We No Longer Depend on Turkmenistan Gas

In 1995, the first agreement was signed for Iran to import gas from Turkmenistan, one of breakaway republics of Former Soviet Union. The agreement was aimed at supplying gas to some northern cities in the country, particularly in cold seasons of year. Over these years, the Turkmen side cut gas delivery to Iran on several sensitive occasions in a bid to demand a higher price. As a result, gas supply to northern cities hit snags under the two previous administrations.

In a bid to resolve this problem and guarantee sustained gas supply to north of Iran, the Iranian Ministry of Petroleum put construction of Damghan-Kiasar-Sari-Neka pipeline on the agenda. The project finally came on-stream on August 1 by Iran's Minister of Petroleum Bijan Zangeneh.

Addressing the inauguration, Minister Zangeneh said Damghan-Neka pipeline would secure energy supply in the northern provinces.

"For the first time I announce that we have no problem with supplying gas feedstock to industries in Mazandaran and Guilan provinces," he said.

He added that people's concerns in these provinces have been allayed over secure gas supply and energy security. "We expect that this gas will be used as fuel and also feedstock for industries."

Zangeneh said 14,000 villages had been connected to gas supply network up to 2013, adding that over the past three years, 9,000 villages had been connected to the network.

"Over the coming 1.5 to 2 years, 5,000 villages are to be connected to gas network. In total, 28,999 villages will have been connected to gas since the 11th administration took office (in 2013) until two years later from now," he added, noting that nearly 95% of Iran's population is gas subscribers.

Zangeneh referred to oil and gas exploration and development in the Caspian Sea, saying: "In case of willingness of foreign investors, Iran is ready to develop these areas."

IRR 8,200bn Investment

Hassan Montazer Torbati, CEO of Iran Gas Engineering and Development Company, said at the ceremony that the Damghan-Neka pipeline was valued at IRR 8,200 billion. He added: "With the startup of this pipeline, gas supply in the provinces of Mazandaran and Golestan would no longer rely on imports from Turkmenistan."

He said the basic and detailed design of this project had been done in 2005 and 2006.

Montazer Torbati said the pipeline would have a capacity of 40 mcm/d. The pipeline is 170 kilometers long.

On the sidelines of the event, he told Iran Petroleum: "Damghan-Neka pipeline will have nothing against gas imports from Turkmenistan; rather its startup will end the dependence of people in the Northern provinces on foreign sources."

He said the pipeline would boost gas network stability, which in turn would help supply sustainable gas to provinces in northern Iran.

"An Iran-Turkmenistan relation is related to long-term gas imports, and has its own procedure. In our relations with Turkmens, we can now act more reasonably and not have our hands tied because northern cities in the country no longer depend on their gas."

Reiterating that the Damghan-Neka pipeline would even help broaden gas cooperation between Iran and Turkmenistan, Montazer Torbati said: "If we want to increase gas imports from Turkmenistan or if the Turkmens want to have gas swap via Iran, this pipeline could be of help."

Pipeline Sneaking Through Obstacles

The 170-kilometer Damghan-Kiasar-Sari-Neka project was accelerated in 2015 as one of government's strategic plans. The pipeline, with the capacity of 40 mcm/d, has been built to boost, stabilize and diversify gas transmission system in northern Iran and manage gas imports from Turkmenistan.

The pipeline, whose objective is also to supply more gas to Neka power station, stretches from Damghan and cuts through the cities of Kiasar and Sari. In addition to strengthening the system of gas transmission from south to north, it will also help the sustainability of gas supply in the country and reduce political, economic and social risks emanating from shortages of gas supply in the northern provinces.

On its way, the gas pipeline runs through a variety of natural and unnatural obstacles like watercourses, seasonal and permanent rivers, forest zones, lagoons, mountains and roads. Such conditions required precise operation in observance of environmental, security and engineering standards.

The pipeline is fitted with 12 valves, eight connection stations, three cathodic protection stations, two pigging stations and a CGC station.

Khangiran/Gonbadli Supply 6% of Iran's Gas

Khangiran and Gonbadli gas fields, located in Sarakhs in northeastern Iran, account for 6% of Iran's gas production. These fields supply gas to six provinces in northern and northeastern Iran. The Mozdouran reservoir in the Khangiran area is among few gas fields in the world with compressed sour gas. The gas supplied from this area is the backbone of gas consumption in eastern Iran.

Mozdouran was discovered in 1968, but it started production in 1984. Currently 31 wells are connected to this reservoir to supply gas to eastern provinces.

Given its 34 years of production, the gas field is largely expected to see decline in production in coming years. Therefore, in a bid to ensure sustained gas supply to northern and northeastern provinces, Iran has in recent years embarked on studies and exploration to make up for the decline in the Mozdouran production. These studies are reportedly paying off.

This reservoir is among rare ones in the world because of its 3.5% sulfured and 6.5% carbonic gas. Such gas is very corrosive to pipelines and wells and any release of poisonous sulfured hydrogen into the environment is life-threatening. However, throughout its production, this reservoir has not caused any death or damage.

Mohammad Mambeigi, CEO of East Oil and Gas Production Company (EOGPC), said development of Tous field would start in 2018. "Preliminary estimates indicate that development of this field would allow the recovery of 3 mb/d to 5 mb/d of gas."

Tous is located 100 kilometers north of the city of Mashhad. It holds 60 billion cubic meters of gas in place. It has a production capacity of 4 mb/d of gas.

After the drilling of an exploration well in this field provided promising findings, development of Tous was put on agenda and the results of this study were submitted to Iranian Central Oil Fields Company (ICOFC).

Mambeigi said production from Tous would make up for shortcomings due to the decline in the output of Mozdouran in coming years. Iran has also started exploration activities in Kashafroud field in the Khangiran area.

He said that gas supply to northeastern Iran would be sustained in coming years by reliance on existing capacities.

15 bcm Output in 2016

As a subsidiary of ICOFC, EOGPC is responsible for production, processing and transfer of gas and gas condensate from Khangiran gas field (Mozdouran, Shourijeh D and Shourijeh B storage sites) as well as Gonbadli field in Sarakhs.

The company is mainly active in eastern Iran and feeds Neka Power Plant and Bojnourd Petrochemical Plant in addition to supplying gas to the provinces of North Khorasan, Khorasan Razavi, South Khorasan, Mazandaran, Golestan and part of Semnan.

Mambeigi said the total gas production by EOGPC in the Iranian calendar year to March 2017 was 15.8 bcm (6% of Iran's gas output and more than 20% of ICOFC's production). In the same year, he added, EOGPC produced more than 43 mcm/d of gas, which would remain the same in the current calendar year.

He said that the average rate of recovery of gas from reservoirs administered by EOGPC was 75-80%, adding: "In total, of more than 647 bcm of recoverable gas, the company has so far extracted 347 bcm."

There are 63 wells, five gas gathering centers, a separation and measurement facility, 500 kilometers of underground pipeline, 300 kilometers of power transmission lines and 320 kilometers of paved road in the areas run by EOGPC.

Sustained Production at Gonbadli Field

Gonbadli gas field, which contains Gonbadli gas reservoir, is located 25 kilometers south of the city of Sarakhs and near the border with Turkmenistan. This reservoir has around 13 bcm of recoverable gas. The gas in this reservoir is sweet and contains less than one-percent of carbonic gas.

Mambeigi highlighted continued production in the jointly owned Gonbadli gas field, saying: "Under normal circumstances, gas production from this field was expected to be halted six years ago, but thanks to efforts by the company's specialists and good interaction on the part of Shahid Hasheminejad gas refinery, production continues in this field."

He put the current gas production capacity at Gonbadli at 0.7 mcm/d.

9 mcm/d Gas Injection to Shourijeh D

Khangiran gas storage facility is located 25 kilometers northwest of the border city of Sarakhs. So far, three separate gas reservoirs have been discovered and have long been exploited. Shourijeh D is at the top and Shourijeh B is the deepest reservoir.

Mambeigi said some 94% of recoverable gas of Shourijeh D had been recovered up to 2014, adding that it was now being used as a strategic underground gas storage site.

He said that 1.4 bcm of gas was injected into this storage site in the last calendar year to March 2017, which was of help when Turkmenistan suspended its gas supply to Iran. "The supply of gas to the northeast of the country was never halted," he said.

Mambeigi said some 9 mcm/d of gas was being injected into the storage site.

In case 10 mcm/d of gas is injected into Shourijeh D during the first eight-month period of Iran's calendar year, it would be possible to recover up to 20 mcm/d of gas during the remaining four months, i.e. peak shaving. Mambeigi said such a plan was being envisaged for northeastern Iran as of March 2020.

Shourijeh gas storage site is located 25 kilometers southeast of Sarakhs in Khorasan Razavi Province and near Shahid Hasheminejad refinery.

Shourijeh B storage site is among strategic facilities of EOGPC with a recovery capacity of 1.6 mcm/d.

"Recovery from Shourijeh B normally takes place in winter," said Mambeigi.

80% of Mechanical Parts Homegrown

Given the long distance between Khangiran and companies manufacturing equipment needed by operating units in this area, an EOGPC-run central plant has been established in Khanigran to meet urgent needs.

Mohammad-Hossein Mahjoubi, director of the plant, said 80% of mechanical parts are manufactured domestically.

"Due to the corrosive nature of gas in the Khangiran area, reparation of parts is done in the central plant," he said.

He noted that it would take time to purchase equipment from the main manufacturers which are European or American.

"Even, we have facilitated the reparation and manufacturing of many needed items for companies located farther. That has contributed to reducing costs and saving time," said Mahjoubi.

West Karoun Output Keeps Rising

The managing director of Iran's Petroleum Engineering and Development Company (PEDEC) has announced that the capacity of oil production from oil fields located in the West Karoun area in western Iran would reach 368,000 b/d by next March. Nouroddin Shahnazizadeh's remarks come at a time National Iranian Oil Company (NIOC) has started the process of bidding round for the Azadegan oil field within the framework of newly developed contractual framework known as Iran Petroleum Contract (IPC).

Iran plans to raise output from West Karoun to more than 1 mb/d.

"With the implementation of development plans up to end of the current calendar year [in March 2018], we expect oil production from West Karoun to go beyond the level of [its obligation at 350,000 b/d] and reach 368,000 b/d," Shahnazizadeh told reporters.

He said that the bulk of production in West Karoun would come from enhanced output at South Azadegan oil field and the startup of South Yaran field this calendar year.

Shahnazizadeh said production from the West Karoun fields stood currently at 290,000 b/d. Referring to plans for increasing production from these fields to 1.33 mb/d, he expressed hope that signature of new oil contract would facilitate realization of such an objective.

Shahnazizadeh said PEDEC would need a total of $36 billion in investment to finance its projects. "At present, projects worth $21.5 billion and IRR 50,000 billion have either been done or are on the agenda," he added.

140 tb/d Output Growth in South Azadegan

The contract for the development of South Azadegan field had been initially signed between NIOC and China National Petroleum Corporation (CNPC). But due to CNPC's failure to respect its commitments, it was expelled in 2014 and PEDEC continued the project by hiring Iranian contractors.

Shahnazizadeh said plans were under way to increase production from South Azadegan to 140,000 b/d.

He said the South Azadegan output stood at 45,000 b/d when the buyback deal was in effect with CNPC. "But due to pressure fall-off in some wells of this field, oil production from South Azadegan dropped to 25,000-28,000 b/d."

He said in the wake of drilling of 19 wells in this field, production from South Azadegan increased to 83,000 b/d recently. He added that plans were under way to add another 25,000 b/d to the South Azadegan output before boosting it by 40,000 b/d more.

Shahnazizadeh referred to restrictions on oil processing in South Azadegan, saying: "110,000 b/d of oil extracted from South Azadegan is processed at Jofair facility and the surplus will be processed by mobile processing facilities."

Meantime, Touraj Dehqani, manager of South Azadegan development at PEDEC, said: "In this project, daily recovery has been between 30,000 and 45,000 b/d over the past eight years. With an increase in the production capacity of this field to more than 80,000 b/d, this project is forecast to earn the country more than $1.2 billion in revenue this calendar year."

"Currently 45 wells are ready to start production at this field. Some of these wells are under periodic workover," said Dehqani.

Qodratollah Aqaei, manager of North Azadegan development at PEDEC, said: "The North Azadegan development project became operational more than 15 months ago with a daily output of 75,000 barrels. It has so far earned the country more than $1.5 billion in revenue."

He said total production from North Azadegan had exceeded 31 million barrels. Referring to a $2.2 billion investment in developing this field, he added that the bulk of this sum had already returned.

IPC Contract for Azar Development

Shahnazizadeh said Azar oil field, jointly owned by Iran and Iraq, started producing 15,000 b/d of oil in March 2017, adding that its output doubled last May.

Azar oil field has been developed under a buyback deal with Sarvak Azar Engineering and Development (SAED), which is a 100% affiliate of Oil Industries Engineering and Construction

Company (OIEC).

"It has been agreed that after Azar oil field's production reaches 30,000 b/d, surplus production project (output at 65,000 b/d in 2018) would be awarded under an IPC contract. We are in talks with the contractor of this project (SAED)," he said.

In the second development phase, he said, production from Azar would reach 110,000 b/d.

Kayvan Yar-Ahmadi, manager of Azar development, said total production from this field had exceeded 2.2 mb/d.

South Yaran Output at 25,000 b/d

Shahnazizadeh said early production from South Yaran is planned to start at the rate of 10,000 b/d.

"Of course, oil production from this field will increase by 15,000 b/d to reach 25,000 b/d" by next March, he added.

Shahnazizadeh also said that a total of 65 million barrels had reached 65 million barrels earning Iran more than $3.4 billion in revenue. That is while the initial investment for the development of this field was $2.9 billion.

Azadegan Bidding Round

Shahnazizadeh said the process of bidding for the development of Azadegan oil field under IPC had started.

"In light of negotiations held with companies willing to develop this field and the start of the process of bidding, we hope that the contract for the development of Azadegan field will be clinched," he said.

"So far, NIOC and PEDEC teams have identified good foreign companies to develop this field and they have provided necessary information about the tender bid for this field," said Shahnazizadeh.

He said that bidding companies had been submitting documents for the development of Azadegan field. He expressed hope that a technically and financially powerful consortium would be established to operate this project.

North Yaran Output Target at 80 tb/d

Iran signed last year a heads of agreement (HOA) with Persia Oil and Gas Industry Development Company (POGIDC) which is among E&P companies cleared by NIOC. Under a buyback deal, POGIDC had developed Phase 1 of North Yaran field to reach an output of 30 tb/d. The project was inaugurated in 2016.

Shahnazizadeh said North Yaran had supplied a total of 7 million barrels of oil, generating around $400 million in revenue.

"The investment needed for this development project is $585 million, $525 million of which has already been attracted," he added.

South Yaran's output is expected to reach 25,000 b/d by next March.

Yaran is now expected to undergo integrated development.

"Development of Yaran field (North and South) is planned to be done in an integrated manner. A contract with an output target of 80,000 b/d will be finalized for this field. Using state-of-the-art technologies and downhole pumps will be incorporated into this IPC-style contract," said Shahnazizadeh.

He said that POGIDC had submitted a proposal to NIOC for the integrated development of Yaran oil field.

"Soon, the appendix to the Yaran field agreement, which includes drilling new wells, installing pumps and 3D seismic testing, will be signed with POGIDC and in the future a development contract will be signed too," he added.

Shell Submits Kish Study Conclusion

Shahnazizadeh said that Royal Dutch Shell had submitted the conclusion of its studies on Kish oil field.

Shell is also finalizing its study on Yadavaran oil field, he said, adding that it just delivered its study on Azadegan field to NIOC.

He added that NIOC had signed MOUs with France's Total, Malaysia's Petronas, Iran's Tanco and Japan's Inpex to study oil fields in Iran.

Italy's Eni, Ghadir Investment Company, Russia's Gazprom Neft, Shell and Iran's Sane had signed MOUs with NIOC to study Kish gas field.

Shahnazizadeh also said that Austria's OMV had submitted the findings of its study on Band Karkheh field, adding that Thailand's PTTEP had studied Changouleh, while Norway's DNO and Russia's Gazprom are yet to finalize their reports.

Crude Oil Delivery to Export Terminals

Shahnazizadeh said oil produced at West Karoun's fields would be delivered to export terminals via pipe.

He expressed hope that West Karoun pumping station would become operational soon with a final capacity of 1.05 million barrels. The pumping station will initially have a capacity of handling 740,000 barrels, including 480,000 barrels of heavy crude oil and 260,000 barrels of light crude.

Shahnazizadeh also said that crude oil transmission of from Goureh oil terminal to Jask Port was an important factor in increasing the NIOC flexibility to export oil, adding: "In this project, more than 1,000 kilometers of 42-inch diameter pipeline and five pumping stations would be constructed."

Passive Seismic Applied in Iran

A deputy manager of the Exploration Directorate of National Iranian Oil Company (NIOC) has said that passive seismic survey has been carried out for the first time in Iran; Bahman Soleimani said the passive seismic test had been done in the Dehdasht area.

He said the survey, started in September 2016 and concluded in July, was aimed at exploring hydrocarbon in the aforesaid area.

He added that the passive seismic data gathered from Dehdasht in Kohguiluyeh Boyer Ahmad Province was under processing and interpretation.

The seismic survey was conducted by using 120 sensors on 1,600 square kilometers of land. A higher number of more precise sensors were used mainly in the center of this area, which measured 400 square kilometers.

He said that in common seismic testing methods, dynamite or vibrator is used to generate energy.

"In passive seismic testing, small waves are received by geophones developed specifically for this purpose. By applying this method, it would be possible to develop models for wave speed at different layers before reconstructing the formation by mixing unprocessed seismic data gathered earlier," he added.

Soleimani said: "The passive seismic method is used in areas where common methods of seismography (2D and 3D) have failed."

He said the structure of Dehdasht's formations remained still unknown although several 2D seismic surveys had been conducted there.

He added that passive seismic survey cost much lower and needs a smaller number of manpower.

Soleimani said application of state-of-the-art technology in the Dehdasht project and documentation of these methods would help companies monitor operating reservoirs

"The Exploration Directorate is ready to provide consultation services and help manufacturing companies that would like to apply this method," he added.

Iran's first passive seismic project was conducted by Dana Geophysics Company.

Passive seismic is the detection of natural low frequency earth movements, usually with the purpose of discerning geological structure and locate underground oil, gas, or other resources.

OIEC, Gazprom Sign MOU

Iran's Oil Industries Engineering and Construction Company (OIEC) and Russia's Gazprom have signed a memorandum of cooperation for cooperation in the development of Azar and Changuleh oil fields.

The MOU was signed between the CEOs of the two companies in Russia's Saint-Petersburg. The deal came after the conclusion of talks between the technical committees of OIEC and Gazprom.

The two companies are determined to continue their cooperation within the framework of the newly developed model of oil contracts.

OIEC started early production from Azar field at a rate of 15,000 b/d last March. Over two months, total production from the field reached 1 million barrels. The second phase of early production from this jointly owned field started in May at a rate of 30,000 b/d. The field is projected to see its output reach 65,000 b/d in 2018.

Azar, shared by Iran and Iraq, is located in Anaran Block, and is among the most difficult hydrocarbon fields in terms of drilling and development in the world.

OIEC was recently cleared by National Iranian Oil Company (NIOC) to get involved in exploration and production (E&P) projects. Gazpromneft has been also endorsed by NIOC to develop oil and gas fields in Iran.  

OPEC Decisions Taking Effect in Oil Market

Iran's minister of petroleum, Bijan Zangeneh, has said that decisions adopted by OPEC oil producers have been implemented appropriately in oil market.

"In light of decisions taken last year within OPEC, the Organization expressed its firm determination and strong will, to bring back order to crude oil markets in the world and it made decisions which have taken effect very properly in the market," Zangeneh said at a joint press conference with his Iraqi counterpart Jabar al-Luaibi in Tehran.

Zangeneh said Iran and Iraq were two influential members of the 14-member Organization of the Petroleum Exporting Countries, adding: "I hope that through full compliance with OPEC decisions in coming months, accumulated reserves which have put pressure on oil price would reach good conditions."

He also said that oil market had been affected by improvements in the Iran-Iraq ties.

"Historically and particularly after the liberation of Iraq from Saddam's dictatorship, we have very close ties with this country within OPEC and in other sectors," said Zangeneh.

"Although due to high oil production in the US (more than forecasts) and an increase in the oil output of Libya and Nigeria, we have had slight instability in the market, we hope to see ongoing trend for fair price be stabilized."

Zangeneh referred to Iraq's non-compliance with its OPEC obligations, saying: "Our friends in Iraq had their own views. They explained about them and offered justifications for their decisions. We will continue to have talks. Iraq feels obliged to respect its OPEC obligations."

The Iranian minister also said that OPEC has had more than 90% compliance with its obligations.

Bunkering Fuel Quality to Improve

Iran's Research Institute of Petroleum Industry (RIPI) and National Iranian Tanker Company (NITC) have signed an agreement to cooperate for upgrading the quality of bunkering fuel.

The agreement on "examining modern methods and offering international approaches for improving and upgrading the quality of bunkering fuel and reducing pollutants" was signed between Hamid-Reza Katouzian, director of RIPI, and Sirous Kian Ersi, CEO of NITC.

Kian Ersi cited a report from the International Maritime Organization (IMO), saying the sulfur content of ship fuels must be around 0.5% by 2020.

"Given the significance of this issue and not much time left until then, we decided to benefit from RIPI's scientific potential for reducing the sulfur content and improving the quality of our ship fuel," he said.

He expressed hope that RIPI-NITC cooperation would yield results at international level.

For his part, Katouzian said RIPI was the research arm of petroleum industry, noting that it welcomed such cooperation.

He highlighted the necessity of improvement of fuel quality under international conventions, adding: "Our country too should play a role in this regard and upgrading the quality of ship fuel will definitely help reduce pollutants."

NISOC Develops Contract Format

National Iranian South Oil Company (NISOC) has developed a new model of contract that is expected to be applied later this year.

"Depending on the approval of National Iranian Oil Company (NIOC), the first tender within the framework of the model of contract proposed by this company will be held in the second half of the current Iranian calendar year (ends in March 2018)," Bijan Alipour said.

He said the first tender might be for developing Shadegan oil field, adding that the top priority for NISOC was to improve the status of development projects.

Alipour said that Pergas had concluded its study on the Karanj field, adding that its studies on Shadegan were at an acceptable level.

He said that other companies were also involved in studying these fields, adding that the deadline for some of these companies had been renewed.

Alipour said Russia's Zarubezhneft had signed a memorandum of understanding with NISOC to study Shadegan and Rag Sefid oil fields. He said that the Russian company had agreed to conclude its studies on Shadegan in four months.

"Due to the intertwinement of surface installations in Karanj and Parsi fields, a single contract would be signed for the development of these two fields," he added.

Alipour said MOUs had been signed with both Iranian and foreign companies to study Shadegan, Rag Sefid, Karanj and Parsi fields.

"After these companies submit their development proposals, NIOC will consider them. Development contracts may be signed for each field with a consortium of Iranian and foreign companies," he said.

Total in Iran Petchem Sector

The manager of Iran's main petrochemical company has said that France's giant Total would be present in Iran's petrochemical sector to complete its value chain.

"In light of reiteration by the Iranian Ministry of Petroleum, this French company will be present in Iran's petrochemical industry in order to complete its value chain," Marzieh Shahdaei said at a Vienna-hosted conference on international investment in petrochemical industry.

"Concurrently with the facilitation of conditions for new investment and removal of some impediments post-JCPOA, European investors are now ready to be present in Iran's petrochemical industry," she said. The joint comprehensive plan of action (JCPOA) is the official name of Iran's landmark nuclear deal with six world powers, which took effect in January 2016.

Shahdaei said that Iran's National Petrochemical Company (NPC) was serving as policymaker and facilitator in petrochemical sector. She said that NPC was planning to attract new investment to finance petrochemical projects.

She said Austria was chosen to host the first international conference on investment opportunities in petrochemical industry due to its experience and technical knowhow.

"In addition to investors, bankers, insurers and some members of chambers of commerce from Austria and several other European countries were actively present in this seminar. Some existing issues and problems were raised and discussed with a view to resolution," said Shahdaei.

She said that a specialized forum on banking and insurance was held on the sidelines of the conference. She added that Iran's deputy minister of economy Mohammad Khazaei, as well as managers of Iranian petrochemical holdings and companies held negotiations with foreign participants.

Shahdaei said the representative of Chemical Industry News & Chemical Market Intelligence (ICIS) presented a report about petrochemical industry in the world, future developments as well as Iran's future role and status.

She said the event provided a good venue for participants to get familiar with Iran's petrochemical industry.

"Last year, we successfully held two seminars in Germany, whose result was the signature of MOUs with such companies as Total, Shell, BASF, Air Liquide, Linde and companies from Japan and South Korea. These MOUs are being finalized," said Shahdaei.

She expressed hope that the Vienna conference would help remove obstacles to the presence of new companies and investors in Iran.

She highlighted the experience of BASF, Total and Shell in petrochemical projects, saying: "But some companies are sometimes willing to invest have had no activity in petrochemical sector. We introduce projects and Iranian partners to them."

Iran Petrochemical Value Chain Summit “Investment & Development” was organized by Iran-Europe Business Centre (IEBC) and Independent Inc. for Contemporary International Conferences & Fairs (IICIC), with support of Iran’s NPC and in cooperation with Advantage Austria on July 6-7, 2017 in Vienna.

The two-day seminar was aimed at reviewing ways for developing mid-stream and downstream industries through attracting national and international investment and transfer of technology via joint cooperation with top international companies.

IPCC Opens UK Office

The CEO of Iran Petrochemical Commercial Company (IPCC) has announced the opening of an office of the company in London.

"The idea behind the opening of this office is to follow up on issues related to financing and credit lines for petrochemical projects," Mehdi Sharifi Niknafs said.

He said that the office would help follow up on receiving credit from European banks for petrochemical projects.

Niknafs said a professional team has embarked on negotiations in the London office for opening credit lines and finance.

"At present, the priority is to use new credit lines provided by investment funds to financing petrochemical projects under way," he added.

He said that a financing agreement had been signed with Spain, adding: "The IPCC banking accounts in Europe have been reopened and it is possible to transfer hard currency."

Niknafs said two memorandums of understanding (MOUs) were expected to be signed with leading European companies in the near future for cooperation.

He also touched on the unfreezing of assets of some petrochemical companies in South Korea, saying: "Currently, all financial assets for selling petrochemical projects, which are valued at around $3 million, have been unfrozen and petrochemical plants have no frozen or seized money in South Korea."

Total, Shell Set to Sign Petchem Deals with Iran

The CEO of National Petrochemical Company (NPC) has said that memorandums of understanding (MOUs) signed with two major international companies were turning into agreements.

"The MOUs signed with France's Total and Royal Dutch Shell have reached practical stages and Iranian and foreign teams are finalizing economic and technical affairs. The outcome of these studies will pave the way for the signature of main contracts," Marzieh Shahdaei said.

She gave a positive assessment of the process of presence of foreign companies in Iran's petrochemical sector with a view to improving technical knowhow and attracting investment.

Shahdaei said a six-month deadline had been set for Total to conclude its studies.

She also referred to problems hindering Iran's petrochemical exports to China, saying: "In light of negotiations held between Iranian and Chinese officials, export of petrochemical products and financial transactions will be facilitated."

"Some petrochemical companies faced problems in terms of exporting products to China and financial transactions," she said, adding that Iran's ministries of petroleum and economy had resolved the issue.

Regarding feedstock for petrochemical plants, Shahdaei said a decline in the feedstock supply to some petrochemical plants was also another challenge to petrochemical industry.

"Sometimes, overhaul is conducted in the South Pars phases and less feedstock or ethane is produced. Therefore, there are always ups and downs in the way of production. But currently we are on the right track in production and development," she said.

Shahdaei said there were plans for increasing feedstock supply to petrochemical plants.

Iran Set to Sign 10 Oil Contracts by March 2018

Less than one month after the signature of a $4.8 billion contract for the development of Phase 11 of South Pars gas field with a consortium of France's Total, China's CNPCI and Iran's Petropars, National Iranian Oil Company (NIOC) announced its obligation to finalize 10 more contracts for developing oil and gas fields by March 2018.

NIOC's deputy managing director for development and engineering, Gholam-Reza Manouchehri, said negotiations were under way as part of arrangements for putting out the projects to tender.

He said that Azadegan oil field would be one of the prospective projects, adding: "The process of bidding round has started for it. Azadegan oil field is among giant oil fields and it requires major work."

Manouchehri said there was opportunity for all qualified companies willing to invest in Iran.

"There is room for all these companies to maneuver. Meantime, there are many opportunities for Iranian companies," he added.

Asked if Russian companies would be prioritized for the development of Azadegan, he replied: "No! But Russian companies are bidding for the development of Mansouri and Ab Teimour fields."

"The list of bidders will be drawn up for oil tenders based on the request of these companies and MOUs signed with them, expression of readiness by them and also the calls for tender issued by IOC," he added.

Talks with Maersk under Way

Manouchehri said talks were under way with Denmark's Maersk for the development of the oil layer of South Pars gas field.

"Talks are not limited to this company; however, they have presented their plan," he added.

Manouchehri said NIOC had estimated the oil layer's output at 35,000 b/d, adding: "The plan presented by Maersk contains a higher figure. It was discussed by the consulting board and we hope that the plan would go ahead on schedule."

Qatar owns 60% of the oil layer of South Pars, which is known there as al-Shaheen. Iran recently started extracting 25,000 b/d from the oil layer. Due to the complexity of existence of drilling and heavy crude oil, Iran hopes to conclude negotiations with qualified companies for developing the oil layer of South Pars and raise output from this field which it shares with Qatar.

Europeans Keen to Invest in Iran

Manouchehri said many Russian and Chinese companies held talks with NIOC after the South Pars deal was signed.

"They congratulated us profoundly and they believed that a way had been opened for the development of Iran's petroleum industry. Furthermore, European companies expressed more willingness for negotiations with Iran after the signature of this contract," he added.

"In light of tough and round the clock talks for signing the contract to develop Phase 11 of South Pars, the new model of oil contracts has been watered down and modified. Naturally we will be able to accelerate our project in future contracts," said Manouchehri.

He said it took long time for the government to finalize the newly-developed contractual frameworks.

"Some say negotiations with Total lasted 18 months, but some others say one year and two months. That's not weird for such a contract," he added.

Asked why no tender bid was held for Phase 11 of South Pars, Manouchehri said: "Phase 11 is the only remaining project in South Pars. We expected this project to go ahead quickly and reach production, particularly because it is located along the border with Qatar."

"Due to certain features of this reservoir and the rapidity we had in mind and given the readiness of Total, the Iranian Ministry of Petroleum had predicted that the fastest solution would be to conclude this contract as soon as possible," he said.

"Of course, most contracts for the development of South Pars field have so far been based on tender bid exception and 10 phases have been awarded on this basis. Earlier, bid exception had been applied to some projects," Manouchehri said.

Maximum Use of Domestic Capacity

He said the contract would be for a period of 20 years with repayment to be carried out over 10 years.

"Our objective is that common international procedures and methods would be implemented by maximum employment of Iranian experts and staff," he added.

Manouchehri said in Phase 11 development project, the focus would be mainly on the manufacturing of equipment.

"We are assured that the level of equipment manufacturing has not fallen and will even grow," he added.

"NIOC is very sensitive to this contract and future contracts based on a directive issued by the government and all issues are administered by the CEO of NIOC and Minister of Petroleum," he said.

"Furthermore, contractors have given necessary guarantees that nobody else would be authorized to meddle with this contract beyond the boundaries of negotiations," said Manouchehri.

He noted that disciplinary measures applied by Iran and Europe would guarantee the cleanness of this contract.

Contract Text Disclosed to Top Bodies

Manouchehri said the Supreme Board of Oil Contracts Monitoring keeps a tab on oil contracts. The board comprises representatives from the judiciary,

Contracts Monitoring keeps a tab on oil contracts. The board comprises representatives from the judiciary, prosecutor's office, Ministry of Petroleum and Parliament.

He said that Oil Contracts Compliance Committee, named by President Hassan Rouhani, is tasked with verifying the compliance of oil contracts with rules and regulations. For its part, the Ministry of Petroleum supervises the contracts following government instructions.

"What has been predicted in this new contract for the first time is that the decisions of the Joint Management Committee (JMC) need to win the approval of NIOC which will later on, announce mechanism for such endorsement," Manouchehri said.

Regarding the confidentiality of the contract, he said: "It is not customary to make contracts of this nature public. These contracts are confidential and they are not made public. In the past, we may have provided draft agreements to certain companies, but parties to contracts which contain figures are obligated not to disclose them to others."

"Of course, top state organs are aware of this contract and this contract is not confidential to them. But undoubtedly, it remains confidential for the public, media and rivals," he added.

NIOC Monitoring Contractor

Manouchehri said: "In three parts of this contract, it has been forecast that in case the contractor fails to respect his obligations, we will be able to terminate the contract unilaterally."

"For instance, if the contractor fails to finalize $500 million deals with subcontractors during the first two years of the contract, he will lose the job and he will not be repaid for whatever he has done," he added.

"Or if after three months the contract is halted for whatsoever reason and no clear reason is provided the contractor will lose the job again without any remuneration. Even if some time after the contract takes effect, in case the contractor fails to provide necessary arrangements for the manufacturing of compressor he will face heavy penalties. Therefore, the contractor is not abandoned to his own fate," he said.

"Since the first day when this consortium starts investing in Iran the entire investment is guaranteed and Iran would have no arrangement for repayment unless the project has been completed," said Manouchehri. "In fact, the best guarantee one can envision is that the contractor finishes the job. We give them no letters of guarantee or commitment that we owe them. They will be remunerated from production and after 20 years."

Another advantage of this contract is the obligation of the operator and the consortium to transfer technology, he said.

"In our previous contracts we had no operator. Internationally speaking, operator is the company that provides technology and money and is committed to production," said Manouchehri.

No Concessions Given

Manouchehri said the contractor has not received any concession in the Phase 11 project, adding: "Sometimes we hear that we have given concessions in order to convince an international giant to operate a major project, while that is not so."

He added that the Phase 11 contract is a conventional management services contract.

"This contract is in fact a management services contract, but a long-term one. It does not pertain to ownership of reservoir and even its management, ownership of equipment, output, etc. Furthermore, the contractor is faced with tougher obligations," said Manouchehri.

He said the foreign contractor had no authority on Iranian reservoirs, adding: "Any item of equipment brought into Iran belongs to Iran and not to foreign parties. In fact, the consortium leader is like a general contractor. Total has such a role in the Phase 11 project."

"A management structure is formed jointly by partners to develop the project," he said. In Phase 11, Total, CNPCI and Petropars are individually and collectively obligated to respect their commitments.

Tender for Phase 11 Packages

Manouchehri said executive, service and contracting packages for the Phase 11 project must be put out to tender.

"Total or every other company in this consortium is not authorized to award anything without bidding round and at non-competitive prices," he added.

"Therefore, activities related to companies providing EPC, EPD, drilling and related services will be through tender bid. The list of qualified companies will be reconfirmed by NIOC. Even if there is any new applicant, it will be announced to client to be examined by JMC," said Manouchehri.

He said that a representative of Petropars would be present in the committees of tender bids and contracts. The outcome of tender bids needs the approval of JMC.

"Therefore, the entire process is controlled and whatever is done in buyback deals will happen here too," he added.

Engaging Iranian Companies

Manouchehri said Iranian companies would enjoy the chance of bidding for projects by themselves. Foreign companies would bid alone or under joint venture deals with Iranian companies.

"In case in the tender bids a higher share is envisaged for Iranian companies or domestically manufactured equipment is used we will consider special advantages for them in a way that a 10% share will be given to Iranian companies. That is a high figure and can boost competition between Iranian companies," he added. "Of course, Iranian companies are required to technically catch up with foreign companies and operators."

Manouchehri said briefings would be held with foreign companies in order to let Iranian companies comply with conditions and regulations.

Compression Platforms Manufacturing in Iran

Manouchehri said the contractor had agreed to respect the law on maximum share in commodity and services to Iranian parties.

"Our objective is to improve domestic manufacturing; therefore, in this contract we have made clear certain issues," he added.

"For instance, we have said that compression platforms have to be built in Iranian yards. The consortium will examine infrastructure for yards and choose from four existing yards that are operating," he said.

Investment in SP11

Manouchehri said the total investment envisaged for the development of Phase 11 of South Pars gas field would amount to $4.8 billion.

"This sum will be invested in two phases along with a $1 billion non-capital sum which the consortium will pay to insurance agencies, taxation organization, state organs and municipalities of Iran," he added.

"Therefore, even when Phase 1 reaches production the investment would total $3 billion and then we will start limited repayment. Therefore, if we add the contractor's revenues to this sum the figure will reach $12 billion," said Manouchehri.

"Therefore, this $12 billion will not be given to the consortium or Total. Half of this sum is the investment made in Iran or the money paid to state-run organs in Iran. The revenue will be half that amount or $6 billion until when the contract expires 20 years later," he added.

Manouchehri said the rate of return on investment for this project would be lower than that of buyback projects.

"The total return on investment in this contract is much lower than what has been achieved from other contracts and one reason is a 2.4% interest ceiling," he added.

Manouchehri said one of the advantages of this contract would be long-term repayment.

Regarding revenues for the contractor in the Phase 11 project, he said: "The issue of remunerating the contractor will depend on the level of production and length of production. Naturally repayment will start as of the fourth year and end after 20 years."

Manouchehri said the product of Phase 11 would be rich sour gas, adding that no oil would be recovered from this phase.

"The price set for every one thousand cubic feet will be in cents and dollars. Therefore, in case the production rises this rate will increase, too. In case output falls, so will the contractor's revenue.

"In case for whatsoever reason the contractor fails to respect his obligations or the project fails to become operational on time no repayment will start and the rate of return on investment will be cut," he said.

Manouchehri said figures provided in the Phase 11 contract had been forecast earlier and examined by the NIOC technical committees.

Noting that no sudden event was to happen in the Phase 11 contract, Manouchehri reiterated NIOC was closely watching all aspects of the contract.

"Our colleagues at NIOC and Pars Oil and Gas Company (POGC) are familiar enough with the figures enshrined in the Phase 11 contract and this group would be able to control the workflow," he said.

Referring to the issue of transfer of technology and domestic manufacturing, Manouchehri said that a joint venture deal had been signed between Petropars and foreign party to the contract with a view to bolstering the potentialities of Iran in reservoir engineering and management.

SP Reservoir Management

Manouchehri reiterated the significance of reservoir management in South Pars gas field for NIOC, saying: "Until today Iran has been recovering from the South Pars reservoir by applying the very simple method of drilling wells."

"But given the fact that we will be facing pressure fall-off at reservoirs and this issue will be very worrying for us we have to boost our production by applying enhanced recovery methods, management knowhow and reservoir engineering," he said.

Manouchehri said the Phase 11 contract attached great significance to the growth of research centers at Iranian universities.

"To that effect, the Enhanced Oil Recovery Research Group and the Research Institute of Petroleum Industry are engaged in this project so that joint research projects will materialize," he added.

"Therefore, the contractor is tasked with spending $15 million for this sector until the end of contract and naturally construction of a research lab, development of the Research Group facilities, training of manpower, exchange of information and cooperation with consulting research centers are envisaged in the contract," added Manouchehri.

He said that in the SP11 contract, the NIOC technology and management would be empowered. He added that Iranian contractors, manufacturing companies and consultants should be also engaged to the maximum level possible in these contracts.

Sanctions Snapback and SP11 Fate

Manouchehri also pointed to forecasts about a possible return of sanctions on Iran, saying: "As Iran's petroleum minister Bijan Zangeneh said in the Islamic Consultative Assembly we did not predict the issue of return of sanctions in the SP11 contract; however, we have predicted the 'impossibility' of work."

"Therefore, based on predictions made in this contract, Total and CNPCI would have to submit documents to NIOC to prove that they would be able to continue working in Iran," he said.

Manouchehri said: "In the first place, under tough conditions envisaged in the contract Total will pull out and the project will be continued by CNPCI and Petropars. In the second stage, in case CNPCI provides evidence or the Chinese government officially announces that this company could no longer continue working in Iran, Petropars will take over the project."

"Since Petropars has the experience of operating projects to some levels, it would be able to continue the project. Furthermore, all projects, surveys and information would be at the disposal of NIOC."

He expressed hope that such conditions would never happen. "We are optimistic that such conditions will not occur; however, we have made these forecasts so that no significant halt will happen and we will be able to proceed with our projects up to the end."

"In case the project comes to a halt and the contractor abandons the project under any circumstances, it will receive no sum and it has to wait for the project to end and after the project is done it would be able to take back its own investment. And in this case, nothing will be paid for the second phase," said Manouchehri.

Let's Know More about SP11

France's Total, China's CNPC and Iran's Petropars used to give different timeframes for the development of Phase 11 of South Pars gas field. But in the end they decided to team up together to sign an Iran Petroleum Contract (IPC) deal with National Iranian Oil Company (NIOC) for the project. That opened a new chapter in cooperation between Iran and international companies in South Pars after a decade.

The signature of the SP11 deal sent a clear message to the US and foreign oil companies that Iran was a winner.

The international consortium led by Total is expected to develop Phase 11 offshore by using compression platforms and applying new technologies. Experts say these platforms would boost sour gas pressure up to 90 Bar offshore.

Hossein Taqipour, a senior manager in Petropars, said: "Given the decline in the gas pressure in some South Pars reservoirs, which is spreading all across the field, it is necessary to consider some preparations to boost gas pressure for delivery to refinery."

"Therefore, Pars Oil and Gas Company (POGC) has assigned the feasibility study on the use of compression platforms to Petropars and for its part Petropars has signed an agreement with France's consulting company Doris for the conceptual design of optimal gas compression," he added.

"A variety of options are under technical and economic review. These studies are being conducted on the platforms and the reservoir of Phase 11 and after the conclusion of studies and decision on the optimal option by POGC it will be extended to the entire South Pars field for standardization."

The options on the table include onshore and offshore gas compression, blending them by using sweet or sour gas or transfer of onshore electricity.

Given 24 phases and 42 platforms in South Pars, compression studies on each of them individually with capacities of 500 and 1,000 MMSCFD (million standard cubic feet per day) or several platforms together with capacities of 2,000 and 5,000 MMSCFD are under review.

Installation and launch of compression systems will allow gas recovery from South Pars gas field for 20 more years. Therefore, it could be concluded that construction of such platforms in Phase 11 of South Pars would be a starting point for these platforms in Iran and Iranian companies and contractors will be able to bank in on partnership with companies building such platforms in the future.

In designing compression platforms, facilities for installation and transport have been taken into account. So far, platforms weighing up to 7,000 tonnes have been built and installed in Iran; however, Iranian contractors have to upgrade their potential in order to save costs and time for the construction of platforms and mounting their yards.

Among the main components of these compression platforms are gas turbocompressors. Talks have started with some international manufacturers to choose the most proper one. The objective is to transfer technical knowhow for this equipment to Iran.

335bcm Gas Over 20 Years

The technical specifications of this project include gas production from South Pars gas field at 2,000 MMSCFD to be processed in the refineries of phases 6-8 and 12 of the giant gas field which Iran shares with Qatar. Furthermore, two independent platforms, each equipped with 12 wells for producing 1,000 mcf/d of gas, three-phase separator (gas, liquids, water) for well testing, two three-phase separators (gas, liquids, water) for water separation, purifier of oil-contaminated water before release into sea and three-leg flare platform for emergency evacuation are among technical features of offshore installations in this phase. But in order to transmit gas produced in this phase, two offshore pipelines, 32-inch diameter and 136 kilometers long, to carry gas from platforms to refineries, two 136-kilometer 4.5-inch-diamater pipelines to transmit glycol solution to offshore platforms, a 4.5-kilometer 36-inch-idameter pipeline for the transmission of gas condensates and a single-point mooring for loading and exporting condensates have been provided.

Ali-Akbar Shabanpour, former CEO of POGC, has said that the idea behind the delivery of gas from Phase 11 to phases 6-8 and Phase 12 of South Pars was to use the idle refining capacities in these phases and accelerate realization of production target in this section of the field.

The SP11 development project is aimed at the production of 56 mcm/d of sour gas for Iran LNG and the recovery of 800,000 b/d of gas condensate.

With the implementation of this project, 335 bcm of rich and sour gas would be produced over 20 years from this jointly owned field. The rich and sour gas could be converted into 290 million barrels of gas condensate, 14 million tonnes of liquefied petroleum gas, 12 million tonnes of ethane, two million tonnes of sulfur and 315 bcm of light sweet gas.

In the SP11 contract, it has been highlighted that ownership of reservoir, extracted hydrocarbons and installations belong entirely to NIOC.

Meantime from an environmental standpoint, using natural gas achieved from this project instead of liquid fuels, around 21 million tonnes of carbon dioxide and 1,380 tonnes of carbon monoxide born out of fossil fuel burning would be cut annually. Compliance with environmental standards is a requirement in the project.

Phase 11, a Long Story

In the late 1990s, NIOC and Total reached agreement for the development of the upstream sector of Phase 11 of South Pars and building an LNG plant with an output of 10 million tonnes. A memorandum of understanding was signed between them. Malaysia's Petronas also expressed readiness to team up with them. A consortium of NIOC (50%), Total (40%) and Petronas (10%) was assigned the upstream and downstream development of this phase.

The agreement and relevant engineering studies came against the backdrop of growing international sensitivity towards Iran's nuclear program. From 2006 to 2008, Total did not meet its obligations on the pretext of increased steel prices and higher costs for the project. NIOC rejected Total's request for higher project costs and the French company pulled out of the project. In 2009, negotiations started between NIOC and China's CNPC and finally a $5 billion agreement was signed between these two companies. The Chinese side failed to handle the project and it was expelled in 2012. After that, NIOC turned to Petrorian Development Company, Iranian Offshore Engineering and Construction Company (IOEC) and Petropars. In September 2012, the project was awarded to Petropars. But due to financial restrictions, Petropars dropped the project.

And in the end, a Total-led consortium recently agreed to develop Phase 11.

To what extent can Total's presence help Iran develop South Pars? Due to its location in the border area of South Pars, this phase is not in appropriate conditions in terms of reservoir pressure. Taking a look at the phases of South Pars on the map would show that Qatar has long been extracting gas from its share of the field by drilling horizontal and vertical wells. Iran just started producing from the adjacent phases in the early 2000s and even in recent years. Therefore, Phase 11 is the riskiest development phase of South Pars. It needs cutting edge technology or we would see pressure fall-off and the non-utility of its offshore platforms. Total's presence in this phase will be a golden opportunity for Iran so that the technology of building pressure booster platforms will be indigenized to serve other South Pars platforms. That would help make up for pressure fall-off in other platforms.

Over the past four years, NIOC has spent half of its financial resources on the South Pars projects in order to accelerate the development of this giant offshore field shared with Qatar. However, there is still need for investment in order to preserve production and keep pace with the rival.

This project has two sections; the first section involves drilling of 30 (2 appraisal and 28 development wells), two production platforms each with 15 wells for producing 2 bcf/d (56 mcm/d) of gas and relevant installations, as well as a total of 270 kilometers of pipeline of 32 inches diameter. The second section includes compression platform to preserve production from this field. In addition to sophisticated and unique technologies to be applied to this project, it will have economic benefits.

Operations for Phase II, which is the most instrumental part of this project and will be carried out for the first time in the Middle East, include one or two compression platforms (based on the findings of studies) with a capacity of 2,000 MMSCFD in order to boost the pressure of fluid produced from the Phase 11 platforms after the reservoir pressure drops in coming years. The compression platform weighs around 20,000 tonnes. As production from other phases of South Pars falls, implementing similar projects and building compression platforms for other phases of South Pars would be a must. From this perspective, implementing this project in the country and acquiring technical knowhow for building this platform would be key to the future development of South Pars. According to the project timeframe, primary production from the field will start 40 months following the date of signature of the agreement. Given the complexity of compression facilities in the second phase, 36 months would be needed for studying and preparation, and 60 months for building platform.

Technology Transfer Plus Domestic Manufacturing

Under the SP11 contract, the Contractor has agreed to implement the project by taking maximum advantage of domestic manufacturing. In addition to the engagement of the Iranian partner (Petropars) as party to the contract, the Iranian law adopted in September 2012 for maximum use of domestic capabilities for supplying the country's needs and boosting exports has to be respected. The contractor is also compelled to conduct research and development studies jointly with research institutes in Iran with a view to enhanced recovery.

Foreign contractors in the SP11 project are committed to transfer technology at four levels. They have to help boost the capacity of domestic partner. The principles for this purpose will be determined in the joint venture agreement (JVA) signed between parties and upon the approval of NIOC. Under the JVA, parties to the contract agree to make clear their necessary approaches for boosting the capacities and capabilities of the Iranian party (Petropars) regarding engineering and management of reservoir, management of gas megaprojects and management of assets and financing.

NIOC will closely watch the implementation of provisions of the contract. Furthermore, agreements will be signed aimed at improving research and academic capacities of Enhanced Oil Recovery Research Group (affiliated with the Ministry of Petroleum) under the NIOC supervision and for the purpose of holding education and vocational courses, implementing joint research projects, developing research labs and exchanging manpower.

Engaging domestic contractors and companies to the maximum level possible, upgrading the technological and management capacity of NIOC are among the most important instances of transfer of technology that would also engage subcontractors.

PEDCO Chief:

We Hope to Be Partner to SP Oil Layer Development

Petroiran Development Company (PEDCO) was established by National Iranian Oil Company (NIOC) in the 1990s. Its shares were acquired by Naftiran Intertrade Company (NICO) in early 2000s when it started its activities. PEDCO is mainly involved in offshore projects. The first projects awarded to PEDCO were development of the Salman, Forouzan and Nosrat fields and drilling of exploration wells in Hengman and Esfandyar fields under buy-back deals.

PEDCO went on to operate such projects as "early production from South Azadegan oil field", "early production from Phase 1 of Jofayr field", "development of oil layer of South Pars" and construction of a gas pipeline stretching from Siri to Assaluyeh.

Iran is currently recovering 25,000 b/d of oil from South Pars oil layer. Recovery from this layer has so far totaled 1.6 million barrels.

PEDCO is among companies cleared by Iran's Ministry of Petroleum to operate exploration and production (E&P) projects.

"Iran Petroleum" has conducted an interview with Roham Qassemi, CEO of PEDCO, about this company's plans to operate oil projects within the framework of newly developed model of oil contracts (IPC).

Q: What have been the most important measures  taken by PEDCO during one year since it was qualified as an E&P company by Iran's petroleum ministry?

A: Like every other E&P company, PEDCO actively dealt with the issue of exploration and development since the very beginning. It examined oil and gas projects in which it could win a share and it screened them. It had talks with a variety of foreign companies. Negotiations with foreign partners about some projects have made good progress. I can mention negotiations for the development of the oil layer of South Pars.

Q: PEDCO launched the first phase of South Pars oil layer. How many more phases are to be developed?

A: Yes, that's right. The oil layer is expected to be developed in three phases. In Phase 1 which was about the reservoir description we gathered good data about the wells and we have good output now. Production will reach 35,000 b/d in Phase 1, 80,000 b/d in Phase 2 and 150,000 b/d in Phase 3. Of course Phase 3 depends on the results of Phase 2 development and completion of reservoir data. Currently, Phase 1 is under way.

Q: Apart from Maersk, has any other foreign company offered to develop the South Pars oil layer?

A: As far as I know, no. The oil layer is complicated and capital-intensive. Not any company would be successful in this field. In the Qatar-owned section, first big companies stepped in to develop the field. They studied the field and declared it non-commercial. But Maersk has declared that it could handle the project based on its North Sea experience and it turned out to be successful. Maersk has good experience of working in al-Shaheen and this company's capability in drilling multiwells with long legs measuring more than 10 kilometers could be effective in developing this oil layer. With technologies currently available in the country, we can at most drill three kilometers of such drilling.

Q: Do you mean that technology is the most important challenge for the development of the oil layer?

A: Capital and technology both. Due to its need for specific drilling technology, the oil layer of South Pars is capital-intensive. Therefore, it is natural that Iranian companies are not able to develop this field. We are no exception either.

Q: Are you hopeful of being cleared as the Iranian partner for the development of South Pars oil layer?

A: We have the experience of starting up Phase 1 of oil layer. We spudded nearly 39 kilometers in this phase, installed 2,500 tonnes of offshore structures and over two years, we built and launched two FPSO (floating production storage and offloading), which weighs nearly 10,000 tonnes. So you can see that PEDCO has already the required data and experience to develop the oil field. Furthermore, Maersk has experienced developing Qatar's al-Shaheen (the Qatari section of the oil layer of South Pars). Therefore, partnership between the two companies could be helpful for both sides. Of course, PEDCO's strategy for partnership with Maersk is to be an active partner; otherwise, presence in this project will not be attractive enough.

Q: What technology is to be applied for enhanced recovery from the oil layer of South Pars?

A: The South Pars oil layer is among fields hard for development because the oil layers are not thick, while its reservoir rock is hard. These two factors force us to apply technologies commonly used in recovery from these fields, i.e. technology of multiwells with long legs. Maersk has experience of long-leg drilling with record 10 to 12 kilometers. Our record in the oil layer of South Pars is at most 3.5 kilometers. Therefore, one of our expectations from partnership with Maersk is that we benefit from the experience of this company in applying this technology so that we can enhance the rate of recovery from the wells.

Q: So the technology possessed by Iranian companies in drilling cannot apply to the development of the South Pars oil layer as required by the Ministry of Petroleum.

A: Yes, that's it! If we are to say that three oil fields in Iran need advanced technology for development and we need to benefit from foreign proprietors of technology, I can say with certainty that the first oil field would the oil layer of South Pars because it is a jointly owned field and at the same time the reservoir features of this field would leave contractor with no option but to apply cutting edge technologies. Meantime, we all know that Qatar is making maximum output from its own share of the layer. Therefore, it would be natural for Iran to increase its production from the oil layer of South Pars. Delaying this project is not proper.

Q: Will an FPSO be used for the Phase 2 development, or refineries will be constructed for this purpose?

A: Serious trilateral talks are under way between PEDCO, Maersk and client. The Maersk's mechanism in developing Qatar's al-Shaheen has been to install offshore platforms before placing processing installations on them. Then, FPSO will store and export oil. It is similar to Shell's technology in developing Soroush and Norouz fields. Now we say we can use FSO instead of

FSO instead of offshore facilities.

Q: Is Maersk sharing this view?

A: Maersk has its own viewpoints which are not yet final. Before Iran's FPSO reached the production stage they were not very interested in this issue. But after FPSO was installed in the shortest possible time to allow for oil production, storage and exports they are showing interest. Of course, I believe that this issue needs technical tests like using FSO or FPSO, installing onshore equipment, transferring equipment onshore due to 100-kilometer distance from sea.

Q: How much would be the rate of recovery in Phase 2?

A: As I mentioned production from the oil layer of South Pars will increase from 35,000 b/d to 80,000 b/d, up 45,000 b/d, in Phase 2. The natural rate of recovery from this field is forecast to stand at 3 to 4 percent. With water injection, while production is under way, rate of recovery is predicted to be between 10 and 15 percent for this field.

Q: Do you have any water injection plans?

A: We have got permission from NIOC to drill three injection wells. If the contract for Phase 2 is signed, that will be done under this phase. But if signature of contract is delayed, we will do it. We are trying to start water injection into wells as soon as possible in order to increase production.

Q: Of course it has been said that the oil layer of South Pars is most likely to experience output fall-off.

A: According to our modeling, continued production in this field heavily depends on water injection. Meantime, in al-Shaheen field, the Qataris have reached a production 1.5 times higher than Iran by injecting water. Therefore, we envisaged injection of 45,000 b/d for 35,000 b/d oil output on FPSO. It depends on timely drilling of injection wells.

Q: If PEDCO decides to start drilling injection wells when will it start to do so?

A: Given the fact that PEDCO's rig has been set aside specifically for this purpose since early June, the required commodities have been purchased. We were also waiting for RSS technology for drilling and several companies brought this technology in. As soon as the client (NIOC) gives us the go-ahead, we will not be facing significant restrictions for drilling injection wells.

Q: How much time have you considered for the drilling of three injection wells?

A: With a single drilling rig we can drill three injection wells over a period of nine months. Of course as soon as we start production, it will overlap with development. Therefore, injection will be done partly with FPSO.

Q: Have you had any negotiations with foreign companies for the development of oil fields other than the South Pars oil layer within the framework of new oil contracts?

A: PEDCO is inclined to partnership with foreign companies in the development of fields. But since little work has been done with regard to the application of enhanced recovery methods and PEDCO is more experienced than other companies in this sector we are targeting active presence. To that end we have had talks with leading international companies and we have reached good results and we have chosen our target fields.

Q: Which oil fields are prioritized?

A: Our priority for applying new enhanced recovery methods are Soroush and Norouz fields. Of course, the Iranian Ministry of Petroleum's policy for future is sustained efficient recovery. That depends on the application of these methods. To that end, NIOC welcomes enhanced recovery projects. But the main problem pertains to correct application of these methods, high costs and the need for specific technology. Therefore, not every company is capable of carrying out such operations. Now if we manage to find a foreign partner in this field and reach agreement with it, we will be able to sign a contract for cooperation because we think that application of this method is a forgotten link in the production chain and Iranian companies must become active.

Q: Which projects are you willing to run as main contractor?

A: We prefer to be an active partner in such domains as field study, drawing up development plan and project management.

Q: So you do not insist on being the main contractor? However, the Ministry of Petroleum gives E&P companies the chance to serve as the main contractor in developing small and medium-sized fields.

A: In megaprojects, NIOC's policy is that big international companies develop fields. In that case, they will contribute the lion's share of necessary capital. Therefore, it would be natural for them to be the main contractor. In response to your question I should say that we do not have sufficient capital to develop small- and medium-sized fields. Regarding enhanced recovery projects, we choose a small or medium-sized field and if we find a reliable financer we can develop these fields under EPCF framework.

Europeans Ready to Invest in Parsian Zone

Parsian is one of dozens of special economic zones in Iran. Due to its proximity to the Persian Gulf and the refineries of South Pars gas field, the zone enjoys a very appropriate location for investment in various sectors, particularly petrochemical industry.

Parsian Energy Intensive Industries Special Economic Zone, expanding on more than 10,000 ha of land, is located in the city of Parsian in Hormuzgan Province. The zone is run by the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO). Parsian city is located 30 kilometers from Assaluyeh.

Access to maritime transport lines, existence of sweet gas (recoverable at more than 100 mcm/d in Tabnak, Shanol, Varavi and Homa areas) nearby, access to infrastructural facilities in the Pars I and Pars II sites of Pars Special Economic Energy Zone, potentialities of the provinces of Hormuzgan, Bushehr and Fars for development in Iran, upgraded offshore and onshore potential and above all access to water resources are among advantages and potentialities of this zone.

It should be kept in mind that acceptable sea depth; favorable living environment, as well as airport and railway transport facilities have provided very favorable conditions for the development of energy-intensive industries in the Parsian zone. A contractor was recently chosen to start building four jetties at Parsian Port, so the number of jetties will increase to 19.

Facilities for Foreign Investors

Meantime, foreign investors who invest in this special zone will enjoy such facilities as the allotment of 3,000 ha of land by paying 30% advancement and 70% after production. Infrastructural facilities like water, electricity, gas and telecommunications, customs exemption for the import of equipment, hiring a domestic partner, getting loans, consultation services throughout the project and job permission for foreign employees would be among incentives for investment in this special zone.

The Iranian government recently expressed its willingness to welcome foreign investors in this zone.

Minister of Petroleum Bijan Zangeneh has described Parsian as the best zone for investment in petrochemical industry.

"This special economic zone is the best zone for the development and growth of petrochemical industry and Iran's Ministry of Petroleum favors and supports investment in this zone," he said recently.

The minister expressed satisfaction with measures undertaken in the Persian zone, adding: "Gas supply in this zone is handled by the Ministry of Petroleum." Therefore, we welcome petrochemical activities in the Persian Special Economic Zone. Development of petrochemical industry will be one of issues the government will follow up on."

Over recent years, with the finalization of the formula for petrochemical feedstock price in Iran, many European countries like Royal Dutch Shell and France's Total have shown willingness to invest in Iran. Some of these companies offered $240 ethane to Iran's National Petrochemical Company (NPC). Multitudes of domestic and foreign demand for investment in this zone have been submitted and five agreements have been signed with five domestic companies for allotment of land based on leasing model. Necessary permits pertaining to the environment, customs, hard currency commitments and port construction have been achieved.

BASF Investment in Iran Petchem Sector

Marzieh Shahdaei, CEO of NPC, said recently that Germany's BASF was willing to invest $4 billion in the Persian special zone to build a petrochemical plant. Under this proposal, the German company would have a 60% share in the project and the remaining 40% would be guaranteed by the Iranian side. In the second phase, BASF would increase its investment sum.

BASF has so far built six petrochemical parks all across the globe and it plans to establish the seventh one in Iran (Parsian). BASF posted 74 billion euros in earnings in 2014 to become the top petrochemical company in the world.

Total Keen to Invest in Parsian

Hassan Shahrokhi, CEO of Parsian Energy Intensive Industries Special Economic Zone Company, recently said that attractive features of the zone had pushed European firms and giants like Total to envisage investment there. He said some domestic companies had also pledged $10 billion in investment, which equals one-fourth of total investment envisaged for the development of the zone.

Total plans to invest $2 billion in Parsian in order to complete the value chain in Iran's petrochemical industry.

Iran is currently in talks with Total for the construction of three petrochemical plants and in the event of a final agreement, the French giant would invest $1.5 to 2 billion in Iran's petrochemical sector.

Following the latest round of talks held between Total and NPC, the two sides reached agreement on the construction of petrochemical plants with an annual production capacity of 2.2 million tonnes of petrochemical and polymer products. Agreement has been reached on the construction of two plants producing a special grade of polyethylene and an ethane cracking plant to convert ethane to ethylene.

The advantage with Total's potential investment in Iran's petrochemical sector would be the transfer of technical knowhow to produce a special grade of polyethylene in Iran.

For the time being, agreement has been reached on the construction of two plants that would supply polyethylene and polymer products, each with a capacity of 500,000 tonnes a year. The capacity of ethane cracking unit is estimated at between 1 and 1.2 million tonnes a year.

"Iran forecasts more than 1.5 mcm/d of methane, 2.8 million tonnes a year of ethane, 2.1 million tonnes a year of propane, butane and liquefied petroleum gas as well as 4 million tonnes a year of naphtha as feedstock for its new petrochemical projects," said Shahdaei. "Domestic and foreign investors and companies will have nothing to worry about regarding the supply of feedstock." Petrochemical industry is a water and energy intensive sector; therefore, many petrochemical units are currently facing water shortage and export challenges.

Over the past decade, infrastructure in new zones for domestic and foreign investment have been very slow. Therefore, with the influx of foreign investors to Iran, development of infrastructure in new hubs like Parsian would be a priority for the country's petrochemical industry.

After some 60 incomplete projects (progress 10 to 90%), have been completed, the current annual production capacity of petrochemical products would increase to 120 million tonnes. Furthermore, implementation of 36 new projects that need $41 billion in investment would push the annual production capacity to beyond 180 million tonnes a year.

In the current calendar year to March 2018, the startup of four projects (among the 60 incomplete ones) would add 2 million tonnes to the country's petrochemical production capacity.

MOUs Signed with Toyo, Zarubezhneft

A memorandum of understanding (MOU) has been signed between National Iranian Oil Company (NIOC), Petropars and Japan's Toyo Engineering Corporation for renovation services and gas production hike at Salman gas field. It is the first time that the Japanese firm steps in Iran's upstream oil sector.

The MOU was signed between Gholam-Reza Manouchehri, deputy head of NIOC for engineering and development, Hamid Akbari, CEO of Petropars, and Hiroshi Sato, director of Energy Business Unit at Toyo Engineering Corporation.

Addressing the signing ceremony, Manouchehri said NIOC was considering joint cooperation with Asian countries, particularly Japan whose companies respect all quantity and quality standards and offer better cost prices.

He said that the agreement would have an EPCF (Engineering, Procurement, Construction and Financing) framework, adding: "The Japanese have always been tough in signing such MOUs and that is why our negotiations were lengthened. But after a contract has been signed they are very serious. We hope that like our previous instances of cooperation, this project will yield good results."

Manouchehri said four months of talks led to the signature of this MOU. He added that a heads of agreement (HOA) would be signed after the MOU provisions are implemented.

Referring to the background of Toyo's work in Iran, he said: "Toyo set a good precedent in terms of quantity, quality and cost price in building a refinery for phases 6 to 8 of South Pars [gas field]."

Toyo had teamed up with Japan's JGC, South Korea's Daelim and Iran's Industrial Development and Renovation Organization (IDRO) to build the refinery under an EPC (Engineering, Procurement and Construction) deal.

In addition to the South Pars projects, Toyo has operated petrochemical projects in Iran. It expanded the range of its activities after Iran's landmark nuclear deal with six world powers, signed in July 2015, entered into force in January 2016.

Toyo in Iran Upstream Sector

Manouchehri said the MOU with Toyo was the first instance of the Japanese company's involvement in Iran's upstream sector.

"This project will be executed in several phases. In the study sector, Petropars will be the financer. Then in the construction sector, Toyo and Petropars will work together with the Japanese firm's financing. NIOC will not pay any sum at this stage," he said.

Manouchehri also said that the Iranian Offshore Oil Company (IOOC) output had declined in previous years.

He added that most installations of this company had worn out because of long use; therefore, renovation and upgrade were needed. Manouchehri also said that a review of reservoirs would help apply cutting edge technologies to drilling, workover and enhanced recovery.

He said plans were under way for IOOC to implement six new development projects, which are mainly EPCF-based and pertain to the reconstruction of installations and reservoir study.

Manouchehri said Petropars-Toyo partnership would help the Iranian party gain experience. "Such partnership existed in the past too, but we hope that this partnership would be a good practice for operating more projects."

Iran Bargaining Chip

Manouchehri said that Iran's interaction with leading international companies would be a way for Iran's petroleum industry to acquire state-of-the-art technical and technological savvy. That would give Iran a wider choice in the acquisition of cutting edge technologies.

He said NIOC's priority was to cooperate with hi-tech countries like Japan, adding: "Of course in order to create a competitive atmosphere and increase interaction, NIOC is also cooperating with other Asian countries like China, South Korea and Malaysia."

Manouchehri said Iran's bargaining power had increased compared with the past, adding that Iran's capacity for welcoming technology into its petroleum industry had increased as well.

Toyo Role in Salman Field

Sato expressed content with cooperation with NIOC and Petropars, saying the company first came to Iran in the 1980s. He added that Toyo was not experienced enough when it came to Iran, but it has now become experienced.

He said that Petropars was a company with good reputation in Iran, adding that Toyo would do its utmost effort to enhance recovery from Salman, in cooperation with Petropars.

Akbari also highlighted the record of Toyo's work in Iran and the Japanese firm's record of working in Iran, saying cooperation between Toyo and Petropars had been beneficial to NIOC.

He said the recently signed MOU was a result of earlier cooperation between Toyo and Petropars.

"Toyo insists on having effective technology to boost or preserve the production capacity at Salman field," he added.

NISOC, Zarubezhneft Ink MOU

Separately, an MOU was signed to study the development of Shadegan and Rag Sefid fields. The memorandum was signed by Hamid Deris, technical director of National Iranian South Oil Company (NISOC), and Elias Khamitov, director of field development and investment at Zarubezhneft.

This MOU was signed based on a model of contract proposed by NISOC and approved by the Board of Directors of NIOC. The Russian company agrees to submit its proposed plan for the development of these fields in nine months at the latest.

Rag Sefid lies in the area administered by Aghajari Oil and Gas Production Company and its production stems mainly from the Asmari and Bangestan reservoirs.

Shadegan oil field is run by Maroun Oil and Gas Production Company. It was started up in 1988.

MOUs Signed with Toyo, Zarubezhneft

A memorandum of understanding (MOU) has been signed between National Iranian Oil Company (NIOC), Petropars and Japan's Toyo Engineering Corporation for renovation services and gas production hike at Salman gas field. It is the first time that the Japanese firm steps in Iran's upstream oil sector.

The MOU was signed between Gholam-Reza Manouchehri, deputy head of NIOC for engineering and development, Hamid Akbari, CEO of Petropars, and Hiroshi Sato, director of Energy Business Unit at Toyo Engineering Corporation.

Addressing the signing ceremony, Manouchehri said NIOC was considering joint cooperation with Asian countries, particularly Japan whose companies respect all quantity and quality standards and offer better cost prices.

He said that the agreement would have an EPCF (Engineering, Procurement, Construction and Financing) framework, adding: "The Japanese have always been tough in signing such MOUs and that is why our negotiations were lengthened. But after a contract has been signed they are very serious. We hope that like our previous instances of cooperation, this project will yield good results."

Manouchehri said four months of talks led to the signature of this MOU. He added that a heads of agreement (HOA) would be signed after the MOU provisions are implemented.

Referring to the background of Toyo's work in Iran, he said: "Toyo set a good precedent in terms of quantity, quality and cost price in building a refinery for phases 6 to 8 of South Pars [gas field]."

Toyo had teamed up with Japan's JGC, South Korea's Daelim and Iran's Industrial Development and Renovation Organization (IDRO) to build the refinery under an EPC (Engineering, Procurement and Construction) deal.

In addition to the South Pars projects, Toyo has operated petrochemical projects in Iran. It expanded the range of its activities after Iran's landmark nuclear deal with six world powers, signed in July 2015, entered into force in January 2016.

Toyo in Iran Upstream Sector

Manouchehri said the MOU with Toyo was the first instance of the Japanese company's involvement in Iran's upstream sector.

"This project will be executed in several phases. In the study sector, Petropars will be the financer. Then in the construction sector, Toyo and Petropars will work together with the Japanese firm's financing. NIOC will not pay any sum at this stage," he said.

Manouchehri also said that the Iranian Offshore Oil Company (IOOC) output had declined in previous years.

He added that most installations of this company had worn out because of long use; therefore, renovation and upgrade were needed. Manouchehri also said that a review of reservoirs would help apply cutting edge technologies to drilling, workover and enhanced recovery.

He said plans were under way for IOOC to implement six new development projects, which are mainly EPCF-based and pertain to the reconstruction of installations and reservoir study.

Manouchehri said Petropars-Toyo partnership would help the Iranian party gain experience. "Such partnership existed in the past too, but we hope that this partnership would be a good practice for operating more projects."

Iran Bargaining Chip

Manouchehri said that Iran's interaction with leading international comp

G20 Summit: US-Europe Deep Energy Dispute

The G20 group of countries holds 85% of world economy. The group includes eight industrialized countries (eight big economics) and 11 emerging economies. Argentina, Australia, Brazil, China, Germany, France, Britain, India, Indonesia, Italy, Canada, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United States and some European Union member states are among the G20 members. They are both energy consumers and producers. That is why the issue of energy has always been a focal point in discussions among them.

The recent G20 summit in Hamburg focused on such issues as trade, defense spending, refugees, combating terrorism and above all the obligation of industrialized countries to respect the Paris climate accord.

The summit ended its work while members were divided more than any time ever. This divergence mainly stemmed from the United States' policies on a variety of issues ranging from climate changes to relations with Russia and European countries. Nonetheless, the issue of energy enjoyed a special place in the talks, particularly in the days leading to the conclusion of the summit.

Pre-Summit Differences

The latest round of US sanctions, adopted in the Senate on June 15, against Iran, Russia and North Korea affected the G20 summit. European governments believe that these sanctions would leave impacts on them in addition to restricting their transactions with Iran and Russia.

Many European officials including Germany's foreign minister and Austria's chancellor accused the US government of seeking to create jobs in the oil and gas sector for the Americans and putting European companies under pressure by imposing the sanctions.

For the Europeans, the US is using the sanctions as an instrument to drive European companies off competitions. The German foreign minister, Sigmar Gabriel, and the Austrian chancellor, Christian Kern, maintain that the sanctions bill mainly sought to replace the Russian natural gas with US liquefied gas in the European market. In their view, these sanctions pose a serious challenge to Nord-Stream II pipeline which would carry natural gas from Russia to EU member states, particularly north Europe. The significant point for the Europeans is that the US sanctions bill envisages penalties for European companies involved in the construction of the pipeline.

The US government has announced that it intends to facilitate export of liquefied natural gas (LNG) from the United States to central and Eastern Europe in a bid to reduce the European countries' dependence on Russia; however, the fact is that Washington mainly plans to increase its own revenues and create jobs.

The Europeans disapprove of the sanctions for two reasons: First, transfer of LNG from the US to Europe is facing numerous challenges and it will be profitable for the Americans rather than for the Europeans. Second, transfer of LNG from the US would increase the European countries' dependence on the United States. That comes at a time the European governments have lost their trust in the administration of President Donald Trump who took office in January.

Although the EU has sought to diversify its gas supply resources, it has not welcomed the US offer. However, the US proposal was welcomed in Poland, Hungary, Lithuania, Latvia and Estonia because they heavily depend on Russia's energy and they are afraid of the repetition of history of Moscow's dominance on their territories.

The LNG proposal is also facing challenges in the US. For instance, Republican lawmakers have demanded that President Trump pursue a tougher approach vis-à-vis Russia and take advantage of gas exports as a political tool against Russia. The fact is that US LNG exports would threaten Washington-Moscow ties in one way or other. This issue is not favorable to Trump who seeks to improve relations with Russia.

Furthermore, another issue that has challenged US-Europe energy ties was the signature of a landmark deal between Iran's state-run oil company NIOC and a consortium led by France's energy giant Total. The consortium, which also includes China's CNPC and Iran's Petropars, agreed to develop Phase 11 of the giant South Pars gas field. The deal was signed at a time the US was planning to enact new sanctions barring European companies from cooperating with Iran. That is why Mike Pompeo, the director of the Central Intelligence Agency (CIA), said the signature of Iran's Total deal posed a diplomatic challenge to US policies.

Contradictory Energy Policy

The G20 countries control more than 80% of energy consumption market, 60% of oil and gas production and more than 90% of coal consumption in the world. Therefore, long-term stability in the energy market, particularly oil market, remains a key issue in the economic development of the G20 countries.

Unlike the previous summits, the G20 summit in Hamburg saw energy become an issue of conflict and divergence. The main reason is that energy is tied to the US's decision to pull out of the Paris climate accord.

The summit grew into a venue of discrepancy between the US and other countries on the issue of environment. The US insisted on its withdrawal from the Paris accord and announced its policies on the use of energy, which were in total conflict with those of European governments.

The point highlighted in Trump's policies with regard to the environment and energy, was Washington's contradictory policy of using fossil fuels. The Paris accord calls on signatories to ditch fossil fuels like coal, oil and gas in the long-term, but Trump said US would be ready to help other countries use fossil fuels by reducing losses. This US decision was in total contrast with the decisions of other countries for safeguarding the environment.

Perspective

While until recently the G20 summit provided a venue for cooperation and convergence between the US and European countries, the Hamburg summit became more than ever a place for displaying deep-seated differences and the conflict of interests between participants.

A significant point with this summit was the issue of energy which was not directly on the agenda, but was highlighted during the event and laid bare US-Europe differences of view.

As long as Trump administration is in office the differences between leading European countries and the US would continue to escalate on the issue of energy. The EU does not agree with the policy of US selling LNG to European countries. Nor is it willing to join the White House in imposing sanctions on Iran and Russia. For Europe, Iran and Russia are two major sources of energy that could meet the continent's daily growing demand in the future.

Big Oil Potential Offshore Mexico

Eni’s shallow-water Amoca-3 well in the Campeche Bay offshore Mexico has proven multiple significant oil intervals in the Orca and Cinco Presidentes formations.

The well was drilled in 25 m (82 ft) of water to a TD of 4,330 m (14,206 ft) in Contractual Area 1, 200 km (124 mi) west of Ciudad Del Carmen, 1.5 km (0.9 mi) southwest of Amoca-1 and 3 km (1.8 mi) northwest of Amoca-2.

It intersected 410 m (1,345 ft) of net oil pay, 25-27° API, in several high-quality Pliocene reservoir sandstones; 300 m (984 ft) of the pay were in the deeper Cinco Presidentes sequence, in various Pliocene-age clusters.

During the production test, 45 m (147 ft) of the Cinco Presidentes reservoir were opened to production with the well flowing 6,000 b/d of 25° API crude.

Amoca-3 well has since been suspended but will be re-entered later for production purposes. 

Following the results of this latest well, Eni has lifted its estimate of the Amoca field’s in-place reserves to 1 Bboe. Across Area 1 the total estimated resource base is presently 1.3 Bbbl of oil in place, 90% being oil, with further upside.

The company plans to submit an accelerated and phased development plan later this year targeting an early production phase with a plateau in the range of 30,000-50,000 b/d, with operations set to start in early 2019.  

Exploration of Area 1 continues with the first appraisal well on the Miztón discovery, to be followed by other wells either appraising further finds or exploring undrilled prospects.

CEO Claudio Descalzi said: “The Amoca field represents an optimal opportunity for a phased development approach with a low breakeven. It is an ideal project in this low oil price environment.

“Eni’s objective is to become the first international company to establish operating production in Mexico, which would be the first tangible success of the country’s…‛Reforma energetica’ campaign.”

African Petroleum Reports Slow Progress

African Petroleum (AP) says an exclusivity agreement covering the SOSP license offshore Senegal, and the A1 and A4 licenses offshore The Gambia has expired and will not be extended.

Although the Senegalese authorities expressed their willingness to proceed with the SOSP license once AP secured a farm-out, progress in The Gambia has been slow.

The exclusivity agreement, which regarded both countries as one transaction, appeared too restrictive as AP could not secure the license extension without first resolving the situation in The Gambia.

At present the Senegalese authorities are considering the company’s alternate proposal to extend the license by 18-24 months, giving it sufficient time to acquire 3D seismic and drill an exploration well on the block.

However, any extension would remain conditional on a suitable farm-in partner coming on board. AP now plans to start discussions with companies that had expressed interest in farming into SOSP but were barred from entering into commercial negotiations due to the exclusivity of the agreement.

The company hopes to finalize a standalone farm-out transaction soon, and at the same time continues to reserve its rights on the ROP license.

As for the A1 and A4 licenses, AP has been in dialogue with Gambian officials on identifying a solution satisfactory to all parties. The company’s CEO and CFO recently travelled to The Gambia for a meeting with President Barrow in Banjul.

AP is now hopeful of receiving formal feedback and clarity on the situation from the government in early August. It adds that it will deploy the dispute resolution mechanism provisions of the licenses should the government’s decision not be favorable to the company

Strong Hydrocarbon Indicators in Ireland

Providence Resources has summarized its activities to date in licensing option (LO) 16/27 offshore western Ireland, which have focused on the hydrocarbon potential of the Palaeocene Avalon prospect.

A large scale calibrated petroleum systems model (PSM) over an area including the LO 16/27 suggests a working petroleum system, with Avalon potentially providing a hydrocarbon resource charge of around 8.67 Bbbl of oil and 21.43 tcf of gas.

Providence acknowledges that modeling of petroleum systems in emerging frontier basins carries inherently high uncertainty, but maintains that the study results are positive for potential charging of Avalon.

In addition, the risk of oil biodegradation in the prospect appears to be low to moderate, based on the modeled temporal variations in reservoir temperature.

The study also assessed top seal integrity for Avalon using inputs from both the PSM and a basin-wide geo-mechanical modeling exercise. The conclusion was that there is a low likelihood of a mechanically breached seal at Avalon based on modeled pore pressures.

Dr. John O’Sullivan, Providence’s technical director, said that unlike the similar-aged Paleocene Druid stratigraphic prospect and underlying Lower Cretaceous Drombeg prospect that Providence and its partners are currently drilling, “Avalon is somewhat differentiated insofar as it demonstrates a potentially different trapping mechanism with structural closure mapped in the proximal sediment transport direction.

“The proximity of Avalon to the deeper breached Dunquin North oil accumulation is also a potential positive in terms of hydrocarbon sourcing.”

Gas Dominates Southeast Asia Discoveries

Westwood Global Energy Group (WGEG) sees signs of recovery in exploration in the Asia/Pacific region.

This is based on findings from the company’s 2017 State of Exploration Report, which covers global exploration between 2012 and 2016 and benchmarks the performance of 40 international E&P companies (the ‘W40’).

Its references are 991 conventional completed wildcat wells involving W40 participation.

Globally, commercial oil and gas volumes discovered fell to a nine-year low last year, the report found, a response to the ‘lower for longer’ oil price scenario.

This, WGEG says, has caused companies to cut back further on exploration, with less exposure to frontier - especially deepwater - and emerging play drilling.

For the W40, gas remained the focus in Asia/Pacific during 2012-2016, with around 15.8 tcf of gas and 293 MMbbl discovered from 281 exploration wells drilled in the region.

Of the 991 wildcats cited, 541 were high impact wells and of these, 84 were drilled in the Asia/Pacific region, discovering roughly 9.6 tcf of gas and 103 MMbbl of liquids.

Papua New Guinea provided the highest volume of discovered commercial resources with ~4.6 tcf and ~120 MMbbl from 17 wells, while Australia followed with ~4 tcf and ~80 MMbbl discovered.

WGEG recorded nine commercial discoveries globally in 2016 of around 100 MM boe, compared to 18 in 2015 and 34 in 2014. Three of the discoveries were oil only, with the remaining six split into oil and gas, gas/condensate, and gas.

In the Asia/Pacific region these included Woodside’s Thalin-1A well in the Rakhine basin offshore Myanmar.

 “The key for all companies now is to keep finding costs below $1-2/bbl, or perhaps a bit higher for near field discoveries where development costs are lower.”

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ExxonMobil Abandons Indonesia East Natuna Block

ExxonMobil has decided to end all discussions around Indonesia's gas-rich but technically challenging East Natuna block located in the deep waters of the South China Sea, saying it was not economically feasible to develop it under current terms and conditions.

This brings an end to decades of involvement by the US oil major in the block, and in all likelihood pushes the block's development further out.

"Having completed the technology and market review and evaluated the result, ExxonMobil no longer wishes to continue further discussions or activity involving the East Natuna area," ExxonMobil Indonesia's vice-president of public and government affairs Erwin Maryoto told S&P Global Platts.

"We remain committed to our Indonesia operations and continue to seek and evaluate new opportunities in the country," Maryoto added.

The East Natuna block is located in water depths of 145 meters (470 feet) in a remote location 225 kilometers (139.50 miles) northeast of Natuna Island. The block is estimated to hold 222 Tcf of gas, but has a high carbon dioxide content of around 70%. About 46 Tcf of gas is thought to be recoverable, but the separation of carbon dioxide is technically challenging and costly.

The development of the block has been on the drawing board since the early 1990s when ExxonMobil was awarded a contract to develop the gas resource. But the US major's contract was terminated in 2006 after it failed to provide a development plan by the 2005 deadline.

In December 2010, Pertamina signed a new heads of agreement with ExxonMobil, Total and Malaysia's Petronas to develop the block, but Petronas later pulled out of the project. Thailand's state-owned PTT Exploration and Production stepped in, but no production sharing contract was signed because of delays in finalizing the contractual terms with the Indonesian government.

Regulator Needed to Counter Speculators

Energy markets might need to be regulated to put a brake on widespread financial speculation that is distorting crude prices, the head of Italian oil major Eni told Il Sole 24 Ore newspaper.

Eni CEO Claudio Descalzi said OPEC and Saudi Arabia were not in a position to push prices higher by cutting output, adding that geopolitical tensions, growing U.S. shale oil production and heavy speculation in crude futures were hurting the sector.

"The financial speculation is so strong that it has transformed even those with long term strategies into short term investors," Descalzi was quoted as saying.

"Perhaps we should adopt in the oil sector the sort of regulations and market controls that were imposed on banks. Banks have a central watchdog, while in the past; our regulator was OPEC, which is no longer playing the role it once had."

He said hedge fund speculators no longer believed that the Organization of the Petroleum Exporting Countries (OPEC) was in a position to introduce radical output cuts.

Six OPEC and non-OPEC ministers met in St Petersburg to discuss the market outlook and review a global pact on reducing crude supplies that was agreed upon this year.

Bangladesh Delays LNG Spot Tender Deadline

Bangladesh has extended the deadline of a tender seeking expressions of interest in spot LNG supply to August 17 from its initial July 30 date, following requests from interested parties, said a senior official.

Potential LNG suppliers will be shortlisted based on their trading experience and their ability to deliver the right cargo specification to both onshore and offshore terminals, Md Quamruzzaman, the managing director of Rupantarita Prakritik Gas Company Ltd, or RPGCL, told S&P Global Platts.

Shortlisted participants and RPGCL will be signing sales and purchase agreements governing the spot LNG supply with a validity of at least five years.

The imported LNG should have a gross heating value within the range 1,025-1,100 Btu/scf, Quamruzzaman added, which could be problematic for exporters of lean LNG from Australia's Queensland or rich LNG from the Middle East.

The imported LNG is to be blended with locally produced gas - sulfur free, sweet gas - before it is delivered to the end-user, so the LNG's sulfur content should be low, Quamruzzaman added.

The LNG should be supplied on a delivered ex-ship basis and the vessel size should range between 125,000 cu m and 220,000 cu m.

Bangladesh will not restrict the number of shortlisted applicants, which will be announced within a month from the submission deadline, he added.

"We will procure spot LNG based on market prices, terminal availability, increased regasification capacity and downstream demand," he added.

RPGCL, a wholly owned subsidiary company of state-owned Petrobangla, is in charge of the country's LNG purchases.

Petronas Delivers 1stLNG Cargo to Thailand

Malaysian state oil firm Petroliam Nasional Bhd announced the delivery of its first liquefied natural gas (LNG) cargo to Thailand.

Petronas, as the company is known, is committed to deliver up to 1.2 million tonnes per annum of LNG to Thailand's state-owned PTT Pcl for a period of 15 years.

The cargo was delivered to the east coast of the Gulf of Thailand from Petronas' LNG complex in Bintulu, east Malaysia.

"PTT and Petronas are exploring further opportunities to collaborate in the LNG and natural gas value chain," said Petronas in a press statement.

Thailand's energy policy committee approved in December the proposal for PTT to buy LNG from Petronas. PTT will buy 1 million tonnes of LNG per year from Petronas in 2017 and 2018, and 1.2 million tonnes from 2019 onwards.

CNG Possible Alternative to Diesel

Carmaker "Seat" sees compressed-natural-gas (CNG) as an alternative fuel to diesel, the chief executive of the Spanish Volkswagen division said.

"Seat "was betting on CNG in order to compensate for falling diesel car sales, its chief executive Luca de Meo was quoted as saying in part of a report due to run in full in the July 24 issue of Automobilwoche.

"We have to offer customers a sensible solution. The debate about diesel is continuing; therefore, we need other options, he said.

While "Seat", bought by Volkswagen in 1986, was less exposed to diesel dependency than premium carmakers, it still had to observe market dynamics very carefully, de Meo said.

"If the mayor of Barcelona decides to close the city centre for Euro-6-diesels, then customers will probably no longer buy diesel cars," he said.

The finance chief of sister company Porsche, Lutz Meschke, also interviewed, said that discussions about a diesel-free future were underway.

"In our segment, we have the right answers with plug-in hybrids and purely electrical drives. Why should I anxiously hold on to a diesel?" he said.

Car stocks tumbled after a report in Der Spiegel that VW, BMW, Audi and Porsche may have colluded to fix the prices of diesel emissions treatment systems.

The Spiegel report said that cartel-like behavior may have also applied to vehicle developments, brakes, petrol and diesel engines, clutches and transmissions, citing a letter sent to cartel authorities.

The companies have not commented on details and only referred to speculation with regard to the report, while Transport Minister Alexander Dobrindt said it was now up to antitrust authorities to study the allegations.

"The cartel authorities must investigate, study the accusations in detail and, where necessary, must draw consequences," he said in remarks to Reuters.

"Cartel behavior would be an additional burden for the (diesel) subject matter that we are currently involved in with the car industry," Dobrindt said.

German Economy Minister Brigitte Zypries, in separate remarks, echoed this, adding that trust in the entire German automotive industry was at stake.

"Everyone is well advised to cooperate with the state institutions and to create transparency," she said.

The European Commission said EU antitrust regulators were investigating the allegations.

UAE Hopes Oil Markets Begin to Tighten

The United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazroui said he hopes that global supplies will start tightening in the second half of the year when demand picks up.

"We have seen healthy demand and a flattening of rig counts in the United States," Mazroui told reporters.

"This is the beginning of the third quarter and demand picks up in the third quarter and I hope the agreement will have a significant impact in the third and fourth quarter."

Brent crude oil prices remain just under the key $50 per barrel mark on concerns about high supplies from the Organization of the Petroleum Exporting Countries (OPEC) despite a pledge to cut output in a bid to tighten the market.

OPEC, together with some non-members like Russia, has extended a deal to cut production by 1.8 million barrels per day (bpd) to March 2018.

However, OPEC's compliance slumped to 78 percent in June as higher-than-allowed output from Algeria, Ecuador, Gabon, Iraq, the UAE and Venezuela offset strong compliance from Saudi Arabia, Kuwait, Qatar and Angola, the International Energy Agency said.

"The UAE is committed to its cut," Mazroui said.

"We have seen some increase in production in some of the countries that were not part of the agreement because of their special stance."

OPEC's supply cuts have also been countered by rising U.S. production C-OUT-T-EIA, which has increased almost 12 percent since mid-2016 to 9.4 million bpd. The number of rigs drilling for new U.S. oil supply has also climbed since last year though the pace has slowed in recent weeks.

-Halliburton Smashes Profit View

Halliburton Co swung to a quarterly profit and handily beat analysts' expectations on higher demand in North America, sending the world's No.3 oilfield services provider's shares up 2.5 percent.

The company's revenue from North America surged 83 percent to $2.77 billion in the second quarter, due to increased demand for pumping and well-construction services in the region.

Halliburton said margins in its biggest market by sales grew "into double digits" in the quarter and CEO Jeff Miller expected margins from the region to improve.

The commentary on margins is crucial as Wall Street was already expecting oilfield services companies to beat last year's weak results.

Bigger rival Schlumberger Ltd also reported strong quarterly results and said it would redeploy all of its pressure pumping fleet by early next quarter.

U.S. oil producers added 94 rigs in the three months to June 30 as shale companies have been able to profitably pump oil even as crude prices hover below $50.

Net profit attributable to Halliburton was $28 million, or 3 cents per share, in the second quarter ended June 30, compared with a loss of $3.21 billion, or $3.73 per share, a year earlier.

The year-ago quarter included a $3.5 billion charge related to the termination of the Baker Hughes deal.

Halliburton's revenue rose 29 percent to $4.96 billion, marking the company's second straight quarter of increase, after seven quarters of double-digit percentage declines.

Excluding items, the company earned 27 cents per share in the reported quarter, while analysts expected a profit of 18 cents, according to Thomson Reuters I/B/E/S.

Global Oil and Asian Product Market in July

During June crude prices fell returning to levels not seen since early November. However, in July global oil prices raised slightly supported by falling inventories, higher demand, dollar depreciation and stronger refining margins. A big drop in US crude was the most  significant driving factor of the market. The U.S. government report indicated sharp drawdown in oil and fuel stockpiles. On the other hand, according to IEA estimates, global oil demand is forecast to reach 98 million barrels a day this year, driven in part by rising consumption in Germany and the U.S. during the second quarter of 2017.

Each month something seems to come along to raise doubts about the pace of the re-balancing process. This month, there are two issues: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement. In the past few months, Libya and Nigeria have seen their combined output increase by more than 700 tb/d.

For fellow OPEC members, who agreed to cut production by 1.2 mb/d, to see their cut effectively diluted by nearly two-thirds must be very frustrating, especially as they historical observed to follow the standards.

The second internal issue for OPEC is that its rate of compliance now appears to be slipping. Based on IEA data, the compliance slipped to 78% in June from 95% in May. However, the output agreement runs until March 2018, and success is judged over the whole period rather than in one month. It is OPEC's business to manage its output and we must wait and see if the changing supply picture from the group as a whole forces an adjustment to the current arrangements. Historically, it is  noteworthy that compliance from the ten non-OPEC producers which volunteered to cut production, improved to 82% in June, higher than that of OPEC.

Asian Product Markets

During July, gasoil, jet fuel and gasoline performance were healthy. The fundamentals in these markets were strong ,while fuel oil and naphtha were almost as per the last month.

Light Distillates (gasoline, naphtha)

Gasoline cracks – differential between gasoline prices and Dubai crude prices- climbed to an almost three month high amid a fall in supply and strong demand. Asian Gasoline market was supported by increasing demand from India, Vietnam and Iran. On the supply side, US and Singapore gasoline inventories fell. US gasoline stocks fell to its lowest this year, while Singapore light distillate stocks fell to a two-week low.

Naphtha market slightly improved. Naphtha trends went slightly on upward position. Support continued to stem from healthy regional demand and strengthening reforming spreads. However, there were some volumes from India released to the market. This caused some downward pressures to the market. looking forward, it is expected to see some improvements in the naphtha market as seasonally this always happens in August onwards.

Middle Distillates (gasoil, jet fuel)

Gas oil cracks strengthened over the reporting period. High import requirements from Vietnam due to seasonally high demand combined with refinery maintenance are to provide support. Meanwhile, in Japan high temperatures across the country boosted requirements from the power generation sector to meet peak demand for cooling. In India diesel production fell as some refiners are in maintenance. Looking ahead, Indian gasoil demand will decrease as monsoon season is coming.

Jet fuel cracks recorded a healthy gain compared to June. Buying interest was heard to be rising, but pressure from the unworkable arbitrage economics to theWest remained in place.

Fuel Oil

Fuel oil production in China increased to the highest level since at least 2002. However, strong power generation demand kept domestic requirements robust. Looking forward, it is expected to have further upside in July as demand is likely to continue rising towards its August peak. On the other hand, an improvement in arbitrage flows from the West is expected to limit the upside movement for fuel oil cracks and prevent fuel oil from reaching parity to crude again.

OPEC United Against Cheap Oil

OPEC recently decided to extend its hard-won oil output cuts deal for nine more months up to March 2018.

The decision by oil producers was adopted at a time the market is faced with supply glut. Due to the oversupplied market, oil prices have been halved in recent years, damaging revenue of oil producers.

In addition to the 14-member Organization of the Petroleum Exporting Countries, 11 non-OPEC oil producers including Russia have cut their production since January. This production cut drove oil prices back to above $50 and oil producers once again saw economic improvement. Many of these countries like Saudi Arabia and Venezuela were heavily dependent on black gold sales.

Start of Game

The downward trend in oil prices started in 2014, forcing Saudi Arabia and Russia to streamline their public budget. That also triggered unrest in Venezuela and Nigeria. But this year oil prices have pushed US shale oil industry to become more active. The US has not joined the OPEC-NOPEC oil cuts deal and that would slow down the trend of market balance.

Last December, OPEC made a historic decision after years of disagreement to reduce their production level. It was the first deal reached between OPEC and non-OPEC producers led by Russia in 15 years.

Both parties to the agreement agreed on reducing their output by 1.8 mb/d (2% of world total production) in the first half of 2017.

Most of these countries chose the level of production mentioned in the October 2016 deal as the starting point. Official figures show that in April ten countries fulfilled their obligations. Nine other countries reached their objectives in March. Large producers are more influential in the exercise of this deal. Saudi Arabia, the largest producer of OPEC, has been in full compliance with the OPEC deal since its implementation in January. Libya and Nigeria were exempted from production cut, while Iran was allowed to raise its output.

But non-OPEC producers were facing challenges. Russia, which accounts for half of non-OPEC cut, said it would go ahead with the agreed cut gradually. Non-OPEC states were 69% compliant with the deal in April. However, the International Energy Agency (IEA) put this figure at 66%.

Speculation for Extensional

Despite the output cut, OPEC kept exports fairly stable in the first half of 2017 as its members sold oil from stocks.

The move kept global oil stockpiles near record highs, forcing OPEC first to suggest extending cuts by six months, but later proposing to prolong them by nine months and Russia offering an unusually long duration of 12 months.

“There have been suggestions (of deeper cuts), many member countries have indicated flexibility but … that won’t be necessary,” Saudi Energy Minister Khalid al-Falih said before the meeting.

He added that OPEC members: Nigeria and Libya would still be excluded from cuts as their output remained curbed by unrest.

Falih also said Saudi oil exports were set to decline steeply from June, thus helping to speed up market rebalancing.

“Russia has an upcoming election and Saudis have the Aramco share listing next year so they will indeed do whatever it takes to support oil prices,” said Gary Ross, head of global oil at PIRA Energy, a unit of S&P Global Platts.

OPEC has a self-imposed goal of bringing stocks down from a record high of 3 billion barrels to their five-year average of 2.7 billion.

“We have seen a substantial drawdown in inventories that will be accelerated,” Falih said. “Then, the fourth quarter will get us to where we want.”

The Saudi energy minister separately told executives in Houston that its participation in an international agreement to cut crude output was reinvigorating rivals in the US shale patch.

He acknowledged that Saudi Arabia had a hand in “watering of the green shoots”, and welcomed the return of investment in US shale.

He added: “I am optimistic about the global market outlook in the weeks and months ahead, though I caution that my optimism should not tip investors into irrational exuberance or wishful thinking that OPEC or the kingdom will underwrite the investments of others at our own expense.”

The US, which is the largest producer of oil, is locked in rivalry with Saudi Arabia and Russia. Shale oil has seen significant growth in recent years and it needs to arrange its condition in coming years.

The OPEC, non-OPEC deal to cut production will help rebalance the market, but it will not significantly improve prices.

Iran to Host 2020 IGRC Meeting

Transfer of technology to petroleum industry has been one of the most significant policies of Iran’s Ministry of Petroleum under the administration of President Hassan Rouhani. This issue was highlighted in the recent landmark deal the National Iranian Oil Company (NIOC) signed with a consortium of France’s Total, China’s CNPCI and Iran’s Petropars for the development of Phase 11 of South Pars gas field. Iran’s petroleum industry needs upgraded technology, which could be achieved only through interaction with leading proprietors of technology.

Over recent years, Iran’s gas industry has invested in research and technology and taken steps to acquire state-of-the-art technology. Research conducted in recent years has led to the manufacturing of IGT25 gas turbine and development of a solution for gas sweetening among other achievements.

Iran has been chosen to chair the 2020 meeting of the International Gas Union Research Conference (IGRC), a sign of significant technological progress made by Iran in its gas industry.

"Iran Petroleum" has conducted an interview with Saeed Pakseresht, director of research and technology at National Iranian Gas Company (NIGC), on the activities of the NIGC R&D Directorate in recent years.

Q: Gas industry is one of the sectors in need of highly sophisticated technologies. Over recent years Iran has taken effective steps like NIGC’s efforts for mastering liquefied natural gas (LNG) technology. Would you please tell us about the activities NIGC has done over recent two years?

A: Given huge natural gas reserves Iran holds, NIGC is determined to acquire major technologies in the gas sector. In recent years, Iran’s gas production has increased significantly and that is why the Iranian Ministry of Petroleum has been seeking to export LNG in addition to delivering gas to neighboring countries via pipeline. That is why the LNG Institute was established in 2014 and in a bid to acquire the LNG technology, it was agreed that a pilot be run in a three-year period. Then documents including patients and technological knowhow of different companies would be examined and a mini-LNG unit would be built.

Therefore, in cooperation with LNG Institute the conceptual design of a mini-LNG unit was developed and it was decided that we use LNG in CNG stations. Preliminary agreements have been signed with NIGC and we hope that the permit for the first mini-LNG unit construction would be granted. We have also signed an MOU with the Office of Vice-President for Technology in order to benefit from their technological support in this sector.

Q: Where will this unit be established?

A: Most probably it will be constructed on Haraz Road with a capacity of 30 tonnes a day. I have also to acknowledge that it would be the first LCNG unit to be built in Iran. A liquefied-compressed natural gas (LCNG) station combines LNG and CNG in one station.

Q: Will there be a national or an international bidding round for the project?

A: The construction of this unit is planned to be put out to a national tender, which is expected to be authorized in a month. But domestic companies are required to have a foreign partner.

Q: Is a foreign partner a must or domestic companies could also build this unit without any foreign presence?

A: We lack technology to build LNG units; therefore, it would be important for us to see domestic companies benefit from state-of-the-art technologies in the construction of such units. Before any tender is held we have identified cutting edge LNG technologies and endorsed three technologies owned by renowned international companies. We measure technologies offered by foreign companies on that basis and if the level of technology proposed by a company is below the level of the three endorsed technologies we will reject it.

Q: The LNG Institute recently signed an agreement with a South Korean consortium to master LNG technology. Is it different from the contract for the construction of mini-LNG facilities?

A: Yes! In 2016 Iran and South Korea – NIGC and KOGAS – signed an MOU and then talks began between the two countries for the development of mini-LNG technologies. Then the Korean side offered to have research and technology cooperation with the Iranian side. We agreed and after one year of talks the agreement was signed. Based on this technological and research MOU, we will acquire the technology needed for building mini-LNG units. They could be installed in containers and they are mobile. The agreement signed between the Iranian and Korean parties is a knowledge boundary activity. We hope to be able to maser technology for building LCNG units in four years. The Iranian and the Korean sides will allocate a total sum of $20 million to this project on a fifty-fifty basis. Our objective is to develop technological knowhow together and then we will market our products.

Q: Manufacturing of national turbine has been among major research projects in the gas industry over recent years. Which stage is the project in now?

A:  For this project, the Turbine Institute was set up with the help of the University of Science and Technology. The joint scientific research we carried out with this institute resulted in the signature of a contract between NIGC and OTC (Oil Turbocompressor Company) with a view to developing homegrown technical savvy for turbine gas manufacturing under the supervision of the University of Science and Technology. This project was among major research projects at the Ministry of Petroleum, whose objective was to acquire technical knowhow for 25-MW turbines. OTC partly supplies NIGC gas turbine needs. Based on a license it had received from Siemens, it manufactured these turbines. After sanctions were imposed on Iran, cooperation with Siemens was halted and NIGC signed an agreement with OTC for mastering technical knowhow for 25-MW gas turbines. Since this agreement was implemented four years ago, we have managed to manufacture gas turbine based on Iranian technical savvy. The IGT25 turbine was used in an operating facility in 2016. One year has passed since it was installed and I can say that it has successfully passed tests.

Q: How many gas turbines were planned to be manufactured under the deal with OTC before the sanctions were imposed?

A: NIGC-OTC deal was for the supply of 100 turbines, 21 of which were manufactured under the Siemens brand. Now, 22 IGT25 turbines are manufactured for different purposes.

Q: Does it mean that Iran has acquired technical knowhow for 25-MW gas turbines?

A: Yes, that’s true. We claim that we can manufacture 25-MW gas turbines with Iranian brand. In order to acquire this knowhow, we targeted 59 patents, 30 of which have been registered and that is a record. Our domestically manufactured turbine was awarded the top prize of applied research at Kharazmi Festival in 2016 and it is indicative of the success of our project.

Q: Isn’t the capacity of these turbines supposed to increase?

A: We are making plans to develop different versions of IGT25 and its upgrading. In the first step we plan to boost the capacity of these turbines to 28 megawatts. Other plans include lengthening the lifecycle of turbines to run in hot areas. We need to make certain modifications to meet these conditions. Under such circumstances, the lifetime of the turbine is of higher significance.

Q: Among other institutes cooperating with the R&D Directorate of NIGC is the Gas Sweetening and Processing Institute of the Research Institute of Petroleum Industry. What has been done so far in this sector?

A: As you know gas sweetening and treating at refineries would be of high significance for NIGC. Given RIPI’s capabilities in this sector and its background of cooperation with NIGC, we have assigned the activities related to the Gas Sweetening and Processing Institute to RIPI. An achievement of our cooperation was the development of an Iranian gas sweetening brand known as Parsi Sol Solvent. This solvent is planned to be upgraded and for this purpose we have developed new projects.

Q: Has Parsi Sol Solvent been tested anywhere?

A: Yes, we have conducted the necessary tests for this solvent at Masjid Soleyman and Bidboland refineries. We are currently studying the application of this solvent under tougher conditions and with sourer feedstock. Our target is currently Ilam refinery. We intend to produce a solvent to refine Ilam refinery feedstock which is highly mercaptanized.

Q: Do you have the development of any other sweetening technologies on agenda?

A: Gas treatment by membrane is also a newly developed technology, but it has yet to be commercialized. This technology is monopolized mainly by the Americans. Of course other countries including Russian companies are conducting research in this field. We have recently signed an agreement for cooperation with a Russian firm for the construction of membrane-based gas refining system. This system is planned to be installed at Fajr Jam refinery.

Q: How long will the project take to be completed?

A: This project must become operational in 18 months, 12 months of which we consider for designing, purchase and installation. We hope that we will be able to launch our membrane-based refining pilot at Fajr Jam refinery in 2018 and have good cooperation with the Russians in this sector. Of course, we will benefit from the capabilities of Iranian specialists too because our objective is to transfer technical savvy to Iran. Furthermore, I have to note that gas sweetening with solvents, which is a common method in all countries, is quite challenging. However, research projects have been conducted on the application of membrane in gas refining over the past ten years. Iran started conducting research along with the world. We have carried out certain activities based on research agreements signed with universities. Our cooperation agreement with Russia is in this direction.

Q: What is the difference between using membrane and/or solvents in gas refining?

A: The process of using membrane is much easier than using solvents. However, the materials used in the membrane have special features as they separate unwanted gas from natural gas. Furthermore, natural gas which contains

contains methane and hydrocarbon should not cross this membrane. Producing such a membrane is difficult and the main issue is to develop a proper membrane. If we can produce such a membrane, gas refining will be easier than using solvent for refining.

Q: When did Iran start doing research on making membranes for gas refining?

A: NIGC started research on this project some six years ago and for this purpose research projects have been carried out jointly with universities like University of Ferdowsi in Mashhad, Sahand University of Technology, University of Tehran and Tabriat Modarres University. Numerous membranes have been also produced on a lab scale. Two of them have responded positively and we need to produce their pilot-scale versions in a bid to be able to measure them on larger scales. Of course, in cooperation with the Petroleum University of Technology we have built humidity absorbent pilot which is ready to be moved to Parsian refinery to be tested in a real environment. This pilot could be moved even to South Pars [gas field]. This pilot could be also tested for separating mercaptan from natural gas.

Q: So Iran is not behind other countries in this sector.

A: That’s right. We are not at a large distance from leading countries in terms of research.

Q: In 2014, you were supposed to conduct research on the domestic manufacturing of coldbox for the South Pars Gas Complex. What stage are you in now?

A: Coldbox is very sophisticated and at the same time delicate equipment. It creates cold for the separation process at refineries. It is a special thermal transducer working at very low temperatures. It is known as cryogenic process. This process needs coldbox because LNG is produced at minus 30, 40 and even 60 degrees Centigrade. Sometimes minus 160 or 190 degrees Centigrade is needed. This equipment is hi-tech in gas industry. In 2015, we started the conceptual design of this equipment order to manufacture it domestically. Later on, a tender bid was held for its building with a view to developing technical knowhow and upgrading the potential of domestic manufacturers. Among conditions laid out for domestic manufacturers is having to seek assistance from a renowned foreign partner in order to benefit from state-of-the-art technologies.

Q: Has the Iranian company chosen a foreign partner?

A: Sure. The competence of the Chinese company chosen for this purpose has been assessed and approved by National Iranian Gas Company. Of course, I have to say that we have no restrictions in choosing foreign partners. However, Iran's condition in partnership with foreign companies is the transfer of technology into Iran. Some European companies were not ready to transfer coldbox technology to Iran, but we insist on the transfer of technology to Iran. In order to make sure that technology would be transferred and domestic potentialities would be used, we have chosen Sharif University of Technology as our consultant in order to supervise the transfer of technology and use of domestic capacities in this project. We expect coldbox manufacturing to have been done in one and a half years.

Q: How much is the value of this contract?

A: It's about IRR 130 billion. Two coldboxes are planned to be built for South Pars and Parsian refinery.

Q: Iran has been recently chosen as the chair of IGRC conference for 2020. Would you please tell us about it?

A: NIGC represents Iran at the International Gas Union (IGU) which gathers together gas firms from more than 90 countries. The meetings of the union are held at different levels. Iran sits at the 30-member executive committee of this union. Iran plans to host the World Gas Conference (WGC) in the future. This conference is held every three years in the country that holds the rotating presidency of the conference.

Another conference held at global level is IGRC. Normally, different countries apply for hosting the event. The executive committee examines their request and then the qualified ones are chosen. In October 2016, Iran along with Germany, Indonesia and Oman requested to host the IGRC event. Iran and Germany won the majority of votes. Then, three rounds of voting were held and Iran was chosen as host for the 2020 IGRC conference. Iran was also chosen as the chair of the 2017 IGRC conference scheduled to be held in Rio de Janeiro, Brazil. Therefore, the IGRC conference will be held in Iran in 2020.

Q: Is it the first time Iran is to host this conference?

A: Yes, it is the first time such an IGU conference is being held in Iran. IRGC is based on technological research.

Q: What was the advantage of Iran over Germany?

A: Iran is the largest hydrocarbon reserves holder. It has specialized manpower and oil service workers. We have also nearly five million students in our country, which shows the high number of those interested in research and knowledge. Over the past ten years Iran has made significant progress in research and technology. When it was filing its application, Iran brought up the issue of gas industry technomarket at the 2020 conference. It was a new initiative and such technomarkets have not yet been held at the IGRC events. New technological ideas and projects are expected to be introduced at technomarket.

South Pars Beasal Team Unrivalled in Asia

Iran's petroleum industry has invested in beach football in recent years as it is seeking to expand its sport activities.

The South Pars football beach team in Bushehr Province has come to the fore in the recent two to three years, thanks to support provided by the Pars Special Economic Energy Zone (PSEEZ).  This beasal team is currently uncontested in Asia.

Although there is no soccer beach championship among Asian clubs, the South Pars officials are making efforts to include these matches in the agenda of the Asian Football Confederation, and show brilliant performance in these competitions. The following is a brief review of the South Pars soccer beach team performance in recent years.

South Pars History

The South Pars club in Bushehr, affiliated with PSEEZ, has been widely active in football in recent years. The club managers set up two teams – football and soccer beach – there and they are now seeing the results of their efforts.

The South Pars beach soccer team is currently the top team in this sport in Iran. It was created eight years ago and it has since managed to make beach soccer popular among people in Bushehr Province.

In the wake of changes in the management of the South Pars club in 2013, more investment was made in this sport; therefore, South Pars teams became more powerful.

South Pars beach soccer team has hired top players and paid special attention to talented youth in the province to become the top beach soccer team and win the championship title in the pro league matches.

Championship in Rapid Succession

Thanks to its good performance in the pro league matches of last year, the South Pars team won the championship title of these matches several weeks before the end of games.

Two weeks before the end of the pro league matches, the South Pars beach soccer team overpowered its longtime rival Golsapoush 7-2 and scored 57 points to become champion. Of course, South Pars won its last two matches and scored finally 63 points.

The pro league in the current season has also finished its half season. The South Pars team is head-coached by Moslem Mesigar, a veteran beach footballer.

South Pars is claiming the championship title in the current season and good investment has been made by the club managers in the hope of renewing their win.

Beach Soccer Popularity in Bushehr

As the South Pars beach soccer teams continue to make significant gains in the country, people in Bushehr Province have become interested in this sport. The spread of beach soccer in Bushehr Province could be seen in the demarcation of certain lots of land for this purpose on the Persian Gulf coasts.

A large number of young people in Bushehr have got indulged in beach soccer voluntarily. Beach soccer is now a rival to grass soccer. The growing interest in soccer beach reached such a level that futsal has lost popularity. A large number of fans flock to stadium to watch the South Pars pro league matches.

Standard Stadium

An outstanding feature of beach soccer in Bushehr is the high standard of stadium. It is common in the world that the best beach soccer stadiums are built next to sea. But in Iran most stadiums are not so and the only one complying with standards is the one used by South Pars. It is among the most equipped stadiums in Iran and even in the world. This stadium has already hosted major matches like Asian and intercontinental championships.

National Players

The South Pars team has been largely active in finding talented youth in Bushehr, but it also lends credence to national players. As economic woes are rife in Iran's beach soccer and clubs are facing serious problems in meeting their daily costs Iran's beach soccer team has presented itself as one of the best in recent years. Therefore, the South Pars club has hired national players under reasonable contracts. At present, six national players are at the disposal of the South Pars team, the most prominent of whom is Peyman Hosseini as goalkeeper. Hosseini is happy with his present conditions in the South Pars team.

Renewed Presence in Asian Matches

Iranian officials are trying to hold Asian championship matches for beach soccer. To that end, Euro Asia matches were held in Iran last year. The South Pars and Iranian football federation officials are trying their best to renew these competitions this year. In case these matches are held anew, the South Pars team will represent Iran.

Interview with South Pars Beasal Team Head Coach

We Hope to Organize Euro-Asia Matches

Moslem Mesigar, a renowned beach footballer, has registered major gains for national team. He has stopped playing and is currently serving as the head coach for the South Pars beach soccer team.

Under the leadership of Mesigar, the South Pars team won championship title last year.

Here is an interview with Mesigar.

Q: Let's start with the South Pars team. Are you happy with its conditions?

A: Fortunately, we are in good conditions. We have already recorded only one defeat in the first half season, which was in the penalty shootout. We won all other games and God willing we will proceed with this trend until gaining the second consecutive championship title in the beach soccer pro league.

Q: An issue with your team is the recruitment of many national players. Some are critical of the fact that South Pars is becoming champion on the strength of these national footballers. What do you think?

A: We should not look at the issue from this viewpoint. We have hired some national footballers, but you can see that three to four of our national players were from Bushehr and they had performed brilliantly. We should also take into consideration the bad economic conditions prevailing over beach soccer, but South Pars is hiring them. I even believe that the South Pars club deserves praise.

Q: However, do you agree that many talented youths in Bushehr Province hope to join the South Pars lineup?

A: Definitely! During the last few years, we have been active in identifying talents. We also plan for the future to move towards full localization and train the youth to realize their dreams. We will hire more local players in the future and win championship with them to show the merits of beach soccer in Bushehr to everyone.

Q: How hopeful are you of being able to organize Euro-Asia matches?

A: Efforts have been made in this regard. God willing, the football federation will do its best so that we can host a tournament at Bushehr stadium and win another championship title.

Q: Are you facing any financial restrictions?

A: Hopefully, we are currently in very good financial conditions. As far as financial conditions and facilities are concerned, I can say that South Pars is the best not only in Iran but also in the world. This important achievement has been made thanks to efforts by Mr Rezaian, the CEO of South Pars. The presence of such people in beach soccer is a benediction and God willing we will make bigger success.

I also feel compelled to appreciate Mr Yousefi, CEO of SPEEZ, who contributed to our progress through his support for us.

Hamedan, Capital of Persia’s First Monarchy

Hamedan is one of the most ancient cities in Iran. It was the first capital of Persian monarchy, i.e. the Medes. In addition to historical monuments, the province of Hamedan is home to natural unique tourist attractions.

In our previous issue, some places in the province were reviewed. We introduce some other natural and historical places in this new issue, too.

Tomb of Esther and Mordechai

The Tomb of Esther and Mordechai is among the most important pilgrimage sites for Jews. The existence of this pilgrimage site has been key to the survival of Hamedan’s Jewish community.

The building materials used in this tomb is stone and brick and the tomb follows an Islamic architecture. It has come out that the existing building was erected in the 7th century AH on an older building constructed in the 3rd century AH.

In 1891, the tomb was described as consisting of an outer and inner chamber surmounted by a dome about 50 feet (15 m) high. The dome had been covered with blue tiles, but most of them had fallen away. A few tombs of wealthy Jewish individuals were located within the outer chamber.

According to Stuart Brown, the site is more probably the sepulcher of Shushandukht, the Jewish consort of the Sassanid king Yazdegerd I.

Esther is said to be a Jewish girl married off to Xerxes of Persia.

Alavian Dome

Alavian Dome which was built in the final years of the reign of Seljukids is a post-Islam architecture masterpiece and gypsum work in Hamedan Province. It was first built as a mosque by the House of Alavian. Later on, cellars were built in the basement and the building turned into the family tomb of the Alavian clan.

The building is square shaped with star corners. The walls still stand as far as the start line of the dome. However, the dome itself has collapsed.

The Alavian dome is described as a unique gypsum and brickwork in mid-Islamic centuries. 

Pottery in Lalejin

Lalejin, in Bahar County, is known as the centre of pottery and ceramic productions in the Middle East.

Eighty percent of Lalejin's population are potters, ceramists and involved in related jobs. Undoubtedly Lalejin is one of the important centers of pottery and ceramic productions in Iran. The products of Lalejin artists are diverse.

The artworks designed and developed in this city are sent to cities all across Iran. It was recently visited by an international council of handicraft and was recognized as a city of pottery.

According to existing documents and latest findings, the pottery industry in Lalejin dates back to more than seven centuries ago.

Ali Sadr Cave

Ali Sadr Cave is the world's largest water cave which attracts thousands of visitors every year. It is located in Ali Sadr Kabudarahang County about 100 kilometers north of Hamedan.

The cave walls can extend up to 40 meters high, and it contains several large, deep lakes. The cave has a river flowing through it and most travel through the cave system is done by boat. More than 11 kilometers of the cave's water canals have been discovered so far.

Excavations and archeological studies of the cave have led to the discovery of ancient artworks, jugs and pitchers dating back to 12,000 years ago. Animals, hunting scenes and bows and arrows are depicted on the walls and passages of the exit section. These images suggest primitive man used the cave as their abode. The cave was known during the reign of Darius I (521-485 BC) which can be verified by an old inscription at the entrance of the tunnel. However, the knowledge of the existence of the 70-million-year-old cave was lost, and it was only rediscovered in 1963 by Iranian mountaineers.

Sustained Fuel Supply in Hamedan

Weather conditions vary during different seasons in Hamedan Province. The temperature has been recorded at 40 degrees Centigrade in hot season and -32 degrees Centigrade in coldest months of the year.

The location of this province in a cold area bears proof to sustained cold weather.

Mount Alvand experiences severely cold days most of the year. People are not immune to cold weather. Hamedan is often classified in the category of coldest spots in the country during cold seasons.

Despite cold weather, fuel supply across the province is not halted. Staff and service workers at National Iranian Oil Products Distribution Company (NIOPDC) have been guaranteeing the supply and distribution of various petroleum products across the province and even outside their operating area.

Last winter, Hamedan zone of NIOPDC proved a brilliant performance. Despite heavy snowfall and extremely cold weather, it mobilized all its forces and facilities to distribute fuel across the province in the best possible manner. In the last calendar year to March 2017, more than 124 million liters of kerosene was distributed across Hamedan Province, 28 million liters of which was consumed for heating in autumn and winter.

Some residential areas, particularly villages, are located in treacherous spots in the province and any fuel shortage due to distribution problems could lead to severe problems in fuel supply management in the province. Liquid fuel is necessary for villagers as no gas connection is available due to unfavorable geography.