Iran Petchem Investment Secure and Profitable

Iran's 6th Five-Year Economic Development Plan requires the country's petrochemical sector to attract upwards of $40 billion in investment to realize its objectives and projects. The macro-policies defined for Iran's petrochemical development plans envisage taking benefit from all existing potentialities. Access to low-cost feedstock, specialized and experienced workforce, effective and significant infrastructure, and access to high seas are among outstanding features of Iran's petrochemical industry that facilitate strong presence in international markets through reducing cost price of products.

The capital return, security and transparent financial regulations are among other advantages of investment in Iran's petrochemical sector. These potentialities are of high significance for proprietors of smart knowhow and technology and provident investors.

The expression of willingness by major petrochemical actors, including Germany's BASF, Royal Dutch Shell and France's Total, for future cooperation and partnership with Iran's petrochemical industry indicates the bright future of this sector in Iran.

Iranian petrochemical industry managers have set upgrading the standing of Iran's petrochemical sector at regional and international levels as the top priority of strategic policies in this arena. To that end, they recommend maximum use of domestic privileges and potentialities along with attracting foreign investment and applying state-of-the-art technologies.

Over recent years, despite illogical US sanctions, Iran's petrochemical industry has started up development projects to meet growing domestic demand and export petrochemicals and polymer products at significant levels.

From April to September this year, more than 31 million tonnes of petrochemicals were produced in Iran, nearly 10 million tonnes of which was used by downstream industries in the country. The remainder was sold on international markets.

According to assessments by international bodies, Iran is the only Asian country with all advantages of petrochemical development, including low-cost feedstock and lucrative markets. Every single advantage on its own can motivate investors and proprietors of technology to consider investment in Iran.

As it has been made clear time and again by the Petroleum Ministry and petrochemical industry policymakers, Iran has imposed no restrictions on negotiations with international companies and reliable investors, and it welcomes cooperation and partnership with prospective investors in this secure and profitable market.

IP-66/15

NIOC, Gazprom Sign Gas, LNG Roadmap

 

The heads of National Iranian Oil Company (NIOC) and Russia's Gazprom have signed two memorandums of understanding focusing on a roadmap for gas cooperation and relaunching the Iran LNG project.

The event, which was seen over by Iran's Minister of Petroleum Bijan Zangeneh, came one month after the NIOC signed six MOUs with Russian companies on the sidelines of a visit to Tehran of Russian President Vladimir Putin.

Zangeneh said Iran-Russia cooperation in gas market was decisive. 

He referred to his useful talks with CEO of Gazprom, saying: "Over the past one year, the NIOC has signed numerous MOUs with Gazprom, but this MOU is for Gazprom to present its plan for the development of Kish, North Pars as well as Farzad A and Farzad B gas fields."

He said that these development plans would target gas exports. He added: "Costs must be recouped from gas exports. For this reason, Gazprom, which is an experienced company, will envisage gas exports either via pipeline or via establishment of liquefied natural gas (LNG) plants."

With the startup of new phases of South Pars gas field under the administration of President Hassan Rouhani, Iran's gas production capacity has increased to 850 mcm/d, but markets for Iran gas are not yet sufficient. Turkey and Iraq are buying gas from Iran, while Iran has gas swap deal with Armenia and Nakhichevan.

Iran has widespread plans to develop its independent and also jointly owned gas fields and expand its export markets.

In addition to the NIOC-Gazprom MOU, NIOC and Oil Industry Pension Fund Investment Company (OPIC) – which are owners of Iran LNG – signed an MOU with Gazprom.

Zangeneh said the Iran LNG company is incomplete plant with a production capacity of 10 million tonnes a year.

The minister said Gazprom would conduct its financial and technical study on the project during a 6-month period before presenting its proposal for contribution to the financing of this plant.

Zangeneh said the NIOC-Gazprom MOU was an important step for the Russian firm's presence in Iran's gas development projects, as well as gas-powered petrochemical plants.

Asked about how much investment was needed for the project, the minister said: "Roughly $4 billion in investment is needed to complete the Iran LNG project, but we will know in coming months about the next phase of partnership."

In response to if Gazprom would be a partner with Iran in gas exports, Zangeneh said: "Every circumstance depends on future negotiations."

"Cooperation between Iran and Russia, which respectively hold the first and the second largest known gas reserves in the world, will be decisive in the world market," he said.

 

Gas Fields Study Results in 2018

 

Alexey Miller, CEO of Gazprom, said the NIOC-Gazprom MOU was an important step for gas cooperation with Iran.

"This company will present its development reports about Farzad A and B, North Pars and Kish gas fields during the first quarter of next year to the NIOC," he said.

He added that Gazprom would also study details of presence in the Iran LNG project.

 

10 Oil Deals

 

Separately, Zangeneh said negotiations were under way for signing 10 oil contracts.

"As far as their conclusion is concerned I have to say that we are only one party to agreement and the other party constitutes companies we are negotiating with," he said.

Zangeneh said the negotiations were going ahead seriously, "but both internal and external factors affect such issues that would be out of control of both parties."

Asked about putting out to tender the Azadegan oil field, Zangeneh said: "The process of tender for this field is going ahead on schedule and there has been no delay. As I have already said in case everything goes ahead normally the result of this tender bid will be come out in summer 2018."

 

Reformatting Contract with Norway's Helma

 

Zangeneh said the framework of Iran's contract to sell LNG to Norway's Helma is likely to change.

"It may become like that our gas would belong to us and the Norwegian party would be remunerated for converting gas into LNG and delivering," he said.

Zangeneh said the NIOC might have to consider such an option for certain reasons, adding: "I think the Norwegian company will accept to be remunerated. Meantime, we have to take care of marketing for LNG supply."

Iran signed first ever contract to export natural gas in the form of LNG, following months of negotiations.

The contract was signed between the NIOC and IFLNG (jointly owned by Iran’s Khark Gas Refining Company and Norway's Helma).

Under the contract, Iran’s natural gas will be converted to LNG in a floating LNG vessel (FLNG), belonging to Belgium's Exmar.

The vessel called, Caribbean FLNG which is chartered by IFLNG Company, ‎has the capacity to produce 500,000 tonnes of LNG per year.

The 20-year contract will come into force within three months.

The Caribbean FLNG is expected to dock at Pars Service port in Persian Gulf in mid-2018, in order to receive 2.3 mcm of natural gas per day from 7th South Pars Gas Refinery.

 

Openness to Talks with Turkmenistan

 

Asked about Turkmenistan's decision to take its gas dispute with Iran to international arbitration, Zangeneh said: "Turkmenistan has not field any request for referring the issue to arbitration and they always prefer that the issue would not go to arbitration. However, if negotiations fail to yield results the issue will go to arbitration. But we have let the path to talks open."

Turkmenistan signed a deal with Iran in 1997 to supply gas to some northern provinces in Iran. It halted its gas supply to Iran last January citing a price row. Turkmenistan had earlier done so in 2007 when a cold spell had hit Iran.

As South Pars is developed further Iran will have no problem with its domestic gas supply. However, a 1,500-km pipeline is needed to be built to carry gas from South Pars to northern Iran, while a 100-km pipeline can deliver gas from Turkmenistan to northern Iran.

 

Oil Revenues to Materialize

 

Zangeneh said Iran would reach the target of producing 5 mb/d of crude oil and gas condensate.  "We will reach the target set in this regard," he added.

Touching on oil revenues for the current calendar year to March 2018, he said: "According to what we said from the very beginning, more than 2.5 million barrels of oil was exported at $50 price and we will gain more than envisaged for" current calendar year."

 

Gazprom Eyes North Pars Development

More than two decades has passed since Iran started gas recovery from the supergiant offshore South Pars gas field which it shares with Qatar. When Iran was engaged in the eight-year imposed war, Qatar had awarded attractive contracts to international companies to recover gas and condensate from the gas field. That is why pressure fall-off is seen in the Iranian sector of South Pars. To resolve this problem, Iran has sought assistance from France's energy giant Total which plans to build offshore pressure booster platforms. Until that time, plans are under way to develop North Pars gas field. The CEO of Pars Oil and Gas Company (POGC), which operates the South Pars development, has announced that North Pars is planned to be developed only in the offshore sector.

The North Pars development bears significance because trading of gas, which is abundant in Iran, is among the important plans of the Iranian Ministry of Petroleum in coming years.

North Pars, which is situated 120 kilometers southeast of Bushehr Province at a depth of 3,500 meters and 10-15 kilometers away from land, holds more than 57 tcf of gas in place.

At an international conference in Tehran, Iran offered North Pars along with 50 others for development under the newly developed IPC model. The North Pars development is estimated to cost at least $16 billion, $5 billion for upstream sector and $11 billion for downstream sector (LNG plants).

The discovery of gas in North Pars dates back to 1963 when 3D seismic testing revealed this field. After that, six exploration, appraisal and development wells were expected to be drilled for the development of the field. In the years leading to the 1979 Islamic Revolution, Exxon and Lands were in charge of designing and building facilities for the North Pars development. These activities were halted in the aftermath of the 1979 Islamic Revolution.

At the time of exploration, North Pars was the largest proven gas reservoir in Iran and investment in it was done at high speech. But after the discovery of South Pars, North Pars became the second priority for investment. South Pars is in the final stages of development with domestic and foreign investment, and the time has come for the North Pars development.

Iran recently signed a memorandum of understanding (MOU) with major Russian companies to study 10 oil fields. The Russian side has agreed to present the findings of its studies on North Pars and other fields in the first quarter of 2018.

After signing an MOU with the National Iranian Oil Company (NIOC), CEO of Gazprom Alexey Miller said: "Today, an important step has been taken for gas cooperation with Iran."

Gazprom is the largest producer of natural gas in the world.

So far, 17 wells have been drilled at North Pars and 26 offshore platforms have been installed. However, production from this field has yet to start as the field remains untapped. The production capacity of North Pars equals that of four phases of South Pars. At least 46 wells are needed to be spudded in North Pars to supply 3,600 mcf/d of gas. This amount of gas could be produced from South Pars for 25 years. After that, the field would be able to produce gas for a decade. The recovery rate of the field is estimated at 61%. The North Pars gas would be used to feed gas refineries in South Pars.

A senior Iranian oil official recently said that financing and hiring new workforce would constitute Iran's post-sanctions priorities. The development of South Pars is envisaged in four phases, each with an output of 1.2 bcf/d. The output from all four phases would be 4.8 bcf/d.

The liquefied natural gas (LNG) produced from one phase of this field was agreed to belong to Iran, while the foreign investor would be in charge of marketing LNG produced in two other phases. Another phase will inject gas into national trunkline for domestic consumption.

 

SP11 to Go Ahead Even If Total Quits

 

Roya Khaleqi

 

The CEO of Pars Oil and Gas Company (POGC) has reiterated that the development of Phase 11 of South Pars gas field will go ahead as planned.

"In the contract for the development of Phase 11 of South Pars, a mechanism has been worked out so that nothing would go wrong with the project even if Total happened to pull out," Mohammad Meshkinfam said. France's energy giant Total has signed a nearly $5 billion deal to develop Phase 11 of South Pars.

"We hope that Total would stay in Iran," he said amid speculation that US President Donald Trump may seek to impose fresh sanctions on Iran.

He made the remarks when asked to comment on the Chinese CNPCI's alleged expression of readiness to take over Total's share in case the French company pulls out.

"It means that if Total pulls out of this project CNPCI and Petropars are still present," he added.

Last July, a $4.879 billion IPC-style contract was signed between the National Iranian Oil Company and a Total-led consortium which also includes China's CNPCI and Iran's Petropars for the development of Phase 11 of South Pars. Total has a 50.1% share in the project, CNPCI 30% and Petropars 19.9%.

The development project is expected to produce 56 mcm/d of rich gas to be transferred to the refineries of Phases 6-8 and Phase 12 of South Pars.

Asked how the project was going on, Meshkinfam said: "Total's work in this phase is going ahead on schedule and in some certain cases ahead of schedule."

He said all projects often start with delay, adding: "The tender papers have been distributed and EPC contractors' envelopes have been opened and the process of choosing Iranian contractors is under way."

Meshkinfam said Phase 11 has no onshore sector. He added: "We plan to pump 1 bcf (28 mcm) of gas produced in this phase to Phases 6-8 of South pars and 1 bcm to Phase 12. Therefore, there is practically nothing to do onshore."

 

Iran on Par with Qatar

 

Meshkinfam said that Iranian contractors have grown in the Iranian side of South Pars, while top oil and gas companies have been present in the Qatari side.

"But despite this [big gap], we are both on equal footing in daily recovery," he added.

Meshkinfam said that floating production storage and offloading (FPSO) had been installed in the oil layer of South Pars.

"With a wellhead platform and seven wells, 25,000 b/d of oil is being recovered from this layer, which is planned to reach 150,000 b/d," he said.

Meshkinfam also referred to the South Pars products, saying: "The completed South Pars projects are currently delivering 456 mcm/d of light gas to national trunkline. Meantime, 45 mcm/d of sour gas is being injected into oil fields."

Meshkinfam said gas condensate production from South Pars had reached 808,000 b/d. "The production of ethane, as the most important refined product with a value-added 200 times the gas, has reached 5 million tonnes a year."

Furthermore, he added, 7.9 million tonnes of liquefied petroleum gas (LPG) is produced for exports, while 3,750 tonnes a day of sulfur is being supplied.

 

Tough Winter

 

Meshkinfam said $72 billion had so far been invested in the South Pars development, adding that the project is estimated to cost a total $87 billion.

"All state organs have over the past 10 years shown cooperation for providing the necessary finance and national cooperation was seen for the South Pars development," he added.

Meshkinfam said accumulated gas production from South Pars had reached 1,162 bcm, adding: "If we consider 18 cents for each cubic meter of gas, the products would be valued more than $200 billion."

He also said that four platforms would be built and loaded out this winter. "Platform 14A has been built in ISOCIO (Bandar Abbas) Yard and will be transferred to its destination in January. On February 11, we plan the trial run of the first train of refineries of Phases 22-24. Later, three platforms built in SADRA Yard (Bushehr) will be moved towards destination," he said.

Meshkinfam also said that the first row of the refinery of Phase 13 is to come online on a trial basis before the end of the current calendar year on March 20.

 

Maersk Likely to Develop Oil Layer

 

Meshkinfam said that a number of companies were in talks for the development of the oil layer of South Pars gas field.

"But negotiations with Maersk [of Denmark] are progressing well and we hope to make good progress in coming months," he added.

Meshkinfam predicted that the second IPC-style deal would be signed with Maersk for the development of the South Pars oil layer.

Asked if there was any conflict of interests if Maersk is acquired by Total, he replied: "Maersk's tie-up with Total has yet to be finalized and at the moment Maersk is independent. Necessary arrangements have been made for possible merger between Maersk and Total. In fact if we reach agreement in technical and financial issues the Maersk-Total merger will cause no problem."

He said that the agreement for the oil layer development would be signed this calendar year if negotiations continued at its current pace.

Meshkinfam said Maersk had yet to choose its Iranian partner for the project, as required by Iran's foreign investment law.

The oil layer of South Pars, roughly 100 kilometers off Iran's Persian Gulf coasts, is located along Iran-Qatar maritime border. The oil layer is estimated to hold between 1.5 billion and 4 billion barrels of oil in place in its Madoud, Upper Dalian and Lower Dalian formations. The API gravity of oil in this field is approximatively 21.

 

No Problem Over Farzad B

 

Meshkinfam also touched on negotiations with an Indian company for the development of Farzad B gas field.

"The most important issue in the negotiations with the Indian company over Farzad B gas field is the purchase of gas from this field. They suggested that the NIOC purchases the gas extracted from this field, but due to sufficient gas in the country we don’t need the gas recovered from this field," he said.

Meshkinfam said Iran had no technical problem with the Indians over the development of this field.

He added that negotiations had also started with some other companies, including Russia's Gazprom, for the development of this field.

Farzad A and Farzad B gas fields, in Farsi block, are located along Iran-Saudi Arabia border and 15 kilometers from Farsi Island.

The offshore facilities of this project are located 100 kilometers from the coastal strip and onshore facilities are 80 kilometers east of Bushehr.

 

$20bn Needed for Sustainability

 

Meshkinfam said arrangements were under way for the sustainability of gas production from the South Pars field. He added that the priority for now was to boost pressure in the field.

Meshkinfam put South Pars production at upwards of 550 mcm/d the, which would reach 700 mcm/d when new phases have been developed.

"To avoid pressure fall-off in the South Pars reservoir in coming years, we have already made planning to sustain the production," he said.

Meshkinfam said that nearly $20 billion in investment was needed to guarantee the sustainability of gas production from South Pars.

He said that the POGC would concentrate its efforts mainly on the sustainability of gas production from South Pars over the coming 20 years.

South Pars, known as North Dome in Qatar, is jointly owned by Iran and Qatar. The Iranian side is 3,700 square kilometers, of a total 9,700 square kilometers.

South Pars holds 14.2 tcm of gas in place (8% of world's total reserves and 47% of Iran's proven gas reserves), 19 billion barrels of condensate, 7.5 billion barrels of crude oil in oil layers, and big volumes of helium.

 

SP11 Subcontracts

 

The manager of SP11 project also said subcontracts for the project are to be signed by the end of the current calendar year (20 March 2017).

Regarding platforms for Phase 11, Rasoul Fallahnejad said that six to ten months was needed for the basic design of platforms, choosing a consultant, carrying out environmental studies and taking care of preliminary affairs.

After that, he added, the process of bidding will start to choose subcontractors. That, he said, would take six to eight months.

"On average, 15 to 16 months after the signature of the main contract, subcontracts will be signed and executed," he said.

Fallahnejad said that Total would supervise equipping factories which would be set up by EPC companies to build jackets and platforms.

He said that technical packages have been submitted and financial packages have been examined.

"Given the country's financial conditions, after the opening of financial envelopes, the issues of transfer of hard currency, opening of banking accounts and banking guarantees would take time so that the parties would reach agreement on the mode of payment. After that, agreements will take effect," he added.

Fallahnejad added that plans were under way for the awarding of all subcontracts for Phase 11 before the end of the current calendar year.

He said that production was expected to start 40 months after the awarding of the contract; however, "we are already ahead of schedule."        

 

WEP Petchem Plants Raise Output

 

The director of control at National Petrochemical Company (NPC) has said that petrochemical plants located along the West Ethylene Pipeline (WEP) have raised their output.

Ali-Mohammad Bosaqzadeh said that the increase in output was due to a 20-30% more injection of ethylene into the pipeline.

"In addition to the increase in polymer production with various grades, petrochemical units on the route of this pipeline have increased their output from a year ago," he said.

"For instance, Lorestan Petrochemical Plant has for the first time produced at more than 117% of its rated capacity, which is due to feedstock and catalyst supply, changes in the production process and installation of parallel reactors," said Bosaqzadeh.

He added that Mahabad Petrochemical Plant was also running at 105% of its nominal capacity.

Under normal conditions, he said, a petrochemical unit could produce at up to 110% of its rated capacity. He added that production at more than 125% of rated capacity required changes in equipment and upgrading devices.

Bosaqzadeh said that the petrochemical plants along the WEP route were willing to maximize output through sufficient investment.

He said empty petrochemical depots constituted a success for Iran, adding: "This issue shows broadened domestic and foreign marketing. These units have managed to sell out their products."

WEP Petchem Plants Raise Output

The director of control at National Petrochemical Company (NPC) has said that petrochemical plants located along the West Ethylene Pipeline (WEP) have raised their output.

Ali-Mohammad Bosaqzadeh said that the increase in output was due to a 20-30% more injection of ethylene into the pipeline.

"In addition to the increase in polymer production with various grades, petrochemical units on the route of this pipeline have increased their output from a year ago," he said.

"For instance, Lorestan Petrochemical Plant has for the first time produced at more than 117% of its rated capacity, which is due to feedstock and catalyst supply, changes in the production process and installation of parallel reactors," said Bosaqzadeh.

He added that Mahabad Petrochemical Plant was also running at 105% of its nominal capacity.

Under normal conditions, he said, a petrochemical unit could produce at up to 110% of its rated capacity. He added that production at more than 125% of rated capacity required changes in equipment and upgrading devices.

Bosaqzadeh said that the petrochemical plants along the WEP route were willing to maximize output through sufficient investment.

He said empty petrochemical depots constituted a success for Iran, adding: "This issue shows broadened domestic and foreign marketing. These units have managed to sell out their products."

Assaluyeh Supplies 70% of Iran Gas

 

The deputy managing director of Pars Oil and Gas Company (POGC) for operations and logistics has said the company is ready to supply 570 mcm/d of gas in the second half of the current calendar year to March 2018.

"The South Pars installations are thoroughly ready for the arrival of winter," Yahya Rashidi said.

He touched on the start of production from Phases 2 and 3, adding: "So far 27 gas platforms have become operational in this giant field."

"Currently, around 555 mcm/d of gas is being recovered from the jointly owned South Pars reservoir. As soon as restrictions on gas supply from the South Pars refineries have been removed, this figure can increase to 570 mcm/d," he said.

Rashidi recalled that 70% of Iran's gas is being supplied by South Pars. He added that South Pars gas output would plateau by March 2020.

He said that every year POGC presents an overhaul plan for pipelines and offshore platforms to the Directorate of Supervision on Production. He added that HSE tests, repairs and technical inspections are done regularly.

Rashidi said gas supply commitments for winter would be met in full following overhaul of gas platforms of South Pars in the first half of the year.

He said that POGC had signed an agreement with a domestic company which is a Malaysian partner for remotely operated vehicle (ROV) pipeline inspection. That came following a rupture in the pipeline of Phases 16 and 19.

He said the project would become operational next March, adding that all pipelines and offshore installations in South pars would be inspected.

Russian Firms Submit Study Results

Russian companies Tatneft and Zarubezhneft have submitted the findings their studies about the development of Shadegan oil field to the National Iranian South Oil Company (NISOC).

NISOC signed a memorandum of understanding with Tatneft last March and a memorandum with Zarubezhneft last July to study Shadegan. Both Russian companies submitted their findings in December.

Furthermore, Pasargad Energy Development Company presented the results of its study on Shadegan to NISOC, while Oil Industries Engineering and Construction Company (OIEC) submitted its study on Sepehr to the National Iranian Oil Company (NIOC).

A single master development plan (MDP) will be made of the studies conducted by different companies to be combined with an MDP earlier drawn up by NISOC to serve as the basis of development of Shadegan.