a new phase. In this manner we plan to extend the development models based on enhanced recovery. Of course, under the new model of contracts, development of hydrocarbon fields requires enhanced recovery, too. But the point is that enhanced recovery is very important for us in developing independent fields. We will hire consultants for that purpose and study the fields more precisely. We expect a high number of applicants for the development of fields. As far as enhanced recovery is concerned, BP has said that it will exclusively bid for the Ahvaz field, because it has the license to do so and no other company has the BP development model.

Q: You had mentioned that Iran's crude oil export basket is to be regulated. Which stage is this plan in now?

A: Since oil production in the West Karoun fields has increased and the crude oil produced in this area is heavy, it was decided that Iran's crude oil export basket be regulated based on this crude oil. Currently, composition of Iran's crude oil export basket has not changed; however, the heavy crude oil produced in West Karoun will enter this basket as a new product. I should also note that refineries in the world have been moving towards cocking cracking units in order to have more room for maneuvering and be able to refine a variety of crude oil including heavy crude oil. Heavy crude oil is less expensive; therefore, interest in heavy crude oil will grow while previously the market was inclined further towards light crude oil. I can say that heavy crude oil enjoys a better market. If a pumping station in the West Karoun area becomes operational and we can carry out this separation, new oil will be added to Iran's crude oil export basket for which we are working out necessary mechanisms.

Q: Who are the leading buyers of Iran's crude oil?

A: Currently, 60% of Iran's crude oil is exported to Asian markets and 40% to European markets. Of course, in some months this ratio becomes 50-50. At present, we are trying to preserve this market. But East Asia is better for Iran because it offers better rates and a more diverse market than Europe. Furthermore, markets in China, South Korea, Japan and India need more energy. If you look at Europe's energy diagram you will see that the European market crude oil need has remained unchanged for years and has even been in decline. Therefore, we intend to preserve our status in the East market. Of course, we plan to activate our storage facilities in Rotterdam in order to deliver 35,000 to 50,000 tons of oil to smaller buyers.

Q: Could you update us about NIOC's negotiations with Austria's OMV for the annual purchase of 40 million barrels of crude oil from Iran for Tehran's outstanding debt to the Austrian company?

A: Iran has delivered an oil cargo to OMV and this company has collected the bulk of its money from Iran. Of course, we have proposed that it receives oil from NIOC's 14.5% share in order to settle Iran's debt.

Q: Has Iran collected its oil debts completely?

A: We have collected almost all our debts. Greece and an Indian company have yet to settle their oil debts. Of course, we have restructured the low oil debt of some companies.

Q: Haven't we had problems for selling Iran's oil post-JCPOA?

A: No, we have no post-JCPOA oil liabilities and we have received petrodollars for post-JCPOA sales. We receive them during 30 or 60-day periods. The pre-JCPOA debts have been paid as much as possible.

Q: How much gas condensate has Iran sold?

A: As I mentioned earlier, Iran has no gas condensate parked on water and after implementation of the JCPOA, we sold all our gas condensate.

Q: What do you plan to do for the development of Farzad B field?

A: Our negotiations with Indians are still under way. Meanwhile, we have awarded the Farzad-B Mc to a domestic consultant (Petropars) to define packages for the field. In case our negotiations with the Indians fail to produce results we will develop Farzad-B on an EPCF basis. The consultant is expected to see if gas injection from Aghajari field is possible. We should also see to what extent the installations of this field must change as the gas in the reservoir is sour. In fact Petropars will conduct a complete study on Farzad-B field. In case our talks fail to reach conclusion we will hold a tender bid for an EPCF project.

Q: This year, how much will be our production hike?

A: We will have an approximately 70,000 b/d production hike this year, the bulk of which will come from South Azadegan and North Yaran fields. In this way, Iran's oil production capacity will reach 4 mb/d by the end of the current calendar year [in March 2018].

Q: How much foreign investment do you think Iran's petroleum industry can attract?

A: Throughout the 6th Development Plan we will need $100 to $120 billion in investment. We must be able to attract this amount of investment and sign agreements. Meantime, I have to note that chief among Iran's advantages for productivity the low cost price of oil production in Iran, are reservoir diversity in our country, the depth of technical knowhow about reservoir in Iran that could not be compared with neighboring countries, several institutes and petroleum college which were established thanks to Mr. Zangeneh, while in Iraq there is not as much as in Iran and inexpensive specialized manpower. I think that we have only one problem: productivity. If we resolve the problem of productivity, Iran will become a paradise for work because our useful working hours are very low and I think that this issue will be resolved through interaction with competent companies that are compliant to international standards. When it comes to working it means useful hours and discipline. I have to note that many Iranians who have been working with leading international companies are willing to return to Iran. For instance, a deputy CEO of Shell told me that when this company decided to operate projects in Iran a large number of Shell's Iranian employees announced that they would be ready to work in Iran.

Q: How do you assess the atmosphere of international interaction in the petroleum industry today?

A: I believe that we must watch out so that our cycle would not be harmed. What happened in the wake of the JCPOA was that the cycle of our activities in the petroleum industry became positive. It means that development has started in the petroleum industry. Earlier sanctions had created a flawed cycle in the petroleum industry; therefore, our production rate had declined. After that investment in the petroleum industry dropped and this cycle was continuing its way. But when the cycle becomes positive you can see that even manpower working outside Iran becomes willing to return to the country. I think that what president Rouhani did with the JCPOA was that he reserved a flawed cycle in the country. In certain periods it might have been slow, but I believe that its process has been positive.

Q: What do you think is the most important achievement of the NIOC in the 11th administration?

A: I am personally interested in smashing records. Even at high school and university I used to solve the most difficult problems and I did not answer simple questions. That was my mentality. I have to say that the record 3 mb/d crude oil and gas condensate export was achieved under my management. I am still interested in what I did when I first became the NIOC chief. The first upstream contracts with Total, the resumption of swap oil after a seven-year break and signature of deal for the first FLNG vessel in Iran are among records set during my term. We will be the top LNG player in Iran, which I was always dreaming of.

Q: Who is expected to sell this FLNG to Iran?

A: A Norwegian company will provide the FLNG (floating liquefied natural gas) to Iran. It will be for 20 years with a capacity of 500,000 tons a year. Currently, the NIOC Board of Directors has given its go-ahead for this agreement and following long talks the final agreement between NIOC and this Norwegian company will be made soon.

Q: When will this vessel enter Iran?

A: It will enter into Iran's waters seven months after the finalization of the agreement. It is expected to be installed in Phases 17 and 18 of South Pars to convert gas of these phases into LNG. The Norwegians will themselves make an assessment of LNG in Iran; therefore, I can say that Iran will become the top LNG player in the region. It might be interesting to note that there are currently three FLNGs in the world. One of them was built by Samsung for Shell to be delivered in 2018. The second one has been built by Malaysians and the third one is to be used in Iran.

Q: You said that Iran resumed crude oil swap after seven years. Have you signed a long-term agreement?

A: We have not yet signed a long-term agreement, but we have started our tests. We plan to assess ourselves because no swap has been done for seven years. Under an agreement we have now signed, we will swap six 50,000-tonne vessels every three days. Meantime, our talks with companies in Kazakhstan, Turkmenistan and Russia are becoming serious. These companies are examining the profitability of oil swap via Iran's route after seven years. After Iran's oil swap project was halted the companies that used to work with Iran shifted to the Baku-Ceyhan route. That is why it took us one year to finalize negotiations.

Q: Now that seven years have passed since oil swap was halted, what do you think was the main reason?

A: Some people like Mr. Zangeneh always find a solution and turn threats into opportunities, but some others do not react quickly and when they face a problem they have to choose between going through a short and easy path and going through a difficult way. When Iran's crude oil was parked on oil, the swapped amount was added to this volume. The then minister of petroleum was panicked about how to move so much crude oil from northern waters to the Persian Gulf and even pay for its transfer. Therefore, the best option he chose was to halt it. But it was possible to modify the swap model by telling the oil suppliers for example to find an independent market. I think 50 million barrels of oil was parked on water and the then minister of petroleum did not want to add the swapped oil to that.

Q: Until one or two years ago, the NIOC had to negotiate with low-rated foreign companies for purchasing equipment or developing oil industry. What changes have happened to your negotiations after the implementation of the JCPOA and what is the NIOC's standing in the negotiations with oil companies?

A: To be honest international sanctions had prepared the ground for so-called sanctions busters and dealers to take advantage of oil industry. Due to the conditions of the time, these people exploited Iran and no reputed company was ready to come to Iran. But after the implementation of the JCPOA, due to the NIOC's expertise and experience it entered talks with foreign companies from a position of strength. It would be enough to take a look at the vendor list of foreign companies and you can see that we have brought in powerful companies. Even three big Russian companies that produce 4 mb/d of oil were not included in the list. Of course, after receiving new data from Russian companies this issue has been resolved. In fact, I intend to say that after the implementation of the JCPOA, the NIOC has imposed tough vetting procedures for the entry of foreign companies into Iran. We will not cooperate with just one company. I believe that NIOC is still one of big oil companies in the world and it complies with international professional standards. Today, all our standards are strict. For instance as I am talking to you all equipment used in South Pars is imported from European countries. Equipment of the best quality is being imported anew. Of course, we buy equipment from qualified Asian companies in Japan or South Korea and even China, but we will definitely not use Chinese commodities of low quality.

Q: Is quality of importance to you?

A: In addition to boosting the quality, NIOC's activities have grown significantly in terms of quantity. Enhancing production and export or crude oil and increasing gas and condensate exports are cases in point. Currently we are producing 630,000 b/d of gas condensate.

Q: You were appointed CEO of NIOC on June 12, 2016. How has been all this time?

A: (smiling) Very tough.

Oil Terminal Ready to Handle More Oil
 
The infrastructure for Iran's North Oil Terminal has been renovated, CEO of Iran Oil Terminals Company (IOTC) said.
Pirouz Mousavi said loading arms, berths, stream pipelines, storage tanks and measurement systems have been optimized and the North Oil Terminal is now back to its past normal conditions.  
He added that IOTC is ready to attract foreign investment into modern technologies applied to terminals and storage of crude oil, gas condensate and petroleum products.
Mousavi said IOTC was ready to increase export capacity at Kharg oil terminal, adding that 800 tankers call in at this terminal for loading oil.
He reiterated the need for arranged operations in all sections of receipt, storage, transfer and loading of crude oil, gas condensate and petroleum products.
"Currently for the berthing of oil tankers, ASD vessels which are equipped with state-of-the-art technologies are used. Therefore, marine operation in every weather condition is safe," he added.
Mousavi said these vessels were helpful in the delivery of oil to customers under bad weather last winter.
"According to plans made by National Iranian Oil Company and in a bid to respond to the buyers of Iran's crude oil, the capacity of crude oil export via Kharg oil terminal currently stands at 2 mb/d and 750 million barrels a year," he added.

Iran Gas Exports at 42 mcm/d
 
The managing director of National Iranian Gas Company (NIGC) has announced an increase in the number of export destinations for Iran's gas.
"Iran's gas exports have reached 42 mcm/d," Hamid-Reza Araqi, who is also deputy minister of petroleum, said.
He added that signature of gas exports deal with Iraq was a strategic plan by the administration of President Hassan Rouhani for export hike.
"In line with the implementation of this contract, Iran completed its own section of the project and waited for the Iraqi side's readiness before opening its taps. This important step has been recently taken," he said.
Araqi added that Iran's gas exports to Iraq started with 42 mcm/d.  
He added that gas delivery to Iran's neighbors would continue this year, adding that the volume of gas exports and the number of destinations would rise gradually.
"Expansion of export infrastructure including Iran Gas Trunkline 6 (IGAT6) and high-pressure gas installations on this trunkline are among Iran's serious plans to increase its share of gas market, particularly in neighboring countries," said Araqi.
He gave a positive assessment of the NIGC record in the 11th administration, saying that harmony and convergence among NIGC staff put gas on the right track towards sustainable development.
Araqi said natural gas was viewed as the cleanest fuel of choice. "Gas is present in life, production and economic development and for me without gas the economy could never move," he said.
"The pivotal role of gas in the country's economy does not provide a good reason for its unbridled consumption; rather, with  its efficient and optimized use we should provide the future generation with the opportunity to benefit from this benediction," said Araqi.

China Oil Imports from Iran Up 0.45% Y-O-Y

China's crude oil imports from Iran increased 0.45 percent in July year-on-year, the General Administration of Customs said in a detailed breakdown of commodity trade data.

Imports from Iran inched up 0.45 percent on year in July at 568,720 bpd, while supplies from Iraq shot up 16 percent at 857,020 bpd, customs data showed.

Russia held its spot as China’s top crude oil supplier for a fifth month in a row in July, with shipments up 54 percent over a year earlier. Russian shipments last month came in at 4.97 million tonnes, or about 1.17 mb/d.

For the first seven months of the year, Russia’s volumes to China grew nearly 16 percent year-on-year to 34.22 million tonnes, or 1.18 mb/d.

Meanwhile, India's Essar Oil shipped in 18.3 percent less oil from Iran in July compared with a year ago, at about 152,000 b/d, according to tanker arrival data obtained from trade sources and ship-tracking services on the Thomson Reuters terminal.

In the first seven months of the year, the refiner received 4.8 percent less oil from Tehran at about 151,300 b/d, the data showed.

Iran to Cut Fuel Oil Output at Refineries

Iran's deputy minister of petroleum for refining affairs has said that fuel oil production at refineries would be cut to below 10% by 2025.

"With the signature of contracts for upgrading the quality of refinery products in the country, fuel oil production will be cut to below 10% by 2015 and all products will meet the Euro-5 standards criteria," Abbas Kazemi, who heads the National Iranian Oil Refining and Distribution Company (NIORDC), said.

He said that Iran's average gasoline consumption has been at 79 ml/d since March. Over this time, he added, Iran has imported less than 12 ml/d of gasoline. He said Iran is currently holding 1 billion liters of gasoline in storage tanks.

Kazemi said Bandar Abbas Gas Condensate Refinery is currently producing 7 ml/d of gasoline, which would reach 11 ml/d.

Since its startup, the refinery has distributed more than 300 million liters of gasoline, he said.

"The first phase of the refinery has been completed and is online. The second phase will be launched next [calendar] year," said Kazemi.

He also said that South Korea's Daelim had signed a 2.5-billion-euro deal for upgrading Isfahan oil refinery. He said contracts had been also signed for Tabriz and Tehran refineries while talks were under way for a quality upgrade contract for Bandar Abbas refinery.

Kazemi said that the agreement for Tabriz refinery had been signed with South Korea's SKEC for 1.6 billion euros. South Korea's Export-Import Bank is to finance the project which is expected to be fully implemented within 48 months.

700 Wells Drilled and Completed

The head of National Iranian Drilling Company (NIDC) has announced the drilling and completion of 709 oil and gas wells by the company during the first administration of President Hassan Rouhani.

Heydar Bahmani said drilling industry had made progress over the past four decades, citing the drilling of more than 4,300 oil and gas wells.

He said that the 709 wells drilled over the past four years have been effective in recovery enhancement plans by the Iranian Ministry of Petroleum and National Iranian Oil Company (NIOC).

He said that 194,714 meters belonged to directional and horizontal wells, adding that directional and horizontal drilling is more sophisticated than vertical drilling.

He said that provision of technical and specialized services along with drilling operations were among the strenghts of NIDC.

Belgium, New Buyer of Iran Petchems

Belgium has joined buyers of Iran's petrochemicals after it received a cargo of products from Mahabad Petrochemical Plant, the CEO of the petchem plant said.

Mohsen Majidi said the Mahabad plant had exported more than 90,000 tons of products since the beginning of the current calendar year in March. He said the value of exports by this plant was estimated at $85 million.

He cited India, Turkey, China and Belgium as the top buyers of petrochemical products of the Mahabad plant this calendar year, adding that exports this year were some 1% higher year-on-year.

The plant has a production capacity of 300,000 tonnes of low-density and high-density linear polyethylene as well as 30,000 tonnes of butane-1.

Majidi said once fully operational, the plant would have 1,000 direct and 4,000 indirect job offers.

Mahabad Petrochemical Plant which is located on the strategic West Ethylene Pipeline was launched during the first round of President Hassan Rouhani's administration.

New Chapter in Tehran-Kiev Energy Ties

Ukraine's Ambassador to Iran Serhii Burdyliak has announced that Tehran and Kiev could become strategic partners in different sectors including energy.

"For sustained and fruitful cooperation in oil and gas sectors, we are taking steps forward, which is part of our strategy in bilateral relations," he said after meeting with Marzieh Shadaei, CEO of Iran's National Petrochemical Company (NPC).

"We share interests in many domains. Therefore, in our cooperation, we may apply investment joint projects, deep cooperation including in the energy sector. That will not be limited to buying and selling," he said.

Burdyliak referred to Russia's monopoly on Ukraine's market in recent years, saying: "We are currently seeking new markets and we create new opportunities for our partners and I hope that Iran would be our special and strategic partner in the Middle East."

He said that Ukraine would be able to carry Iran's products to the European Union.

Gazprom Neft Shares Fields Data with NIOC

Russia's Gazprom Neft has discussed the results of its studies on Changouleh and Cheshmeh Khosh oil fields with National Iranian Oil Company (NIOC).

 A meeting was held in Tehran on August 29 between representatives of Gazprom, NIOC deputy head for development and engineering Gholam-Reza Manouchehri, NIOC experts as well as experts from Iranian Central Oil Fields Company (ICOFC) and Iran's Petroleum Engineering and Development Company (PEDEC).

Gazprom Neft agreed in December with NIOC last year to study the two oil fields. The MOU was signed in the presence of Iran's Minister of Petroleum Bijan Zangeneh, Russia's Minister of Energy Alexander Novak, Salabali Karimi, then head of ICOFC, and Alexander Dyukov, CEO of Gazprom Neft. Vladislav Baryshnikov, a top deputy CEO at the Russian company, met on August 28 with Iran's deputy petroleum minister for international affairs and trade Amir-Hossein Zamani-Nia. They discussed expansion of relations between Iran and Russia in oil and gas sector.

Changouleh oil field is located in Ilam Province. It lies 50 kilometers southeast of the city of Mehran and 10-15 kilometers from Iran-Iran border. It is surrounded by Dehloran and Azar fields.

In addition to Gazprom, Norway's DNO and Thailand's PTTEP have been studying the field.

Cheshmeh Khosh lies 52 kilometers south of Dehloran and 70 kilometers west of Andimeshk. It became operational in 1975 and is run by ICOFC. NIOC has signed MOUs with Gazprom Neft, Malaysia's Petronas, Austria's OMV and Iran's Industrial Development and Renovation Organization (IDRO) to study the field.

 

Iran Ready to Resume Oil Swap

Iran restarted crude oil swap from the Caspian Sea after a seven-year hiatus. The manager of the northern Iranian department of the Iranian Oil Pipelines and Telecommunication Company (IOPTC) says the company is ready to transfer imported crude oil. Hamid Hosseini said that the transfer operation from Neka Port would start upon an instruction by the National Iranian Oil Company (NIOC).

Through swap operations, Iran will receive crude oil from the Caspian Sea littoral states at Neka Port and deliver the same volume to clients in the Persian Gulf at Kharg oil terminal.

The oil swap project was halted in June 2010 at the order of then minister of petroleum. But when Bijan Zangeneh took office as Iran's petroleum minister in 2013 he insisted on the revival of the project noting that oil swap would give Iran a more active role in the oil trading of Caspian Sea states.

In August 2017, the NIOC announced that oil swap had resumed at Neka Port in northern Iran and that several companies had discharged their oil there. More vessels are expected to discharge their oil cargoes at Neka Port. Iran is currently in talks with several companies for swap operations.

Crude oil is discharged at Neka Port. After miscibility and storage at the tanks of North Oil Terminals Company it will be pumped from Mazandaran Province to reach Tehran through a 272-kilometer pipeline.

Ready for Swap

Hosseini told reporters that the idea of oil swap was first raised in 1996 when the then presidents of Iran and Kazakhstan met. The oil swap project was finliazed in 2002.

He said that up to 500,000 b/d of oil could be handled for swap. "This company faces no problem in transferring this amount of oil and pipelines are thoroughly ready," he added.

Jafar Ebrahimi, head of Neka oil transfer center, said: "Since control systems and equipment used in this area are sophisticated we are ready to start transferring oil."

After oil swap was halted in northern Iran, IOPTC started smart pigging and safety operations on a regular basis on the pipeline stretching from north to Tehran in order to provide sustainable conditions.

Regular Pigging

Hosseini said: "Since 2010, we have regularly carried out maintenance and periodic maintenance in the oil pipelines so that we would be always ready."

He noted that the inoperability of swap imposed 50% extra costs on IOPTC.

Hosseini said foreign companies had been conducting pigging in the pipelines. "Of course, Iranian companies have been doing pigging alongside Russian companies. Recently, the pipeline of 32-inch diameter underwent pigging," he added.

Oil Storage Level

Hosseini said that several ships have so far discharged their oil at Neka Port, adding: "We are waiting for our oil storage to reach our desired level and then we can start the operation."

"When between 400,000 and 500,000 barrels of crude oil has been stored we will be able to start oil transfer operation at an average rate of 90,000 to 120,000 b/d," he said.

Hosseini said that the devices installed on the pipelines for swap operations were among the best used in this industry. "The company is only tasked with transferring oil to Tehran, but managing the consumption of this oil is not among the tasks of the company," he added.

Hosseini said the quality of oil imported from the Caspian Sea states was excellent, adding: "As soon as oil is entered its quality is analyzed and after transfer to Tehran the same amount of oil at the same quality would be delivered to customers at Kharg terminal."

Transferring crude oil imported from the Caspian Sea littoral states from Neka to refineries in Tehran and Tabriz is only one of tasks assigned to IOPTC. Other tasks upon IOPTC include delivery of petroleum products produced at Tehran refinery to distribution centers in Mazandaran and Golestan provinces, securing telecommunications in oil distribution centers and pressure relief valves in the two Northern provinces.

High-Pressure PSV

Operations for the transfer of crude oil and petroleum products in northern Iran are handled by five oil transmission centers (Neka, Sari, Gol Pol, Urim and Mergav), three pressure reducing valves (Veresk, Lajim and Ali-Abad) and three end facilities (Sari, Gorgan and Gonbad) via 620 kilometers of pipeline.

The pipeline mainly crosses through a treacherous area; therefore, its maintenance has become difficult, Hosseini said adding that the PSV in this area is under the highest pressure.  

He said that IOPTC delivers 81.67 million liters per month of petroleum products to Golestan Province and 181 million liters to Sari.

The northern branch of IOPTC was established in 2006. It is based in the city of Sari in Mazandaran Province.

Iran poised to move up to its deserved status in the world energy market

The first term in office of President Hassan Rouhani ended and his second just started. The first term was marked with more ups than downs. Undoubtedly, the outstanding achievement during the 11th administration was the signature of a landmark nuclear deal with six world powers and EU, dubbed the Joint Comprehensive Plan of Action (JCPOA), and the subsequent removal of sanctions on Iran.

Iran's petroleum industry, which was the main target of sanctions, benefited from the post-JCPOA atmosphere. In addition to helping Iran raise its oil output and exports and regain its OPEC quota, the nuclear deal prepared the ground for major oil companies to return to Iran. The agreement signed with a consortium led by France's energy giant Total for the development of Phase 11 of South Par is a case in point.

Amir H. Zamaninia, Deputy Minister of Petroleum for Trade and International Affairs, told "Iran Petroleum" a number of other contracts are expected to be signed with major foreign companies before March 2018.

Here is the full text of the interview Dr. Zamannia gave to "Iran Petroleum":

Q: The government of President Rouhani, the11th administration, ended its term with great international achievements like the JCPOA. Would you please explain the track record of Petroleum Ministry in Post-JCPOA?

A: Oil has always been the major driver of Iranian economy. That is why since the very start of the imposition of sanctions by US government, i.e. when the US Embassy in Tehran was taken over, Iran's petroleum industry was directly targeted with a view to undermining Iran. The significance of this industry for Iran is no secret to anybody. In recent years, this industry has been through major problems and challenges. The current state of our production capacity, in a country sitting atop the largest oil and gas reserves together, indicate the clear imbalance of our reserves to our production capacity, and the magnitude of problems and challenges created for it. Our current output stands at close to 3.9 mb/d. That is why the main points in the Resilient Economy instruction by the Supreme Leader [Ayatollah Ali Khamenei] focuses on oil output hike.

In early 2013, when the JCPOA had not been signed and implemented, Iran's oil exports had fallen to below 800,000 b/d. Furthermore, we had become importer of many petroleum products. But after the implementation of the JCPOA, our crude oil production and exports doubled and we managed to regain our lost markets.

We have 28 common oil and gas fields we share with our neighbors. In many of these cross-border fields, our neighbors are ahead of us in terms of hydrocarbon production. That means significant loss of income for our people. In post-JCPOA, Minister Zanganeh and the hard working people of the oil and gas industry were able to increase production from the biggest common field of South Pars to a level equaling to that of Qatar’s production.

To compensate for the losses of the past, increase our production to a level that our oil industry deserves, primarily from the cross border fields and enhance our recovery factor from our brown fields, the collective wisdom within the industry developed a new model contract to draw in IOC’s capital and technology. This major step coincided with the transition of government from President Ahmadi Nejad to President Rouhani, when the differences among political parties and groups had been amplified. As Iran is a pluralistic society in nature, compounded with post-Ahmadi Nejad amplified domestic politics, the new model contract in oil industry became subject of a major public debate at national level. The consensus-building on this model contract took much longer than reasonably expected. This long and slow process delayed, by nearly a year, our negotiations for development of upstream projects in post JCPOA. However, it was done and over within early 2017. The first contract on the basis of the new model contract was finalized and concluded in July on the development of Phase 11 of South Pars with the oil majors Total and CNPC.

 

Q: Now that the ground is prepared for attracting foreign investment and technology, has any planning been made for that purpose over the coming four years?

Foreign investment can be secured only if significant domestic investment is made. We require about 200 Billion dollars of investment in oil, gas and petrochemical industry for the next five years. Out of this figure if we cannot secure at least 70-80 Billion dollars from domestic sources, we will face formidable challenges to raising 120 Billion dollars from foreign capital market. We are positively encouraged to be able to secure the required capital both from the domestic and foreign capital markets.

The process for the petroleum industry to reach the status it deserves requires a stable economic and political environment. The government of Dr. Rouhani has made significant progress on both grounds during its first term of office. All indications point to the same direction in his second term of presidency.

The Petroleum Ministry plans to increase its crude production capacity by over one million barrel per day over the next five years.  By 1421, we are confident we will have renovated Tehran, Tabriz, Isfahan and Bandar Abbas refineries with a total of 14 Billion dollars foreign investment to generate value-added production.

We also plan to have about 365 million cubic meters per day of spare production capacity by 2021. This would allow us to enter the gas market in the region and beyond both by gas pipeline and LNG.

Q: Some in the country believe that crude oil exports would mean selling raw materials and losing national wealth. What do you think?

A: Oil producing nations, including big producers like Russia and Saudi Arabia, compete to gain a bigger share of the world crude market. Crude oil export does not mean selling just raw materials. It entails economic and political cohesion and stability. Oil is not just a simple commodity. Therefore, we have to create some sort of balance in our share of world energy market between our crude oil and petroleum products exports. With renovation of our old refineries and construction of Siraf and Persian Gulf Star refineries, the Petroleum Ministry has planned to increase its crude oil production capacity, as well as its capacity to produce value added products.

Q: You spoke about the necessity of domestic investment and infrastructure before attracting foreign investment. But petroleum industry projects need huge capital which domestic companies may not be able to afford.

A: Based on the new model of oil contracts, foreign companies are required to have a domestic partner for activity in Iran's petroleum industry. The domestic partner is required to provide a portion of initial capital needed for the project. For instance, in the development of Phase 11 of South Pars, which has been awarded to a consortium of Iranian and foreign firms, Petropars is required to provide more than $1 billion of the $4.8 billion [needed for the project]. Therefore, claiming that petroleum industry does not need foreign investment and domestic investment is sufficient is groundless and unfounded.

Petroleum industry projects need huge capital and technology. Therefore, domestic investment alone is not sufficient. During years of sanctions when we executed some oil and gas projects alone without foreign partnership we learnt that despite the fact that we gained priceless experience, but working under normal conditions where foreign capital and new technology is accessible, execution of a major project saves us billions of dollars in terms of lower cost and faster completion of the project.

Q: The contract for the development of Phase 11 of South Pars gas field was signed under the 11th administration. Are any similar agreements planned this year or the following years?

A: More than 20 parallel negotiations are underway. These negotiations are very tedious. They relate primarily to cross border fields. Time is of the essence, no one better than the oil industry executives understand this. We expect to make progress in these negotiations as quickly as practicable. They cannot be rushed unduly though. I expect to finalize a few of them in the current Iranian year.

Q: How will you handle marketing and selling Iran's oil to old and new buyers under the 12th administration?

A: Iranian crude oil global market share is managed by a very professional team under the head of international department of NIOC. This department has had unprecedented achievements; gaining our lost market during the sanctions and securing new markets. We need to do more nevertheless. Relying on our hydrocarbon reserves, we need to develop a more creative approach beyond our borders where for the foreseeable future demand for fossil fuel continues to be high. In addition to increasing our current markets, we are planning to create liquidity and self-generating assets in big markets of South America, Africa, and Asia.

Q: Is Iran's oil production capacity not in contrast with OPEC plan to keep its production ceiling unchanged?

A: Not at all. We support the understanding within

the OPEC and continue to encourage OPEC to stay the course to try to bring a balance to global oil market. At the same time, we will not cease to increase our production capacity.

Q: You attended the World Petroleum Congress (WPC) gathering recently. Would you please explain about this Congress and its agenda?

A: World Petroleum Council (WPC) is a reputable organization with consultative status at the United Nations. It is a forum for energy dialogue between producing and consuming countries. Its goal and programs focusses on promotion of sustainable management and use of the world’s oil and gas resources for the benefit of all. It therefore, shares knowledge of technological developments and scientific research to address challenges facing energy industry, environmental protection and multi-sectorial co-operation with the aim of sustainable development.

WPC’s 65 member countries represent over 96% of the world’s oil and gas production and consumption. Therefore, one can picture that anybody who is somebody in the oil and gas industry is likely to participate in WPC. The 22nd World Petroleum Congress was held in Istanbul under the theme of “Bridges to Our Energy Future.”

Petroleum Ministry encourages private and public representatives of Iranian oil and gas industry to actively participate in such international gatherings to enhance the profile of Iranian oil industry on the one hand, and to promote the great potentials that exist in this industry in Iran, on the other.

It is against this backdrop that I headed a delegation to the 22nd WPC in Istanbul. The contribution of Iranian delegation to the Congress was outstanding, in my view. The Iranian Youth Committee was very dynamic and active both in organizational and scientific capacities. They ranked third in terms of scientific papers accepted by WPC.  Iranian delegation held a ministerial meeting where five presentations were made about different potentials of the oil and gas and oil tanker shipping services available in Iran. Upstream projects and gas potentials of Iran for the world energy market were presented to a packed hall of interested international audience. I also made a statement in a plenary panel shared with BP CEO and the executive of US Energy Agency, under the theme of “Responsible leadership of oil industry.” Issues addressed in this plenary meeting included: environmental protection, anti-corruption initiatives and transparency considerations in oil business.

The organization of the 22nd WPC was exceptional for which I congratulate the Turkish organizers. We managed to have a good number of bilateral meetings with heads of international oil and gas organizations, our current foreign partners and potential partners.

Q: As you know Iran's petroleum industry has long been focused upon by foreign companies and investors. You recently held talks with Linde and other foreign companies. What have been the achievements?

A: Linde is going through a merger with an American company. Along with H.E. Ms. Shahdaei, we had a meeting with executives of Linde to explore and facilitate Linde’s interest for partnership in Iranian petrochemical industry while the company remains in compliance. We had constructive discussions and they will be followed up.

Q: Can Iran transfer money like it did before the sanctions were imposed?

A: NIOC has no problem receiving payment for its oil sales. The challenge is somewhere else. Major European and Asian banks are somewhat reluctant to establish banking relations with Iranian banks for reasons that are not legal but merely political. According to a report recently released by the Financial Times, these banks have so far paid $150 billion in penalties to the US Treasury for supposedly circumventing US Treasury Departments’ sanctions against many countries including Iran. However, medium-sized banks are working with Iran's banks and petroleum industry. We feel no major challenge in this respect.

Q: Does the agreement with Total encourage foreign banks and companies to cooperate with Iran?

A: Like in conduct of international relations where the image one has of its interlocutors is very critical, in the oil industry also the same is true. The image can be built or ruined. JCPOA was a major achievement as an instrument to countering the efforts of those trying to ruin Iran’s image. The contract on phase 11 of South Pars was also a small step in the right direction to build the image of oil industry in Iran. This agreement will definitely have positive effects on the general environment of doing business in Iran and not just in the oil industry.

Q: Doesn't Iran face any problems with regard to selling oil?

A: We do have problems. We do not have as much oil as demanded by our customers.

Q: There was recently speculation about Iran's crude oil exports to Russia. Is that true?

A: Iran-Russia cooperation is much wider and the recently-finalized contract for a Russian company to lift 100 thousands of Iranian crude per day is part of a broader understanding between the Presidents of both countries.

NIOC to Tender Seven 2D, 3D Seismic Testing Projects

The Exploration Directorate of National Iranian Oil Company (NIOC) plans hold a tender for seven 2D and 3D seismic test projects in the current and next calendar years, the NIOC exploration director has said.

The idea behind implementation of the projects is to complete basic data and reduce exploration risks in sedimentary areas, Saleh Hendi told Iran Petroleum.

He reiterated the significance of Abadan Plain and the northern part of Persian Gulf, saying plans were under way for the Apadana, Arvand and Minou seismic test projects.

"Due to location along the border, these projects are of high significance. In addition to customary exploration objectives, we plan to study strata in the Bangestan and Khami formations," he said.

Hendi said according to plans, the first project would be to gather seismic data in the northern part of the Persian Gulf leading to the southern end of Abadan. It has been put out to tender under Apadana project for which assessment of documents submitted by applicants is under way.

Apadana in a project which combines 3D offshore seismic test, transition zone (TZ) with dynamite and airgun energy, OBC and shallow water seismology. A combination of different environmental conditions and the need for various equipment have made this project a seismologically complicated one. The project requires gathering 3D seismic data on 2,620 square kilometers, CSEM (controlled source electromagnetic) and final processing of data.

Regarding financing the project, Hendi said the bills for this project would be settled through deferred payment, i.e. two to three years after data gathering.

He also said that Arvand would be a 3D project on 1,200 square kilometers and Minou also a 3D one on 1,900 square kilometers.

Hendi cited other projects like the 2D Basht seismic test on 850 square kilometers in Kohguiluyeh Boyer Ahmad Province, 2D Dousti project on 400 square kilometers in Kappeh Dagh area and 2D Izeh project on 1,200 square kilometers in Khuzestan Province.

He also said three gravimetry/magnetometry projects were also planned for the current calendar year to March 2018. These are non-seismic projects that would be awarded in the near future through tender and in the form of exploration projects.

"Since all these projects would be awarded to contractors through tender bid, qualified international companies could bid for these projects through forming joint venture or consortium with Iranian companies," said Hendi.

He also said that an integrated 3D seismic and geophysical project was envisaged in the Persian Gulf and Sea of Oman waters (some 100,000 square kilometers) within the framework of a multi-client project.

"Since necessary permits have been taken from the Board of Directors of NIOC, negotiations with several qualified international companies and their domestic partners will start in the near future," Hendi said.

He said that gathering this data would pave the way for the awarding of exploration and development blocks within the framework of new oil and gas contracts.

Persian Gulf Geology and Fault Line Map Drawn Up

Bahman Soleimani, deputy for exploration affairs at the Exploration Directorate of National Iranian Oil Company (NIOC), has announced that experts at the Directorate have drawn up the geology and fault line map of Persian Gulf bed.

"The map has been sketched out by using data of drilled exploration wells and interpreting geophysical seismic lines by an exploration working group comprising veteran geologists and geophysicists," he said.

Soleimani said that due to the large number of exploration wells spudded in the Persian Gulf, the first map of geological formation expansion beneath the Persian Gulf sediments had been prepared. He added that data of fault lines and fractures have been compiled based on the interpreted geophysical and seismographic data.

He added that incongruous dispersity of wells posed a serious challenge to drawing the geological map of Persian Gulf.

"In order to complete the map of long distances between wells, interpolation has been applied. Therefore, despite restrictions and uncertainties, this map could be used in different fields including marine geology by many organizations and companies," said Soleimani.

"In the Persian Gulf exploration project, the Exploration Directorate of NIOC plans to draw up a map of the extension of the first geological formation and fault lines beneath the Persian Gulf bed by consolidating and interpreting low-depth horizons' data in seismic lines and development and production wells," he added.

A geologic map or geological map is a special-purpose map made to show geological features. Rock units or geologic strata are shown by color or symbols to indicate where they are exposed at the surface. Bedding plans and structural features such as faults, folds, foliations, and lineation are shown with strike and dip or trend and plunge symbols which give these features' three-dimensional orientations.

In Iran, the "Exploration Directorate of NIOC" and "Geological Survey & Mineral Explorations" of Iran are responsible for geological maps on different scales.

            10 Agreements Signed         

Foreigners Bid for Iran Petchem Projects

The attractive nature of Iran's petrochemical industry is no secret to anyone. This colorful and diverse industry is profitable. However, it is currently facing financial shortages due to sanctions imposed on the country under the administrations of former president Mahmoud Ahmadinejad. Under the administrations of former reformist president Mohammad Khatami (1997-2005), Iran's petrochemical sector was the top absorber of foreign financing in the country.

Iran's 2015 nuclear deal with six world powers has benefited the petrochemical sector like every other industry. Iran's National Petrochemical Company (NPC) has been inundated by requests for meeting with managers. Hossein Ali-Morad, director of investment at NPC, says negotiations are under way with foreigners for attracting investment.

In an interview with "Iran Petroleum", he said that foreign investors and banks are helping establish funds for Iran to get financing for its petrochemical projects.

Here is the full text of the interview Mr. Ali-Morad gave to "Iran Petroleum".

Q: Many experts believe that the JCPOA (Iran's nuclear deal with six world powers) is one of the major achievements of the previous administration of President Hassan Rouhani. To what extent do you think this agreement has managed to change conditions for the petrochemical industry?

A: These days, media and my colleagues at the petroleum industry are asking me the same question. Everyone believes that lack of cooperation by foreign banks has prevented the full implementation of the JCPOA. As one of the people directly involved in the relevant affairs I believe that Iran may not meet conditions set by foreign banks due to long years of unjust sanctions. I will not waste the time of the interview explaining post-JCPOA conditions because I believe that existing statistics speak sufficiently about bad conditions of this industry at that time. Before the [implementation of the] JCPOA, foreign companies did not either respond to Iran's direct request or their response was not clear, and it was neither affirmative nor negative. The sanctions were like a trap in which the more we made efforts the more restricted we became and if any loophole was found it was identified quickly by Western countries. Fortunately, Iran's petrochemical industry was so attractive that foreign companies were closely watching our country's petrochemical industry market during years of sanctions and they knew that as soon as the sanctions were lifted Iran would become an appropriate market for investment. During first months following the signature of the JCPOA and even now, my colleagues and I were short of time for meeting with negotiating delegations from foreign companies. Although the petrochemical industry has in recent years been fully privatized foreign companies and investors are still willing to hold talks with the National Petrochemical Company (NPC). Given my personal experience in negotiations with business and investment delegations I came to the conclusion that ordinary talks with foreign parties without signing any agreement and without schedule and specific framework will be useless for this industry. Iran's petrochemical industry has so far managed to sign 10 agreements with European and Asian companies, which we hope that some of these agreements will lead to financial contracts. It is necessary to draw your attention to the point that some agreements have been for financial and economic studies. All these are achievements of the JCPOA.

Q: When will these agreements finally end in investment in the petrochemical industry?

A: Foreign investment is different from domestic investment due to Iran's different business environment and lack of knowledge about Iran's market. Foreign investors need first to conduct a precise risk evaluation and economic feasibility test. Unlike domestic investors, foreign investors speak in their negotiations about the formation of joint working teams to carry out comprehensive studies based on political, social, economic and other conditions in order to guarantee the return of investment. For them, their investment is contingent upon the results of these studies. On the other hand, for investment in petrochemical industry they look for a state partner and therefore we introduce reliable companies with totally state-owned shares to them. In the negotiations with foreign parties, economic feasibility studies within a specified schedule, examining the results of studies, selecting a competent foreign contractor to determine the amount of investment, agreement on the share of foreign companies in a project, choosing an Iranian partner, etc. are only part of arrangements for the presence of foreign companies and banks in the petrochemical industry. That is why this procedure is often time taking and lasts often up to one year so that both sides could reach a decision-making point and they may agree on investment.

Q: Has NPC so far reached the decision-making point in the negotiations with international financial bodies and companies?

A: Yes, fortunately we have reached this point in two cases. An important agreement is to be signed soon about transfer of technology. Two months after that, another agreement for joint cooperation in the engineering affairs of a project will be implemented.

Q: What country is this company from?

A: It's a German company, but let the MOU be signed first and then we will announce more details to people. Just know that Iran would become proprietor of a joint license on new petrochemical technology the JCPOA tree is bearing fruits in the petrochemical industry little by little. For instance, more than eight months of negotiations were held with that foreign company for this memorandum of understanding. Furthermore, in coming months, another round of talks with leading European companies about investment will conclude. Meantime, within one month the first agreement for a French contractor to conduct economic feasibility studies will be signed between Persian Gulf Holding and Total. Once this agreement has been signed, studies will be conducted and the results will be presented. We hope that after the presentation of results, the agreement with Total will be finalized.

We are in talks with two other foreign companies about downstream petrochemical projects. Representatives of these companies are travelling to Iran to review studies conducted so far. At present, negotiations with 10 leading international companies are under way in the petrochemical sector on schedule and without any delay.

Q: Although two years has passed since the signature of JCPOA, major international companies in the world are still showing no desire for presence in Iran's petrochemical industry investment projects. What do you think?

A: I think that the first and foremost reason for this is pressure by the US Treasury Department's OFAC (Office of Foreign Assets Control). During years of sanctions, the US managed to sign agreements with leading banks in the world, which bar these banks from dealing with countries placed on the US Treasury sanctions list. Violation of this agreement will lead to imposing US penalties on them. These agreements would expire in October 2017; however it is said they are likely to be renewed.

Q: Doesn't renewal of this agreement contradict with the spirit of the JCPOA?

A: Yes, it's in total contravention [of the JCPOA]. The US has to annul these agreements as soon as possible. This issue is being pursued by Ministry of Foreign Affairs, Central Bank and other competent authorities.  Some foreign companies willing to invest in Iran are using petrochemical industry as a lever of pressure against these banks. Experience has shown that pressure exerted by foreign entities in the US and sometimes in Europe will be more effective for the annulment of sanctions. For example, we implemented this policy about Japanese companies. The companies in this country were told to convince their government and banks to cooperate in Iran's petrochemical projects without any guarantee by the Iranian government. Fortunately this policy paid off and we managed to attract around $1 billion of short term finance for petrochemical industry without any state guarantee. It was the result of collective cooperation of  the NPC and the private sector in line with following up the case with foreign companies to  convince banks and authorities in their own countries.

In their recent talks, some foreign banks expressed readiness for cooperation with Iran's petrochemical industry. For instance, an Austrian bank is set to sign a 1.4-billion-euro credit line [agreement] with the Central Bank of Iran. The [Austrian] bank officials told us in the negotiations that after the reelection of president [Hassan] Rouhani in Iran, the number of German and Austrian companies willing to offer credit for Iran's petrochemical industry projects has more than doubled; therefore, this bank has doubled the number of its staff dealing with Iran's petroleum industry in order to be able to respond to needs. This bank will soon finalize the framework of its agreement with CBI in order to respond to its country's industry.

Before privatization, the NPC used to directly outline projects and opportunities for investment in petrochemical industry or foreign companies travelled to Tehran in order to learn more about details. But for a variety of reasons, rarely is that being done now. Foreign banks, financial institutes and even companies often say they are unaware of opportunities for investment in this industry. The fact is that in recent years we have not fared well in introducing projects and opportunities for investment in petrochemical industry.

Another point that has recently managed to improve conditions for investment in Iran is the renewal of suspension of our case in the FATF (Financial Action Task Force). This political and economic mechanism provided good venue for attracting foreigners into petrochemical sector. Iran was struck off the list of countries where investment is not recommended. CBI officials are currently trying to remove existing obstacles to systematic transactions between domestic and foreign banks. In the post-JCPOA conditions, we have managed to reestablish connection with foreign banks. Fortunately, the number of foreign banks announced by CBI as brokerage bank is increasing on a daily basis. Meantime, petroleum industry projects should get to know the mechanism of connection with banking and financial institutes in the world and documents needed for the economic feasibility of a project. For instance, foreign banks need to produce an acceptable economic survey for cooperation in the financing of a project. Domestic companies have unfortunately not acted appropriately in this sector. I can tell you that only the names of financing projects have been announced to foreign companies and banks post-JCPOA and no economic survey acceptable to banks has been produced.

Currently, foreign banks and companies before taking any action assess financial credit of the Iranian concerned company in terms of financial scoring, investment and capital sponsors in order to figure out the standing of their Iranian trade partner in Iran. Today, along with the private sector, Iran's NPC is required to provide better and more data to foreign companies and banks about the projects and potential for attracting investment into the petrochemical industry. In our negotiations with foreign companies and banks, we ask them to tell us about the type of supporting documents which we need to produce and submit them. Presenting a clear image of investors and direct and indirect proprietors of projects along with economic survey are among requirements for attracting foreign investment and financing.

 

private sector, Iran's NPC is required to provide better and more data to foreign companies and banks about the projects and potential for attracting investment into the petrochemical industry. In our negotiations with foreign companies and banks, we ask them to tell us about the type of supporting documents which we need to produce and submit them. Presenting a clear image of investors and direct and indirect proprietors of projects along with economic survey are among requirements for attracting foreign investment and financing.

Q: Given the privatization drive in the petrochemical industry, is the NPC's international standing like before?

A: The NPC standing is so high that all foreign companies negotiating with the private sector say they would not step in for cooperation if the NPC (which is experienced) does not sign the MOU for cooperation. Some of these foreign companies have even gone beyond saying they would negotiate only with the NPC about implementing technology and investment projects. The private sector must know that in every negotiation for the purchase of technology and attracting foreign investment, it would need our colleagues at the NPC for faster and easier success.

Q: What technologies is Iran's petrochemical industry more interested in for foreign investment and partnership?

A: New technologies that would convert petrochemical products to finished products of higher value added and technologies which are based on gas feedstock and full chain up to production of special petrochemicals are prioritized.

Q: How much domestic and foreign investment does Iran's petrochemical industry need to continue its activities?

A: Currently our incomplete projects need more than $40 billion in financing, new projects need $30 billion in investment and financing. Under normal and unlimited conditions, we need eight to ten years for attracting this amount of investment. Of course in the past, some people in the private sector have accepted to implement certain projects in this industry without any financial support. My colleagues are now deciding about their fate. The next point is that we should end the prioritized projects which do not lie within the framework of the strategy of Iranian Ministry of Petroleum and direct our domestic financial resources like National Development Fund of Iran and foreign financial resources towards prioritized projects.

Q: What is the current mechanism for awarding new petrochemical projects to the private sector?

A: With the prudence of the esteemed Minister of Petroleum of Iran, the responsibility for the assessment and awarding of petrochemical projects in the country has been delegated to the NPC, and the company is tasked with assessing projects and monitoring petrochemical projects. Every foreign and domestic investor in petrochemical industry has to visit us first and foreign companies will enter talks with the private sector through arrangements made by the NPC.

Q: You mentioned that all your negotiations with foreign companies under the 11th administration are only at the stage of memorandum of understanding and no money has entered this sector. In other words, it is the ninth year in a row that no foreign investment has entered this industry. How much investment has been made in this sector over the past four years?

A:  Over the past four years, LCs for petrochemical plants in Bushehr, Masjed Soleiman, Lordegan, Sabalan, Kimia Pars Middle East have been released by Chinese banks for a value of $4.5 billion. It shows that we did not wait for the sanctions to be lifted. For instance, following talks with the CBI some petrochemical projects are to be allotted hard currency. Unfortunately, due to the dominance of conditions of sanctions we have been very slow in financing, but we have not submitted to just any price. In their visits of plants under construction, foreign companies say Iranians have started from scratch in developing their projects, while with state-of-the-art technology these projects will reach full profitability.

According to this year's budget bill, the Iranian government is able to provide guarantee for the financing of projects up to $50 billion. The CBI and Iran's Ministry of Economic Affairs and Finance are in talks to determine a framework for financing by South Korean banks up to 8 billion euros and for credit lines opening by banks from Denmark, Germany, Italy and France.

In its talks with foreign banks and financial institutes, the NPC has announced its willingness to see special credit lines opened for Iran's petrochemical sector given its record of no default on its foreign loans during years of sanctions.

Currently, one of our important measures taken has been the establishment of funds for petrochemical projects outside the country with the contribution of foreign banks and investors. During a visit to Belgium, I held fruitful talks arranged by the Iranian embassy there. These funds can easily finance petrochemical industry projects without any need for Iranian government guarantee. Meantime, my colleagues are drawing up a similar plan (rial project fund) inside Iran so that Iranians could contribute to the development of this industry and receive return on their investment.

Q: How much is the rate of return on investment in these funds?

A: First of all we need to finalize the project and then its rate of return will be announced. But definitely the rate of return on investment in rial and foreign currency funds will be totally different.

Q: Has there been any project financing in the petrochemical industry since 2008?

A: Not at all. I think that we will need long time post-JCPOA to work out mechanisms for the financing of projects so that we could operate projects on our won. After long years, our talks with a foreign company for investment and possibly financing recently reached good results.

Q: When will the installments of pre-2008 financing of Iran's petrochemical industry end?

A: By late 2020. Most of these installments which were from Germany, Italy, Japan and France will end. I would like to say that we have not defaulted on any installment. I would like to point out once more that this is why foreign banks and companies show more willingness for presence in Iran's petrochemical industry.

Q: According to Article 44 of Iran's Constitution on privatization, revenues obtained from the privatization of petrochemical plants should be invested in infrastructure and other projects. That has not happened in recent years. Did the 11th administration take any actions to that end?

A: Yes, efforts were made to that end. These sums are required under Article 8 of 4th Five-Year Economic Development Plan to be transferred to the NPC, but it has yet to take place. A recent resolution approved by the government is for this purpose. It is one of cases which we believe that privatization of petrochemical industry has not been done with proper and strategic mechanism.

Q: How do you assess the prospect for investment in the petrochemical industry in the 12th administration?

A: I think that out of 10 MOUS signed so far, some will be finalized over coming six months and arrangements would be made for more than $8 billion investment in this industry. We have currently focused on the optimal execution of these memorandums. Meantime, we are making efforts and following the procedure to become proprietor of technology in this industry. We are determined to sign cooperation agreements with leading petrochemical technology companies and domestically develop cutting edge technologies.

Iran-Russia Oil Deal; Mutual Advantages

In 2014, negotiations started for Iran to export oil to Russia. Based on an initial agreement, Russia was expected to buy up to 500,000 b/d of oil in return for Russia equipment and commodities.

This major oil deal, estimated to be worth $1.5 billion a month, was subject to modifications. The two countries finally agreed on 100,000 b/d, largely down from the previous figure.

Russian Minister of Energy Alexander Novak recently announced that Iran's oil exports to Russia within the framework of an oil-for-goods program would start soon. Novak has spoken about the finalization of details of the agreement between Tehran and Moscow, but Iran and Russia seem determined to start this project.

However, this project has faced challenges and elicited diverse reactions. Sometimes, there are words about the enforceability of this project and sometimes related news is dismissed downright.

The present article aims to examine existing challenges before analyzing the prospects of this deal.

Challenges

Ever since news emerged of oil-for-goods deal between Iran and Russia, several significant challenges came up. Either of these challenges may easily scupper such an agreement. The most important challenges of this type are as follows:

First, it is not yet clear how Iran plans to deliver its oil to Russia. In other words, it is not clear whether Russia would receive this oil in the Caspian Sea or in the Persian Gulf from Iran. In case the Russians are to receive this oil in the Persian Gulf, they will have to pay for transportation. That comes a time when there is currently no possibility for the delivery of this oil to Russia in the Caspian Sea. The reason is that Neka terminal, which is Iran's biggest oil terminal in the Caspian Sea, is in no position to let very large crude carriers dock. In fact, one of the most important weak points in Neka oil terminal is the impossibility of berthing for VLCCs. Therefore, it is necessary to build new jetties to let oil tankers dock.

Second, it is not clear what Russia plans to do with this oil. Does Russia intend to consume this oil in Russia or sell it on world markets? It is noteworthy that Russia is currently the largest producer of oil in the world. Therefore, if it wants to sell Iran's oil in world markets it has to buy at a lower price from Iran to be profitable for Moscow. Furthermore, if this oil is supposed to be used domestically, its price must be the same as in Russia and any price higher than that will not be profitable for this country.

Third, it is not clear which commodities Iran would import in return for giving oil to Russia. As it is said, if Iran imports wheat, steel and some equipment from Russia that would not be advantageous for Iran, because Tehran would give a strategic product in return for non-strategic goods. In fact, in case the commodities Iran would import in return for giving oil to Russia are not strategic such a deal would not be beneficial for Iran.

Fourth, the method of implementation of this agreement and the mode of pricing for Iranian crude oil and Russian commodities has yet to be decided. According to what has already been said a company which is not present in global markets is expected to be registered in Russia to represent Rosneft. The idea is that in case after Iran and Russia sign an oil-for-goods deal the US imposes sanctions on both parties will Rosneft remain immune. Nonetheless, it is not clear if the newly planned company is placed on the US sanctions list what would happen to the deal.

Fifth, the planned oil deal between Iran and Russia has since the very beginning faced tough opposition from the Americans. In view of the Americans, such a deal would be a way to get round sanctions on Iran. The US officials have warned that signature of such a deal could lead to the imposition of sanctions on the parties to the contract.

Sixth, the oil-for-goods deal was agreed upon between Iran and Russia when Tehran and six world powers had not concluded their landmark nuclear agreement, dubbed the Joint Comprehensive Plan of Action (JCPOA). Now that the sanctions have been lifted on Iran following the implementation of the JCPOA in January 2016, serious doubts have emerged over Iran's intention to remain interested in such a deal with Russia. In the post-sanctions era, major Russian oil companies are willing to invest in Iran's energy sector and Tehran can sell its oil without any restrictions and purchase its necessary commodities from different sources. Therefore, under conditions when there is no longer any restrictions for Iran in importing commodities, implementation of oil barter deal between Iran and Russia and limiting Iran to Russian goods would look unjustified.

Bright Perspective

Although the challenges listed above indicate that the planned Iran-Russia oil-for-goods deal faces many obstacles and its implementation is facing ifs and buts which could not be resolved in the short term, the future of such a deal looks bright in case it goes ahead according to what Iran's minister of petroleum, Bijan Zangeneh, had earlier said.

Minister Zangeneh had said that Iran planned to sell its oil to foreign customers via Russia and in return, it will receive half the price in cash and spend half on buying Russian services and commodities. Such a method would serve the long-term interests of both Iran and Russia.

The Iran-Russia oil deal, which is referred to as oil barter trade or oil-for-goods, is by no means a barter deal because Iran can use its own money to purchase commodities and services which it needs. Meantime, Russia will be able to sell its commodities and equipment to Iran and that would be profitable for Moscow.
The Iran-Russia oil deal is an appropriate method for Iran to diversify its oil buyers. Under the deal, Russia will export Iran's oil to any country. Since Iran's oil has a quality similar to the oil extracted from Russia's Ural area, Iran's oil will be sold by Russia easily. Meanwhile, by selling Iran's oil Russia will be able to gain a bigger share of Europe's markets, which would be a long-term energy strategy pursued by Moscow.
Implementation of the Iran-Russia oil deal will increase Iran's oil exports, which would help improve Iran's economy post-sanctions. Such an oil deal will be profitable for Russia too because it will let Moscow receive transit rights for selling Iran's oil to other countries.
The Iran-Russia oil deal is a golden change for Tehran and Moscow which are both willing to develop long-term trade ties. That can prepare the ground for the development of trade ties between the two countries in the energy and other economic sectors.
An important advantage of the Iran-Russia oil deal is the facilitation of trade between the two countries. Currently, Iran-Russia trade is more than half the revenue from 100,000 b/d of oil. Therefore, such a plan would facilitate the Iran-Russia trade and the two countries could scrap money in their transactions.

Given the advantages mentioned above, it seems that it would be possible for Russian businesspeople and companies to help Iran find international oil buyers. In return, Iran will spend its petrodollars on buying Russian-made products. This project can be profitable for both countries in the long-term. In fact, the mutual advantages of oil deal will convince both Tehran and Moscow to follow up on its implementation more seriously.

1-Guinea-Bissau Sanctions Offshore License Changes

FAR says that amendments to offshore Guinea-Bissau licenses have been approved by government decree.

Early in April, the company concluded negotiations with Petroguin, the national oil company of Guinea-Bissau, to revise the terms of both the Sinapa and Esperanca licenses.

FAR’s participating and paying interest in the permits is now higher at 21.42%. However, if a commercial discovery follows, Petroguin will have 10% interests, with FAR and Svenska, respectively holding 19.28% and 70.71%.

The new license terms are more favorable to deepwater investment, including a reduction to production royalty rates payable to the government.

In addition, the licenses have been extended through Nov. 25, 2020.

The partners have committed to drill one exploration well on each license with a minimum expenditure for each permit of $3 million.

According to FAR, both concessions are in a similar geological setting to plays offshore Senegal, including the SNE oil field discovery.

2-3D Seismic Survey Offshore Malaysia

Schlumberger subsidiary WesternGeco has completed a hybrid seismic acquisition survey offshore Sarawak, Malaysia, using its newly deployed multipurpose vessel WG Vespucci.

The 340-sq km (131-sq mi) 3D seismic survey was acquired for Roc Oil using a triple source array with simultaneous recording by ocean-bottom nodes and a towed-streamer spread, all from a single seismic vessel. 

The WG Vespucci acquired the ocean-bottom seismic (OBS) data required around existing platform obstructions supplemented by streamer seismic data. Simultaneously acquiring the OBS and streamer data without having to employ multiple acquisition vessels and crews resulted in cost reduction and greater efficiency, while achieving the survey objectives.

Maurice Nessim, president, WesternGeco, Schlumberger, said: “Providing a hybrid OBS and streamer acquisition option with our multi-purpose vessel versus a traditional OBS or towed streamer survey gave the customer a versatile and cost-effective solution to better fit their specific challenges and budget.

“This industry-first acquisition underscores our commitment to offering our customers innovative approaches to offshore seismic acquisition challenges.”

3-Papua Guinea Offers Offshore Condensate Project

Baker Hughes has entered into what it claims is the industry’s first full-stream agreement in support of the Pasca A gas condensate field development offshore Papua New Guinea in the Gulf of Papua.

The company will provide services and equipment during Phase I to Australian operator Twinza Oil, including drilling services, wellheads and pressure control equipment for the fourth and final appraisal well.

Drilling of the well is due to start soon. It will then be suspended as a future development well, and the final investment decision (FID) to proceed to development should follow next year.

Post FID, Baker Hughes expects to provide an integrated gas processing solution from the wells through to point of export.

The full-stream offering covers drilling services, subsea equipment, gas processing topsides, gas compression and turbomachinery, and installation and commissioning services.

Baker Hughes also assisted Twinza with a financial solution to allow the company to complete appraisal drilling and proceed to FID.

Pasca, in 93 m (305 ft) of water in the PPL 328 lease, will be Papua New Guinea’s first offshore oil and gas development to produce natural gas liquids (NGLs) in the form of condensate and LPG, as well as producing natural gas.

The project should further develop relevant offshore skills and services in-country and provide local employment. Additionally, the LPG produced will be available to reduce the country’s imports, offering an alternative to imported diesel fuel for power generation.

Twinza, which holds 100% of the Pasca A license, has submitted a two-phase plan. Phase I initially involves production of NGLs, with reinjection of dry gas ahead of Phase II. During Phase II, dry gas will be exported.

4-Noble Drillship to Work Offshore Guyana

Noble Corp. has issued an update on its offshore drilling rig fleet.

ExxonMobil has awarded the drillship Noble Bob Douglas a three-year contract for offshore Guyana. The contract is expected to begin in 1Q/2Q 2018 and end in 1Q/2Q 2021. The day rate was not disclosed.

In October, the Noble Bob Douglas is expected to drill for Tullow Oil at the Araku prospect offshore Suriname.

Hess has awarded the semisubmersible Noble Paul Romano a three-month extension in the US Gulf of Mexico. The estimated contract duration is early October 2017 to late December 2017 at a day rate of $115,000.

Late last month the jackup Noble Houston Colbert completed a program offshore Qatar and is currently warm stacked, while Noble assesses opportunities in and outside the Middle East.

5-Norway Approves Eni, Statoil Drilling Plans

Petroleum Safety Authority (PSA) Norway has sanctioned three forthcoming drilling programs in the Norwegian sector.

Eni is cleared to drill well 7122/10-1 S in block 7122/10 in the Barents Sea, targeting the Goliat Eye prospect south of the Goliat field in the Barents Sea. Water depth at the site is 342 m (1,122 ft).

Drilling should start during the first half of September and continue for at least 37 days.

In addition, Eni has authorization to use the accommodation semi Floatel Endurance at Goliat, where extra work necessitates more cabin capacity.

The rig will be dynamically positioned and linked to the Goliat floating platform via a telescopic footbridge. The consent runs through Nov. 15, 2017.

Statoil has permission to drill an exploration well on the Gina Krog field in the North Sea, which came on-stream earlier this year.

The jackup Maersk Integrator will drill well 15/6-14 S as a side track from the existing 15/6-B-2 well, in 116 m (380 ft) water depth.

Drilling will start next month and could continue for 25 days, depending on the outcome.

Finally, Statoil has the PSA’s approval to use the semisub West Elara for drilling and completing tasks on the Valemon field in the North Sea. The 160-day campaign should get under way in September or October.

 

Sinopec Half-Year Profit Up 41%

China Petroleum and Chemical Corp , known as Sinopec, reported its best six-month profit since the second half of 2014, the latest Chinese state oil major to report a surge in results due to a big recovery in crude prices from last year.

The country’s largest refiner reported a first-half net profit attributable to equity shareholders of 27.1 billion yuan ($4.08 billion), up 40.7 percent on a year prior, based on Chinese accounting standards. Revenue for the period rose 32.6 percent to 1.166 trillion yuan.

Profit rose 40.1 percent to 27.92 billion yuan during the period based on international accounting standards.

The company attributed the strong performance to higher prices and sales of downstream products compared to the year-earlier period.

The data comes after China’s largest oil producer PetroChina and offshore oil and gas producer CNOOC Ltd each released their best results in years.

Sinopec said it expects second half crude oil production to total 148 million barrels.

Sinopec also said it expects global oil prices to continue to fluctuate at low levels the rest of this year, while structural adjustments in China’s energy sector mean natural gas demand will continue to grow quickly.

Sinopec has a larger downstream business than PetroChina, which focuses on upstream oil and gas production. But the refiner is facing headwinds from a glut in the domestic fuel market.

Total domestic fuel sales inched up 0.82 percent to 87.22 million tonnes in the first half.

Crude oil throughput rose 1.6 percent in the first six months to 117.79 million tonnes, as the pace of growth eased from 3.1 percent in the first quarter.

In a bid to reclaim market share, Sinopec and PetroChina have been involved in a pricing war in the retail fuel market since June.

Sinopec is also considering cutting up to 230,000 barrels per day (bpd) of crude runs in the third quarter to counter weaker demand, sources said.

A decline in Sinopec's crude oil production eased in the first half as the company invested more in upstream exploration and production.

Sinopec's capital spending on upstream development rose to 6.87 billion yuan in the first half, compared with 5.168 billion yuan in the same period last year.

22% of U.S. Gulf Oil Output Offline

About 22 percent of U.S. Gulf of Mexico oil production is offline due to Tropical Storm Harvey, the U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement (BSEE) said. Output levels rose slightly when roughly 25 percent of Gulf oil output was offline.

The amount of production offline was roughly 378,633 barrels of oil per day out of the roughly 1.75 million bpd pumped from the Gulf.

About 26 percent of Gulf natural gas production is offline, or about 828 million cubic feet (23.4 million cubic meters) per day, BSEE said.

Roughly 105 platforms have been evacuated in the Gulf so far as a result of Harvey, about 14.3 percent of those in the region. Half of the drilling rigs in the Gulf remain evacuated, BSEE said.

BSEE tabulates the data by polling 30 Gulf operators.

Royal Dutch Shell Plc said it has not yet been able to assess damage to its deepwater Perdido platform in the U.S. Gulf of Mexico after evacuating it ahead of Tropical Storm Harvey, which came ashore as a hurricane.

The company scrapped plans to send a reconnaissance flight over the platform, about 200 miles (321 km) south of Freeport, Texas, said spokesman Curtis Smith.

Supply and Demand Factors Impact Natural Gas Prices

Market intelligence company PointLogic estimates that weekly US dry natural gas production fell 0.27% to 72.8 Bcf per day on August 17–23, 2017. However, US dry natural gas production has risen by 1.1 Bcf per day, or 1.5%, Y-o-Y.

The EIA (U.S. Energy Information Administration) estimates that monthly natural gas production is at a ten-month high. High natural gas production could have a negative impact on natural gas (UNG) (GASL) (BOIL) prices.

Lower natural gas prices have a negative impact on natural gas producers’ earnings like Gulfport Energy (GPOR), Southwestern Energy (SWN), and WPX Energy (WPX).

US production averaged 74.1 Bcf per day in 2015. Production fell to 72.3 Bcf per day in 2016. Production fell for the first time in 11 years in 2016.

According to the EIA’s estimates, US dry natural gas production has risen to 73.5 Bcf per day in 2017. Production is expected to rise 5.2% to 77.3 Bcf per day in 2018—compared to 2017.

Weekly US natural gas consumption rose 3.7% to 75.2 Bcf per day on August 17–23, 2017. It also rose by 2.2 Bcf per day or 3% Y-o-Y. Changes in natural gas consumption impact natural gas prices (UGAZ) (DGAZ).

US natural gas consumption averaged 75.1 Bcf per day in 2016 and 74.7 Bcf per day in 2015. The EIA estimates that consumption will average 72.6 Bcf per day in 2017. It’s expected to rise 4.4% to 75.8 Bcf per day in 2018.

US natural gas production could surpass demand in 2017 and 2018. Excess supplies would pressure natural gas prices. However, booming exports could limit the impact of excess supply.

Venezuela's PDVSA Open to China Partners

Venezuelan state oil company PDVSA said it was negotiating the continuation of its lease of Curacao’s Isla refinery but was open to Chinese partners following a preliminary deal between the island and China’s Guangdong Zhenrong Energy to operate the complex.

PDVSA has for decades operated the refinery, which opened in 1918, under a lease agreement.

But the cash-poor company has been reluctant to invest some $1.5 billion that Curacao authorities requested several years back to modernize the 335,000 barrels-per-day facility.

China’s Guangdong Zhenrong Energy Co, a commodity trader with strong backing from Beijing, signed a binding framework pact with Curacao’s government in November.

If the deal goes ahead, the Chinese firm would replace PDVSA as operator of Isla, tightening its grip on Venezuela’s oil industry.

PDVSA has said its lease, which expires in 2019, is not up for renegotiation, but appeared to open the door to partnering with China.

“There is a big business potential for an alliance with Chinese partners or any world-class investor to operate this infrastructure,” PDVSA said in the statement, adding it was “advancing” in negotiations to continue its lease on the refinery.

Refinery Vice President Guillermo Blanco was in Curacao meeting with the island’s Prime Minister, Eugene Rhuggenaath, PDVSA said in a statement.

Petrobras Sees IPO in December

Petróleo Brasileiro SA will aim to launch the initial public offering of fuel distribution unit BR Distribuidora SA by early December after having fixed a hefty debt issue that afflicted the subsidiary for years, Chairman Nelson Carvalho said.

Earlier in the day, the Brazilian oil producer - Petrobras- agreed to inject 6.3 billion reals ($2 billion) into BR Distribuidora. This will in turn transfer part of 10.4 billion reals worth of invoice receipts that a state power utility owes to Petrobras subsidiaries for fuel sales.

He said the capital injection solves the main hurdle to the BR Distribuidora IPO, because the hefty burden of invoice receipts were depressing potential valuations. The board of Petrobras has already selected a roster of banks to meet the IPO deadline, Carvalho said.

The IPO of BR Distribuidora, which controls Brazil’s largest network of gas stations, has been stymied time and again since the government first proposed it in 2015. Petrobras revived the plan in June to cut debt and capital spending in low-return activities.

Reuters reported earlier this month that Citigroup Inc and seven other banks would underwrite the IPO.

“Works for the IPO are at full steam,” Carvalho said on the sidelines of a seminar hosted by B3 Bolsa Balcão Brasil SA.

Regarding the debt that state-controlled power holding company Centrais Elétricas Brasileiras SA now has with Petrobras, Carvalho said the oil producer is considering bundling the debt’s receivables into securities that could be sold to investors. He did not elaborate.

Brazilian companies often repackage such type of assets, from property to contract receivables, into notes that are similar to asset-backed securities and are known locally as FIDCs.

Petrobras said that the capital injection remains subject to approval by shareholders and other stakeholders.

Preferred shares of Petrobras rose 0.4 percent to 13.86 reals, paring back their year-to-date decline to 6.8 percent.

 

Saudi Aramco, SABIC Launch Chemical Bidding

Saudi Aramco and Saudi Basic Industries Corp (SABIC) have launched bidding for engineering work on their joint crude oil to chemicals project, industry sources said, a key step towards developing the $20-billion-plus complex.

The project, known as COTC, the first major scheme to bring the two giants together, is expected to process Arabian Light and Extra Light crude oil, one of the sources told Reuters.

Several plants are expected to be built including a 400,000-barrel-per-day integrated crude distillation and vacuum unit, a distillate hydrotreater, a vacuum gas oil hydrocracker, a residual fluid catalytic cracking unit, a mixed feed cracker, as well as polyethylene, polypropylene, butadiene and aromatics recovery units.

Aramco and SABIC are still considering where to locate the chemicals site; at Yanbu, near a power plant; or in Jubail, close to Sadara, which is an Aramco joint venture with U.S. company Dow Chemical.

The closing date for bids for pre-front end engineering and design work (pre-FEED) and FEED for the COTC is Sept. 25, one of the sources said, adding that the plant is expected to be commissioned by the end of 2024.

Another source said pre-FEED is expected to be completed by late 2018, with FEED to be finalized by late 2019. Aramco and SABIC are expected to launch bidding for construction by mid-2020.

SABIC did not immediately respond to a Reuters request for comment. Aramco said it “declines to comment on rumor or speculation”.

Aramco’s chief executive has said it was a priority for the company to convert crude oil to chemicals as the state oil producer aims to diversify operations in the run-up to an initial public offering of shares next year.

Downstream, which covers refining and chemicals, will help Aramco boost value from hydrocarbons by securing revenue streams and become less vulnerable to oil price swings.

Analysts say the project will help reduce natural gas usage in petrochemicals at a time when the kingdom is trying to use more gas to generate power, rather than burning crude oil, as it seeks to diversify its energy mix.

“What is new and different is that the prices of crude and gasoline/diesel have come down more than petrochemicals. This makes the incentive to produce petrochemicals greater than to make gasoline and diesel,” Mark Routt, chief economist for the Americas at KBC Advanced Technologies, said.

“It certainly could usher in a new ’wave’ of investments in producing those petrochemicals,” he said.

The project is strategic for Saudi Arabia, which plans to expand further into the petrochemical chain to export more end products and grow beyond oil.

It is also crucial for Saudi Arabia's economic reform plan and could create as many as 100,000 jobs.

SABIC's CEO told Reuters in May that COTC could produce more than 18 million tonnes of materials yearly.

-Nigeria Oil Output in July below 1.8 mb/d

Nigeria’s oil production, excluding condensates, was slightly below 1.8 million barrels per day in July, the country’s oil minister said.

Emmanuel Ibe Kachikwu, speaking on the sidelines of an event in the capital, Abuja, said there had been issues with aging pipelines.

 “We continue to have challenges, some of our pipelines are old, so these are basically technical. They are not militancy-induced stoppages, but they are basically maintenance-induced stoppages,” he said.

Nigeria’s oil output has rebounded this year, aided by government efforts to placate militants in the Niger Delta region where the bulk of the country’s crude is produced, but it has struggled to maintain peak output levels.

Crude production in the country was cut by more than a third last year when militants carried out a series of attacks on energy facilities in the southern Niger Delta oil hub.

The country’s crude oil exports are expected to fall to 1.72 million barrels per day in October, according to loading programs.

When asked whether Nigeria would agree to join OPEC’s production cap at the group’s November meeting, the minister said: “I can’t disclose that.”

OPEC has agreed with several non-OPEC producers led by Russia to cut oil output by a combined 1.8 million barrels per day (bpd) from January 2017 until the end of March 2018. OPEC members Libya and Nigeria were exempted from the limits to help their oil industries recover from years of disruptions.

The minister said condensates contributed 450,000 bpd to Nigeria's production in July.

Petrobras Sees IPO in December

Petróleo Brasileiro SA will aim to launch the initial public offering of fuel distribution unit BR Distribuidora SA by early December after having fixed a hefty debt issue that afflicted the subsidiary for years, Chairman Nelson Carvalho said.

Earlier in the day, the Brazilian oil producer - Petrobras- agreed to inject 6.3 billion reals ($2 billion) into BR Distribuidora. This will in turn transfer part of 10.4 billion reals worth of invoice receipts that a state power utility owes to Petrobras subsidiaries for fuel sales.

He said the capital injection solves the main hurdle to the BR Distribuidora IPO, because the hefty burden of invoice receipts were depressing potential valuations. The board of Petrobras has already selected a roster of banks to meet the IPO deadline, Carvalho said.

The IPO of BR Distribuidora, which controls Brazil’s largest network of gas stations, has been stymied time and again since the government first proposed it in 2015. Petrobras revived the plan in June to cut debt and capital spending in low-return activities.

Reuters reported earlier this month that Citigroup Inc and seven other banks would underwrite the IPO.

“Works for the IPO are at full steam,” Carvalho said on the sidelines of a seminar hosted by B3 Bolsa Balcão Brasil SA.

Regarding the debt that state-controlled power holding company Centrais Elétricas Brasileiras SA now has with Petrobras, Carvalho said the oil producer is considering bundling the debt’s receivables into securities that could be sold to investors. He did not elaborate.

Brazilian companies often repackage such type of assets, from property to contract receivables, into notes that are similar to asset-backed securities and are known locally as FIDCs.

Petrobras said that the capital injection remains subject to approval by shareholders and other stakeholders.

Preferred shares of Petrobras rose 0.4 percent to 13.86 reals, paring back their year-to-date decline to 6.8 percent.

Statoil, YPF to Explore Shale Oil, Gas in Argentina

Norway’s Statoil has signed a deal with Argentina’s leading energy company YPF to jointly explore for onshore shale oil and gas resources in the Vaca Muerta formation, the company said.

Statoil and YPF will each hold 50 percent in the Bajo del Toro exploration block, it said. Statoil will recognize YPF’s past costs in the block and will finance 100 percent of the cost of some activities, it added.

“This is a light oil exploration project in a world-class unconventional resource play, the Vaca Muerta formation,” Statoil’s exploration chief, Tim Dodson, said.

The companies will invest between $300 million and $500 million, in line with previous partnerships between YPF and foreign oil majors in Vaca Muerta, according to a source familiar with the agreement who asked not to be identified because the deal was preliminary.

One of the world’s largest shale gas formations, roughly the size of Belgium, Vaca Muerta has remained mostly undeveloped due to high production costs and lack of labor flexibility.

Argentinean President Mauricio Macri reached a deal this year with unions and oil companies, including Chevron and Royal Dutch Shell to support the development.

The Bajo del Toro exploration permit covers an area of 157 square km in the Neuquen Basin in the west-central part of Argentina.

The agreements with YPF have to be approved by the Neuquen provincial authorities, Statoil said.

Earlier this month, YPF Chairman Miguel Gutierrez told Reuters in an interview that more partnerships with oil majors could be announced.

 

Global Oil And Asian Product Market, July

 Crude oil prices increased in response to supply-side factors as well as strong U.S. refinery demand. Total commercial crude oil and petroleum product inventories in the United States fell by 22.4 million barrels from June 30 to July 28. The prices rose for the second consecutive months and this was mostly due to the bigger draw than expected in crude and gasoline stocks along with a surprise drop in distillate inventories.  
Crude oil prices were further supported as the Organization of the Petroleum Exporting Countries (OPEC) member Saudi Arabia announced a cap on the country's crude oil exports in August. However, it is unclear how much this will be applicable.
Despite the recent increase in the prices, global oil price forecasts for 2017 and 2018 have been adjusted lower on concerns about fading OPEC and Non-OPEC compliance with output cuts and rising supply. Global crude production has risen by 800,000 b/d in the past two months, boosted mainly by higher OPEC supplies, after dropping by 2.7 million b/d between November and May.

Asian Product Markets

Light Distillates (gasoline, naphtha)

Gasoline cracks – differential between gasoline prices and Dubai crude prices- climbed to its highest in the year 2017. The US and Singapore gasoline inventories declined during August, causing the market to be improved. The unplanned shutdown of GS Caltex’ reformer at its Yeosu facility, as well as the fire in Shell’s 400,000 b/d Pernis refinery caused limitation on supply. the demand was supported by Middle East countries due to the summer time. Looking ahead, the market will be healthy at least by end of September.

Naphtha market improved reaching back into positive territory on a barrel basis. On the demand side, naphtha imports by Japanese players increased. Moreover, naphtha demand as gasoline blending component supported the market. Along with the mentioned factors, active buying from other petchem operators in the region such as from South Korea and China helped the market shaping upward trend.  On the supply side, Indian refinery maintenance at Indian refiner MRPL’s 300,000 b/d decreased Indian naphtha exports as one of major exporters in the region.

Middle Distillates (gasoil, jet fuel)

Asian gasoil fundamentals weren’t healthy on the back of weak demand. Most the weakness in demand side came from monsoon season has which helped to bring an end to Indian diesel buying. However, some of the downside was limited by increased buying from Europe following the outage of Shell’s 400,000 b/d Pernis refinery. Asian gasoil cracks decreased and weakened and the high sulphur ones fell  the most.

Asian fuel oil market remained weak despite the open arbitrage from Asia to US and Europe. However, it is expected that demand from both regions to wane going forward due to seasonally lower demand in those markets.

Fuel Oil

Asian fuel oil cracks – the differential between fuel oil and Dubai prices- fell to its lowest since April 2017. The market fundamental is weak due to ample supply and lower demand in the region. More arbitrage arrivals to Singapore supported the supply. Moreover, the Yeosu fire damaged a secondary unit that uses fuel oil as feedstock, increasing supply in the region more.

Top Refiner in Mideast

Shazand Refinery Supplies 2/3 of Iran Euro-4 Petrol

An abrupt and unusual enhancement of air pollution level in the cities of Iran in recent years has prompted Iranian officials to find an appropriate solution for countering the consequences of pollution.

Increasing Euro-4 gasoline production was one of approaches pursued by the Iranian Ministry of Petroleum to reduce air pollution. To that effect, following the implementation of Iran's landmark nuclear agreement with six world powers, the country has moved to produce Euro-4 gasoline mainly in big cities.

With a significant increase in clean and standard gasoline in the refineries in recent years, shutdowns due to extreme air pollution levels decreased to a large extent. Currently around one-third of gasoline consumed in Iran complies with international Euro-4 standards. More than 90% of this gasoline is distributed in big cities. Of a total of 24 million liters of Euro-4 gasoline produced in the country, more than 16 million liters is supplied by Imam Khomeini refinery in Shazand in central Iran. Due to development and establishment of new sections, this refinery has turned into one of the most profitable refining facilities in Iran. The refinery became operational in 1993.

Ali Jamshidi, CEO of Imam Khomeini Oil Refining Company, said the refining capacity of this facility stood at 250,000 b/d of crude oil.

"Every day, we supply 16 million liters of Euro-4 gasoline for big cities like Tehran and Alborz," he said. "Meantime, we have projects on the agenda to upgrade the quality of refined products. Following consultations with several European companies it is now possible to upgrade the quality of gasoline and gasoil to Euro-5 standards only by replacing the catalyst."

The refinery embarked on a project in 2006 to boost the production capacity of its products and upgrade their quality in a bid to maximize gasoline production, minimize fuel oil output and supply products in compliance with environmental obligations and international standards. That came during years of sanctions. A consortium of an Iranian and a Chinese company started the job. Although working under such conditions looked difficult, specialists at Imam Khomeini Refinery managed to install the heaviest integrated reactor weighing 1,300 tonnes and three new serial generators (STG700). Such measures boosted productivity in this company.

Jamshidi said the refinery has become one of the most modern facilities in Iran and is now among the best in the region.

Treatment Capacity Enhanced

The crude oil refining capacity of this facility increased from 170,000 to 250,000 b/d and gasoline production rose from 4.7 ml/d to 16 ml/d of Euro-4 grade; the sulfur content of gasoil fell from 10,000 ppm to below 50 ppm; the feedstock of the refinery switched from light crude oil to blended heavy crude oil; environmental pollution levels declined; liquefied petroleum gas production capacity jumped from 500 tonnes to 2,000 tonnes a day; and benzene used in gasoline fell below one percent in compliance with international standards.

Jamshidi broke down the refinery's production in the last calendar year as follows (The facility was fed 247,800 b/d of crude oil):

15.1 mb/d of Euro-4 gasoline, 300,000 l/d of premium gasoline, 10.5 ml/d of Euro-4 gasoil, 2,900 cubic meters per day of LPG, 200,000 l/d of light naphtha, 1.2 ml/d of kerosene, 1.2 ml/d of jet fuel, 5.8 ml/d of fuel oil, 700 cubic meters a day of propylene, 900,000 tonnes a day of vacuum bottom (for Pasargad Oil Company), 350 tonnes a day of sulfur.

16 ml/d of Euro-4 Gasoline

During the first four months of the current calendar year up to July 22, the facility's production was 15% beyond projections. For instance, in gasoline production, 421 million liters was initially expected to be supplied in the first month of the year, which reached 455 million liters.

In the second month of the year, due to overhaul at the facility, gasoline production was forecast to fall to 350 million liters. But the output was even 23% more than planned and reached 435 million liters.

During the third month of the first quarter, 424 million liters of gasoline was to be supplied, but 427 million liters were produced. And in the fourth month of the year, the output was 5% more than planned.

A strong point with the Imam Khomeini refinery is its Euro-4 gasoline production. Under the former administration of President Hassan Rouhani, Euro-4 gasoline production resulted in a fall in environmental pollutants in big cities like Tehran and Alborz, both densely populated.

Currently, this big refining facility is producing 15 million liters a day of Euro-4 gasoline. In case all refining units remain in service, the gasoline production rate would reach 16 million liters.

When overhaul is done and catalysts are replaced some sections are automatically offline and the Euro-4 gasoline output declines.

"As far as the quality of gasoline production at the refinery is concerned I have to note that it is based on Euro-4 standards. The quality of gasoline has no shortcomings in terms of octane, benzene and aromatics," said Jamshidi.

Overhaul Time Shortened

Every refinery needs to plan overhaul of its processing sections in a bid to sustain production. Shazand refinery is no exception. This year's overhaul at this refinery includes replacing catalysts at the reduced crude desulfurization (RCD) section and overhaul of one of two lines of sulfur and hydrogen units.

Given the highly sensitive nature of this project and also in a bid to eliminate pollution from H2S gas emissions when the sulfur production section is offline and in order to preserve hydrogen production for its consumers to continue working, overhaul in these units are done one after another and within the framework of a specific interval. Initially 25 days were envisaged for overhaul, but the period was reduced to 18 days. The catalyst of the RCD unit absorbs the sulfur and residues of atmospheric distillation and vacuum tower and sends to the residual fluid catalytic cracking (RFCC) unit for gasoline, LPG, gasoil and propylene production. This catalyst has to be replaced every 11 to 16 months. In the calendar year to March 2015, replacement of this catalyst lasted 93 days. Iranian and foreign companies helped replace this catalyst. It was the first unit built in Iran; therefore, no sufficient experience had been achieved in discharging this catalyst. Therefore, it was decided that Iranian and foreign companies be consulted and finally Rojan Sanat Alborz and New Zealand's CR were selected for this purpose.

The overhaul of this unit was initially planned to be done last calendar year, but tests conducted later showed that this catalyst could still operate ; therefore, replacement of catalysts was put off for six months. The replacement of catalysts was initially expected to last 90 days, but since CR is among qualified companies with sophisticated equipment the project was done in two stages with a one-month-and-a-half interval. It took 20 to 25 days to replace each line.

Refinery Quality Upgrade               

Jamshidi said the refinery plans to upgrade the quality of its products, adding that several European companies had noted during talks that the quality of gasoil and gasoline could be upgraded to Euro-5 grade only by replacing catalysts.

"Studies are under way for that purpose and the quality of output could be easily upgraded to Euro-5," he said.

The main challenge to Euro-5 production is high levels of olefin compounds in the RFCC unit. Planning is needed for reducing these compounds.

In addition to implementing projects to upgrade the quality of products at Imam Khomeini refinery, the company has carried out activities for safeguarding the environment. Some of these measures are the elimination of penetration of wastewater into soil, monitoring of water, preventing water pollution and gathering greenhouse gases.

The refinery also plans to improve the quality of fuel fed into furnaces and conduct online monitoring.

NIOPDC Activities Infographics

National Iranian Oil Products Distribution Company (NIOPDC) was established in 1928 and has since been involved in the distribution of petroleum products across the country. NIOPDC is currently managing and monitoring the supply of 220 million liters a day of petroleum products all across Iran.

Facilities and Installations across Iran:

Number of Zones and Districts: 37 Zones, 232 Districts

Number of Petroleum Products Distribution Centers: 3,742

Number of Compressed Natural Gas (CNG) Stations: 2,400

Number of Aviation Fuel Centers: 50

Number of Oil Tanker Trucks: 12,500

Number of Gas Tanker Trucks: 2,500

Number of Oil Tankers: 5

Storage Capacity for Four Core Products: 13bn Liters

Number of Petroleum Product Storage Facilities: 94

Performance Report in 1395 (March 2015-March 2016)

Total Volume of Petroleum Products Transfer: 118bn Liters

Average Distance of Transfer: 403km

Petroleum Product Distribution Details in 1395

Tanker Trucks

Volume of Petroleum Products Supply: 67.8bn Liters

Share in Total Petroleum Products Distribution: Above 57%

Average Distance: 221km

Tank Wagons

Petroleum Product Supply: Above 3.2 bn Liters

Share in Total Petroleum Products Distribution: Above 3%

Average Distance: 858km

Pipeline

Volume of Petroleum Products Supply: Above 44.6bn Liters

Share in Total Petroleum Products Distribution: Above 38%

Average Distance: 552km

Chartered Oil Tankers

Volume of Petroleum Product Supply: Above 2.6bn Liters

Share in Total Petroleum Products Distribution: Above 2%

Average Distance: 759km

CNG Status

Number of CNG Stations: 2,400

Daily Consumption: 21 mcm

Potential Daily Distribution: 40 mcm

Number of CNG Vehicles: 3.5mn

Gas Pressure Booster Stations Extended

Development of gas industry in Iran is half-a-century old now. But Iran embarked on a widespread campaign to extend gas supply to cities and villages all across the country in 1986. To date, 88% of Iranian households have been subscribers of natural gas network. Iran’s Minister of Petroleum Bijan Zangeneh has promised that the coverage will go beyond 95% by the end of the second administration of President Hassan Rouhani in four years’ time.

Roughly 95% of Iran’s gas resources lie in the southern parts of the country. As a result, over recent decades, high-pressure pipelines have been laid out to supply gas to provinces mainly located in the north, northeast, and northwest. Experts say every year gas pipeline need to be extended by 10% as gas production increases and gas network is expanded across Iranian cities and villages.

This trend of extension may seem incredible to foreigners because each gas industry project costs thousands of billions of rials. For instance, National Iranian Gas Company (NIGC) recently moved to expand a network connecting central Iran to Northern provinces.  That would help sustain gas supply in cold seasons and end the need for gas imports from Turkmenistan.

The inauguration of Damghan-Neka gas pipeline will help develop industries in Northern provinces, particularly gas-intensive industries.  This gas pipeline is fitted with 12 pressure relief valves, eight connections, three cathodic protection stations, two pigging stations and a city gate station (CGS). For the construction of this gas pipeline, some 14,500 42-inch pipes weighing 84,000 tonnes and more than 200 tonnes of electrode for welding were needed. Domestic manufacturing companies provided the necessary materials.

This pipeline, which can carry 35 mcm/d of gas, cost IRR 8.2 billion. It was fully built and made operational by Iranian contractor sand consultants.

Iran has currently more than 37,000 kilometers of gas pipeline and more than 80 gas pressure booster stations, which would be enough for laying pipelines all across the Equator. It might be also interesting to note that 2,500 kilometers of high-pressure gas transmission pipelines are added every year to Iran's pipelines.

37,000 km of Gas Pipeline

Iran, which has already more than 37,000 kilometers of high-pressure gas pipeline, intends to launch new projects in coming years in a bid to preserve its status as the fourth largest holder of gas network in the world. For example, the Iran Gas Trunkline 6 (IGAT6) sill connects Assaluyeh to Bidboland and Ahvaz. This 625-kilometer pipeline is meant for carrying 95 mcm/d of natural gas. Fitted with five gas pressure booster stations, it is costing $1.1 billion. It is one of the most important high-pressure natural gas transmission projects in the world. In continuation of this trunkline lies the Iran Gas Trunkline 7 (IGAT7) which is 920 kilometers and would carry gas from Assaluyeh to Sarkhoun and Iranshahr. This $2.2bn project has 10 gas pressure booster stations and would have a capacity of 100 mcm/d of gas.

The Iran Gas Trunkline 8 (IGAT8) is 1,050 kilometers and would connect Assaluyeh to Naein and Tehran. With a capacity of 100 mcm/d and 10 gas pressure booster stations, IGAT8 is under construction with a $3.3bn capital.

The Iran Gas Trunkline 9 (IGAT9) stretches from Assaluyeh to Dehgolan before cutting through Bazargan. It is 1,860 kilometers long and has a capacity of 110 mcm/d of gas transmission. With 117 gas pressure booster stations, it is estimated to cost $8bn.

The Iran Gas Trunkline 10 (IGAT10) connects Kangan to Pataveh and Tiran on 590 kilometers. With four gas pressure booster stations and a capacity of 65 mcm/d, it is under construction with a capital estimated $635 million.

The Iran Gas Trunkline 11 (IGAT11) stretches from Assaluyeh and cuts through Naein to Miamy. The 1,320-kilometer pipeline has a capacity of transmitting 110 mcm/d of gas. It is fitted with 12 gas pressure booster stations.

The second north trunkline is 900 kilometers and stretches from Parchin to Miamy and Sang Bast near Mashhad. It is under construction with a capital estimated at $1.5bn.

The third north trunkline connects Azarbaijan to Saveh, Hamedan, Bijar and Miandoab. It is 470 kilometers long with three pressure booster stations. It is under construction with a capital of $800 million.

At present, Iran's gas network measures 37,000 kilometers long. Over a 10-year period, it is estimated to go beyond 64,000 kilometers. Under the present circumstances, 67 gas pressure booster facilities are in operation. The figure is expected to reach 150.

Under a five-year plan defined for gas sector, more than 6,000 kilometers of gas pipeline and 36 gas pressure booster stations are to become operational. Iran has so far built 37,000 kilometers of gas pipeline and has 1,680 kilometers under construction. Furthermore, 80 pressure booster stations have been so far built across the country and construction of 10 more is under way.

The Iran Gas Trunkline 10 (IGAT10) connects Kangan to Pataveh and Tiran on 590 kilometers. With four gas pressure booster stations and a capacity of 65 mcm/d, it is under construction with a capital estimated $635 million.

The Iran Gas Trunkline 11 (IGAT11) stretches from Assaluyeh and cuts through Naein to Miamy. The 1,320-kilometer pipeline has a capacity of transmitting 110 mcm/d of gas. It is fitted with 12 gas pressure booster stations.

The second north trunkline is 900 kilometers and stretches from Parchin to Miamy and Sang Bast near Mashhad. It is under construction with a capital estimated at $1.5bn.

The third north trunkline connects Azarbaijan to Saveh, Hamedan, Bijar and Miandoab. It is 470 kilometers long with three pressure booster stations. It is under construction with a capital of $800 million.

At present, Iran's gas network measures 37,000 kilometers long. Over a 10-year period, it is estimated to go beyond 64,000 kilometers. Under the present circumstances, 67 gas pressure booster facilities are in operation. The figure is expected to reach 150.

Under a five-year plan defined for gas sector, more than 6,000 kilometers of gas pipeline and 36 gas pressure booster stations are to become operational. Iran has so far built 37,000 kilometers of gas pipeline and has 1,680 kilometers under construction. Furthermore, 80 pressure booster stations have been so far built across the country and construction of 10 more is under way.

80 Pressure Booster Stations

Iran's gas industry has currently 80 pressure booster stations, 36 production centers and more than 37,000 kilometers of pipelines with diameters varying from two to 56 inches are transmitting this clean fuel to consumption centers. Given the increase in gas production capacity in coming years, it is necessary to build new facilities. According to plans, the volume of gas transmission in the country will reach 1 bcm/d by next March, which will reach 1.1/d by 2025. In the 2025Vision Plan, the number of pressure booster stations will reach 136, production centers to 74 and the length of high-pressure pipelines to 62,000 kilometers. Gas pressure booster facilities are key to transmission of gas. Despite restrictions, seven pressure booster stations became operational last calendar year. In the current calendar year, five new facilities are set to become operational.

According to projections, more than 10 gas pressure booster facilities are to come online over the coming two years. Given the fact that these facilities cost billions of dollars and Iranian contractors would be hired, many jobs would be created in the country.

In the gas transmission and pressure booster sector, more than 500 items of commodities are used. Thanks to efforts by NIGC, more than 90% of these commodities are currently manufactured in the country. Development of gas industry in recent years has seen significant growth, leading to increased gas production and processing. At present, this clean fuel constitutes more than 70% of the country's energy mix.

This industry is spending billions of dollars every year in the construction of installations, new pipes, and expansion of network and provision of necessary infrastructure for gas supply to different areas in the country. Implementation of these projects would create a massive labor market for domestic companies.

NIGC is tasked with extending gas infrastructure in the country. Given activities conducted so far and strategic projects having become operational in gas sector, it could be concluded that NIGC has fared well and is still facing a long way ahead.

High-Pressure Gas Pipeline Length to Double

The length of high-pressure gas transmission pipelines is expected to increase from the current 37,000 kilometers to 64,000 kilometers by the end of the 7th Five-Year Economic Development Plan. The number of gas pressure stations is also forecast to reach 140, currently at 80. That would place the Islamic Republic of Iran among the owners of large gas transmission networks in the world.

Currently, more than 700 mcm/d of gas, equivalent of 4.5 million barrels of petroleum products, is being consumed in the country. Natural gas constitutes around 70% of the country's fuel mix. Natural gas, which tops the energy basket, is the pivot of economic development in the country. Last calendar year, more than 158 bcm of natural gas was produced, transferred and distributed in the country. During the first three quarters of the last calendar year (started March 20, 2016), a total of 143 bcm of gas was transferred. This year, gas transfer is expected to reach 159 bcm.

Today, energy is a fundamental issue in global economy. Therefore, countries with a higher share of production, transmission and distribution will be more influential in the sectors of economy and job creation.

Meantime, one-third of gas production in the world (1,000 bcm) is traded among countries and more than two-thirds (68%) of this gas is being transferred via pipeline across the globe and the rest is carried in the form of liquefied natural gas (LNG) to remote spots.

Laying out long gas pipelines in the world underlines the significance of pipeline in gas transmission. Building gas pipeline is currently a good option for the transfer of this energy commodity in the world.

So far more than 1.535 million kilometers of pipeline across the world have been launched to transfer more than 3.376 bcm of gas. Iran has a share of around 37,000 kilometers. This share puts Iran in the fourth place in the world in terms of gas transmission network. Under the present circumstances, Iran comes fourth after the US, Russia and Canada.

Currently, a major policy in gas transmission is a higher contribution of private sector in development projects. The growth of downstream gas sector in different countries in the world stands at 1 to 1.5 percent annually. But the growth of natural gas transmission industry in Iran has been 10% annually in recent years, a sign of jump in this sector. Iran's gas transmission network plans to increase the number of its pressure booster stations to 140 and its gas transmission network to 70,000 kilometers.

Russian Firms Eye Shadegan, Rag Sefid Fields

Iran is currently in talks with a number of domestic and foreign firms for the development of Shadegan and Rag Sefid oil fields. Tanco and Pasargad, both Iranian companies, Schlumberger and Pergas recently offered to study the oil fields before developing the reservoirs.

Russia's Zarubezhneft recently expressed readiness to develop the oil fields and signed a memorandum of understanding (MOU) with National Iranian South Oil Company (NISOC) to study Shadegan and Rag Sefid. The agreement was signed between Hamid Doris, director for technical affairs of NISOC, and Director for Development of Fields and Investment of Zarubezhneft Elias Khamitov.

The MOU was drawn up based on a model of contract proposed by NISOC and validated by the Board of Directors of National Iranian Oil Company (NIOC). The Russian company agrees to present its proposal for the development of these fields in nine months at the latest.

It is the 9th MOU signed between NISOC and a foreign company based on an NIOC-developed model.

Rag Sefid is located in an area run by Aghajari Oil and Gas Production Company (AOGPC). Oil is currently being extracted from its Asmari and Bangestan reservoirs, while its Khami reservoir remains untapped.

Shadegan which started production in 1998 and is currently supplying oil from its Asmari and Bangestan reservoirs is run by Maroun Oil and Gas Production Company.

These two fields are on the NISOC agenda for enhanced oil recovery in Iran. By establishing a production unit, it will become possible to recover more oil and gas from Shadegan and Rag Sefid. This project is being studied by the Petroleum Engineering Section of NISOC for more authentic assessment.

Shadegan, 50-Year-Old

Shadegan oil field which is 60 kilometers south of the provincial capital Ahvaz is located in Khuzestan Province.

The field was discovered in 1968, but started production 20 years later. This field is run by NISOC, but its production is handled by Maroun Oil and Gas Production Company.

The oil field measures 23 kilometers long and 6 kilometers wide. It contains Asmari and Bangestan reservoirs.

The current crude oil production capacity of Shadegan stands at 61,000 b/d from Asmari and 5,000 b/d from Bangestan.

Bangestan was discovered in 1996 and started production in 2008. Oil was proven to exist in this field after a first oil well was drilled there.

Production from the Bangestan reservoir currently stands at 5,000 b/d. This output was reached after two new wells were spudded and wellhead equipment was installed.

Shadegan is adjacent to Maroun oil field to the north, Ramshir to the east, Mansouri to the south and Ahvaz to the west.

Rag Sefid

Rag Sefid which measures 55 kilometers in length and 7 kilometers wide is located near Deylam Port in the southern Bushehr Province and is 150 kilometers southeast of Ahvaz.

Discovered in 1964, Rag Sefid has the second largest gas cap among Iranian oil fields, just behind Pazanan.

Rag Sefid is estimated to contain 16.5 billion barrels of oil and 54.16 tcf of gas in place.

Crude oil production from Rag Sefid currently stands at 180,000 b/d on average. Every day, an average 120,000 b/d is being extracted by Aghajari Oil and Gas Production Company and 60,000 b/d by Gachsaran Oil and Gas Production Company.

The Asmari reservoir of Rag Sefid was discovered in 1951. The American company Exxon conducted geophysical studies on this field between 1957 and 1963 until oil and gas deposits were known in this field in 1964 after the drilling of an exploration well.

As soon as oil and gas deposits were discovered in this field operations started for building industrial facilities, as well as oil pipelines.

Two years later, crude oil production from Rag Sefid began following the launch of installations and completion of pipelines. The Rag Sefid average output currently stands at 180,000 b/d.

Rag Sefid which is estimated to contain 16.5 billion barrels of oil in place, 4.49 billion barrels of which is recoverable, is among major Iranian oil fields. It neighbors Bibi Hakimieh oil field to the southeast, Pazanan oil field to the northeast, Ramshir oil field to the northwest and Zagheh, Hendijan and Bahregansar oil fields to the southwest.

The Asmari and Bangestan formations are estimated to hold 8.17 tcf of gas in place.

Total oil and gas production from this field in 2000 (after nearly four decades of production) was reported at 1.521 million barrels of crude oil and 970 bcf of natural gas.

The shares of Asmari and Bangestan reservoirs from this accumulated output stood at 1,230 million and 291 million barrels, respectively.

Until 2002, a total of 105 wells were reported to have been drilled in this field. The number of drilled wells reached 119 in 2007 and 160 in 2012.

Rag Sefid is divided into Rag Sefid-I and Rag Sefid-II areas. Rag Sefid-I is run by Aghajari Oil and Gas Production Company and Rag Sefid-II by Gachsaran Oil and Gas Production Company. There are also 14 wellhead separators in Rag Sefid oil field.

Some associated petroleum gas produced in this field is delivered to NGL 1300 plant in Siahmakan. All industrial facilities in Rag Sefid belong to NISOC.

Austria's OMV to Develop Band-e-Karkheh

West Karoun covers a quite large area of land in the western bank of Karoun River as far away as the Iran-Iraq border. West Karoun is part of oil-rich Khuzestan Province, but in the 1980s and the following two decades it was impossible to operate oil exploration and production projects due to the imposed war and landmines that had not been cleared.

This area contains significant oil deposits, including the heavy crude oil in Band-e-Karkheh field.

Most oil fields in the West Karoun area are shared with neighboring Iraq. But Band-e-Karkheh is an independent one. Several years ago, National Iranian Oil Company (NIOC) devised strategic plans to invest more than $20 billion in the West Karoun fields in a bid to recover 1 mb/d of crude oil from them.

Band-e-Karkheh was among projects introduced to foreign firms for development under the new format of oil contracts, known as the Iran Petroleum Contract (IPC).

Band-e-Karkheh is located 20 kilometers northwest of Ahvaz, the provincial capital of Khuzestan. The field is 50 kilometers long and 5 kilometers wide, and is estimated to hold more than 4.5 billion barrels of crude oil in place with an API gravity of 24 in Sarvak and Ilam formations.

Band-e-Karkheh is administered by Arvandan Oil and Gas Production Company, but its development has been assigned to Petroleum Engineering and Development Company (PEDEC).

Band-e-Karkheh is forecast to have a production capacity of 7,500 b/d of crude oil. It has an anticline structure, one-sixth of which is extended to the northeastern boundary of Mehr Block.

Oil exploration operations in Band-e-Karkheh date back to the 1960s when 2D seismic testing and drilling of first well (BKH1) were conducted with the objective of identifying the hydrocarbon potential of Asmari formation. BKH1 was assessed as empty and exploration operations were halted. In 2007, another well (BKH4) was drilled in the northern part of the field to appraise Ilam formation. It was proven that at least 1,000 b/d of oil could be extracted. Sarvak Formation in Band-e-Karkheh is also estimated to hold 2.5 billion barrels of oil in place.

In 2012, an agreement for the development of Band-e-Karkheh was signed between PEDEC and the Armed Forces Social Security Organization Investment Company. But two years later the agreement was declared null and void.

The manager of development of this field recently announced that Austria's OMV had started work in Band-e-Karkheh, saying the field would be soon put out to tender under an IPC deal. Ali-Reza Zamani said OMV had already declared Band-e-Karkheh commercial.

"These operations were carried out within the framework of an exploration and development agreement between NIOC and OMV of Austria," he said.

OMV left Iran as international sanctions were tightened against the Islamic Republic. As a result, all development activities that it had to carry out on Band-e-Karkheh were halted. After OMV pulled out of Iran, PEDEC and the Armed Forces Social Security Organization Investment Company signed an agreement for the early production of 7,500 b/d of oil from Band-e-Karkheh, which would reach 20,000 b/d in Phase 1.

Now OMV has signed an MOU with NIOC to study Band-e-Karkheh and is seriously following up on relevant negotiations. Technical working group committees are to soon start work. According to 2D seismic data, Ilam and Sarvak formations are the target reservoirs in Band-e-Karkheh which has three humps.

Two appraisal-extension wells are to be drilled in the central and northern humping of the field to gather data about the second phase development of Band-e-Karkheh in parallel with drilling development fields in the southern humping. It is likely to enhance early production from Band-e-Karkheh by more than 7,500 b/d; however, this issue will be made clear after seismic data is processed and interpreted. 2D seismic data has estimated that Ilam formation contains 2.2 billion barrels of oil in place. But 3D seismic test shows that the amount of oil in Ilam formation is much higher. Add to this significant oil deposits in Sarvak formation.

OMV plans to transfer oil from Band-e-Karkheh to West Karoun pumping station by using multiphase pumps. In case the adjacent production units are at their full capacity mobile processing installations will be used.

Good Performance at Iran Soccer Pro League

Although Iran's petroleum industry is training teams in different disciplines and has managed to register significant success at national, Asian and even global levels, naturally what catches people's attention is football because of its popularity all across the globe.

However, senior officials at Iran's Ministry of Petroleum have never refrained from investing in other disciplines like basketball, volleyball, weight lifting, etc. and they have paid attention to these disciplines along with football. Sanat Naft, which belongs to the oil-rich city of Abadan, and Pars Jonoubi Jam, financed by the Pars Special Economic Energy Zone, are two leading teams of petroleum industry that have so far fared well in the 17th round of Iran's soccer pro league.

Depending on their background, they are in different conditions; however, their common point is their good conditions in this year's pro league matches.

Pars Jonoubi and Sanat Naft are currently vying for a higher ranking in the pro league table.

Sanat Naft is undoubtedly has the longest history in Khuzestan Province where football is extremely popular. In 1972 when Iranian soccer officials were organizing "Persepolis Cup" national matches they decided that Sanat Naft be represented in the tournament. The reason for this decision was that Abadan enjoyed strong and brilliant background in national competitions. At that time, National Iranian Oil Company (NIOC) commissioners intervened and awarded a berth to Abadan in club matches. That was when a group of top players from football clubs from across Abadan joined Sanat Naft which turned out to be the most popular soccer team in Khuzestan.

Sanat Naft has since been able to maintain its popularity in Abadan. Despite such a background, Sanat Naft has been among low-ranked teams in Iran's football. It has participated in the pro league matches but it has always been fearing decline. It used to play in the first league matches; however, its efforts were in vain for the team to find its way into pro league. However, conditions are different for Abadan this year.

Top Players Recruited

Faraz Kamalvand, serving as the head coach of Sanat Naft, has helped promote the status of this team in the pro league matches. Since the very day he took over as the Sanat Naft head coach, Kamalvand promised to bring this team to the status it deserves and that was the basis of recruitment. In its first step, it attracted some famous players who had registered good success in Iran's soccer. He hired competent players like Karar Jasim (Iraqi player) and Moteza Assadi. Thanks to their experience, they could be of great help to Sanat Naft. Moreover, all the three quotas envisaged for foreign players went to Brazil. The three Brazilian players were familiar with Kamalvand. They finally joined and they were welcomed. The interesting point is that along with Karar Jasim, these three Brazilians have been among the best players of Sanat Abadan.

Towards Big Dream

Sanat Naft is dreaming of a high rank in this season of Iran's football. They had a good start after defeating powerful Esteghlal ,and they now hope to achieve good results.

Footballers of Abadan who have so far not got a rank below 11th are determined to join the top10 in the premier league and register a historic result. That could bring happiness and joy to people of Abadan. What makes this achievement easier is the wholehearted support provided by managers of Sanat Naft Abadan Club, headed by Ali Issazadeh. The management of this club has performed effective measures with regard to infrastructure and improved the status of Sanat Naft's soccer pitch. Meantime, the budget allocated to this club this year has increased from the year before and it is one of the best in terms of payments.

Pars Jonoubi in Pro League

Pars Jonoubi was established not long time ago; however, it has grown significantly to the surprise of many.

Over four years, Pars Jonoubi jumped from the second to the first and now premier league. Now in the pro league, it has achieved results which surprise all football fans. Such brilliance with a young team comprising not many football stars is great.

Promotion to Pro League

Last year, Pars Jonoubi participated in the pro league matches for the first time. Nobody counted on this team by that time. Pars Jonoubi was run by Mehdi Tartar. The players were all young and ambitious; however, they experienced happy days during matches. One week before the matches ended they found their way into the pro league. Championship in the pro league matches was the starting point for Pars Jonoubi.

Making Surprise in Pro League

After jump into the pro league, Pars Jonoubi kept Mehdi Tartar as its head coach. For his part, Tartar did not change the structure of team and asked for hiring some new players. Pars Jonoubi had the least number of stars in their bid for the pro league. They mainly placed confidence in players with high potential and those inspired with high motivation for brilliance.

Pars Jonoubi managed to have good days and they surprised everybody in the first weeks of pro league.

The top ranking for Pars Jonoubi was of significance because never has an Iranian team managed to shine in the pro league in its first year of presence.

Fans' Support

An outstanding feature of matches of Pars Jonoubi Jam was that Takhti Stadium was packed when local matches were held. This stadium was renovated to host pro league matches. Every week, supporters of football attend this stadium in a bid to encourage their football team. Football fans from the city of Jam and other cities in Bushehr Province are in favor of Pars Jonoubi. Even former supporters of Shahin Bushehr are now pinning hope on Pars Jonoubi Jam. Relying on its supporters, Pars Jonoubi is sketching out a more brilliant future for itself.

Sport Management

One of the main reasons behind the success of Pars Jonoubi in recent years has been the stable management of this club. Bahram Rezaeian, manager of Pars Jonoubi Jam FC, has fared well in terms of financial affairs and management. He has kept the spirit of the team at a good level.

Rezaeian has offered his unflinching support to the club staff and the technical committee of the football team in a bid to keep them afloat.

Kohguiluyeh Boyer Ahmad, Land of Four Seasons in Iran

Kohguiluyeh Boyer Ahmad (KBA) Province which is located in a mountainous area is surrounded by Mount Zagros to the north and east, and Khomei Khaeiz and nil to the southeast.

The highest area in this province is Dena Summit (4,409 meters) and the lowest area is Lishtar (500 meters above sea level).

The history of KBA Province dates back to the Sassanid era. The nature of KBA Province is such that it has double climatic conditions. The province is divided into two cold and hot areas.

Given its history and climatic conditions, this province enjoys abundant historical attentions. Here is a brief review of the most attractive ones:

Nomads

KBA Province is among few provinces where nomad life is still under way. Six tribes known as Boyer Ahmad, Bahmaei, Tayebi, Doshmanziari, Bashtbavi and Charam live there. Boyer Ahmad itself is divided into three parts. The tribes include sub-tribes and families.

Pataveh Bridges

Pataveh district is located in Dena County in KBA Province. Five ancient bridges dating back to the Sassanid era are located in this district. Due to its climatic and geographic conditions, Pataveh used to be a main pathway to Ctesiphon, Istakhr, Susa, Behbahan and Isfahan. Bridges were restored during different periods, particularly Safavid era.

Dena Protected Zone

Dena protected zone in Sisakht is located in KBA Province. It is a mountainous area with treacherous heights. The highest point is 4,425 meters and the lowest point 3,000 meters above sea level.

This protected zone is of high value in terms of diversity of flora. Given its trees, forests, medicinal herbs and decorative plants, it is considered a genetic asset.

The fauna in this area is also diverse in terms of animals living there. Animals like wolf, bear, leopard, wild cat and birds like flamingo, pelican, crane and falcon and reptiles are abundant.

Deh Sheikh Cave

Deh Sheikh is among least known attractions in KBA Province. It is located in Deh Sheikh Village and dates from 135 million years. Deh Sheikh is a fully natural cave whose formation dates back to the second geological period. Throughout time, water has crossed its pores and created seven corridors. Other attractions of this cave include being warm in winter and cold in summer. Potteries and bones discovered in this cave show that in certain periods of history some human beings had chosen to live in this giant and mysterious cave. The history of these potteries remains unknown; however, some experts attribute them to the pre-Islamic era. Absence of any murals on the interior walls of the cave shows that this place had remained intact for centuries.

KBA Province Consumes 600,000 Liters a Day of Petrol

Kohguiluyeh Boyer Ahmad (KBA) Province enjoys a unique geographical position along its potential economic and natural features. Located in the North-South Corridor and close to southern ports, the province welcomes thousands of light and heavy vehicles. This geographical position has given rise to good conditions in such indices as fuel consumption.

Furthermore, KBA Province has important transportation projects under way, including Eqlid-Yasouj railway, expansion of Yasouj airport tarmac, expansion of main roads and construction of freeways. That would provide favorable opportunities for investment in this province in the near future. Based on projections made so far, fuel consumption in this province is set to grow significantly in the future.

Meantime, this province is located on the route of oil and gas transfer from south to north. According to plans, this potential is expected to be used in downstream and upstream gas sector and particularly for operating petrochemical projects.

Lotfollah Masoudi, director of the KBA provincial zone of National Iranian Oil Products Distribution Company (NIOPDC), told "Iran Petroleum" that KBA Province has three areas of fuel consumption.

He said that there are more than 25 liquid fuel distribution centers, 28 natural gas distribution centers and 208 centers distributing fuel in villages.

Masoudi said that KBA receives fuel from Isfahan and Bushehr provinces as well as the cities of Mahshahr, Ahvaz and Abadan.

"The fuel is held in our storage sites with a capacity of 27 million liters, including 10 million liters allotted to gasoline, 9.4 million liters to gasoil and 6.8 million liters to kerosene," he added.

Masoudi said that more than 49 million liters of gasoline had been consumed in spring last calendar year, which would reach 54 million liters this year. On average, more than 588,000 liters of gasoline has been consumed in the province, which often reaches 647,000 liters in peak periods, he added.

He said that the ground is prepared in the province to develop oil storage sites, adding that no such policy was being considered by NIOPDC.

"During the first quarter of this [calendar] year, gasoline consumption grew more than 10% year-on-year. Kerosene consumption saw no change, while we witnessed 14.7% decline in gasoline and 31% decline in fuel oil consumption," said Masoudi.

He said that during the first quarter of the current calendar year, more than 18,000 liters of jet fuel was distributed and consumed in this province. He added that this consumption would increase soon, as the airport in the province was being expanded.

"Currently, numerous projects including a fuel station, a CNG station and renovation of transportation fleet are under way," he said. "Furthermore, other industrial projects including Dehdasht Petchem Plant, Gachsaran Petchem Plant and a cement factory are in the stage of construction. Once they are commissioned, fuel consumption will increase in the province."

Regarding an education and recreation center for the Ministry of Petroleum employees in KBA Province, he said that 70ha of land in the province would be allotted for that purpose.

"Once such a complex has been launched, we will witness a major development in fun time by the petroleum industry staff and their families and also livelihood of people in this province," he added.