Show for Future

The 11th Iran Plast was held in Tehran with the participation of 530 international and 600 Iranian companies. The massive participation of Iranian and foreign entities in this event should not be interpreted as a routine trend in industrial exhibitions; it was not ordinary news.

The presence of representatives of petrochemical industry from 23 countries to showcase the latest technologies in this sector is indicative of realities much deeper than the ordinary description of an event registered in the calendar of industrial exhibitions.

With more than 60 years of history, Iran's petrochemical industry has experienced significant growth in recent years. The construction of dozens of major petrochemical plants and widespread planning with the objective of enhanced production and persistent development alongside such advantages as accessible feedstock, experienced manpower, location between to hubs of petrochemical consumption in East Asia and Europe, and Iran's stability and security in the midst of regional chaos would not go unnoticed by petrochemical industrialists.

Add to all these advantages Iran's move to open its petrochemical projects to investors and its numerous investment projects which are definitely attractive to potential investors.

Petrochemical industry is a quick-impact one and the petrochemical market has the capacity to attract billions of dollars a year in capital.

Investment in a secure country like Iran with deep-rooted industry and allocation of privileges to investors represents a unique opportunity which may not be repeated again.

The massive participation in the Iran Plast heralded a bright future for Iran's petrochemical industry and represented an unrivalled opportunity for those who seek a safe place for investment.

New Chapter in Iran-Brazil Oil Cooperation

Iran and Brazil have agreed to come closer as the latter has technology and the former is rich in hydrocarbon. Brazil's Minister of Mines and Energy Fernando Coelho Filho recently travelled to Tehran and met with Iran's Minister of Petroleum Bijan Zangeneh.

After their talks, Zangeneh said: "The Brazilians have suggested that Iran supply oil to a refinery which is planned to be built in that country. Iran has also offered to Brazil's Petrobras the development of South Pars Oil Layer."

Coelho was not visiting Tehran for the first time. He travelled to Tehran in December 2016 when he said in a meeting with Zangeneh that strong banking relations would guarantee oil and gas cooperation.

Filho's official visit was aimed at driving Iran-Brazil oil talks into a new phase. These talks started in March 2015 when Iran's Deputy Minister of Petroleum for International Affairs and Commerce Amir-Hossein Zamani-Nia welcomed Brazil's then minister of development, industry and trade, Armando de Queiroz Monteiro Neto, in Iran's capital. During those talks, Tehran expressed its readiness to have cooperation with Brasilia in the manufacturing of downhole and wellhead drilling equipment for the purpose of deep-water production, as well as in the development of oil fields within the framework of new model of oil contracts, known as "Iran Petroleum Contract" (IPC). 

Last March, Zamani-Nia met with Brazil's Ambassador to Tehran Rodrigo de Azeredo Santos and discussed grounds for oil and gas cooperation. The Brazilian side had shown inclination for purchasing crude oil from Iran.

After the last meeting between Zangeneh and Filho, Zamani-Nia told reporters that there was potentiality for cooperation between the two countries in many sectors.

"But since cooperation between the two countries does not enjoy a long history, it is a little bit difficult to prepare the ground for the start of cooperation," he said.

He said banking relations between Iran and Brazil would be reestablished soon after an Iranian delegation comprising representatives from the Central Bank of Iran and Iranian private banks travelled to that country.

SPOL Offered to Petrobras

Zangeneh said Brazil's state-run major Petrobras would send a delegation of managers to Iran to discuss development of the South Pars oil layer and cooperation in the Caspian Sea oil projects.

Zamani-Nia said Petrobras was equipped with required technology to develop the oil layer of South Pars, but it lacked sufficient finance, at least for now.

Denmark's Maersk had held talks for the development of the oil layer, but the purchase of its oil stocks by France's Total worried Iran. The reason is clear: Total is the operator of the Qatar-owned section of South Pars which is jointly owned by Iran and Qatar. The two countries have been vying for recovery from South Pars and Total's acquisition of Maersk would give rise to conflict of interests.

"Over the coming three to four months, we will hold intensive trade talks with oil companies," said Zangeneh.

Brazil's interest in cooperation with Iran is not limited to oil and gas sector. The South American major economy is also willing to manufacture electric and gas-fueled buses in Iran.

Zangeneh and Filho also discussed manufacturing of oil equipment in Iran to be used in Iran and also be exported to countries in the region.
"The Brazilians have said that a group of Brazilian industrialists are to travel to Iran in coming months. Iran welcomes such a visit," he said.

Oil Supply to Brazil Refinery

Brazil renewed its request for Iran to supply crude oil to a refinery it plans to build in the future.

"It was agreed that an international consultant be hired by Iran to review the Brazilian party's proposal in terms of its concerns and requests, and then give its views,

," said Zangeneh.

The planned oil treatment facility would be able to process 600,000 b/d of oil. A Chinese company is to cooperate with Brazil in the financing and manufacturing of this facility.

Zangeneh said Iran would welcome the Brazilians' cooperation in Iran's IPC-based oil and gas projects. "It seems that the Brazilians are seeking to cooperate with Iran in the refining sector."

"We have not so far exported products to the American market and the American continent will be our final market for oil exports and this issue needs to be studied," said the Iranian minister.

Investment in Oil Projects

Filho said after his talks with Zangeneh that examining opportunities and grounds for cooperation between the two countries would be conducive to investment in oil projects.

He said representatives of Brazil's petroleum industry were intent on visiting Iran, adding: "After considering request for the Brazilian companies' technology and technical knowhow in Iran, we will review the expansion of cooperation."

"Undoubtedly, the presence of Petrobras here and examining solutions would be of help in future cooperation and investment," he said.

"We want to see what kind of help and which solution we can present in the technology sector because we already know that Iranian companies and other foreign firms like France's Total, which is a strategic partner of Petrobras in the world, would be ready for investment in Iran's oil and gas projects," said Filho.

He said that Iran's Zangeneh had welcomed Petrobras' cooperation in deep-water drilling in the Caspian Sea oil projects.

"Today, Petrobras is drilling for oil and gas in the depths of nearly seven kilometers offshore Brazil. Therefore, we have abundant savvy and technology in these sectors and we hope to be able to work together here," said Filho.

"I will hold talks with Iran's ambassador to Brazil and also with our ambassador here in Tehran in order to set a date for the future visit of a Petrobras delegation which would examine grounds for cooperation," he added.

Oil Market Balanced

Separately, Zangeneh gave positive assessment of Iran's oil market, saying: "I see the market in a balanced state."

"The compliance of members of the Organization of the Petroleum Exporting Countries (OPEC) [with an oil production cut deal] is in good conditions and the members' convergence about the supply cut agreement has not dropped over the past six months and has been on the rise," he said.

"Cooperation between non-OPEC countries, particularly Russia, is good with regard to the oil supply cut, and in my view the market is headed towards balance," said Zangeneh.

"The global agreement for output cut will continue by the end of the current year and there have been talks about its extension, but not finalized yet. But in my view, the level of crude oil storage still remains high," he added.

Zangeneh said Iran welcomed cooperation with non-OPEC producers, adding: "Cooperation does not mean oil production cut; however, it is unlikely that Brazil would join the supply cut agreement under the current circumstances."

Third Party Needed in IP Pipeline

Zangeneh also referred to Iran-Pakistan gas pipeline, saying he thought that Iran would finally start pumping gas to its eastern neighbor.

"However, based on our experience in recent years I think that a third party is needed to settle the Iran-Pakistan deal (in terms of finance and other commercial procedures)," he said.

"It means that a third company would agree to build the Pakistani side of the IP pipeline so that we would have peace of mind with regard to payment of gas cost," he added.

"The Pakistanis say they don't have money to build their side of the pipeline and there are concerns that even if the pipeline is built and gas is exported, they may not have capacity to pay money to us for gas exports," said Zangeneh. "A number of oil and gas companies in the world are willing to be engaged in the IP project as third party; however, no conclusion has been achieved yet."

Swap Operations Crucial

Zangeneh also touched on the resumption of crude oil swap, saying: "The important issue has been the resumption of crude oil swap operations. We can have cooperation with the three countries: Turkmenistan, Kazakhstan and Azerbaijan in this regard. Of course, we are in the process of receiving oil from international companies."

He said that swap deals are often for six months up to one year. He added that changes of parameters and price criteria needed to be taken into consideration in the swap deals.

"In swap operations, we compete with the Mediterranean market. Supplying oil in the Persian Gulf market must be more profitable than cargoes headed via the Mediterranean," he added.

Zangeneh said: "We are not after profits from crude oil swap operations and revival of these operations is of higher significance to us."

Iran resumed crude oil swap from the Caspian Sea after a seven-year hiatus.

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

In the first swap, 360,000 barrels of crude oil was transferred from Neka to Tehran oil refinery.

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

Iran-Russia Oil Deal on Track

Zangeneh also said that Iran was waiting for Russia to start receiving crude oil supplied by Iran.

"Iran has no problems in this regard. The Russian side had some banking issues, which have been resolved to some extent. For us, the banking issues have been resolved too," he said.

Zangeneh said a Russian bank was expected to open a letter of credit (LC) and handle relevant payments.

Foreign Firms Visit Azadegan

17 Foreign Companies Bidding for Azadegan Development

A four-day workshop was held in Tehran and the oil-rich city of Ahvaz to discuss bidding for the giant Azadegan oil field which Iran plans to develop under the newly-developed model of oil contracts (IPC). Thirteen of seventeen international companies cleared by Iran to bid for the project sent delegates to Tehran to visit installations at the field and attend a technical session on bidding.

Iran expects to put Azadegan out to tender over the coming eight months. Iran Petroleum has conducted an interview with Nouroddin Shahnazizadeh, CEO of Petroleum Engineering and Development Company (PEDEC), about the visit by foreign companies and oil production at the West Karoun area.

Q: It is the first time that 13 international oil companies are traveling to Tehran to visit oil installations in the West Karoun area ahead of a planned bidding for the development of Azadegan. What was the philosophy behind this visit?

A: Since Azadegan field is to be developed through a tender bid, we have been in the process of getting permissions and drafting description over the past 18 months. A total of 50 international companies expressed their willingness to bid for the Azadegan project. In the end, National Iranian Oil Company selected 17 companies to bid for the project. Over this time, NIOC signed memorandums for studying the field with some of these companies. However, some of them had questions about Azadegan and Iran's installations in West Karoun. We decided to invite them to Iran before they submit their technical documents for the development of Azadegan to visit Iran's data-room and installations in the field. We also decided to hold a briefing session about financial and technical proposals to respond to their questions which were very similar. That would help provide a harmonious description of the project.

As I mentioned some of these companies had signed memorandums to study Azadegan oil field. They had certainly good knowledge about the field, but there were companies that did not have as much information as them and we maintained that all these companies needed to have identical information.

During four days, these companies visited our data-rooms and datacenters and then they acquired full information about West Karoun and the planned development of Azadegan in a meeting attended by PEDEC experts. After that the companies were divided into two groups of five or six companies and visited our installations in Azadegan oil field and West Karoun.

Q: So 11 companies came to Iran.

A: We announced that all 17 companies could come to Tehran. Some of them said they did not need to visit the field. Eleven companies visited Iran's installations in West Karoun, but at the workshop in Tehran, 13 companies were represented. Both sides expressed their demands and expectations from the development of Azadegan field, which I think we managed to reach a common understanding.

Q: What did the questions concentrate on?

A: Among the most important questions I can highlight their concerns about water and power supply in Azadegan oil field. Regarding power supply we said that we were in the process of building a 500MW power plant. They visited the location of the power plant and were kept abreast of the level of progress of the project. They were assured that in case investment is made for the development of the field and development is finished in three years, there would be no problem with regard to power supply there. Other questions included how to consume gas produced in West Karoun. We said that associated petroleum gas would be consumed in the NGL 3200 facility. Construction of this unit was assigned to the Persian Gulf holding in 2016 and after the foreign firms visited NGL 3200 they were assured that after development of Azadegan the associated gas would be consumed and there would be no threat to the environment.

Transfer of oil to consumer spots was another issue highlighted by the companies. We told them a pumping station was planned to be built in West Karoun. Phase 1 of this unit is becoming operational and a tender bid has been held for Phase 2. This pumping station would be able to deliver up to 1 mb/d of oil to consumers. The foreign companies visited this pumping station and its installations. Since we are in a period of drought, water supply was another cause of concern for the companies willing to develop Azadegan. They were asking how water would be provided for industrial consumption and injection into the field to enhance recovery. We said that we have hired a consultant to examine supply water and pointed out that studies had started for that purpose. We have also hired a consultant for gas injection. We responded to their questions on this issue, as well.

Q: Where will the West Karoun water be supplied from?

A: We decided to consider integrated water supply for West Karoun. As far as water supply is concerned we have to deal with the two issues of distance and water source. In any case, West Karoun fields are scattered and we have to locate the central one in order to distribute water among the fields. Another issue is the source of water. For instance, because of drought and water shortage, we do not plan to use drinking water and dam waters. Persian Gulf is a potential source of water. Our consultant is currently studying options on how to use the Persian Gulf water and transfer it to West Karoun and prepare the grounds to use water for injection into wells and for industrial purposes.

Has the volume of required water been determined?

A: If we intend to inject water into all West Karoun fields, we will need 1 mb/d of water. In fact, our planning is based on maximum water supply to West Karoun in an integrated manner. Method of water supply and its source are up to us. But the flow of water and technical specifications of water injection would rest with contractors.

Q: Is Iraq also injecting water for enhancing recovery from its fields?

A: As far as I know, no.

Q: What was the agenda of the Tehran briefing for the Azadegan bidders?

A: After the 11 international oil companies visited the West Karoun area for two days and became familiar with the facilities and conditions there, a briefing was held in Tehran with senior managers from the Ministry of Petroleum and National Iranian Oil Company in attendance. But this time, there were 13 companies present. Once more, full information was presented about the tender for Azadegan oil field, Iran's expectation from the development of the field, modalities of transfer of technology, participation of Iranian companies in the project, enhanced recovery, schedule for the start of project and other related issues. The companies also asked their questions and received answers. For instance, for Iran it was important to see when the companies were to start the project and how much time they needed to complete the project. Of course, NIOC has reiterated that contractors have to start work in the field as quickly as possible so that we would save time.

Q: Which companies were present in the briefing?

A: Sinopec and CNPC of China, Eni of Italy, Inpex of Japan, Maersk of Denmark, OMV of Austria, ONGC of India, Pertamina of Indonesia, Petronas of Malaysia, Rosneft of Russia, Royal Dutch Shell, Wintershall of Germany and PTTEP of Thailand.

Q: Was Total absent?

A: We invited all companies to Iran, but Total announced that it had enough information about the field. Such absence does not mean their lack of willingness to bid for the project. Like other absentees, Total said it would like to take part in this tender bid.

Q: When will the tender documents be submitted to companies?

A: As I mentioned, 17 international oil companies can bid for the Azadegan oil field project. The tender documents were distributed in Tehran on August 24 when the workshop was under way. They were also sent to companies that were absent. Less than a month later, they will receive remaining documents for the tender and then a non-disclosure agreement would be signed between them and NIOC before entering talks for agreement. Foreign companies will have two months to review these documents and present their technical, engineering and financial proposals to us. After that, they must introduce their consortium and Iranian partner to us. Once they have submitted the documents to us, NIOC will enter one-on-one talks with foreign companies in order to sketch out details and aspects of project.

Q: Will the tender be held in Tehran?

A: Yes, it will.

Q: When do you think the Azadegan oil field tender will be held?

A: As Minister mentioned, I think it will be held in seven to eight months. Of course, NIOC would do its utmost to hold this tender sooner than planned.

Q: How long will the process last?

A: This process will take roughly eight months before the winner is known.

Q: But the 320,000-barrel processing unit of South Azadegan is not ready yet.

A: Yes, but the tender for this unit has been held and an Iranian-European consortium has been chosen as winner. This unit will take 24 to 30 months to be built. In order to save time for the South Azadegan oil processing, we will use mobile processing units in order to use money from oil sales in the development of the field and as soon as the processing unit has been completed we will let go the mobile processing units that we rent.

Q: What would be the modus operandi for the Iranian and foreign share of the project?

A: The contract for building this unit will be a joint venture. Designing and providing items which are not manufactured in Iran are up to the foreign contractor. The rest will be handled by the Iranian contractor.

Q: How much investment is envisaged?

A: Construction of this unit will need around €300 million in investment which will be provided by the National Development Fund of Iran (NDFI).

Q: Once a tender bid has been held for the Azadegan field, what will happen to the processing unit contractor?

A: At any stage the tender has been held and the winner has been known the contract for construction will be awarded to the winner who would be responsible for remunerating the contractor.

Q: What if the winner of the bid decides not to clear the contractor?

A: In the tender bid for this unit, technically qualified companies were cleared and our work complies with international standards. Therefore, there is nothing to worry about.

Q: The first HOA under IPC format was signed with Tadbir Energy for the development of North Yaran field. Which stage are the talks in and when is the agreement to be signed?

A: Due to the signature of HOA with Persia Oil and Gas Industries Development Company, known as Tadbir Energy, development of Yaran will no longer be put out to tender. Meantime, it has been decided that Yaran field (North Yaran and South Yaran) be thoroughly developed by this company. Therefore, we are finalizing the provisions of agreement and I think that the agreement for the development of this field for a targeted output of 70,000 b/d would be signed very soon.

Q: Has Tadbir Energy chosen its foreign partner?

A: Yes, it has.

Q: Will Yadavaran field be put out to tender, too?

A: Yes, this field is less complicated than Azadegan and we expect more bidders.

Q: Will Azar field be developed under IPC format?

A: Yes, this field is among the hardest oil fields in Iran and even in the world in terms of geological structure. It came online in March 2017 with an early output of 15,000 b/d, which reached 30,000 b/d in May. The contractor for the development of Azar was Sarvak Azar, a subsidiary of Oil Industries Pension Fund. This field is also planned to be developed under IPC. OIEC (Oil Industries Engineering and Construction), as the contractor for the development of phase 1 of Azar, has begun talks with foreign contractors for the development of this field.

Q: How much is Iran currently recovering from West Karoun?

A: Last year by this time Iran was recovering around 40,000 b/d of oil from oil fields in West Karoun, but today, except for Darquain oil field, we are recovering nearly 320,000 b/d of oil from the fields of West Karoun. Iran is currently recovering 75,000 b/d of crude oil from North Azadegan under a buy-back deal with China's CNPC. Of course, the production capacity of oil in this field has reached 85,000 b/d.

In Phase 1 of Yadavaran field, which Sinopec of China developed under a buy-back deal, we are recovering 115,000 b/d of oil, which we plan to bring to 135,000 b/d this year.

North Yaran field, which Tadbir Energy developed under a buy-back deal, has the production capacity of 30,000 b/d and we are currently producing a little bit less. In South Azadegan, we used to produce 40,000 b/d, which we currently recover 65,000 b/d now. Since the Chinese contractor was expelled, Iran proceeded with the development of South Azadegan without waiting for the implementation of new oil deal format. Oil production from South Azadegan is gradually rising. A total of 120 wells have been drilled in South Azadegan, 60 of which are operational. If surface facilities were ready, we would operate the remaining 60 wells.

Q: Will oil production from South Azadegan keep rising this year?

A: Yes, of course. First the production capacity will go from 65,000 b/d to 110,000 b/d. By October, 28,000 b/d will have been added to this output and we will raise our production again 25,000 b/d one month later. Therefore, before a tender bid has been held for Azadegan field, our production from South Azadegan would reach 140,000 b/d.

Total Outlines Vetting Terms for SP11 Partnership

This is moment of truth for Iranian companies. France's energy major Total is legally bound to hire a local partner in the development of Phase 11 of South Pars gas field. The first post-sanctions project is providing Iranian firms with a golden opportunity to prove themselves.

Total sent representatives to Tehran workshop on September 13-14 to lay out terms and conditions for companies willing to join the South Pars project. The landmark $4.8bn contract was signed in July between National Iranian Oil Company (NIOC) and a Total-led consortium which also includes China's CNPCI and Iran's Petropars.

Technical and legal experts of Total said in the workshop that the French giant was determined to launch the project in 2018 or early 2019. That means that gas will be extracted from Phase 11 in 2020 or early 2021.

Subcontracts are needed to be signed with local companies. The terms and conditions of these subcontracts were discussed in the Tehran workshop, which was attended by representatives of Total, NIOC, Pars Oil and Gas Company as well as Iranian equipment manufacturers and service contractors.

Idea behind Workshop

The South Pars contract stipulates that at least 51% of equipment needed in the project must be provided by Iranian manufacturers and contractors. Therefore, Total must take this issue into consideration. But Iranian companies are required to comply with terms of international contracts. Since Iranian companies had no idea about the requirements, the Iranian Ministry of Petroleum suggested that Total send representatives to Tehran to explain its requirements, regulations and standards for Iranian manufacturers and vendors.        

A Total delegate said the signature of the agreement showed the “continuity” of cooperation between Iran and Total, which had been present in Iran since the 1990s.

He said Total was satisfied with the Iran deal as it had been forced to leave Iran under international sanctions.

“This project is coming true and is a cause of great satisfaction,” he said. “This new contract is for 20 years, i.e. we will be working in Iran for at least 20 years. So we have to learn to live together.”

He expressed hope that the Phase 11 deal would provide a “great incentive” for international oil companies (IOCs) to step in and sign contracts with Iran.

He said that the SP11 deal would help “attract new foreign investment and trigger new projects” in Iran.

Qualified Companies

Total's delegates laid out legal requirements for partnership, noting the qualification process in use by Total to find a partner for working in Iran was similar to processes applied by IOCs everywhere else.

They said international requirements and regulations need to be observed in any partnership for the South Pars gas project.

A Total legal expert highlighted "anti-corruption" regulations, saying it was an important element in the process of vetting Iranian companies.

Reza Khayamian, chairman of Board of Directors at the Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM), said holding such workshop was of great help to Iranian manufacturers, as we got to know about Total's criteria.

Rasoul Fallahnejad, SP11 project manager at POGC, said the workshop let Iranian companies prepare to bid for subcontracts.

"That helped them know the procedures for qualification," he said, adding that their ambiguities were removed.

Khayamian said Iranian manufacturers need to improve their level and capability to the level required by Total.

"During my talks with a manager of Total, we were told that in case Iranian companies are placed on Total's vendor list, they will be easily able to be placed on the vendor list of companies like [Royal Dutch] Shell," he said.

In other words, Iranian companies deemed qualified by Total will be able to compete in tender bids that Total will hold in other countries.

Incentives and Penalties

Reza Dehqan, chief coordinator for upstream oil and gas contracts at the Office of NIOC Deputy CEO for Development and Engineering, said the project operator would be tasked with the management of reservoir and financing as set forth in the contract.

Dehqan said subcontractors would be chosen from among engineering, procurement and construction (EPC) firms, General Contractors and oil service companies.

He noted that transfer of technology to Iranian exploration and production (E&P) companies would be another advantage of upstream oil contracts.

He noted that Iranian companies would have the chance to be empowered for enhanced oil recovery (EOR) and improved oil recovery (IOR) projects at international level.

Dehqan said contractors whose proposals grant a higher share to Iranian manufacturers would be privileged.

To that end, he added, transfer of technology to the Iranian client, contractors, consultants and manufacturers and maximum participation of Iranian companies should be taken into consideration. 

He warned that subcontractors who fail to fulfill their obligations regarding supply of commodities and services would be imposed with pecuniary penalties.

Khayamian said: "Some members of the Society enjoy potential to cooperate with Total, but some others do not meet the Total requirements. Therefore, we are trying to work out a mechanism to facilitate a more helpful and more active presence of Iranian manufacturers in the SP11 development project and other projects."

He said one solution was to push Iranian companies to tie up, adding: "By consolidating manufacturing companies we will be empowered to meet the Total requirements in the development projects."

Many Iranian contractors hope to win big shares in the subcontracts envisaged for the Phase 11 development such as offshore and onshore projects including pipe-laying, technical services, well completion and construction of jackups.

In case Iranian companies manage to provide the bulk of required equipment, the proposed prices will be affected. Of course, Iran's Ministry of Petroleum will pay this balance amount to Total under the title of supporting domestic manufacturing.

He expressed hope that Iranian companies would bid for the subcontracts after having full knowledge of the terms and conditions set out by Total.

Iranian companies willing to become partner with Total would be required to fill out a questionnaire in order to provide the details of their activities for final decision-making on their work.

Total S.A. is French multinational integrated oil and gas company and one of the seven "Supermajor" oil companies in the world. Its businesses cover the entire oil and gas chain, from crude oil and natural gas exploration and production to power generation, transportation, refining, petroleum product marketing, and international crude oil and product trading.

Many Iranian firms attended the two-day workshop, but Fallahnejad noted that presence in the workshop would not create any privilege for the participants.

Iran E&P Firms Brace for Post-Sanctions Business

Major oil companies from across the globe are preparing themselves to win oil projects in Iran now that the country is not under sanctions, 17 Iranian exploration and production (E&P) companies have teamed up to share experience in oil projects and increase their involvement in Iran's petroleum industry projects which are coveted thanks to Iran's historic nuclear accord, dubbed the Joint Comprehensive Plan of Action (JCPOA).

The Society of Iranian E&P Companies held a gathering in Tehran to allow Iranian firms examine methods of financing for implementing oil projects and dealing with risks.

Mehdi Mir-Moezzi, head of the Society, highlighted financing challenges and high risks for Iranian E&P companies, saying: "Iranian companies do not have any record of activity in E&P field. Furthermore, carrying out projects in Iran is high-risk. All these factors give rise to financing problems."

He said that one solution for countering the challenge of financing was to launch an investment fund replenished with Iranian currency. "Through this action, the obstacles to financing may be contained. Of course, that requires support from the Ministry of Petroleum and Ministry of Economy and cooperation of Central Bank of Iran," Mir-Moezzi, a former managing director of National Iranian Oil Company, said.

Abdorreza Hajihosseinnejad, E&P director at Ghadir Investment Company, said financing was the most important challenge faced by Iranian E&P companies.

"Given the exorbitant capital needed for the development of oil and gas reservoirs and numerous obstacles in the way of financing, including restrictions and weakness in the country's banking network in granting facilities, it is highly important to adopt new approaches for providing capital," he added.

It is the first time in the history of Iran's petroleum industry that Iranian companies are cleared for E&P activities.

But whereas Iranian companies have no experience of E&P projects, the Society was established in a self-motivated way to help them learn more about business. The Society plans to meet every month.

The seventeen members of the Society, which were cleared by Iran's Ministry of Petroleum are as follows:

Petropars, Oil Industries Engineering and Construction Company (OIEC), Dana Energy, Petroiran Development Company (PEDCO), Iran Power Plant Projects Management Co. (MAPNA), Khatam al-Anbia Construction Base, Industrial Development and Renovation Organization (IDRO), Executive Committee to Follow Up Imam Khomeini's Directive, Ghadir Investment Company, Pasargad Energy Development Company, Petrogohar Farasahel Kish Co., Iranian Offshore Engineering and Construction Company (IOEC), Kayson, Iran Ofogh Industrial Development Company (IOID), Pars Petro Zagros Engineering & Services Co. (PPZ), Global Petro Tech Kish (GPTKish) and North Drilling Company.

Azar Output Totals 4mn Barrels

Behzad Mohammadi, CEO of OIEC, spoke about Azar oil field, saying its output had been stabilized at 30,000 b/d.

He added that production from Azar field totaled 4 million barrels.

Azar is estimated to hold around 4 billion barrels of oil in place, but Mohammadi said new studies put the figure much higher.

He added that Azar oil field was planned to supply 65,000 b/d in the first phase of development, which would reach 100,000 b/d in the second phase.

Azar oil field, one of the hardest and the most complicated hydrocarbon fields in Iran and the world, lies in Anaran Block along the Iran-Iraq border, more specifically between the cities of Mehran and Dehloran in Ilam Province.

Mohammadi expressed hope that development of Azar would pick up speed under an Iran Petroleum Contract deal.

Development of Azar oil field, which is shared by Iran and Qatar, was awarded in 2011 to a consortium of Oil Pension Investment Company (OPIC) and OIEC.

Azar started production last March at a rate of 15,000 b/d, which doubled two months later.

Franco-Iranian Consortium to Recover SP Flare Gas

A Franco-Iranian consortium has agreed in a €42 million deal to recover flare gas at phases 2&3 of South Pars gas field. The agreement was signed between National Iranian Oil Company (NIOC) and the consortium of France's Sofregaz and Iran's Sanat Sazeh Samin.

The prospective project will save half a million cubic meters per day of gas. At the signing ceremony, NIOC was represented by Ali-Mohammad Ahmadi, manager of South Pars sustainable development project, CEO of Sofregaz Yann Aubry Lecomte, and CEO of Sanat Sazeh Samin Kourosh Ahanj.

Besides saving flare gas, the project would prevent the emission of a large quantity of carbon monoxide, and would facilitate sharing technology with other phases of South Pars, facilitate flare gas gathering and injection into oil and gas fields for enhanced recovery, protect the environment and help improve air quality in favor of local staff and people's health.  

Flare gas recovery is the most effective technology and the most advanced method in the world to gather flare gas at refineries and similar industrial plants.

After assessing the status quo and defining objectives for the removal of pollution and recovery of flare gas, the NIOC proceeded with holding a tender bid on the project. The Sofregaz-Sanat Sazeh Samin consortium was among an array of Iranian and foreign bidders for the project.

€500mn Investment

Mohammad Meshkinfam, CEO of Pars Oil and Gas Company (POGC), told the ceremony that $90 billion had been envisaged for the development of South Pars field. "So far, $70 billion has been invested and $20 billion remains to be spent."

"Of remaining $20 billion, €500 million will be earmarked for preventing flare gas to be burnt off at South Pars," said Meshkinfam.

He said that South Pars accounts for some 70% of Iran's gas, expressing hope that the flare gas recovery project at South Pars would become operational soon.

Meshkinfam expressed hope that the contract would be a starting point for more flare gas recovery projects in the other refineries of South Pars.

The refineries of South Pars were designed to prevent gas flaring, he said, adding: "Unfortunately, we hit snags in this sector due to sanctions and the refusal of global manufacturers to cooperate with us."

He, however, said that after Iran's signature of a nuclear deal with world powers in 2015 "good cooperation" had taken shape between manufacturers and South Pars Gas Complex (SPGC). The landmark nuclear deal, dubbed the Joint Comprehensive Plan of Action (JCPOA), took effect in January 2016.

"In the recent two years, given the start of cooperation between Iran and foreign companies post-JCPOA, we have been using new technologies," he said.

Meshkinfam said projects had been also devised for the disposal of oil pollutants in order to safeguard the environment.

He said that "no flaring" would be important in terms of protecting local environment and helping Iran fulfill its international commitments with regard to GHG emissions.

Noting that signature of this agreement would set precedent for Iran to be engaged in reducing polluting gas, Meshkinfam said that 75% of total polluting gas produced in the world belongs to ten countries, including Iran.

Sofregaz Boss Happy With Project

Addressing reporters, Lecomte expressed happiness with the conclusion of the agreement for flare gas recovery at South Pars.  

"We are very proud to be here…We are very happy [with this project]," he said, describing the project of great "importance".

He said that Sofregaz started talks with Iran three years ago and finally it came to conclusion to cooperate with NIOC in this project which he said had "economic" advantages.

Lecomte noted that the flare gas recovery project would help Iran fulfill its commitments under the Kyoto Protocol which calls for capping greenhouse gas emissions.  

"As a gas engineering company, we have the best and latest technology to recover flare gas," said the Sofregaz chief.

He said Sofregaz would begin by recovering 25% of flare gas produced at the South Pars refinery.

Alongside Sazeh Samin, "we also enjoy the cooperation of French engineering company Technip", which specializes in designing, said Lecomte.

"We are happy that this project would meet all expectations," he added.

He also referred to the history of Sofregaz's presence in Iran, saying it "participated in Iran's gas projects since 1960"

"Now we are very happy to be able to come back and we are happy especially with this project," he said, noting that the gas flare recovery project would not be limited to the present generation, but it would belong to future generations.

He termed as "great" the environmental advantages of the project, saying: "We are happy to cooperate in the project. 95% of gas will be reinjected into installations. So you see it is very efficient."

Lecomte said the gas recovery project would have great economic and environmental advantages.

Sharp Reduction in Gas Flaring

Gholam-Reza Manouchehri, deputy managing director of NIOC for engineering and development, said the level of gas flaring at South Pars had dropped from 15 mcm per week to 3 mcm per week.

He said that normally there must be "no flaring" at South Pars, adding that "since the gas flaring had been an issue we tried to reduce its level" by upgrading installations.

Flare Gas Recovery

Ahanj said implementation of the project in partnership with Sofregaz would help transfer of technology for flare gas recovery into Iran.

"In implementing this contract, Sanat Sazeh Samin would have close cooperation with France's Sofregaz and France's Technip would help this consortium in this domain," he added.

He said that Sofregaz first started cooperating with Iran in the midst of international sanctions, adding that it had never halted its cooperation.

Noting that flare gas recovery would cause no trouble in the operation of the refinery of South pars, Ahanj said the return of investment would be in 18 months.

"We are in talks with the National Iranian South Oil Company for a similar project. In case talks reach conclusion and cooperation starts we hope to be able to gather and recover at least 1 mcm/d of flare gas of this company," he said.

South Pars Sustainable Development

Ali-Mohammad Ahmadi, director of South Pars sustainable development project, said: "The project for the recovery and consumption of gas flare at the 2nd refinery, which is the first contract for the sustainable development of South Pars, will become operational in less than two years."

"This plan (sustainable development) was approved along with 50 subprojects by the Board of Directors of NIOC," he said.

Ahmadi said that Iran's Minister of Petroleum Bijan Zangeneh had insisted on concentration on environmental projects.

$60 Oil Can Stabilize Market

The director for international affairs of National Iranian Oil Company (NIOC) has said that $60 per barrel of oil could bring stability to the world energy markets.

"The price of $60 a barrel could bring stability to oil market and serve as a signal to investors to develop oil and gas fields. Low and fluctuating oil prices have sent unfavorable signals to investors," Saeed Khoshroo said.

"When the price of oil approaches $60, many investors may be able to invest in developing oil fields, but when the price varies between $40 and $45, the story would be different," he added.

"In my view, a price around $60 stabilizes the market because it is good enough to attract investment, particularly in the Middle East where there are many fields with low production cost which could be developed easily and meet market needs," said Khoshroo.

He said that production cost per barrel is around $10 in Iran, adding that the oil reserves to production(R/P) ratio in Iran could be a sign of attractiveness of Iran for investment.

Khoshroo said Iran's current oil production was around 3.9 mb/d, as set under Vienna Agreement, adding that the country's production capacity stands at 4 mb/d.

Rouhani Stresses IP Gas Line Benefits

Iran's President Hassan Rouhani has reiterated mutual benefits of a gas pipeline which would carry natural gas from Iran to neighboring Pakistan.

"I hope that the two sides would fulfill their obligations in this regard because this project would benefit both countries," he said during a meeting with Pakistani Prime Minister Shahid Khaqan Abbasi in New York where they attended the annual UN General Assembly gathering.

He said that Iran had fully respected its commitments by completing its own section of the pipeline as far as Iran-Pakistan border.

The Iranian president welcomed enhanced ties between the two neighbors, saying: "The two nations seek strong and perpetual ties between Iran and Pakistan."

Highlighting extensive potential between Iran and Pakistan for deepening cooperation, he said: "We are ready to supply energy to Pakistan and we also welcome attraction of foreign investment in this sector."

Rouhani said improved banking cooperation between the two countries would be key to economic cooperation and said Iranian and Pakistani banks need to open branch offices in respective countries.

For his part, the Pakistani prime minister described Iran as a very influential country with which Pakistan would seek better ties.

Meanwhile, Iran's Ambassador to Pakistan Mehdi Honardoust said completion of the Iran-Pakistan pipeline was essential for the realization of objectives of China-Pakistan economic corridor.

"Pakistan is one of Iran's top gas destinations," he said in an address to the Institute for Political Studies in Islamabad.

Honardoust said China-Pakistan Economic Corridor (CPEC)'s benefits would not be limited to bilateral business between the two countries, noting that the project must be seen as a factor that would change the future of the entire region.

Iran, Venezuela Welcome Oil Market Stability

Iran's Minister of Petroleum Bijan Zangeneh and his Venezuelan counterpart Eulogio Del Pino have recently expressed their desire for stability in the oil market. Following a meeting in Tehran, Zangeneh said the two countries were ready to take any action which would help stabilize oil markets.

"We are ready for any action that would help the oil market stability," said the Iranian minister.

He put at 98% the level of compliance of OPEC and non-OPEC oil producers with a November 2016 plan for cutting output.

"Fortunately, the level of commitment of member states of the Organization of the Petroleum Exporting Countries(OPEC) with the Declaration of Cooperation on supply cut has been good," he added.

The minister added that the level of compliance would "get better" in the future.

Zangeneh said his talks with Del Pino were focused on expanding bilateral relations, conditions of crude oil market and encouraging non-OPEC cooperation for more stability in the market.

He gave a positive assessment of the oil market's reaction to the OPEC deal and said the Iranian and Venezuelan ministers had discussed extension of the agreement to June 2018.

Zangeneh said more talks were expected about the OPEC deal extension during the upcoming meeting of Gas Exporting Countries Forum (GECF) ministerial meeting due to be held in Moscow in October.

"Russia is the most important non-OPEC producer and we plan to hold talks with Russia's Minister of Energy Alexander Novak on this issue," he said.

"The non-OPEC countries' compliance with [output] cut is good, but they need to show more compliance," said Zangeneh.

Signatories of the OPEC and non-OPEC deal are considering various options to extend their crude oil output cut deal.

The agreement, which went into force January 1, calls on OPEC and 10 non-OPEC producers, led by Russia, to cut a combined 1.8 mb/d in output through March 2018 in order to rebalance the market and induce draws of oil from storages.

Oil Terminal in Shahid Rajaei Port

Iran's Ports and Maritime Organization plans to build an oil terminal in Shahid Rajaei Port, the PMO chief said.

Mohammad Rastad said the project was to be implemented after attracting IRR 1,600 billion over a two-year period.

He also said that the PMO was concentrating on finalizing the case of operators in Phases I and II of Shahid Rajaei Port before relevant agreements are signed.

"For Phase III development of Shahid Rajaei Port, a package of investment attraction been prepared for the private sector in the hope of development of this phase in the near future," said Rastad.

He also said that phase I of Chabahar Port, currently 85.5% complete, was berthing container ships.

"Fortunately, we have no financial problem with the contractor of Chabahar Port and we hope to see the completion of remaining 15% of the Chabahar development project in coming months," said Rastad.

OPEC Output Cuts Visible in Market

Iran's Minister of Petroleum Bijan Zangeneh has given a positive assessment of OPEC member states' commitment to a production cut deal.

"The results of OPEC decisions are visible in the oil market," he said.

Zangeneh said Iran had always favored the strength of the Organization of the Petroleum Exporting Countries, adding that Tehran would be always ready to help OPEC for market stability in favor of both producers and consumers.

"Generally speaking the level of OPEC commitment is acceptable; however, some modifications are needed," the minister.

Asked what changes he meant was necessary, Zangeneh said: " The first one is all member states' full commitment to the OPEC and non-OPEC supply cut and then paying attention to the Libya and Nigeria output."

"Iran will support any decision that would benefit OPEC, within the framework of national interests," he said.

OPEC and some non-OPEC oil producers, led by Russia, have been cutting their output in a bid to contain a global glut which has slashed oil prices.

In November, OPEC ministers are to get together to decide on possible extension of the output cut deal.

France Bank to Fund Iran Projects

Bpifrance, the country’s state investment bank, will finance investment projects of French companies in Iran from 2018, granting up to 500 million euros ($598 million) in annual credits, its CEO said in a newspaper interview.

"Excluding a force majeure case, we will be on their side in early 2018. We are the only French bank that can do it without risking U.S. sanctions for a possible breach of remaining embargo rules," Nicolas Dufourcq told Le Journal du Dimanche.

The deal Iran struck in 2015 with six major powers lifted many sanctions against the country in exchange for restrictions on its nuclear activities and paved the way for international business deals.

But many banks have stayed away for fear of inadvertently breaking remaining U.S. sanctions, which could lead to huge fines.

Because the BPI has no operations abroad, notably in the United States, it is not exposed to possible fines for U.S. sanctions breaches.

Several Franco-Iranian deals were announced during Iran President Hassan Rouhani's official visit to Paris in January last year. These included a joint venture between carmakers PSA Peugeot Citroen and Iran Khodro, as well as plans for Iran to buy Airbus aircraft to update its ageing fleet.

There were also deals in sectors: oil, shipping, health, agriculture and water.

Petchem Guarantees Iran Future

Iran's Minister of Industry, Trade and Mine Mohammad Shariatmadari has said petrochemical industry would guarantee the future of Iran.

"Petrochemical industry has managed to convert raw materials to products of high value-added and therefore we need to be grateful to all those contributing to the petrochemical industry because they guarantee the future of the country," he said during a visit to the Iran Plast exhibition in Tehran.

"Despite the growth of upstream petrochemical industry, downstream industry has seen slow progress due to restrictions on investment. Some products of upstream sector are exported to other countries," Shariatmadari said.

"I hope that these products would be used in the private sector's downstream petrochemical industry by knowledge-based companies so that with the help of the National Development Fund of Iran and under the aegis of the government would be used in job creation and generation of value-added," he said.

"Downstream petrochemical industry is the hope of the country's industry and by relying on downstream industries we can boost the country's industrial and technical capabilities," said Shariatmadari. 

Iran Plast Captivates Foreigners

Iran is trading each tonne of crude oil at around $500. That could be multiplied by 16 if crude oil is converted into other products, particularly petrochemicals. More fascinating figures will be achieved if the value chain in hydrocarbon materials is extended further. For instance, Iran is earning $300 million from each million tonnes of raw materials, but it could raise the figure to $670 million in downstream industry. It means the rate of return on investment is 12% to 15% in upstream sector and 30% to 35% in downstream sector.

Iran is expanding its petrochemical sector at a rapid pace. The country's petrochemical output, which was below three million tonnes in the early years following the 1979 Islamic Revolution, has exceeded 60 million tonnes a year.

Plastic industry is a key element in petrochemical production chain whose completion would prevent the sales of crude oil.

The 11th Iran Plast Exhibition, which is the main plastic exhibition in Iran, was held on schedule. Senior Iranian officials, including First Vice-President Es'haq Jahangiri and Minister of Petroleum Bijan Zangeneh, and senior MPs attended the inauguration. The presence of these high-ranking officials was a proof of the significance of the event among Iranians.

Petrochemicals make up only five percent of Iran's oil and gas production; however, the share of petrochemical industry in non-oil exports is currently above 40% with more than 50 million tonnes of products. It means the highest value-added and the growth of gross domestic product (GDP) in Iran.

Since 70% of petrochemical industry's value-added comes from downstream sector, development of this sector with the current volume of raw materials would earn Iran more than $48 billion a year, which would be nearly half the revenue from crude oil export.

Converting raw materials like methane, ethane and petroleum to products like bags, shoes, clothes, electric appliances, auto parts and equipment like desks and chairs, luxury products, components of computers and medical equipment all lie under downstream sector, particularly petrochemical industry.

Despite Iran's relative advantage in petrochemical industry, we are witnessing discontinuous chains in this sector. For instance, raw materials are exported to industrialized countries like China, Japan and the European Union before being resold to Iran at much higher prices in the form of products.

International exhibitions provide a good opportunity for interaction with domestic and foreign firms. Iran Plast is the most important event in Iran's petrochemical industry. This international event is held every 18 months. The 11th Iran Plast Exhibition was held from 24 September to 27September.

Foreigners Grow in Number

Marzieh Shahdaei, CEO of Iran's National Petrochemical Company (NPC), views Iran Plast as one of the most important events in Iran and in the Middle East.

She said at the inauguration of the 11th Iran Plast Exhibition that the presence of foreign companies saw a 100% growth thanks to the implementation of Iran's landmark nuclear deal with six world powers – dubbed the Joint Comprehensive Plan of Action (JCPOA) – in early 2016.

Shahdaei said the number of foreigners has grown significantly from 250 in the 9th Iran Plast to 524 in the 11th Iran Plast Exhibition.

She said that Iran Plast Exhibition had gradually experienced quantitative and qualitative growth. She said Iranian and foreign exhibitors present in the 11th Iran Palst totaled 1,100, much higher than 294 in the 1st Iran Plast Exhibition.

Reza Khalaj, director of NPC Public Relations, said Iran Plast Exhibition was aimed at bringing prosperity to the plastic industry, facilitate marketing in this sector, taking advantage of post-JCPOA atmosphere to attract foreigners with a view to attracting foreign investment and transferring technological knowhow.

He said that 600 Iranian companies and 524 foreign companies from 23 European and Asian countries were present at Iran Plast Exhibition. Germany was presented by 65 companies, Italy by 49, Austria by 19, France by 15 and Turkey by 24.

The 11th Iran Plast Exhibition experienced 39% growth in the number of Iranian participants and 21% growth in the number of foreign participants year-on-year.

Iran Plast Exhibition or similar exhibitions enjoy significant potential. Exhibitions and events like seminars, conferences and workshops could turn exhibitions into a place for more transactions, display of raw materials and foreign machinery, and introduction of opportunities for investment.

Relying on their significant potential, such exhibitions would become a venue to attract foreign investment, and they should not be only a place for foreign companies to sell their commodities and machinery.

Iran Plast Exhibition and similar events could serve as a center that brings together domestic and foreign potentialities for further development in the petrochemical industry with a view to providing more services.

The presence of foreign participants at this exhibition could be viewed from two aspects; first, long-term presence in Iran's market, participation in projects and investment in upstream and downstream sectors; second, selling machinery to downstream industry, raw materials including advanced polymers and compounds, as well as industrial parts.

The fact is that the most important element in the presence of foreign companies in the oil, gas and petrochemical industries is related to upstream units, oil and gas recovery and production of petrochemicals and polymer products, which require cutting edge technology and high financing.

This sector has not so far managed to directly attract international companies, which could be explained by national and international restrictions.

Unjust sanctions imposed on Iran by Western governments had blocked investment in Iran's upstream sector and paralyzed the country's efforts to compete with other countries in the region.

Jahangiri at Iran Plast:

Petchem, Iran Top Investment Attracter

Iran's First Vice-President Es'haq Jahangiri and Iran's Minister of Petroleum were among high level officials attending the inauguration of the 11th Iran Plast Exhibition in Tehran, where high level oil and petrochemical managers, foreign ambassadors and representatives of foreign companies were in attendance.

Addressing the inauguration ceremony, Jahangiri highlighted the Ministry of Petroleum's success in realizing the objectives set out in the resilient economy policy instructed by Supreme Leader Ayatollah Ali Khamenei.

He said that Iran's petroleum industry showed the "best performance" with regard to the resilient economy policy in the last calendar year to March 2017.

Jahangiri said petrochemical industry is dynamic and economically justified, adding that the Ministry of Petroleum has put much effort into improving this knowledge-based industry, particularly in downstream sector.

Noting that petrochemical industry is one of Iran's priorities to attract investment, he said: "The Ministry of Petroleum has so far taken great strides with regard to attracting foreign investment, among which are the development of a new model for oil and gas contracts, signing big oil deals, attracting investment into jointly owned fields, and cooperating with foreign companies.

"The new oil contracts, whose restructuring took too much time, was welcomed by many pundits in the country. Today is the best chance for world majors to cooperate with Iran's oil and gas sector," said Jahangiri.

He said that Iran, which sits atop the world's largest hydrocarbon reserves, has to boost its position further although the Ministry of Petroleum has devised special plans for that purpose.

Jahangiri said more than $14 billion in investment had been attracted in the aftermath of the implementation of Iran's nuclear agreement with world powers, known as the Joint Comprehensive Plan of Action (JCPOA).

"Our top priority for using foreign resources is to allocate them to the private sector," he said.

"The ground is prepared for national development and we have to take advantage of this chance. We seek cooperation with the world and of course we are ready for any conditions whatsoever," he added.

Jahangiri gave a positive assessment of economic indicators in the country, saying that Iran's economic growth had reached 12% after a long period of stagnation.

Citing data from the Central Bank, he said that Iran's economy grew 6.5% in the first quarter of the current calendar year. Excluding oil, he added, the figure would be 7%.

Foreign Financing for Petchem Projects

For his part, Zangeneh said his promises had come true about the startup of a number of petrochemical projects. He said that the projects, which were launched in the last calendar year and early this year, would significantly increase Iran's petrochemical capacity.

Zangeneh named Lorestan, Urmia, Mahabad, Marvdasht, Karoun, Phase II of Takht-e Jamshid, Kurdestan, Morvarid, Phase II of Kavian, Etenkhab and Assaluyeh Takht-e Jamshid as petrochemical projects which became operational last calendar year and early this year.

In the last calendar year, three polyethylene units of the West Ethylene Pipeline with a total capacity of one million tonnes were also inaugurated.

Zangeneh said Kaveh, Phase III of Pardis and Bushehr petrochemical plants would come online this year.

He said that petrochemical projects in Iran were becoming operational at a high pace due to abundant and low-price feedstock, adding: "Most of these projects are being financed by National Development Fund of Iran (NDFI) or by other countries."

Zangeneh underscored foreign investors' strong inclination for investment in Iran's petrochemical projects, saying: "That is a very big opportunity for increasing value-added, acquiring new technologies and supplying products of higher value-added."

The minister went on to say that 2,000 ha of land had been allocated to mid-stream petrochemical industry in Assaluyeh. He said that a consultant had been chosen to give advice on necessary infrastructure.

Zangeneh said that Iran had increased petrochemical production and exports post-JCPOA, adding: "Around one million tonnes of more feedstock has been supplied to downstream petrochemical units, which means job creation, production and wealth generation for the country."

The minister said that the value of upstream petrochemical products would go beyond $40 billion in five years. He said that planning was needed in the mid-stream and downstream sectors for job creation and generation of value-added.

Polymer Output on the Rise

Marzieh Shahdaei, CEO of National Petrochemical Company, said Iran Plast was one of top polymer, plastic and rubber exhibitions in the world. She said that more than 530 companies from 23 foreign countries, 16 European and 7 Asian, and more than 600 Iranian companies attended this year's Iran Plast Exhibition which sprawled on 35,000 square meters of land.

Shahdaei said the Ministry of Petroleum and the NPC had made effective arrangements in recent years to realize the objectives of resilient economy so that Iran would become the leading supplier of raw materials for plastic industry.

"Iran is producing around 7.5 million tonnes a year of raw materials for polymer products, which is planned to reach 12 million tonnes by the end of the 6th [Five-Year] Development Plan and which would boost downstream polymer industry and diversify its products," she said.

Shahdaei said that out of 16 million tonnes of petrochemicals supplied on domestic market in the last calendar year, more than four million tonnes of polymer products was supplied to downstream industries.

She said that polyethylene and propylene are the most important polymer products which account for more than 60% of the country's consumption of polymer.

The NPC managing director added that petrochemical industry policymakers had put efforts into stabilizing the supply of petrochemical products on the mercantile exchange, developing domestic and international markets and providing new petrochemical grades.

Shahdaei said Iran Plast Exhibition was among the most significant specialized exhibitions in the region, adding: "This exhibition can put on display the potentialities and capabilities of this industry in the world and familiarize Iranian industrialists with new achievements in the world. It also provides an opportunity for displaying new achievements of plastic industry and showcasing innovations and technologies in this industry."         

 

Iran Petchem, Plastic Tempt Foreign Firms

Similar to previous years, a large number of foreign firms attended Iran Plast. But it was clear that this time the companies were not present to test the waters for future cooperation.

The representatives of foreign companies were in talks with Iranian entities all through the exhibition. It was definitely an outcome of the implementation of Iran's 2015 nuclear deal with six world powers, known officially as the Joint Comprehensive Plan of Action (JCPOA), in January 2016.

In the past couple of years, transactions have increased significantly between Iranian and foreign companies thanks to the implementation of the JCPOA. Before the sanctions were removed, foreign companies were banned from even responding to emails Iranian companies sent them.

The 11th Iran Plast was timed to coincide with post-JCPOA growth and removal of international restrictions, particularly in the area of technical savvy. That has created the ground for further diversification of the basket of petrochemical and polymer products in the existing petrochemical units. It is currently possible to develop new grades of polymer products for the first time in some petrochemical plants.

Foreign petrochemical companies and downstream industry in foreign countries know quite well that Iran is instrumental in supplying basic needs of other countries.

Iran's share of petrochemical production in the Middle East would reach 41% when development projects in petrochemical sector have become operational by 2020 which marks the end of the country's 6th Five-Year Economic Development Plan.

Machinery Exports to Iran at €22mn

Mario Maggiani, director of Italy's AMAPLAST, said he had managed to bring more than 40 Italian companies to Iran.

He expressed hope that the European Union (EU) would make independent decisions with regard to economic cooperation with Iran without being influenced by the US.

He said that Italy sold more than €22 million worth of machinery to Iran in 2016.

Maggiani said AMAPLAST comprised more than 160 members, adding: "Most members of this association are medium-sized manufacturers of products, equipment and machinery of plastic in Italy. This association is currently the second largest manufacturer in Europe."

Maggiani highlighted his personal presence in all Iran Plast exhibitions in Tehran, noting that the event has been progressing both in quantity and quality over years.

He said that European and American companies that failed to attend some Iran Plast events in the past years due to international sanctions had suffered losses.

"Given the implementation of the JCPOA, the international conditions for presence in Iran's plastic market have improved drastically over the past 1.5 years. According to available statistics, this association's trading with Iran peaked in 2008, but dropped sharply in 2012," said Maggiani.

He said Italy was one of the first countries to host Iran's presidential delegation post-JCPOA, adding that Iran-Italy ties remained strong.

He said the AMAPLAST members had always been eager to work in Iran, but the United States was continuing to pressure the companies for cooperating with Iran.

Maggiani expressed hope that the current trend of trading would continue between Iran and Italy. He said that Italy had exported machinery worth over €11 million to Iran in the first half of 2017.

Shocking Market

Sylvie Montaigne, the sales manager of a French company present at Iran Plast said she was shocked by Iran's market and the hospitality of Iranians.

She said she had come to take advantage of the exhibition to prepare the ground for agreements with Iranian companies.

She said her company was getting 80% of its revenues from exporting products and equipment.

"As someone who has visited all plastic exhibitions in the world, I believe that markets in Iran and neighboring countries are very attractive for foreign companies," said Montaigne.

She highlighted the production of synthetic textile fabrics at her company, saying: "My first presence in Iran coincided with the 11th Iran Plast and so far we have conducted marketing in Iran. Many of our experts had spoken very highly of the attractions of the Iran market."

Spain Eyes Iran Petchem

Juan Carlos Eliva Mateo, director of trade development section of Spain's Top Machine, said its company was experiencing its second ever presence at Iran Plast.

He said his company was a major exporter of machinery used in polymer and petrochemical industry.

Mateo said his main objective was to establish sustainable ties with the Iranian side, expressing hope for broader cooperation.

He said that over the past eight years his company has had very good cooperation with big Iranian companies, adding that he was seeking to preserve the current standing of the company, while trying to broaden its cooperation with medium-sized and growing plastic companies in Iran.

Mateo said Top Machine is cooperating with a large number of companies from around the world in the supply of plastic industry machinery.

He noted that Iran Plast provided a very good chance for petrochemical and polymer businesspeople to get together.

Mateo said he was representing the only Spanish company at Iran Plast, expressing hope for a stronger presence of Spanish companies in the Iran market.

French Firms Make Comeback

Denis Vaillant, head of France's plastic and rubber union SFNCP, highlighted the high quality of Iran Plast, saying he would try his best for a stronger presence of French companies in future editions of Iran Plast.

Vaillant complained that the booth allotted to French firms did not meet their expectations.

He also said that SFNCP had signed a memorandum of understanding with Iran's Polymer Research Center during Iran Plast.

"Unfortunately, sanctions imposed against Iran in recent years had partly restricted the country's access to new technologies.

"We hope that the new MOU would partly facilitate exchange of technical knowhow between Iranian and European companies.

"Access to rich resources, skilled and quite low-cost manpower is among the most important attractions of Iran's market for France," said Vaillant, adding that Iran was among the leading producers of raw materials for petrochemicals in the world.

Iraq, Afghanistan: Destinations of Iran Plastic

Trading with Afghanistan and Iraq has historically been of significance to Iran. Cultural, historical and religious commonalities have added to the importance of these neighboring countries in different sectors. Over recent years, Iran has had abundant commercial and economic transactions with Iraq and Afghanistan. One of sectors Iran has traded with its eastern and western neighbors has been export of technical and engineering services, as well as petrochemical products. Iran has also a good market for importing commodities from Iraq and Afghanistan.

According to official data, more than two-thirds of Iran's plastic products go to Iraq and Afghanistan.

Tehran has recently hosted a seminar to promote export destinations for Iran's plastic industry in the two countries. Senior officials from Iran's National Petrochemical Company (NPC) and delegates from Iraq and Afghanistan attended the event.

Polymer Exports to Iraq Quintupled

Reza Mohtashamipour, director of downstream industries office at the NPC, said Iran's export of polymer products had more than quintupled over the past five years to more than 100,000 tonnes.

Reiterating the need for preserving and boosting the market for Iran's plastic and polymer products, he said: "In such markets, the most significant need is to develop capital and have a strong presence. Iran can be a supplier of plastic industry machinery to Iraq and Afghanistan, along with after-sales services."

Mohtashamipour said that machinery constituted more than 20% of Iraq's imports over the past two years.

"In the near future, we will be dealing with an industrialized country whose share of plastic industry will increase and it has to start planning for such circumstances," he added.    

Jump in Polymer Exports to Afghanistan

Abbas-Ali Motevasselian, chairman of Association of National Plastic Industry, said in the seminar that the decline in the activities of "Daesh" terrorists in Iraq would be the best chance for Iran to increase polymer exports to its western neighbor.

"The volume of polymer product exports to Iraq and Afghanistan has experienced a jump," he said.

Motevasselian said Iran's share of polymer markets in the two countries was still meager.

"Breaking into neighboring countries' markets must be the top priorities of our country's economic diplomacy. This issue needs a precise and specialized knowledge of target markets," he added.

"The ground is paved for the delivery of goods to Afghanistan. Common language and national willingness for Iranian polymer products in Afghanistan could be influential," he said.  "Currently, Afghanistan is importing $300 million of polymer products, which Iran has had a $42 million during the first five months of the current [calendar] year."

Motevasselian referred to Iran's polymer market targets, saying: "China, the United Arab Emirates, Belgium, Turkey and Iraq are the leading importers of raw materials and polymer products from Iran."

He said that Iran exported 36,000 tonnes of polymer products and raw materials, worth $67 million, to Afghanistan during the first five months of the year, up 16% year-on-year.

He said that increasing exports would require cooperation on the part of the NPC, as the state-run administrator of downstream petrochemical industries.

Motevasselian said Iran's potential in the plastic industry must be known on a larger scale in order to win toeholds in neighboring countries' markets.

As "Daesh" is getting defeated, he added, stability and security is returning to Iran to the benefit of Iran's plastic industry.

He said Iran's export of raw materials, as well as polymer products to Iraq and Afghanistan have experienced growth in both value and volume. He added that this upward trend had to continue.

Afghanistan Opens Polymer Market

Jaber Ansar, the economic counselor of the Afghan embassy in Iran, said his country was willing to benefit from Iran's plastic industry technologies in its own industries.

"Rather than importing the commodities from other countries, the Afghans are more willing to use Iranian commodity. Afghanistan is cut off high seas, but it enjoys a good status geopolitically. Therefore, Iran can make optimal use of this chance for communication with other countries," he said.

The Afghan diplomat said Iran and Afghanistan would be playing in a win-win game due to mutual incentives. 

Ansar said 35% to 37% of Afghanistan's $300 million market belongs to Iranians, expressing regret that Iranian commodities were sent only to west and southwest.

He highlighted the role of common language as an advantage for mutual transactions, saying: "Afghanistan can benefit from Iranian universities and specialists and that would facilitate Iran's presence in Afghanistan for long time. That would create solidarity between Afghan industrialists and Iranian researchers."

He said Afghanistan needed investment and was willing to use Iran's technology.

Ansar said Afghanistan's investment support law was the newest law on investment in the region, adding: "Investors can take out 99% of their liquid capital and they are exempt from 50% of taxes for ten years. Foreign investors can also benefit from these incentive packages."

He said Iran's plastic industry was not limited to a single phase, adding that Iran could show off its potentialities in this sector.

Iranian Investors in Iraq

Abdussamad Rahman Sultan, advisor to Iraqi prime minister for economic and infrastructure investment affairs, said his country was open to investment in petrochemical projects.

He said that Iran and Iraq had broadened their ties after the downfall of Saddam Hussein.

He highlighted Iran's role in Iraq's political and economic stability, saying: "Earlier I dreamt of academic attendance at Iran Plast so that we would benefit from Iran's scientific potential and also make reforms at Iraqi universities."

He said that workshops were expected to be held to discuss development of trade with Iran. He expressed hope that Iran would be a model of development for all countries including Iraq.

"In 1977 we were able to produce ethylene, but Iraq plunged into long wars. Today, we intend to attract new investment in petrochemical industry and I would like to note that we have permanent supportive laws for investment and Ministry of Industry has opened all doors to investment," he said.

The Iraqi official said that his country would not be complete without Iran's market. "We hope that current political stability would continue and we are making efforts to facilitate Iran's investment."Daesh" has vanished in Iraq and 2017 is the year of putting an end to all enemies of Iraq."

"We have to eye economic evolution and we invite everyone for investment," he said.

Technical Presence in Iraq

Hamid Hosseini, secretary general of Iran-Iraq Chamber of Commerce, said: "In light of establishment of stability and security in Iraq we can stabilize our presence in the Iraqi market, and the best way to achieve this objective would be through Iranian engineers and specialists for software and education."

"Opportunities for job creation and exports in the Iraqi market have increased in the current year; therefore, we can see Iraq as the opportunity for the supply of Iranian products," he said.

Hosseini said: "Iraq can be our biggest and the most important trading partner and in light of its growing population and on average in 20 years' time it could be a potential market for Iran's polymer products."

"Therefore, the intact capacities of Iran and Iraq must be put together and since Iraq's infrastructure is not ready for industrial work, Iran can use its own capabilities and technical knowhow to build capacity in Iraq."

Hosseini said: "Iraq alone makes up 50% of our non-oil exports and we can use Basra Port for maritime transport."

"Iraq is our second destination for exports and our commodity exports to this country will increase 20% by the end of the current year, and once Iran's gas pipeline is operational the volume of Iran's exports would go to $4 billion," he said.

Majlis Backs IPC Deals

Iran and Qatar share the giant South Pars gas reservoir, and now Iran and Qatar recovery level from the gas field has reached the same level. France's Total has agreed to develop Phase 11 of South Pars. Mohammad Khaledi, an MP sitting at the Energy Committee of Iran's parliament (Majlis) says the French company may earn $11 billion in revenue, but Iran would reap more than $100 billion in revenue from the development of this Phase.

Mohammad Khaledi, who represents Lordegan in Chahar Mahal & Bakhtiari Province, talked to Iran Petroleum in an exclusive interview. The following is the full text of his interview.

Q: As an MP from Chahar Mahal & Bakhtiari Province, how do you assess this province in terms of potential for attracting investment in oil, gas, refining and petrochemical sectors?

A: There is currently good potential for investment in downstream oil industry in this province. For instance, most Iran's trunklines cross the province and that could provide feedstock to investors in petrochemical and other sectors. Lordegan Petrochemical Plant is one of opportunities for domestic and foreign investment. Despite sanctions, the project has had 80% progress. Once operational, this plan can produce 1.5 million tonnes a year of chemical fertilizers and create jobs. We have also Boroujen Petrochemical Plant in this province. The petrochemical plant would receive feedstock through the West Ethylene Pipeline in Iran.

Moreover, in light of mothballed oil wells in some areas in this province, some other provincial officials and I tried to make arrangements for drilling new wells with cutting edge technologies so that this province could once again join oil-rich provinces. Furthermore, once oil has been extracted, a refinery may be built in Jamal Plain in this province. In our latest talks, the Petroleum Ministry agreed to oil extraction and establishment of an oil refinery if an investor volunteers to invest. Iran's Petroleum Ministry is currently pursuing the strategy of developing fields shared with neighbors and we also accept this strategy. Therefore, we are trying to absorb necessary investment and we can benefit from foreign investment.

Q: How do you assess the performance of Iran's Minister of Petroleum Bijan Zangeneh, particularly with regard to jointly owned oil and gas fields?

A: As you know Iran has recently managed, for the first time after the lifting of sanctions, to sign an agreement with Total to develop Phase 11 of jointly owned South Pars field. That is of high significance for Iran. In addition to capital, the company has agreed to provide state-of-the-art technology for gas compression platforms to Iran; an 18,000-tonne platform could guarantee sustainable production from this phase for more than 25 years.

Iran would have incurred more than IRR 1,250 billion a day in loss from non-development in South Pars gas field. That is while our province's total budget allocated for development projects stands at IRR 5,000 for a year. That indicates the level of Iran's loss.

Once President Hassan Rouhani took office for the first round, the petroleum minister concentrated on jointly owned fields, particularly South Pars, and we are now seeing Iran reach Qatar's production level from this field. Once Total finishes its work in South Pars, it will be gaining $11 billion in profits, but Iran's profits from this phase will be more than $100 billion.

One of the main positive performances of Iran's petroleum minister has been enhanced recovery from jointly owned fields, and he has managed to win back Iran's share of oil trade in world markets. Furthermore, more attention has been paid to domestic manufacturing over recent years.

Q: Now that sanctions have been lifted on Iran, are required mechanisms available for Iran to absorb foreign investment?

A: Yes, necessary mechanisms for domestic and foreign investment have been worked out and we stress this point in our negotiations with business delegations. For instance, all investee projects in Lordegan have been listed and introduced to foreign delegates. Of course in Iran, administrative red tape is tougher than in other countries; however, profits of investment in Iran would not dissuade foreign companies from investment in Iran. Today, marketing is a modern technique to attract investment. Within the framework of new oil contracts, Iran's Ministry of Petroleum has sought to enhance foreign investment.

Q: What do you think of the nature of new model of oil contracts (Iran Petroleum Contract), an example of which was the deal signed with France's Total?

A: Veteran Iranian experts and lawyers supervised these agreements which have been endorsed by Iranian regulatory bodies. These are the new generation of oil contracts and all countries in the world are familiar with this type of contracts thanks to the government's energy diplomacy. Like most members of the Majlis Energy Committee, I strongly support this type of agreement to accelerate development of oil industry in Iran.

Q: You are a member of the Majlis Energy Committee. What does this committee think in general of the Iranian Petroleum Ministry? Will it continue to support the minister and his plans?

A: The majority of members of Energy Committee hold a positive view of the performance of Petroleum Ministry, an example of which we can see in the committee's sustained support for the development of Phase 11 of South Pars with Total. Such support will go on.

Q: National Iranian Oil Products Distribution Company (NIOPDC) is the only subsidiary of the Petroleum Ministry to be directly dealing with people. As a representative of Chahar Mahal & Bakhtiari Province in Majlis, how do you assess the track record of the company in the province?

A: Chahar Mahal & Bakhtiari Province, a four-season province, has a population of more than one million. It has always been grateful to this company whose performance has been under watch round the clock because of its engagement with people's everyday life. Gasoline, gasoil and kerosene distribution centers are operating well in this province and there has been no complaint about fuel shortages.

Condensate Refinery Open to Foreign Investment

Bandar Abbas Gas Condensate Refinery is under construction by Persian Gulf Star Oil Refinery. It is generally referred to as Persian Gulf Star Refinery.

Today, Persian Gulf Star Refinery is as famous as South Pars gas field as it is being spoken highly of by Iranian petroleum industry officials.

Since taking office, Minister of Petroleum Bijan Zangeneh prioritized this refining project. The first section of the refinery became operational in the final months of the first administration of President Hassan Rouhani in office to convert gas condensate into gasoline.

The Persian Gulf Star Refinery is of significance due to the fact that it would end Iran's need to import gasoline and would even make Iran into an exporter of gasoline. The refinery did not come on-stream on time mainly because of sanctions and financial shortages. The undeniable fact is that the project still needs injection of capital to survive.

Morteza Emami, CEO of the refinery, said that one billion dollars was still needed for the full operation of the treatment facility.

National Development Fund of Iran (NDFI), more equity by shareholders and selling oil products are solutions for financing the project; however, managers of the refinery welcome financing and foreign investment, too.

Emami said the world is dominated by economic recession, but there is sufficient money for investment in Iran.

"Iran enjoys full security in the Middle East region, and all sanctions have been lifted on the country after the implementation of the JCPOA (Iran's nuclear deal)," he said.

"Furthermore, good facilities have been envisaged for investors. Therefore, there is a growing wave of interest for investment in projects in Iran, particularly in the petroleum industry," said Emami. "Over the past months, we have met and held talks with seven foreign delegations about investment in the Persian Gulf Star gas condensate refinery."

Foreign investors and companies have demanded guarantees for working at the Persian Gulf Star refinery. Emami said the Iranian government had no plan to guarantee private sector projects and shareholders are required to provide guarantees.

"It is not possible for the moment, but we are seeking solutions including selling products of this refinery as guarantee and direct investment. For that purpose, we have had negotiations with investors from Europe and Asia and we hope that we would achieve good results in the near future," he added.

Euro-4 Gasoline

The construction of Persian Gulf Star Refinery started 11 years ago with a rated production capacity of 36 million liters a day of Euro-4 and Euro-5 gasoline, 14 million liters a day of gasoil, as well as jet fuel, liquefied petroleum gas (LPG) and kerosene. The first phase of the refinery came online in April with a production capacity of 12 ml/d of Euro-4 gasoline, 4.5 ml/d of Euro-4 gasoil, 1.5 ml/d of Euro-4 kerosene and 1.3 ml/d of Euro-4 LPG.

The refinery can produce gasoline, gasoil, jet fuel, kerosene and LPG.

"Our main focus is to produce gasoline, given the priorities of the Ministry of Petroleum and the negative balance in the gasoline production and consumption," said Emami.

"Meantime, since 60% of the feedstock received by this refinery is converted into gasoline, the gasoil, kerosene and LPG output is much lower. Of course, the country needs less of these products now," he added.

Emami said that since startup, the facility has produced 722 ml of gasoline, 630 ml of gasoil, 1.514 billion liters of sweet naphtha and 1.722 billion liters of sour naphtha.

"At present, 6 ml/d of gasoline is being produced at this refinery, which is forecast to reach 12 ml/d in coming days," he said, adding that supply of the five aforesaid products would be stabilized by next March.

Regarding the quality of Persian Gulf Star Refinery products, Emami said that due to the high quality of gas condensate received as feedstock, the products of this refinery are in compliance with Euro-4 and Euro-5 standards.

At present, on average 60,000 b/d of gas condensate is being supplied to this refinery from South Pars gas field.

The second section of Persian Gulf Star Refinery is set to come online by March 2019 and the third phase by March 2020.

South Korea to Upgrade Tabriz Oil Refinery

Tabriz oil refinery is one of the oldest nine oil treatment facilities in Iran. It recently signed a €1.6 billion deal with a South Korean firm for enhancing the quality of output.

The agreement was signed between SK Engineering & Construction (SKEC) and Oil Design and Construction Company (ODCC) in Tehran. The signing ceremony was overseen by Abbas Kazemi, CEO of National Iranian Oil Refining and Distribution Company (NIORDC).

Gholam-Reza Baqeri Dizaj, CEO of Tabriz Oil Refining Company, says the refiner attracts foreign investors due to such advantages as ownership of a 50% stake in Tabriz Petrochemical Plant, proximity to five countries and supplying products of its own brand.

In an interview with Iran Petroleum, he said that the signature of deal with the South Korean firm would help the company enter regional and global market.

The following is the full text of the interview he gave to Iran Petroleum:

Q: When was Tabriz oil refining company established?

A: The basic design for the Tabriz oil refinery was done by the American UOP company in 1974 while Italy's Snamprogetti carried out the detailed design. The refinery became operational in February 1978 with a rated refining capacity of 80,000 b/d. In 1992, the oil refining capacity of this company rose to 110,000 b/d. The company was privatized in 2010. It has currently 15 refining units to process crude oil and produce petroleum products, and 8 utility units to support production.

Tabriz oil refining company owns a 7% share in Iran's refining industry. 90% of this company's products are destined for fuel supply and the remaining 10% are sold on stock market to be used as feedstock in downstream industries.

Q: You recently signed a €1.6 billion deal with South Korea's SKEC to upgrade production. In recent years, optimization projects including its new gasoline production section had become operational. What was the reason for the signature of the deal with SKEC?

A: As I mentioned this company was established 40 years ago. Initially, the refinery was designed in a way to provide 30% fuel oil which was transferred directly to a thermal power plant in Tabriz. However, with the turn of time and improvement in conditions and emergence of environmental obligations and also in consideration of decisions of NIORDC, we and other nine crude oil refining companies in Iran were obligated to reduce our fuel oil production level to below 10%, while at the same time improving the quality of other products to the Euro-5 grade, and reducing sulfur content to below 0.5% weight. Therefore, refinery development projects started in 2007 and the first step was to establish a new gasoline production unit. This unit became operational in 2013 with an investment of €265 million. Currently, 35% of the refinery's gasoline production complies with the Euro-4 standards. In order to bring the grade of remaining production to the Euro-4 standard, the isomerization unit will come online and by the end of the current [calendar] year or at the latest in the first half of the next [calendar] year, quality of the gasoline produced in the Tabriz oil refining company will be in full compliance with the Euro-4 and Euro-5 standards. Furthermore, gasoline refining project or gasoil output quality improvement is set to become operational next February with an investment of €100 million (€70 million for the main project and €30 million for utilities). That would raise the standard of this product to Euro-4 grade.

But improving the quality of fuel oil and converting it to lighter products would need significant investment. It was impossible for us to merely invest in this project; therefore, we sought credit line with a lower borrowing rate. After the implementation of the JCPOA (Iran's nuclear deal with six world powers) by the 11th administration, we embarked on negotiations with several companies, including South Korea's SKEC, which has technology to improve fuel oil production and finance the project. One year ago, feasibility studies for the improvement of fuel oil quality started. Over this period of time, 37 models were presented for the refinery and the most attractive one was chosen.

Q: What was the advantage of the SKEC model compared with others?

A: In addition to the model

the finance of project was of high importance to us. One reason for choosing the company was its specific financing resources. After the JCPOA implementation, we had held talks with companies that could receive credit line. In the end, South Korea managed to provide the credit line via Export- Import Bank (EXIM Bank). Afterwards, a €1.6 billion agreement was signed between Iran and South Korea for optimizing the output of Tabriz oil refining company. The agreement will be in effect for 48 months.

Q: What is the share of South Korea in this finance?

A: At least 75% of financial resources for implementing this project will be provided by South Korea's EXIM Bank. However, we noted in the contract that at least 51% of equipment and technical assistance must be provided by Iran and that equipment which would be manufactured domestically should not be imported. For instance, in the gasoline production unit of the refinery, which came on-stream in 2007, we had to import machinery and reactors. But now all thermal transducers and reactors needed for our projects are made in Iran. Most pumps are supplied by Iranian companies and we have only to import equipment and machinery whose manufacturing is not possible in Iran.

Q: Given the signature of this deal, will we witness more agreements with foreign companies in the future?

A: No, we will no longer sign any agreement with foreign companies for optimizing products supplied by the Tabriz refinery because this section is the last optimization project here; however, I think that we will need to attract foreign investment into petrochemical units over coming five years. Of course, SK has embarked on feasibility studies in this regard, but it does not mean that we will award the project to the Koreans. We intend to have cooperation with other companies, too.

Q: You had earlier said that the Tabriz oil refinery would attract foreign investment. Would you please explain further?

A: The first reason is that we neighbor Azerbaijan, Turkey, Iraq, Armenia and the autonomous Republic of Nakhichevan. In case our need for some products falls in the future, we will have the chance to be present in global markets. Furthermore, after the implementation of this agreement [with SKEC] we will step into regional and global markets for selling our products.

Second, we are the only crude oil refiner with 50% petrochemical share (Tabriz Petchem Plant). We are in fact a petrorefinery and we can convert any surplus products to petrochemicals to be supplied on European markets. In fact, we can develop downstream units and investors could easily be engaged.

Third, we are among the first refining companies in Iran to have received brand permit from NIORDC in the gasoline and gasoil sectors. Multinational companies can produce our high-quality products under our own brand and sell to venues located near the Tabriz oil refining company.

: How do you guarantee the sales of your products?

A: Our products enjoy strong technical support. We are the technical base of northwest Iran and we have boosted our experience and technical knowhow in recent years. We own the most hardware-advanced refineries in the refining and oil production phase. It is unique in Iran. We are not worried at all about the market because multinational companies are willing to supply engine oil and gasoline to spots near border via our company. With the signature of this agreement, I think that we can become more active in the regional market in the future and we can export our products to global markets under our own brand.

Q: How many types of products are currently produced at Tabriz oil refinery?

A: This company was producing eight oil products up to 2013; however, we have reached 13 over these four years. We plan to add seven more products to our basket to bring the variety of our products to 20 by the end of the [current calendar] year. That would boost our competitive advantage. We are legally bound to supply our products on domestic markets first. Then our products will be supplied to places which are under our direct supervision. In the final phase we will export surplus products.

Tabriz oil refining company is the only refinery that will produce its own base oil up to the end of the year and then we will try to diversify our base oil production.

Q: How much is the current rate of gasoline and gasoil production at the refinery?

A: We were producing 2.9 mb/d of gasoline by 2013, which has now reached 3.8 mb/d. We are also producing 6 mb/d of gasoil.

Q: What measures have you taken with regard to reducing sulfur production?

A: Establishment of a new gasoil refining unit to reduce the sulfur content of gasoil (from the current 7,000 ppm to below 50 ppm) and increasing the capacity of sulfur production from 60 tonnes a day to 104 tonnes a day are under way. They will become operational this year.

Australia, New Energy Giant

Whenever we hear about energy and rich oil and gas reserves the Middle East region, Russia and the United States strike our minds. Nobody may imagine that Oceania and Australia sit atop huge oil and gas deposits. Australia is forecast to become an energy giant in coming years. Over recent years, the Australians have invested heavily in their oil and gas fields in the hope of upgrading their standing in global markets.

Given the significance of increased production of energy carriers by Australia for markets, we try to review this issue from various aspects.

Dreams and Challenges

Australia is known to be home to natural resources like iron (3^rd world ranking), nickel (2^nd world ranking), coal (1^st world ranking) and gold (2^nd world ranking); however, it occupies the 29^th position in terms of oil reserves as it accounts for seven percent of the world oil reserves.

Australia first moved in the 1900s to extract oil from its western areas. The first exploration well was drilled near Warren River. After that, oil was explored in 1919 in Fitzory region, where oil extraction officially started in 1946. Although the bulk of Australia's oil reserves lie in its offshore west, central Amadeus and Cooper oil regions are of high significance.

Australia has seen its production drop over recent years. Its oil production fell from around 800,000 b/d in 2000 to 550,000 b/d in 2010 and to 270,000 b/d in 2017. However, there are estimates about increased oil production in Australia in coming years. Australia's energy company Linc Energy has announced existence of huge untapped shale oil reserves in the country. According to the company, the shale oil is situated on 30,000 square miles in Arckaringa Basin amounts to 233 billion barrels. Leading oil producer Saudi Arabia is estimated to have proven reserves of about 263 billion barrels of crude oil.

If the upper end estimates are correct then it means that the Arckaringa Basin is six times larger than Bakken, seventeen times the size of the Marcellus formation, and 80 times larger than the Eagle Ford US shale deposits.

Furthermore, Six basins in Australia stretching from coastal Queensland to Western Australia’s far northwest contain recoverable shale resources of as much as 437 trillion cubic feet of gas, all of which was previously inaccessible because it is contained in shale formations, which could be unlocked by “hydraulic fracturing.”

It means that Australia is rich in untapped hydrocarbon reserves which could be of great help to global energy supply in coming years.

Investment in LNG

Investing heavily in liquefied natural gas (LNG) production and exports, the Australian government hopes to claim the top ranking in this market in the near future. Australia's LNG production capacity was around 16.3 million tonnes a year in 2000, but two LNG projects were launched in 2006 and 2012 to raise the country's production capacity to 24.3 million tonnes a year.

The Australians hope to increase their LNG production capacity to 85 million tonnes in 2017 by completing seven more projects. That means Australia would outperform Qatar which is currently the leading LNG producer with an annual output of 77 million tonnes.

The Australian companies have invested $60 billion in LNG projects in recent years as part of their efforts to win toeholds in Asian energy market. Reaching such an objective will not go ahead smoothly. Over recent years, most LNG projects in Australia have experienced cost overruns. For instance, the initial $37 billion investment envisaged for the Gorgon project was revised up to $54 billion due to cost overruns.

What has added to the complexity of commissioning LNG projects in Australia is the sharp decline in oil prices in recent years.

The oil price fall has pushed LNG sellers to show more flexibility in negotiations for marketing their products. Consequently, oil majors become reluctant to finish their incomplete projects.

In addition to the Gorgon project whose startup has been delayed many times, Wheatstone LNG and Prelude are facing uncertainty.

Future Giant

Due to lack of infrastructure needed for shale industry development, Australia is currently slow in extracting shale oil and gas. However, similar to what happened after the US shale extraction, shale oil and gas recovery in Australia could largely affect global markets.

Significant factors like stable political atmosphere, transparent economic system, financial support by investors and entrepreneurs, specialized and skilled manpower, proper infrastructure in more areas, rich hydrocarbon reserves, untapped offshore and onshore fields and geographical proximity to Asia's growing demand could turn Australia into a country which would captivate oil investors.

Australia is set to become a hydrocarbon giant in the near future. That would guarantee energy security in the country and upgrade Australia's standing in global energy markets.

Australia is forecast to become a main supplier of energy to China, India, South Korea and Japan.

Studies Start on Senegal Offshore Project

Xodus has secured two environmental and social impact assessment (ESIA) contracts for projects offshore Senegal.

These are for the Cairn Energy-operated Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore blocks.

Xodus’ environmental team will undertake a study for drilling activities in the blocks and perform an ESIA for the Phase 1 development, based on an FPSO over the deepwater SNE oil field in the Sangomar Deep Offshore.

In addition, Xodus’ Technical Safety and Risk division will work with the environmental team on safety studies, and the company will work with its in-country partner, Earth Systems, to assist Capricorn and Woodside to ensure compliance with Senegalese environmental law.

Transfer of operatorship to Woodside for the development phase is due to take place next year with Cairn continuing exploration activities on the acreage.

The joint venture plans to submit an evaluation report and exploitation plan to the government of Senegal in 2018. The front-end engineering and design will also likely to start next year with a final investment decision targeted before the end of 2018.

Vietnam Drilling Update Issued

SOCO International has issued updates on its development and exploration programs offshore Vietnam.

The company and its partners received formal approval for the updated TGT full field development plan from the Vietnamese government in February.

This is said to be a ‘dynamic’ plan outlining development options beyond 2017, based on prediction scenarios drawn from the 2016 TGT reserve assessment report and the 2015 TGT geological model and dynamic simulation.

Approval provides for up to 18 additional wells, with locations to be defined at a later date, and installation of new processing equipment on the H1 wellhead platform (WHP). The aim is to arrest and then reverse the field’s production decline.

Development drilling started last fall with two infill wells from the H4-WHP. Two more infill wells were added to the program for execution during 2017.

In March, the PVD VI jackup resumed operations from the H1-WHP, drilling and completing the TGT-30P well, targeting the Miocene and Oligocene reservoir horizons in the crestal part of the H1.1 fault block.

This well is currently producing around 2,500 boe/d, with an as-predicted 40% water cut.

Australia LNG FPSO in Place

The Ichthys LNG project’s FPSO has been moored in 250 m (820 ft) of water, 220 km (137 mi) offshore Western Australia, according to operator INPEX.

The 336-m (1,102-ft) long FPSO, named Ichthys Venturer, is designed for 40 years of operations without dry dock. It was connected to 21 pre-installed mooring chains, weighing more than 15,000 metric tons, in the Ichthys field.

The FPSO has been designed to process and store most of the condensate delivered from the Ichthys LNG project’s central processing facility, Ichthys Explorer, before periodically offloading it to carriers for export to market.

The Ichthys Venturer is moored 3.5 km (2.2 mi) away from the Ichthys Explorer. Hook-up and commissioning are under way.

-Storms Impact Petrobras’ Overseas Production

Petrobras’ oil and gas production last month totaled 2.72 MMboe.

Output from the company’s oil fields in Brazil averaged 2.11 MMb/d, in line with volumes for July.

Presalt production was 2.5% lower; however, due mainly to the scheduled stoppage of the FPSOs Cidade de Maricá and Cidade de Itaguaí at the Lula field in the presalt Santos basin.

The company’s oil production from overseas fields fell 4.9% to an average of 62,000 b/d, and gas output from these fields was 7.2% lower at 7.8 MMcm/d.

Shutting in of producing fields in the US Gulf of Mexico during the passage of Hurricane Harvey was the main factor.

-North Sea Ekofisk Reaches Gas Export Milestone

ConocoPhillips Norge has commemorated 40 years of gas deliveries from the Ekofisk field in the southern Norwegian North Sea.

First gas traveling south through the offshore Norpipe line reached the NorSea Gas Terminal at Emden on German’s north coast on Sept. 17, 1977.

This was Norway’s debut as a gas exporter to the European market.

In the 1970s, bringing the oil and gas to shore in Norway was not technically feasible, the company says, mainly because the Norwegian Trench was too deep to cross with a pipeline at that time, so the end station for Norpipe’s 443-km (275-mi), 36-in. gas line was sited at Emden.

Construction started during the fall of 1973. Until the terminal was opened four years later, gas from Ekofisk was re-injected into the reservoir.

In 1973, Norwegian Phillips Group signed the first gas sales agreement for the Norwegian shelf with a consortium comprising German’s Ruhrgas, Belgium’s Distrigaz, Gaz de France, and Gasunie in the Netherlands.

The new pipeline was the world’s longest welded pipe structure, with two compressor platforms for pressure support.

ConocoPhillips operated both pipeline and the terminal for a time, then briefly in the Gasport joint venture with Statoil. Over the last decade, state-owned Gassco has operated the pipeline and the terminal in Emden on behalf of Gassled.

In May 2016, a new reception terminal opened in Emden, designed to receive and distribute gas from fields in the Greater Ekofisk Area and others offshore Norway that export their gas through Norpipe.

To date more than 250 bcm of dry gas have passed through the Norpipe system to Emden.

 Statoil Outlines CO2 Reduction Measures

Statoil says that it has already achieved a target set in 2015 to reduce carbon dioxide (CO2) emissions from its shelf operations by 2020.

In 2008, the Norwegian petroleum industry, under the direction of Konkraft, set a reduction target across the shelf equivalent to 1 MM metric tons/yr (1.10 MM tons/yr) of CO2 until 2020: Statoil’s share was 800,000 metric tons (881,849 tons).

Two years ago, the company announced it had already achieved this goal, and had decided on a further 50% cut to 1.2 MM metric tons (13.22 MM tons) the same year.

In August 2016, a new initiative led by the Norwegian Oil and Gas Association, announced further carbon reduction measures equivalent to 2.5 MM metric tons (2.75 MM tons) on the shelf by 2030, of which Statoil’s share is 2 MM metric tons (2.2 MM tons).

Arne Sigve Nylund, Statoil’s executive vice president, Development and Production, Norway said: “We do not have all of the answers to how to achieve this, but the results we have achieved show that we can find solutions that make this possible.”

Statoil’s focus has been on reconstructions or improved operation of gas turbines, gas compressors, pumping installations, reduction of gas flared, and better fuel consumption for mobile rigs offshore.

Since 2007, it has cut emissions from gas flaring by 140,000 MM tons (154,324 tons) of CO2.

On the Statfjord A platform in the North Sea, it has changed its methods of producing drinking water, cutting emissions by around 4,800 MM tons/yr (5,291 tons/yr).

At Åsgard A in the Norwegian Sea the company has modified two gas compressors, saving 8,200 MM tons/yr (9,039 tons/yr)of CO2, and at Oseberg South in the North Sea, it has installed new control systems for two main power turbines, in the process cutting  annual CO2 emissions by around 10,000 MM tons (11,023 tons).

By using gravity pressure from the sea instead of a water injection pump on the Kristin field in the Norwegian Sea, emissions here have fallen by 7,375 MM tons/yr (8,129 tons/yr). Also at Kristin, a newly installed check valve to reduce pressure drop in the inlet manifold has cut CO2 emissions by 10,000 MM tons/yr.

Unfinished Hydropower Plant Sold to Turkey

Norwegian utility Statkraft has sold a partially-constructed hydropower plant in Turkey to local conglomerate Limak Holding, which will invest some $400 million in the plant and expects to start operations by 2021, the firm told Reuters.

The Cetin power plant in southeast Turkey was to be Statkraft’s largest hydropower plant outside Norway but the company had to stop construction due to fighting between Turkish security forces and Kurdish PKK militants in 2016.

Only 20 percent of the project was built and Statkraft wrote down assets valued at 2.1 billion crowns ($269.8 million) last year.

“The deal is closed,” said a Statkraft spokesman, adding the transaction’s value would be published in the firm’s third-quarter results on Oct. 26.

Limak, which is involved in sectors such as energy, construction and tourism, plans the facility to be operational by 2020 but the beginning of 2021 is a more “realistic” date, a Limak official, who declined to be named, told Reuters.

“When Limak took over, some construction work had taken place and some of the equipment had been ordered. From today onwards, Limak will make around $400 million in investments,” the source said.

Security was not an issue in the area, the official added. “We haven’t experienced any issues about security in the area. Limak is already an investor in the region with different facilities,” the person said.

Algeria's Foreign Reserves Drop to $102bn

Algeria’s foreign exchange reserves fell by $2 billion in August and will drop further, to $102 billion by the end of this month, due to the country’s high imports bill and a sharp fall in energy earnings, Prime Minister Ahmed Ouyahia said.

Falling reserves will hit the value of the OPEC member nation’s dinar currency, which has already seen a 25-30 percent depreciation over the past three years, Ouyahia told parliament.

Reserves were $105 billion in July, having declined from $195 billion in 2014 when global crude oil prices started falling.

That caused financial pressures that pushed the government to reduce public spending and set import restrictions, but the value of purchases from abroad is still high.

Algeria’s oil and gas exports account for 60 percent of the state budget and 95 percent of total sales abroad.

“The value of the dinar is linked to two things: the exchange reserves and the evolution of other currencies,” Ouyahia told lawmakers who had expressed concern that planned amendments to the Credit and Money law would hit the dinar.

The amendments, which will be discussed by parliament, will allow the central bank to lend directly to the public treasury to help it finance budget deficits and internal public debt.

LNG Prices Edge Higher on November Demand

Asian spot LNG prices rose, buoyed by the outcome of a two-cargo sale tender from Russia’s Sakhalin II export plant, as well as a purchase by Japan and demand from India.

Spot prices LNG-AS for November delivery rose about 15 cents to $7.60 per million British thermal units (mm Btu).

Russia’s Gazprom sold one of two mid-November loading cargos from its Sakhalin II plant for as much as $7.80 per mm Btu, traders said, but prices have retreated since, with some cautious northeast Asian buyers waiting out the rally.

Still, November shows a relatively strong contango, with the back-end of the month trading above the front, traders said.

A sales tender from Indonesia’s Donggi Senoro facility for early November delivery fetched $7.50 per mm Btu. The buyer was a Japanese utility, sources said.

Indian buyers including Gail and GSPC sought supply.

Kuwait closed a tender seeking a November shipment.

At France’s Montoir terminal, a cargo held in storage will be reloaded onto the Cool Runner tanker for onward export to state-run Petrobras in Brazil, a market source said.

State-run Pakistan LNG Ltd launched a tender seeking four cargoes for January delivery, according to documents posted on the company’s website.

The delivery dates are Jan. 11-12, 16-17, 21-22 and 26-27, according to the tender notice.

Bids must be submitted by Oct. 18 and are valid until Nov. 10, according to a separate bidding document.

A potential bullish factor for Asian winter markets is potential delays to production from Chevron’s new Wheatstone LNG project.

The Asia Venture LNG tanker was initially headed for Wheatstone with a due date of Sept. 24 but was diverted toward the port of Dampier, indicating fresh export delays.

Wheatstone was initially scheduled to export its first cargo in early September.

“Start-up of the Wheatstone project is progressing, with Train 1 close to first LNG production,” a Chevron spokesman said.

Puerto Rico Oil Terminal Still Closed

Buckeye Partners LP’s Yabucoa oil terminal in Puerto Rico remained closed, the company said, days after Hurricane Maria left a trail of destruction and at least 25 people dead across the Caribbean.

The U.S. oil storage and transportation company did not say if the tanks at the 4.6-million-barrel terminal were damaged by the storm, which made landfall near Yabucoa, but it said a full assessment of the facility is under way.

“We are working to maintain the safety and well-being of our Yabucoa, Puerto Rico employees,” it said in a statement.

A larger terminal operated by U.S. NuStar Energy LP on the island of St. Eustatius, with capacity to store up to 13.03 million barrels of oil, also has been unable to reopen after a previous hurricane, Irma, affected several tanks.

The closure of oil terminals in the Caribbean and restrictions to load and discharge large vessels in several Texas ports have constrained flows of crude and refined products across the Atlantic in recent weeks.

Maria, the second major hurricane to hit the Caribbean this month, lashed the Turks and Caicos Islands after knocking out power to all of Puerto Rico and pushing several rivers to record flood levels.

Egypt's Zohr Gas Field to Yield 500 mcf/d

Egypt’s giant new offshore Zohr gas field in the Mediterranean is set to be producing 500 million cubic feet per day by the end of 2017, Prime Minister Sherif Ismail said.

The country imports peak at 10-12 shipments of natural gas per month, Ismail told reporters at the General Authority for Investment, adding that imports should decline significantly once the field starts producing.

Discovered in 2015 by Italy’s Eni with an estimated 30 trillion cubic feet of gas, the Zohr field is due to start producing in December.

Egypt’s own natural gas output rose to about 5.1 billion cubic feet per day in 2017 from 4.4 billion cubic feet in 2016 with the start of production from the first phase of BP’s North Alexandria project.

The country has been seeking to speed up production from recently discovered fields, with an eye to halting imports by 2019 and achieving self-sufficiency

Stormy Weather Exposes Refiners Weaknesses

Hurricane Harvey’s crippling impact on U.S. oil refinery operations this month and the challenge buyers faced in filling the gap in gasoline supplies has exposed a shortage of spare refining capacity around the globe.

Nearly a quarter of U.S. refining capacity was knocked out by the storm this month, driving U.S. gasoline prices to two-year highs above $2 a gallon. Many plants are still struggling to resume normal operations, prompting other refineries around the world to crank up output to fill the gap.

Global refining is considered to be running at its maximum when capacity utilization is 85.5 percent, the highest level reached in the modern era, BP’s head of refining economics Richard de Caux said.

Today the utilization level is 83 percent, he told the Platts Refining Summit in Brussels, suggesting a very slim buffer.

“The spare capacity is not really there,” said Dario Scaffardi, general manager of Italian refiner Saras. “In as much as consumption worldwide is growing, refinery capacity is not long at all.”

Spare capacity is needed to meet demand when refineries undergo maintenance or face unexpected outages. Too much in reserve is costly for refiners. But Hurricane Harvey has shown the world may not have enough.

Consultant JBC Energy said refiners could process 83 million bpd of crude by the end of 2017. In 2016, BP data showed processing at roughly 80.6 million bpd.

Energy consultancy FGE estimates spare global refining capacity, based on official or nameplate numbers, stands at 14 million bpd, down from 18 million bpd earlier this decade.

But nameplate figures can be misleading, as they are based on capacity of a refinery when built or refurbished. Many cannot match those levels due to years of underinvestment. So actual spare capacity may only be a fraction of that 14 million bpd.

For example, Venezuela’s four refineries have run at record lows this year as they lack spare parts. Plants in Mexico, Brazil and Nigeria have also suffered poor investment for years.

At the same time, demand for oil and its products is climbing, led by China and India, and more developed economies.

-Damaged New Zealand Fuel Pipeline Restarted

A damaged pipeline that resulted in a fuel shortage across New Zealand and grounded hundreds of flights was restarted after repairs were completed, officials said.

“This is a significant milestone,” New Zealand Refining Co Ltd said in a statement on its website. It said it expected to be delivering jet fuel to Auckland Airport.

More than 100 flights were cancelled over the past three days and many more delayed, disrupting the plans of thousands of travelers.

The government called in the military to help truck in supplies of fuel just days before a general election.

Damage to the 170 km (105 miles) fuel line, which supplies almost all of the fuel for New Zealand’s largest city, was believed to have been caused by a digger.

Refining NZ Chief Executive Sjoerd Post later told New Zealand media that full capacity would probably not return until early next year.

“We are in a start-up process ... so we’re going carefully,” Post told Fairfax Media. He said the pipeline would operate at 80 per cent capacity until further tests were carried out over the next few months.

The New Zealand government set up a commission to oversee the response to the crisis amid concerns raised by tourism industry officials about the impact on the international reputation of the South Pacific island nation.

Tourism has soared to record levels of more than 3.4 million visitors a year to New Zealand.

U.S. Oil Drillers Cut Rigs

U.S. energy firms cut the number of oil rigs operating for a third week in a row as a 14-month drilling recovery stalled as companies pared back on spending plans when crude prices were softer.

Drillers cut five oil rigs in the week to Sept. 22, bringing the total count down to 744, the least since June, General Electric Co's Baker Hughes energy services firm said in its closely followed report.

That put the rig count on track for a second month of losses in a row and also its biggest monthly decline since May 2016. It was also on track for its first reduction in rigs over a three-month period since the second quarter of 2016.

The rig count, an early indicator of future output, is still higher than the 418 active oil rigs a year ago as energy companies had mapped out ambitious spending programs for 2017 when they expected U.S. crude to be higher than the $50 per barrel range where they are currently trading.

Crude prices were up about 7 percent so far this month after declining in five of the past six months, including a near 6 percent drop in August as rising U.S. output helped to add to a global glut.

U.S. shale production is set to rise for the 10th month in a row in October to a record high 6.1 million barrels per day, according to a U.S. government projection this week.

Although several exploration and production (E&P) companies have trimmed their investments for this year due to the drop in crude prices, they still planned to spend much more this year than last year.

Analysts at U.S. financial services firm Cowen & Co's capital expenditure tracking was unchanged this week, showing the 64 E&Ps it tracks planned to increase spending by an average of 49 percent in 2017 from 2016.

That expected 2017 spending increase followed an estimated 48 percent decline in 2016 and a 34 percent decline in 2015, Cowen said.

Global Oil and Asian Product Market, September

Oil prices rose on during September on the back of the following reasons. The key points in crude market is mentioned in the following.

The International Energy Agency announced that global surplus of crude was starting to shrink, even though U.S. data showed another big increase in crude inventories due to the ongoing effects of Hurricane Harvey. Analysts say U.S. stocks data may not give a full picture in coming weeks because of two major hurricanes — Harvey and Irma. However it is obvious that hurricane caused differential between US crude grades and other grades of crude oil in the other region, to be widened. The US crude stocks increased as they couldn’t be exported due to terminals closure and lower run rates of the refinery.
U.S. gasoline and distillate stocks fell sharply as Harvey shut nearly a quarter of the nation's capacity with major Gulf Coast refineries only starting to come back to life in the last few days.
The market is reacting in anticipation of refineries restarting, at the same time expecting a decline in demand due to the after effects of Hurricanes Harvey and Irma. Overall, the IEA said in its monthly report that robust global demand and an output drop from OPEC and other producers should help balance inventories.

Asian Product Markets

During September light and Middle distillates and also fuel oil performance were healthy. The fundamentals in these markets were strong mostly due to the recent hurricane in US and cut in US inventories.

Light Distillates (gasoline, naphtha)

Gasoline cracks – differential between gasoline prices and Dubai crude prices- increased slightly. Supply in Asian gasoline market was already tight amid strong demand from Indonesia and India, and this was exacerbated by pulls from Mexico's west coast for Asian barrels and European barrels being directed to the US Atlantic Coast, leaving Asian and Middle Eastern stocks and going into US stocks. Traders believe that Asian Gasoline market without US hurricane couldn’t be strong.

Naphtha market improved largely due to the healthy fundamentals. Asian naphtha market participants expected a lower volume of October-arrival naphtha barrels from the Mediterranean to East Asia, limiting supply in the region. On the demand side, good petrochemical margins amid lack of condensate in Asia, caused the petrochemical units to keep their run rates high and try to substitute naphtha with condensate as their feedstock. Looking ahead, naphtha market will continue its strength due to cold season.

Middle Distillates (gasoil, jet fuel)

The Asian gasoil market was active during September on the back of ample buying interest and a wider EFS. Meanwhile, tighter supply has helped support the Asian gasoil market. The widening EFS had pulled barrels from Asia and the Middle East to west of Suez. On the supply side, Singapore's commercial onshore middle distillate stocks including gasoil, jet fuel and kerosene amid lower products stocks added more pressure to the market. The open arbitrage from Asia and the Middle East to west of Suez, as mentioned above, has led to a further draw on stocks.

Fuel Oil

Asian fuel oil market is healthy and expected to remain supported in the near term. The optimism stemmed from expectations of a relatively lower volume of arbitrage supply into Singapore in September and October amid steady demand, especially from the end-user bunker market. Structurally, supply in the market appeared to be tightening, with relatively less volumes from Mexico, Venezuela, the US Gulf Coast and Russia which are major suppliers.

Deal Signed with Foreign Firms

GICO Counts Days to Become International

Ghadir Investment Company (GICO) was established 26 years ago. The holding has extended its activities to different sectors of industry and has grown into a leading company listed on stock market. The company has been recently cleared by the Iranian Ministry of Petroleum to carry out exploration and production (E&P) activities. It may be inexperienced when compared to rival Iranian companies; however, it hopes to become a qualified company over five years.

On August 15, Turkey's Unit International signed a $7 billion agreement with Russia's state-owned Zarubezhneft and Iran's GICO to drill oil and natural gas wells in Iran.

Abdorreza Haji-Hosseinnejad, former CEO of Petroleum Engineering and Development Company (PEDEC), is currently serving as director of exploration and production at GICO.

In an interview with" Iran Petroleum", he said it was high time that Iranian companies learnt how to manage megaprojects and work with international companies.

Here is the full text of the interview:

Q: GICO is an investment holding listed on stock market. Its activities involve a variety of sectors including oil, gas, petrochemicals, electricity and mining industry. You have no experience in upstream oil sector. How come you decided to bid for oil and gas projects within the framework of an E&P company?

A: You are right, we have no experience in upstream oil sector; however, we think that GICO, which is comprised of seven holdings, is technically, financially and economically qualified and can use its experience in operating upstream oil projects.

Of course, GICO is not unfamiliar with oil and gas industry. As you know, this holding has been largely active in petrochemical and refining industries and has fared well.

We are also active in power plant construction and in the mining and metal sector. We are operating $1.1 billion worth of projects with foreign investment. We supply some 15% of the country's cement needs, have around 1.5mn square meters of construction projects under way and we are currently building one of the tallest residential high-rises in Tehran. Therefore, you can see that GICO is not novice in economic activities. You must know that our shareholders are state pension funds, Oil Industry Pension Fund Investment Company (OPIC), Bank Saderat Savings Fund, Villagers Insurance Fund and more than 80,000 natural persons who are mainly retirees of Armed Forces and Petroleum Ministry. Therefore, we think that ground is paved for us to extend our activities to upstream oil sector. If we can push ahead with our company's activities in upstream oil sector, we will be the second company after National Iranian Oil Company (NIOC) to have handled both upstream and downstream oil projects.

Q: Nonetheless, upstream oil is totally new for your company.

A: We know quite well the upstream oil sector has its own requirements with regard to specialty, techniques and engineering. But we can benefit from the experience of veteran oil managers. We also think that macro-management is the link connecting our activities in GICO. Macro-management would arrange coordination between capital, technology and investor. I have to note that many large companies that have won fame in the world today started from scratch and they became specialized. We can do the same in upstream oil sector. GICO has won Ministry of Petroleum's approval for E&P projects.

Q: You have a brilliant record in downstream oil industry, but as I noted upstream is totally different from downstream. Furthermore, E&P activity is a new experience that would help certain companies become E&P firms. How come you decided to shift your activities to E&P?

A: GICO's strategy, which has won the approval of the company's Board of Directors, has set out our roadmap for the coming 20 years. The roadmap requires us to step into upstream industries for completing the company's production chain and activities. Meantime, oil sector continues to play a significant and vital role in the country's development. Naturally, a company like Ghadir will be willing to enter this sector.

Q: But you had not stepped into this sector up to now.

A: We should have done so. Our absence has delayed our progress in this sector. After the Ministry of Petroleum issued a call for the submission of documents by companies willing to operate in exploration and production, we sent our own documents in thousands of pages. The Ministry of Petroleum had a long procedure for vetting. We are finally qualified for activity in this sector. Of course, qualification is only the first step and we will have to take many more steps with a view to implementing projects we envisage for the future. Some of them are recruiting specialized manpower and providing technical, software and hardware facilities. We are required to record success in upstream sector for our company. We asked our former colleagues to join us so that we would more knowingly take steps for activity based on the new model of oil contracts.

It is true that operating projects based on the new model of oil contracts is difficult in terms of financing and project risk; however, GICO has good experience in financing its projects and partnership with foreign companies. That could help the company finance projects. We have currently more than $10 billion worth of development and petrochemical projects under way. Therefore, we own the necessary mechanisms for managing projects and we can properly benefit from our past experience.

Q: How do you plan to manage project risk?

A: We need to be accountable to our stockholders for any project. We cannot run risks on their capital. Therefore, before handling any project extensive technical and economic feasibility studies need to be conducted, the rate of return on investment need to be calculated with accuracy and precision and we must have an assessment of the future of market and rivalry for projects. Definitely, we will adapt our calculated rate of return on investment with criteria set for new oil contracts. Therefore, we will not step into projects which are likely to be non-profitable for our shareholders. We are interested in working in upstream oil sector, but we will choose projects whose profitability for us will be justified.

Q: You did not say in clear terms how you plan to manage project risk.

A: Let me answer your question from a different viewpoint. When Mr. Zangeneh, Iran's minister of petroleum, communicated regulations for the establishment of E&P companies he knew quite well that our company had no experience in exploration and production. The petroleum ministry had not provided any ground for the growth of E&P companies up to that time. Now the ground is prepared and the Ministry of Petroleum is well aware that we do not have qualified E&P companies. We have good EPC companies. However, I think that a very intelligent and proper decision has been made by the Ministry of Petroleum in this regard. At the beginning they can become partner to foreign companies in megaprojects before being able to operate projects independently. We know that E&P activity is risky. We are no longer an EPC contractor. We intend to learn the procedure for the management of megaprojects to be able to become one day like [France's] Total or [Italy's] Eni and operate projects.

Q: Which tools do you think you need for success in this sector?

A: Under the present circumstances, I think that E&P companies that have capital would be successful because even technology could be acquired with capital. In Iran, we have very qualified consulting companies for surface activities. We can benefit from their potentialities. But we need modern technologies in drilling in order to apply modern subsurface methods. I did not mean acquiring new drilling rigs. Rather I mean that drilling methods must be such that we would be able to use several layers at the same time. This method of drilling belongs to American and Italian companies. Russian companies say they own such technology. In the new model of oil contracts, enhanced recovery from oil fields is a major cause of concern for the Ministry of Petroleum. I think that we can apply new methods in this sector. I should also note that Mr. Zangeneh has studied civil engineering, but he knows quite well that drilling can help us enhance recovery. At the moment, the only way for us to enhance recovery is to apply modern drilling technologies. I think that enhanced oil recovery is a logical demand envisaged in the new model of oil contracts by the Ministry of Petroleum. Anyone opposed to it is showing enmity.

Q: Can capital help bring in new technologies under new oil contracts?

A: I think that we can buy technology if we have enough capital and credit. Currently our main problem is capital, and technology comes next. If you have technology but you do not have money, nobody will take you into account. But with credit you can go ahead and many will be eager to cooperate with you. Of course, I need to highlight that client is also instrumental. A strong client can make a weak contractor strong. The contrary is also true. Therefore, in the new round of oil and gas field development based on the new model of oil contracts, the NIOC has proven to be a qualified client.

Q: Of course, it is not such that anyone with capital could be involved in upstream oil projects. There is a specific mechanism for that. You seem to have peace of mind for financing. But development of a field is not limited to having money.

A: No, that's not so. Attracting capital is not easy at all. But I can say that we are in appropriate conditions with regard to financing. When for instance, we can finance projects worth $10 billion it shows that we have good potential in this regard. Even now that I am talking to you, a number of foreign oil companies have come here and we have held talks. Relying on our general potentialities in terms of human resources, experience, financing, technology and banking services, I think that we will be able to cooperate with each other. Of course, activity in the development of oil fields is our first experience. We hope to be able to attract good partners for developing oil fields.

Q: What are your strategies for developing oil fields?

A: Since it is our first experience, we will mainly enter greenfield projects with no need for improved oil recovery (IOR) and enhanced oil recovery (EOR). If EOR and IOR are needed, we will enter a tough and complicated process which is risky. We don't want to enter this sector. We plan to enter medium-sized greenfield projects. For bigger fields we prefer to be a partner to foreign companies to learn the task. Of course, we will accept risks and provide financing based on our share of the project. Meantime, we will cooperate with companies that would have necessary technology for developing our envisaged field and accept risks for the job. We can provide 20% to 30% of capital and accept risks. Therefore, I can say that in big fields we are willing to be the second partner, while in small and medium sized fields we intend to be project leader.

Q: Which fields do you prefer?

A: Since we are at the beginning of our work we prefer to be active in onshore oil and gas fields. We are not still ready for offshore work and if we do not have a proper assessment of risks we may run into trouble in the future. Of course, in case a strong foreign partner agrees to operate an offshore project we can be a partner in offshore field development projects.

Q: Last April, NIOC signed an MOU with GICO to study four oil and gas fields. What stage are the studies in now?

A: The MOU requires GICO to present the findings of its studies on Sepehr, Jofair and Darquain (Phase III) oil fields and Kish gas field within six months. Now we hope that we will be able to present the results of our studies to NIOC before that schedule. GICO insists on drawing up a master development plan (MDP) for each field and it hopes to be involved in all of the four fields. Since this holding company consumes both oil and gas, it is interested in handling the development of these fields. For MDPs, we have signed an agreement with a competent domestic consultant. We insist that an international oil company (IOC) reviews our MDP. But as you know upstream oil sector requires big investment. Under new oil contracts we have to specify how much oil we can produce and make clear our output for years. In case we fail to reach the promised output, we will be facing penalties. Therefore, we must be careful with the proposals and figures we announce.

Q: You signed a trilateral agreement with two foreign companies in Russia. Would you please explain about that?

A: Yes, that’s true. As an E&P company, GICO is the leader of the project and equal shares have been envisaged for the companies involved in the agreement. Based on this agreement, it is possible for each party to propose joint investment for the development of oil and gas fields inside and outside the country. The parties have also agreed to follow up on all economic and technical activities pertaining to the implementation of oil and gas field development projects and formation of techno-economic steering teams.

Q: In addition to these fields, what other fields do you like to develop?

A: We do not insist on being present in the development of more fields. We are currently assessing ourselves and we want to use our potential fully for the development of these four fields and finalize their development contracts.

Q: Which companies have you negotiated with?

A: Specifically we have had negotiations with Lukoil [of Russia] for the development of Ab Teimour and Mansouri fields. We have also had talks with German and Chinese companies, [Britain's] BP and [Azerbaijan] SOCAR to be their partners for the development of oil fields. We have also specified several small and medium sized oil fields which we plan to develop, and announced them to NIOC. They are assessing our potentialities.

Q: How many years do you think GICO would need to start operating oil projects like any other E&P company?

A: Within five years we will definitely be able to claim our ability to develop projects outside Iran. Since the Ministry of Petroleum has already prepared the ground for the activity of these companies in Iran we can be hopeful that the technical and financial capabilities of E&P companies would be upgraded in Iran gradually so that they would be able to play their roles in world markets. The Ministry of Petroleum has already done what it could. Now it is time for Iranian companies to prove their capabilities.

RIPI Stepping in Post-War Syria

Syria to Own Iran-Made Refinery

Iran's Research Institute of Petroleum Industry (RIPI) is the largest research institute in Iran and one of leading scientific centers in the Middle East. Over recent years, it has made great achievements regarding development of technological savvy and processes needed in Iran's petroleum industry. In its recent move, the RIPI has designed a fully Iranian refinery to be built in Syria in cooperation with an international consortium.

News of the planned refiner construction was announced at a press conference organized by RIPI managers.

Mansour Bazmi, deputy head of RIPI for technology and international affairs, said offering oil refinery construction technology to Syria was one of technological services provided by the research institute.

"After the relative return of calm to Syria, this refinery will be constructed. It has been agreed that Iranian companies would have a lion's share in the refinery construction," he said.

Bazmi said the refinery construction would cost $1 billion, adding: "The consortium owning the refinery is currently in talks with a financer."

He added that two other units for gasoline production and increasing the octane number of gasoline at the planned refinery are to be studied by the RIPI.

He said the planned refinery in Syria would be supplying liquefied petroleum gas (LPG), gasoline, gasoil, kerosene, fuel oil and bitumen.

"Light and heavy crude oil of Syria will be the feedstock of this refinery. In order to attract investors, discounts will be offered on crude oil supply," said Bazmi.

He said the refinery would have a capacity of 140,000 b/d, which would operate in two phases. The treatment facility will be fed on blended crude and heavy oil.

Bazmi said that currently seven refining units are operating on technologies developed by the RIPI.

"Operating two other refining units, using RIPI technical knowhow, is on the agenda," he added.

Bazmi referred to the RIPI's cooperation with South Korea in developing technology for liquefied natural gas (LNG) production.

He said that RIPI had signed an agreement with the National Iranian Tanker Company (NITC) for future cooperation.

He added that some foreign companies that had held talks with the National Iranian Oil Company (NIOC) about the framework of new oil contracts have also had meetings with the RIPI. The foreign companies, he said, have demanded that the RIPI be involved in the development of fields.

Bazmi said RIPI had held talks with Iranian exploration and production (E&P) companies, adding that the talks would continue.

He said that RIPI was the only research institute in the country to have sold technical savvy and services worth millions of dollars to foreign companies.

"This company was selected as the best research center in the country for successive years. Registering more than 130 inventions and international patents in Europe and the US, among other countries, would be only one reason for such a choice," said Bazmi.

First Fully Iranian Refinery

Akbar Zamanian, head of Downstream Industries R&D Department of RIPI, said the refinery planned in Syria would be the first one to be constructed fully by Iranians.

"In the century-old history of oil industry, it is the first time that designing and awarding license of an oil refinery are fully done by Iran," he said.

Zamanian said Syria would need fuel and petroleum products during its reconstruction period, adding: "The capacity of this refinery will be 140,000 b/d in two phases and will be fed by a mixture of light and heavy crude oil supplied in Syria."

"Syria has two oil refineries, one of them (Homs) needs renovation as it is worn-out. Therefore, construction of a new refinery was planned," he added.

"The planned Iranian refinery would have a total of nine processing units, five of which are under license which has been awarded by the RIPI," he said, adding that the refinery is currently in the financing phase.

Zamanian said a Venezuela-Iran-Syria consortium, which is to build the refinery, as demanded construction of two more RIPI-licensed units for the purpose of increasing the economic attractiveness of the refinery. He added that fulfillment of this request by the RIPI would boost the rate of return on investment in this refinery.

1st Odorizer Unit to Be Launched

Zamanian also said that RIPI is helping launch the first odorizer production unit in the country by the end of this year. He said that this unit would be producing 800 tonnes a year of odorizer. The RIPI technology has been applied to this unit which is currently in the pre-commissioning stage.

"This unit, which is to become operational within three months, can meet the country's needs for natural gas odorizer and also provide a chance for the export of this product," he said.

In a bid to prevent risks of possible leaks of natural gas, it is necessary to use first an alarming substance. Therefore, for that purpose, some sulfur compounds are used due to their penetrating smell.

RIPI and National Iranian Gas Company (NIGC) have helped the country to become self-sufficient in producing odorizers.

An odorizer is a device that adds an odorant to a gas. The most common type is one that adds a mercaptan liquid into natural gas distribution systems so that leaks can be immediately detected

Other types have been used for carbon dioxide fire extinguishers.

Natural gas odorizers run the gamut from a simple wick in a container to computerized equipment, which controls the amount of odorant based on flow rate, tracks the amount of odorant in inventory, and alarms when odorant is not being injected into the gas stream.

Odorants used for natural gas vary from country to country, depending on gas distribution regulations. Some odorants contain sulfur, which is oxidized to sulfur dioxide when the gas is burned.

Zamanian also said that the Demercaptanization of Condensate (DMC) unit of Phases 2 and 3 of South Pars gas field was 50% complete. "This unit is set to become operational in 18 months. The money invested in this project will return in less than three years as it generates value-added for gas condensate."

He said that development of composite equipment was another strategy pursued by RIPI, adding that the first composite pipeline for transferring crude oil has been designed by the RIPI specialists, sponsored by the National Iranian South Oil Company (NISOC). The pipeline, which is 10 kilometers long, delivers sour crude oil from Maroun to Ahvaz.

Design, Production and Commercialization of Catalysts

Zamanian referred to mass production and commercialization of some catalysts used in the refining and petrochemical sectors as another RIPI achievement for reducing dependence on imports and creating jobs.

"More than 5,000 tonnes of catalyst and absorbent is used in the country's petrochemical and refining industry. Self-sufficiency in these products could be a big step towards realization of policies of resilient economy," he said.

"Of 12 catalysts which the RIPI plans to design and build, 7 have been assigned to private sector and domestic manufacturers and four have already reached mass production stage," he added.

Zamanian said the catalyst needed for the process of reforming naphtha in the Bandar Abbas Gas Condensate Refinery had been produced by a domestic company using the RIPI technology.

"Furthermore, aromatic catalyst has been developed by the RIPI and produced the private sector. It is currently used at Bandar Imam Petrochemical Plant," he said.

RIPI Drilling, Enhanced Recovery Achievements

Ezzatollah Kazemzadeh, who heads the RIPI Petroleum Engineering Department, said a special drilling fluid had been designed and built, which would save costs by 70% and earn the petroleum industry billions of rials in profits.

He mainly spoke about the RIPI activities in drilling and enhanced recovery, saying: "In the drilling sector, after the implementation of a national project for self-sufficiency in strategic and largely used additives in drilling, completion and stimulation of wells, nine additives have been manufactured domestically."

He said that this fluid would be used in other wells under an agreement which would be signed between the RIPI and the Exploration Directorate of the NIOC.

Kazemzadeh referred to the use of light and ultra-light fluids and such achievements as faster drilling and lower-cost drilling by benefiting from these fluids, saying: "Another challenge in the drilling industry is to deal with such problems as the fall of well wall and bits being balled up during shale drilling. A new fluid was tested to remove this problem. The results of this test showed that the drilling output had increased significantly."

Referring to enhanced recovery, he said that the RIPI had conducted studies on enhanced recovery from Yadavaran oil field, gas injection into Cheshmeh Khosh field, water injection into Binak field and Bangestan reservoir and technological development of Ahvaz field.

Soil Decontamination in Siri and Khangiran

At the end of the press conference, Jaber Neshati, head of Energy and Environment Department of RIPI said 15,000 tonnes of soil contaminated with oil materials had been cleaned in Siri and Khangiran regions.

"Bioremediation of oil-contaminated soil by using microbiology and transforming it to flora was conducted in Siri and Khangiran regions; 5,000 tonnes of soil in Siri and 10,000 tonnes of soil in Khangiran were bioremedied by applying the microbiology technology," he said.

Neshati said the RIPI had been also active in reducing pollution levels in water tables, adding: "The RIPI specialists acquired the technology to monitor underground water and it is now possible to draw up a map of underground water contamination in response to every single request."

He said that 15 portable sensors had been designed and made for measuring environmental pollution levels. He said these sensors had been delivered to the NIOC, the client in the project.

"One of current activities in the Energy Division of RIPI is to indigenize the technical savvy for CHP Microsystems. In this project, by using gas-fueled engines and modifying them, electricity and heat are produced. This project is in its final stage and it could be used in border areas and oil platforms where electricity transmission is nearly impossible," he said.

Chahar Mahal & Bakhtiari, Iran's Switzerland

Chahar Mahal & Bakhtiari Province which neighbors the provinces of Isfahan, Khuzestan, Kohguiluyeh Boyer Ahmad and Lorestan is a mountainous area located in Iran's central plateau.

This province has gained fame for its high altitude and its numerous natural and tourist attractions. Beautiful waterfalls, springs flowing out of Zard Kouh, drooping tulips, historical caves and marvelous lagoons are among outstanding features of this province whose capital city is Shahr-e Kord.

Due to its captivating nature and landscape, Chahar Mahal & Bakhtiari is often referred to as Iran's Switzerland.

Chahar Mahal & Bakhtiari Nature

Due to its high altitude and location on the path of humid Mediterranean winds, this province experiences quite good precipitation. Karoun and Zayanderoud rivers originate from this province before flowing in the neighboring provinces of Khuzestan and Isfahan.

Due to its beautiful and intact nature, Chahar Mahal & Bakhtiari Province welcomes local and foreign visitors in all four seasons of the year. Provincial ecotourism is a major feature of this province.

Handicraft

Handicraft is very common among tribes living in this province. The most important handicrafts here are locally woven rugs, guelims, jajim (a type of pileless tribal blanket woven with woolen wefts and cotton warps), choqas (garment for men), poshtis (pillows), khourjins (siliqua), black tents, salt pots and table mat.

Nomads

The Bakhtiari tribe, with its own specified lifestyle and traditions, is a unique and significant attraction in this province. One of the most beautiful scenes in Chahar Mahal & Bakhtiari is the migration of tribes.

In the first decades of the current century, large groups of the Bakhtiar tribe, like many other tribes and nomads in Iran, were ordered to settle. However, there are still migrating tribes in this province. The migratory Bakhtiaris pass winter in the eastern deserts of Khuzestan Province, while during summer they go to the western parts of Chahar Mahal & Bakhtiari Province.

Heights

The natural form of Chahar Mahal & Bakhtiari is based on the Zagros heights and is one of mountainous areas in Iran.

The provincial capital is among the Iranian cities of high altitude. Zagros stretches like a strip from northwest to southeast and Zard Kuh Bakhtiari, which is 4,548 meters tall, is located in this province.