2nd IPC Deal

First Iran-Russia Upstream Contract Signed

Iran has struck a second oil deal under the framework of the newly developed Iran Petroleum Contract (IPC). The first agreement was signed last July between the National Iranian Oil Company (NIOC) and a French Total-led consortium comprising China's CNPCI and Iran's Petropars for the development of Phase 11 of the giant offshore South Pars gas field. The second such deal was signed on March 14 between the NIOC and a consortium of Russia's Zarubezhneft and Iranian private company Dana Energy for the enhanced recovery from the Aban and West Paydar oil fields which Iran shares with neighboring Iraq on its eastern border. Zarubezhneft will hold an 80% share in the contract, while the remaining 20% will belong to Dana Energy.

Iran's Minister of Petroleum Bijan Zangeneh, speaking at the signing ceremony of the new IPC deal, said some of "firsts" were recorded in the agreement to enhance the Aban and West Paydar output.

"For the first time, a renowned Russian company is helping develop Iranian oil fields. Of course, we were already cooperating with the Russians in oil and purchase of technical services; however, this is the first such contract for oil production within the framework of the new model of oil contracts, and I hope it would not be the last," he said.

Zangeneh said Zarubezhneft's partnership with a private Iranian company was another new achievement. "A fully private E&P Iranian company is involved," he said, noting that the agreement with the Russian-led consortium was the second IPC deal.

The minister said increased production from Aban and West Paydar would earn Iran $4 billion in revenue.

"With a combined production of 67 million barrels of oil from these two fields, at current prices, $4 billion will be added to state revenue," he said. "This agreement has been signed for the development of two jointly owned fields which are already producing, and they will undergo improved oil recovery (IOR)," he added.

"Had such agreement not been signed for the development of Aban and West Paydar fields accumulated production from these two fields would have not reached even 38 million barrels in ten years, but now thanks to this agreement, 67 million barrels will be added to their combined output to reach 105 million barrels," said Zangeneh.

The minister said enhanced recovery was a key factor in this contract. "This agreement is signed for a period of ten years, during which we hope to be able to find new solutions for enhanced recovery from these fields."

Zangeneh said negotiations were under way with other Russian companies including Gazprom Neft, Tatneft, Lukoil and Gazprom for the development of other oil and gas fields.

He said the Iranian Ministry of Petroleum would be facing tough tasks in the new calendar year which started on March 21, adding: "Most of talks are in their final stage and we hope to see signature of new contracts soon."

Zangeneh said domestic manufacturing would be a key part of the deal with Zarubezhneft, adding that Iranian companies would be involved in drilling and other activities.

"Signature of such contracts is fundamental for the petroleum industry. It is also risky, but we have to accept risks," he added.

 

22 Fields Up for Development

 

Gholam-Reza Manouchehri, deputy CEO of NIOC for development and engineering, said: "The Aban and West Paydar fields are already producing oil, but they will soon face output decline. Therefore, the main objective of this agreement is to enhance their production."

"The total investment to be made under this contract would be around $670 million, 10% of which will be spent on non-capital costs," he said.

"In drawing up the contract, the issue of domestic manufacturing and maximum contribution of Iranian companies have been taken into consideration and the Russian side has accepted necessary obligations. Implementation of this agreement heralds transfer of enhanced recovery (EOR) technology," said Manouchehri.

He said this agreement would bring prosperity to domestic manufacturers of equipment for the petroleum industry, adding: "We hope that in the near future it would become possible to manufacture hundreds and even thousands of ESP pumps in the country."

Manouchehri also touched on negotiations under way for upstream oil projects, saying: "Currently, we are actively following up on the negotiations for the development of 22 oil and gas fields."

He said talks had been almost finalized with a view to signing agreements for the Yaran, Mansouri, Sepehr and Jofair fields. He also gave a positive assessment of negotiations under way for the development of Azar, Ab Teimour, Changouleh, Dehloran, Maroun (Bangestan) and Koupal.

Manouchehri said talks had begun on Yadavaran field, while Azadegan was still on the agenda.

He said NIOC was in talks with India for the development of Farzad B gas field. "The agreement for the development of Balal field will be signed soon with domestic companies and completion of Forouzan field development is on the cards. Meantime, negotiations with other Russian companies including Gazprom Neft and Rosneft are under way, which we hope will be finalized one after another."

"Nearly 30 EPC agreements are on the NIOC agenda for oil recovery enhancement," he said, expressing hope that Iran would experience prosperity in this sector in the second half of the new calendar year.

 

Technological Savvy

 

Mohammad Iravani, CEO of Dana Energy, highlighted transfer of technology and financing as the most important issue in Iran-Russia cooperation.

"The private sector in Iran is facing restrictions which we hope will be removed," he said.

"Ever since introducing the new model of oil contracts, the Iranian Ministry of Petroleum was seeking to create E&P companies and engage them in the new contracts," he added.

Iravani said the main idea behind IPC deals was to transfer technical knowhow and management to Iranian companies.

"The most important issue in Iran-Russia agreement is transfer of technology, management of knowledge and financing," he said.

 

Details on Oil Fields

    

Aban oil field is located 38 kilometers southwest of the city of Dehloran, and West Paydar field is situated 150 kilometers northwest of the oil-rich city of Ahvaz and 35 kilometers from Cheshmeh-Khosh processing facility in Ilam Province. Both fields are jointly owned by Iran and Iraq. Their current production together stands at 36,000 b/d.

A memorandum of understanding (MOU) was signed with Zarubezhneft on 12 July 2016 for the Russian company to study Aban and West Paydar under IPC provisions with a view to accelerating oil and gas fields Iran shares with neighboring countries.

The agreement with Zarubezhneft is meant for the two fields to produce up to 48,000 b/d with an accumulated output of 67 million barrels over ten years. The agreement is subject to renewal upon request by the parties hereto.

The main jobs envisaged to be carried out under this agreement include conducting engineering studies, workover of wells and their equipment with downhole pumps, reconstruction, repair and renovation of existing installations, installation of separator, installation of multiphase flowmeter, and transforming a production well into a waste injection well in Phase 1, and purchase and installation of oil, gas and water transmission unit, drilling eight appraisal/production wells, purchase and installation of downhole pumps, installation and operation of separator, conducting 3D seismic studies, and drilling relief wells in Phase 2.

The CAPEX calculated for the development of Aban and West Paydar fields is estimated at $674 million (including direct capital, and downhole pumps repair and replacement costs). Indirect costs are estimated at $68 million.

Once operational, this project will create technical jobs on a large scale in Ilam Province, particularly workshops to repair and rebuild ESP pumps for the first time in that area. Furthermore, Zarubezhneft is expected to apply its enhanced oil recovery (EOR) technology in these fields so that the Iranian parties would learn about the technology and its application.

 

Zarubezhneft Boss:

We Accept Iran-Russia Contract Risks

After Iran's National Iranian Oil Company (NIOC) and Russia's Zarubezhneft struck an agreement for the development of Aban and West Paydar oil fields in western Iran, CEO of NIOC Ali Kardor and

General Director of Zarubezhneft Sergei Ivanovich Kudryashov talked to journalists. The highlights of their remarks are as follows:

Ali Kardor, CEO of NIOC:

Zarubezhneft is a proprietor of technology in terms of enhanced recovery and we hope that the rate of recovery from Aban and West Paydar oil fields would increase after the implementation of this agreement.
Negotiations are under way with Iranian, European and Asian companies for the development of other fields.
France's Total is pushing ahead with the development of Phase 11 of South Pars gas field on schedule.
We have asked candidate companies to form consortiums before bidding for oil and gas projects including Azadegan oil field.

Sergei Ivanovich Kudryashov, General Director of Zarubezhneft

Zarubezhneft is accepting contract risks.
An oil contract is naturally fraught with risks; we have to accept the risks and push ahead with the job, seriously.
Each contract is fraught with different risks including political and pricing risks.
We face no disturbance today.
Using ESP pumps and drilling new wells are among our plans to increase production from these fields.

3rd IPC Deal Signed with Local Firms

$2.4bn Deal with Local Company for Sepehr, Jofair Development

National Iranian Oil Company (NIOC) has signed a long-term $2.4 billion agreement with local firm Pasargad Energy Development Company (PEDC) for the development of the Sepehr and Jofair oil fields.

The agreement, which coincided with the 67th anniversary of nationalization of petroleum industry in Iran, will see the two fields produce 110,000 b/d of oil. Accumulated production from Jofair and Sepehr will reach 512 million barrels over a 20-year period.

It is the first time in the history of Iran's petroleum industry that an Iranian private company is set to operate integrated development and production projects at oil fields.

The agreement follows the terms of the Iran Petroleum Contract (IPC), the newly developed model of oil contracts to replace old buybacks.

The contract was signed on March 18 in the presence of Iranian Minister of Petroleum Bijan Zangeneh, CEO of NIOC Ali Kardor and CEO of PEDC Mehdi Mir-Moezzi.

Implementation of this agreement is forecast to cost $2.427 billion with indirect costs estimated at $413 million. The agreement will take effect in three months, and 30 months after its entry into force, with the start of production the contractor will be remunerated.

100% Local Content

Addressing the ceremony to sign the contract, Zangeneh said intensive talks had been held with PEDC for the project, saying: "It is the first IPC-style contract signed with an Iranian E&P company."

He said that PEDC is required by the agreement to provide nearly $3 billion finance for the project.

"In addition to conventional horizontal drilling in this project, improved oil recovery (IOR) and enhanced oil recovery (EOR) methods, which are complicated, must be applied," he added.

Zangeneh touched on PEDC's involvement in the construction of the $1.8 billion Iran Gas Trunkline 6 (IGAT6), which is currently delivering gas from Iran to neighboring Iraq, saying: "Given the successful experience of cooperation with this company, we decided that PEDC could finance such a big project better than other bidders owning to its affiliation with Pasargad Bank."

He said PEDC benefitted from young manpower. He added that young staff at this company had helped provide a realistic understanding of the financial aspects of the project.

Zangeneh heaped praise on the NIOC and PEDC experts, who brought this agreement to fruition through empathy, saying: "Given the fact that an Iranian company is the operator of the project we believe that the job has been assigned to an Iranian firm 100%. I hope that in practice Iranian companies would be given the bulk of the project."

He underlined the significance of the signing this agreement on the anniversary of the victory of the Islamic Revolution. "I had already said that the victory of the Islamic Revolution nationalized oil which means feeling free to make decisions about production levels."

"For the time being, national oil means we must have our own E&P companies and we must be able to operate big projects by ourselves," said the minister.

Zangeneh said Iranian companies were required to boost their potential. "Currently, 14 Iranian companies have been cleared to operate E&P projects. We have sufficient projects to assign to this number of companies, either independently or in partnership with foreign firms."

"We have more than 100 oil and gas fields up for development. Therefore, all these companies will have job to accomplish provided that they prove their technical, project management and financing potential for this purpose," he added.

Zangeneh said IPC terms require foreign companies to hire Iranian partners. "I hope that alongside signing contracts with foreign companies we would sign agreements with Iranian companies."

The minister said that Iranian companies would work alongside foreign companies in order to learn from them and benefit from their experiences in exploration and production projects.

"We want Iranian companies to learn from foreign companies because experience is our yardstick," he said. "The truth is that when it comes to implementing projects, designing and monitoring implementation, we need experience. Such things could not be learnt in classrooms. There are some who are more experienced than us and we can benefit from their experience."

3% Contractor Share

Gholam-Reza Manouchehri, deputy CEO of NIOC for development and engineering, said the revenue from the development of the Sepehr and Jofair oil fields would total $31 billion.

"The contractor (PEDC) will have a $97 million (or 3%) share of total revenue," he said.

"We feel delighted that in the final days of the calendar year and concurrently with the anniversary of nationalization of petroleum industry we are signing a big contract with a major Iranian E&P company in order to facilitate implementation of oil projects from the stage of exploration to production by an Iranian company," he added.

"In the contract for the development of the Sepehr and Jofair oil fields, 50% of target output will be achieved by implementing EOR projects," he said.

Manouchehri said the project would require the drilling of 126 wells in the Fahlyan and Ilam reservoir layers.

This contract, he added, would also envisage injecting 40,000 to 50,000 b/d water and 80 mcf/d to 1 mcf/d of gas.

Manouchehri said the rate of recovery from Sepehr and Jofair would reach 10 to 15% at the end of the term of the project.

Reiterating the need for the transfer of technology to Iran, he expressed hope that PEDC would hire international consultants for this purpose.

Manouchehri explained that contractor's share of the project differed from its portion of profits.

"Although PEDC has a 100% share of implementation in this project its share of revenue, risks excluded, will be more than 3%," he said, noting that some media had mistakenly confounded the contractor's part of project obligations with its revenue. 

He referred to the recent agreement signed between NIOC and Russia's Zarubezhneft teaming up with Iranian private entity Dana Energy, saying the Zarubezhneft-led consortium would have a 5% portion of profits while its share of the contract would be 80%.

On this issue, Minster Zangeneh said: "Foreign media became demonstrated mischief with regard to the signature of agreement with Zarubezhneft saying the Russian side had an 80% share and Iranians 20%. That is while under the agreement the Iranian and Russian companies would have each 5% share of revenue over 20 years."

On Par with World Business Models

For his part, Mir-Moezzi said: "I feel honored to sign on behalf of an Iranian private operator the agreement for integrated development and production at Jofair

and Sepehr oil fields under the new model of contracts with a view to opening a new window to a brighter future in the petroleum industry."

He said the IPC framework was the result of a new look at affairs at the highest level of the Ministry of Petroleum in harmony with global business models in order to require application of technology throughout development of oil and gas fields for production.

"The new model of oil contracts is also the product of a new look at the Ministry of Petroleum, which believes in the necessity of creating Iranian capacities within the framework of E&P companies for presence in the chain of activities pertaining to development and operation of fields," he added.

"In harmony with such fundamental change, PEDC established Pasargad Exploration Company to concentrate on development and production activities and bring together necessary specialties so that under the aegis of financial support by Pasargad Bank proper grounds would be prepared for the technical and financial development of oil fields in the country and guarantee maximum profitability for the future of the country," he said.

Mir-Moezzi said: "The integrated development of these fields could meet needs of raising national oil output and using cutting edge technologies along with attracting investment."

He said the most important element in the implementation of the Jofair and Sepehr project was to drill horizontal wells that would be deeper than those currently available in the country, fracking and using downhole pumps for enhanced recovery.

Mir-Moezzi said water and gas injection would be used for maximum efficiency recovery from the two fields over 20 years. He added that the benefits from development of these fields would serve NIOC for several decades following the accomplishment of the project.

"We hope that PEDC would expand its activities in the West Karoun area in the future and accomplish its mission alongside NIOC," said Mir-Moezzi, a former CEO of NIOC.

He offered gratitude to Minister Zangeneh for having cleared the way for business activities in E&P sector for Iranian companies, saying: "On behalf of PEDC, I would also like to offer my gratitude to the NIOC professional group for their financial and technical talks and also Pasargad Bank for its financial support."

Mir-Moezzi said: "Hopefully constructive cooperation between the parties to the contract and other organizations and institutes involved in the implementation of such contracts would open a new chapter for the Iranian nation to realize its dream of empowering E&P companies and result in creating sustainable capacity in the country and paving the ground for Iranian companies to step into international oil and gas markets."

In February 2017, NIOC and PEDC signed a memorandum of understanding (MOU) for conducting studies on the Sepehr and Jofair oil fields. The findings of the studies led to the development of technical and financial model which won the confirmation of NIOC for a contract. Then talks started between NIOC and PEDC to strike an IPC-style deal.

The Sepehr and Jofair oil fields were discovered in 1976 after the drilling of one well in Jofair. They are located in the northeastern section of the sedimentary zone of Abadan Plain and 60 kilometers southwest of Ahvaz.

The necessity of integrated development of these two fields was felt after they proved to constitute a petroleum play.

 

PEDC Seeks Effectiveness and Efficiency

In March 2018, PEDC signed a contract to lead the development of the Sepehr and Jofair fields in a project involving USD 2.4 billion in CAPEX. The 20-year development plan targets 110,000 b/d in total production from the two fields.

Mehdi Mir-Moezzi, CEO and vice-president of Pasargad Energy Development Company (PEDC), has talked to TOGY about the company’s efforts to digitalize operations across its subsidiaries and its recent and prospective activities in various sectors of Iran’s energy industry. PEDC is a private Iranian company with subsidiaries covering activities from exploration, drilling and pipeline construction to petrochemicals and power generation.

"Iran Petroleum" republishes the full text of TOGY's interview with Mir-Moezzi.

Q: What was PEDC’s focus in 2017?
A: Over the past year, we have designed and implemented a strategy and governance model in our holding to be more efficient; therefore, more effective in our business activities. One of the objectives is to become more agile and pay more attention to risk management operational models through establishing an internal auditing system in the holding and within all of our subsidiaries.
So, we are going to modernize every level of our company from scratch, paying special attention to the requirements of the digital adaptation process that all of our subsidiaries need.

Q: How are you impleenting this strategy?  Has your company been assisted by a third party?
A: Yes, we have hired the services of an international firm, Arthur D. Little, which has now been working very closely with us for more than a year. They assist us in this respect and we are in very good conditions now.
We see that in Iran, the strategic planning and governance models are done absolutely fine in terms of design, but the problem lies in the implementation phase. PEDC is now using world-class expertise to implement this model and I am very optimistic that we, as a leading energy company, will be successful in restructuring and modernizing our organization.

Q: What was your activity in the upstream sector in the past year?
A: We have prepared several proposals for field development for NISOC [National Iranian South Oil Company] and NIOC; they have been assessed as satisfactory by both clients. To NISOC, we have presented the development plan for the Shadegan oilfield, which has been accepted and transferred to the list of approved prequalified companies. The other proposals of a Russian and an Iranian company have also been accepted, but we believe we are ahead of them and we are now waiting for NISOC’s final decision.
With NIOC, we have also been successful in presenting proposals for the development of Jofair and Sepehr oilfields. Apparently, NIOC is very happy with them as well, and accordingly we are the first company which they plan to start negotiations with, so we are optimistic that soon the relevant contracts will be awarded to PEDC. [The contracts were awarded to PEDC in March 2018.]

Q: Will you embark on these projects on your own?
A: Following the IPC [Iran Petroleum Contract] contractual model guidelines, negotiations with potential international partners to form joint ventures are under way. Three international companies have shown interest in being non-operating partners with us.

Q: What about your potential involvement in South Pars phase 11?
A: Total is now evaluating and doing due diligence on companies. Fortunately, our companies in the upstream segment – drilling and services – have all been site visited, audited and prequalified by Total. We are looking forward to beginning co-operation with Total very soon.

Q: Could you provide us with some details on the Iran-Iraq gas pipeline project that PEDC has been involved in?
A: The 600-kilometre gas export pipeline to Iraq is an important project in the midstream sector that has kept us very busy for the past two years. Since we started two years ago, we have constructed 550 kilometers of the two different pipeline branches. One will send South Pars gas from Ahvaz to Shalamcheh for supplying the province of Basra in the south of Iraq. The other is going from Ahwaz to Naft Shahr, and will supply the Baghdad area. Both branches are now in operation and they are transferring more than 10 mcm [353.1 mcf] of gas per day to Iraq.
For this project, we signed a BOT [build-operate-transfer] contract worth more than $ 2 billion with NIGC [National Iranian Gas Company]. As part of this contract, five pump stations are planned. Upon completion of these stations, the capacity of this pipeline will increase to about 50 mcm [1.77 bcf] per day, both for exporting to Iraq and also to send gas to the northwest of Iran.
Overall, the project progress has been satisfactory to NIGC with minimal major delays.

Q: When will the pump stations be finalized?
A: As of January 2018, the five pump stations are at about 60% progress and we hope to have it completed and delivered by mid-2018.

Q: What are the company’s recent highlights in the downstream sector?
A: PEDC has been active in three main downstream projects over the past year. One is Pars BehinPalayesh Refinery in Qeshm Island, where we are completing the procurement of all the equipment and starting construction of all of the foundations and the underground piping. Hopefully, everything will be done by March 2018. Moreover, we secured the approval for the second phase of the refinery to double its capacity from 35,000 bpd to 70,000 bpd. We think we can complete this second phase in one and a half or two years.
Furthermore, we have achieved good progress in our petrochemical project in Chabahar [Sina Petrochemical Complex]. We finally secured the financing needed for the project from Danish and Italian financiers, so we are very optimistic about the progress of this project during 2018.
As for our involvement in the Siraf Refineries Complex, the financing of this was signed with Korea Eximbank and K-Sure, and a smaller part with a Chinese financier. We are now waiting for some formalities to be completed before we begin work.

Q: What is your outlook for PEDC?
A: We are very optimistic about what the future holds for us in the years to come. We are aiming to expand at every level and, as part of this strategy; we have been supporting start-up companies such as ESTD which has developed a brilliant seismic and reservoir simulation and stimulation software called RETINA, which will catch up with other similar products from international companies such as Schlumberger, and will lead the market within the next five years. Overall, the future is promising for PEDC.

Broader Turkmen, Azeri Ties Sought

Iranian President Hassan Rouhani paid separate visits to Turkmenistan and Azerbaijan, where he signed memorandums of cooperation in various sectors of the economy, including energy, with his counterparts. During his visits, President Rouhani insisted on upgraded cooperation in the Caspian Sea.

During Rouhani's visit to Baku, Iranian Minister of Petroleum Bijan Zangeneh and Azeri Minister of Energy Parviz Shahbazov signed memorandums on joint cooperation in the Caspian Sea exploration block.

Tehran, Baku Sign 8 Documents

During President Rouhani's visit to Azerbaijan, Tehran and Baku signed eight memorandums of cooperation, including in the exploration sector.

Recovery from the Caspian Sea's hydrocarbon resources has always been on the agenda of littoral states of the landlocked lake. Throughout its exploration activities, Iran explored Sardar-e Jangal in the southern part of the Caspian Sea; however, it has so far failed to recover from these proven reserves. The document signed between Iran and Azerbaijan would mark a turning point in cooperation between the two countries in development projects.

On the sidelines of the signing ceremony, President Rouhani said Iran and Azerbaijan shared interests in the Caspian Sea.

"Through scientific, economic, technical, trade, shipping, fishing and tourism cooperation we have to be able to make maximum use of Caspian Sea potentialities. Our decision today for joint use of Caspian Sea reserves indicates that the two nations and the other littoral nations would be able to make big profits through cooperation," he said.

He said that joint investment in car manufacturing, construction of railroad, cooperation in health sector, pharmaceuticals, energy and tourism is an indication of the two countries' firm will to broaden prospective cooperation.

Azeri President Ilham Aliyev said Iranian and Azeri heads of state had held 11 meetings over recent years.

"Agreements and cooperation between the two countries in different bilateral, regional and international domains are on the path of implementation and we have good relations with each other," he said.

Aliyev said Tehran and Baku were determined to develop economic and trade ties and push ahead with joint investment projects.

"The documents signed during this visit will undoubtedly broaden cooperation between the two nations and will be influential on regional ties," he added.

Tehran, Ashgabat Sign 13 Documents

The Iranian and Turkmen heads of state oversaw the signature of 13 documents for cooperation between the two countries.

Rouhani referred to Iran-Turkmenistan agreement in the energy, transport and transit sectors, and saying: "Iran and Turkmenistan are two energy-rich countries. During the talks, it was decided that we upgrade our cooperation more than ever in this sector."

He said that gas swap and cooperation in the energy sector in the Caspian Sea were among topics of discussion between the two sides.

"Cooperation in different sectors including Caspian Sea oil and gas could be a new step in economic ties between Iran and Turkmenistan," said Rouhani.

For his part, Turkmen President Gurbanguly Berdimuhamedov said his country was determined to broaden its relations with Tehran in all sectors.

He underlined the significance of cooperation between the two sides, particularly in energy security sector.

"In economic cooperation we have to pursue diversity in mechanisms and take advantage of all potentialities and possibilities for development of relations in transportation, agriculture and energy sectors.

Berdimuhamedov described the Caspian Sea as the sea of peace and security, saying: "Iran-Turkmenistan cooperation on the coast and in the waters off the Caspian Sea and special economic zones must improve more than before."

Annual Oil Exports at 2.5 mb/d

Iran averagely exported 2.6 mb/d of oil to Asian and European countries during the last calendar year which ended on March 20.

The exports included 2.115 mb/d of crude oil and 428 tb/d of condensate during the one-year period.

China and India were the largest crude oil importers from Iran; meanwhile South Korea was the first destination for the country’s condensate exports in Asia.

Over 60% of Iran’s crude oil and condensate exports were ‎shipped to Asian refineries in the same year.

Share of the European countries from Iran’s oil exports was about 40 percent.

Total (France), Tubrash (Turkey), Eni and Saras (Italy) are among Iran’s major European customers.

Michael Cohen, head of energy commodities research at Barclays, told Bloomberg that Iran could do a lot of different things to kind of skirt possible tighter sanctions on its oil sector, such as sending oil to different places.

“There are a lot of different things that Iran can do to kind of skirt sanctions. In the past, they’ve used more oil in their power sector, they’ve actually sent oil to different places that can take it,” Cohen told ‘Bloomberg Daybreak: Americas’.

Commenting on the recent oil price rally that diverged from a general slump in equities, Cohen said that at the end of last week that oil prices were supported by the Energy Information Agency (EIA)’s inventory that reported a decline in crude oil inventories of 2.6 million barrels for the week to March 16, and the appointment of John Bolton, an Iran hawk and a proponent of war, as National Security Advisor.

With Bolton’s appointment, market participants are looking at pretty much an end to the Iranian nuclear deal as of May 12, Cohen said.

“I think that the market pretty much assumes that there’s going to be some kind of reduction in Iranian supply,” he said, but added: “I’m not so sure that that’s the case.”

There is some wiggle room and Iran could send oil to other places, according to Cohen.

Asked about if Saudi Arabia could increase its oil production in the event of reduced Iranian supply, Cohen said that “there is some wiggle room at least in terms of other OPEC suppliers, but they are all committed to this OPEC deal and I don’t expect them to diverge from that either.”

Refinery Processes 2.5bcm Gas in One Year

Sarkhoun and Qeshm gas refinery processed more than 2.5 bcm of gas in the Iranian calendar year which ended on March 20, CEO of refinery Mohammad Hossein Norouzi said.

"The refinery is located in the center of Sarkhoun gas field, supplying Iran's energy needs partly. The refinery receives its feedstock from 20 wells drilled in the Sarkhoun gas area," he said.

Norouzi said Sarkhoun gas field contained 318.42 bcm of gas, 267.158 bcm of which is estimated to be recoverable.

"The Jahrom gas layer is sour, while the Gouri layer gas is sweet. Currently, 7 mcm/d of gas is being recovered from this field, including 500,000 b/d of sour gas and 6.5 mb/d of sweet gas," he added.

"The processed gas is dispatched to consumer destinations via two pipelines, measuring 22 and 24 inches in diameter. The 22-inch pipe supplies gas to facilities west of Bandar Abbas like steel industry, power plant and Bandar Abbas oil refinery, and the 24-inch pipeline feeds Persian Gulf power plant and some areas in Kerman Province," Norouzi said.

"With the launch of Iran Gas Trunkline 7 (IGAT7), the two 24-inch and 22-inch pipelines have been connected and gas shortages are made up for via the main pipeline," he said.

Hi-Tech South Pars Oil Layer Development

CEO of National Iranian Oil Company (NIOC) Ali Kardor said cutting edge technology was used in the development of the South Pars Oil Layer.

"Production through benefiting from state-of-the-art technologies are among features of the process of development and production in the South Pars Oil Layer," he said.

Kardor said the process of recovery, refining and export of oil from the layer was being handled by a refining vessel for the first time in the jointly owned South Pars gas field.

He reiterated the significance of development of upstream industries, singling out Pars Oil and Gas Company (POGC) as a major contributor to development projects.

"Owing to its longtime record in the implementation of development projects, this company has turned out to be successful in steering EPC projects," said Kardor.

He touched on the significance of development of oil and gas fields Iran shares with neighboring countries, saying: "Huge efforts have been made with regard to the supply of financial resources and acceleration in implementing upstream oil industry projects. We are fortunately witnessing completion of development projects in South Pars."

PRTC, Air Liquide Sign MTP Deal

Iran's Petrochemical Research and Technology Company (PRTC) and France's Air Liquide signed an agreement to develop a joint license for methanol-to-propylene process.

Under this agreement, PARS MTP brand products will be supplied to customers.

Esmaeil Qanbari, CEO of PRTC, said: "In light of newly created atmosphere in recent years and the expression of readiness on the part of Air Liquide of France for a new round of cooperation, an agreement has been signed for awarding the license for the MTP process under PARS MTP brand."

He said: "The National Petrochemical Company (NPC) will be the first buyer of this license in order to be able to award to other Iranian applicants. Basic engineering documents will be jointly drawn up by PRTC and Air Liquide experts."

"PRTC has launched a pilot polypropylene production unit with a limited output of 120,000 tons per annum," Qanbari said, noting that plans are in place to raise the production of the complex to 500,000 tons per year in cooperation with energy majors, namely Air Liquide.

Air Liquide is an engineering, construction and chemical process licensing company. Since 2007, it has been part of Air Liquide S.A., a multinational company that supplies industrial gases and services to industries. PRTC is the research and development arm of NPC.

8-Month Gas Storage Exceeded 2.5bcm

The Iranian Central Oil Fields Company (ICOFC) stored 2.567 bcm of gas in the Shourijeh and Sarajeh underground gas storage sites during the first eight months of last Iranian calendar year which ended on March 20, ICOFC chief said.

Rahim Hatami also said that ICOFC delivered 2.017 bcm of gas to national trunkline during cold months of year.

"With a maximum output of 277 mcm/d of gas, ICOFC supplies 30% of Iran's gas needs," he said, adding that the company met 96% of its obligations during the last calendar year.

Hatami added that ICOFC produced 229,000 b/d of oil in the last Iranian calendar year, setting a record in production from shared oil fields. He said West Paydar field saw its production grow by 8,000 b/d.

He also referred to continued production from Azar oil field for a year, saying that recovery from this jointly owned field doubled to 30,000 b/d shortly in the last calendar year.

Domestic Manufacturers Key in Petchem Development

Ali Mohammad Bosaqzadeh, director of National Petrochemical Company (NPC) projects, has stressed the need for supporting domestic manufacturers of equipment.

"Domestic manufacturers of equipment and parts needed by Iran's petroleum industry can be instrumental more than ever on the path of development of this industry by benefiting from latest knowhow," he said.

Touching on the involvement of qualified Iranian manufacturers in the development of petrochemical industry, he added: "In light of arrangements, the industry is entering a new phase of development. To that effect, manufacturers of equipment and parts for petrochemical industry in our country can benefit from the latest savvy in the world and become more influential than before."

"Under construction in different areas of the country, the use of domestically manufactured items and equipment in petrochemical projects has had a rising trend. Most petrochemical projects and facilities in our country are looking for the utilization of capabilities of domestic industrialists," Bosaqzadeh said.

"Foreign companies are interested in entering our country and cooperating with different sectors of petrochemical industry. We hope to be able to improve the quantitative and qualitative level of Iran's petrochemical industry, which is a pillar of the economy, through transferring in technical and technological knowhow," he added.

 

Iran: Home to World Largest Euro-5 Gasoline Supplier

A deputy minister of petroleum has said that Iran is home to the world's largest supplier of Euro-5 gasoline.

Ali-Reza Sadeq-Abadi, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), said Bandar Abbas Gas Condensate Refinery, known by its builder company Persian Gulf Star Oil Co., would be the world's largest producer of Euro-5 gasoline.

He said Phase 3 of the refinery would become operational in the first half of the current Iranian calendar year which began on March 21.

He said Phase 2 of the treatment facility would supply an additional 12 ml/d of Euro-5 gasoline, which would end Iran's dependence on gasoline imports.

Sadeq-Abadi said most Iranian refineries would be overhauled in the new calendar year, adding that the Bandar Abbas condensate refinery would make up for any gasoline shortages.

"The activities which have been carried out for the startup of Phase 2 of the Persian Gulf Star refinery are unrivalled in Iran. For the first time, all factors involved in a project have concurred," he said. "Completion of units until the launch of Phase 2 over a week, thanks to round-the-clock efforts, bears proof to such fact."

He touched on records set in instrumentation, piping and electricity, saying: "These records are unique and if we quantify them we will realize the value of job."

Sadeq-Abadi said Phase 2 was expected to come online in the new calendar year, but it became operational sooner than planned.

He boasted that the gas condensate refinery had hired young service workers.

"Another record set [in the launch of the refinery] is the delivery of 200 tonnes of catalyst over 20 days in the country," he added.

Sadeq-Abadi said financing was not the only requirement for the completion of a project. He added that coordinated management was instrumental in the startup of the condensate treatment facility.

"Fortunately, thanks to follow-up by senior officials of [Petroleum] Ministry and the agreement of President [Hassan Rouhani], a €260 million loan was approved for completing Phases 1, 2 and 3 of this refinery," he said.

Shiraz Refinery to Supply Euro-5 Gasoil

Shiraz oil refinery is undergoing development to supply Euro-5 gasoil, its CEO Rahim Shamsoddini said.

He said an agreement had been signed for the purchase of license and basic design for upgrading gasoil production.

"Based on this agreement, the Shiraz refinery will be supplying gasoil in compliance with the Euro-5 standards," he added.

"With the purchase of license and basic design from Honeywell UOP for gasoil production at 26,000 b/d, the quality of gasoil supplied by the Shiraz refinery will be upgraded to international standards," said Shamsoddini.

"The objective behind designing the gasoline hydrogen purification unit is to upgrade the quality of gasoil through cutting sulfur compounds to standard levels and also to minimize environmental impacts and consequences," he said. "Throughout this process, in addition to a decline in the sulfur content, the cetane number of purified gasoline will increase 2 to 5 units."

Cetane number is an indicator of the combustion speed of diesel fuel and compression needed for ignition. It is an inverse of the similar octane rating for gasoline.

Shamsoddini said: "The refinery's total gasoil [supplied after feeding 60,000 b/d) stands at 26,000 b/d with the sulfur content of 6,000 ppm."

He added that the aforesaid project would reduce the sulfur content to 10 ppm.

Fresh Gas Production at South Pars

The second train of gas sweetening at the refinery of Phase 13 of South Pars gas field would become operational in April, CEO of Pars Oil and Gas Company, Mohammad Meshkinfam said.

He said that the first row of sweetening at the refinery of Phases 22-24 would come online in May.

The first row of sweeting in Phase 13 came online in late March, said Meshkinfam, adding that completing the remaining phases of South Pars would be a propriety in the current calendar year.

Phase 13 is being developed to produce 56 mcm/d of sour gas from 38 offshore wells, 50 mcm/d of sweet gas, 2,900 tonnes a day of liquefied petroleum gas (LPG), 2,750 tonnes a day of ethane, 75,000 b/d of gas condensate and 400 tonnes a day of sulfur.

Meshkinfam said in the current Iranian calendar year, every two months one train of Phases 22-24 would come online.

He added that POGC was planning to enhance recovery from South Pars as instructed by the Ministry of Petroleum.

Iran's Minister of Petroleum Bijan Zangeneh said in February that six phases of South Pars were 90% complete.

He said South Pars would see its production grow 140 mcm/d in the new Iranian year as five new phases become operational. The minister said that Phase 14 would become fully operational next calendar year.

Petchem Catalyst to Be Commercialized

An Iranian petrochemical company has agreed to commercialize a catalyst produced by an Iranian petrochemical plant.

The agreement was signed between Petrochemical Research and Technology Company (PRTC) and Shazand Petrochemical Plant for the commercialization of SAC500.

Deputy Minister of Petroleum for Engineering, Research and Technology Habibollah Bitaraf and Deputy Minister of Petroleum for Petrochemical Affairs Reza Norouz-Zadeh oversaw the signing.

SAC500, which belongs to the Ziegler-Natta family, is used in the slurry process of manufacturing high-density polyethylene. This catalyst can rival foreign-made ones and is usable in the production units of Hostalen process for manufacturing pipe grade.

Currently, 400,000 tonnes a year of high-density polyethylene pipe is needed in the country. To that effect, 30 tonnes of catalyst with an average price of $400 per kilogram would be needed a year.

Petrochemical plants in Jam, Maroun, Shazand and Kermanshah are currently manufacturing such grade. As new petrochemical plants are becoming operational consumption of this catalyst is forecast to grow.

PRTC, which enjoys a 10-year background in research on catalysts, has managed to develop SAC500.

Bitaraf said more than 50% of Iran's revenue from petrochemical industry is in hard currency, adding that two to three percent of petrochemical revenues should go to research and technology for more effectiveness.

Norouz-Zadeh stressed the need for supporting petrochemical plants in Iran to rival international competitors, adding: "That would help us no longer depend on other countries for catalyst and new technologies."

Esmaeil Qanbari, CEO of PRTC, predicted that commercialization of SAC500 on industrial scale for HDPE would save around $40 million.

Jump in Petchem Output, Exports

The removal of international sanctions on Iran in the aftermath of the implementation of Iran's 2015 nuclear deal with six world powers, dubbed the Joint Comprehensive Plan of Action (JCPOA), once more tempted international companies and foreign investors to step into Iran which sits atop huge oil, gas and petrochemical deposits.

The JCPOA allows Iran to forge a new alliance with the West, which would benefit both sides. Such alliance would further interaction through trade, investment and negotiations for the development of oil, gas and petrochemical projects. Now that the way has been cleared for investors and proprietors of technology to step into Iran, everybody is preoccupied with development in the shadow of the existing calm atmosphere.

Iran's National Petrochemical Company (NPC), a subsidiary of Iran's Ministry of Petroleum, has already embarked on activities to that end. Iran is currently producing at least 60 million tonnes a day of petrochemicals. In the meantime, more than 60 petrochemical projects left from the third, fourth and fifth national development plans are under operation. Once the foregoing projects come online, Iran will see its petrochemical output double.

A review of petrochemical production in Iran in the past two decades indicates two periods of hike in production in 2006 and 2010. According to official data, Iran's petrochemical production stood at around 10.8 million tonnes in 1997, which jumped to 18.3 million tonnes in 2006 and 42.6 million tonnes in 2010. According to projections, the output is expected to reach 53.4 million tonnes in coming years.

The NPC data shows that petrochemical production in Mahshahr, Assaluyeh and other areas of Iran stood respectively at 19.5, 22.9 and 11 million tonnes during the calendar year 1396 which ended on March 20. A total of 53.4 million tonnes of petrochemicals were supplied by 51 petrochemical plants operating in Iran. That represents only 84% of Iran's rated petrochemical production capacity.

Qodratollah Farajpour, acting manager of production control at NPC, said feedstock shortages, technical and processing malfunction were to blame for the non-supply of 13 million tonnes of additional petrochemicals. He said that feedstock shortages were responsible for 6 million tonnes and technical malfunctions for 7.4 million tonnes. Farajpour said such restrictions needed to be minimized so that existing production capacities would be used.

Furthermore, Iran's petrochemical storage capacity currently stands at three million tonnes.

The value of products depends on a variety of factors including supply, demand, oil price and mix of products. If the average price for each tonne of petrochemicals is assumed at $543, Iran's petrochemical exports were on the decline from 2011 to 2017 due to oil price crash. In 2011, Iran exported 17 million tonnes of petrochemicals for $14 million, while in 2017, Iran's petrochemical exports reached 21 million tonnes for only $11 million. In terms of weight, the products included mainly methanol, liquefied petroleum gas (LPG) and urea fertilizer, which were priced respectively at $370, $380 and $210 per tonne.

Nonetheless, manufacturing more valuable products including polymers (polyethylene at $1,400 per tonne) and Karoun Petrochemical Plant's products (MDI at $2,800 per tonne) could boost the value of petrochemical sales. The 2011-2017 period experienced a sharp decline in petrochemical exports in 2013 due to tough international sanctions imposed on Iran. The country saw its petrochemical exports sharply fall from 17.8 million tonnes in 2011 to 12.8 million tonnes in 2013. Thanks to the JCPOA, Iran's annual petrochemical exports have reached 21.5 million tonnes.

In Farajpour's view, the growth perspective and the improvement in the rated production capacity of existing units indicate that due to the increased ethane production in the South Pars phases in coming years, the olefin units of Assaluyeh would move to enhance their ethylene production capacity through filling up their vacant capacities.

Fanavaran Petrochemical Plant hopes to reach its rated methanol production capacity by improving its installations, while Amir Kabir Petrochemical Plant plans to boost its rated olefin production capacity. Takht-e Jamshid Petrochemical Plant eyes building its second PBR production unit while Bandar Imam Petrochemical Plant is investing in a new olefin unit.

The methanol unit of Kaveh Petrochemical Plant, with a rated capacity of 2.3 million tonnes a year, is close to becoming operational. It will start production this year or next year. Furthermore, the methanol unit of Marjan Petrochemical Plant, with a rated production capacity of 1.65 million tonnes a year, is to come on-stream in coming months.

$80bn Investment in Iran Petchem Sector

Iran's petrochemical industry potential is no secret to anyone. Petrochemical projects worth $75 billion are envisaged in Iran, most of which need foreign finance. There are currently 62 incomplete and new petrochemical projects in Iran, which are like 62 sources of attracting capital.

By drawing investment into these projects and new ones, Iran's petrochemical industry would be able to make up for its delays.

Over recent years, Iran has introduced many changes into its upstream petrochemical production and it has been moving towards manufacturing products of higher value-added.

To learn more about planning for petrochemical projects, "Iran Petroleum" has conducted a short interview with Farnaz Alavi, director of planning and development at the National Petrochemical Company (NPC).

 

Q: What have been the achievements of Iran's petrochemical industry in preventing crude oil and creating value in the past decade?

A: Over the past decade, Iran's petrochemical production capacity has increased from 38 million tonnes to more than 62 million tonnes with production having gone from 24 million tonnes to over 50 million tonnes. In the same decade, the government has devised plans regarding designing and implementing major petrochemical projects, particularly in the Assaluyeh zone while at the same time upstream feedstock supply projects have become operational in the South Pars gas field. That has led to the blossoming of this industry. In the meantime, making arrangements for the removal of obstacles to production, monitoring and following up on projects under way by the National Petrochemical Company, management of optimal allocation of feedstock of upstream petrochemical plants including ethane in light of startup of different phases of South Pars and supply of required ethane to the Assaluyeh zone, management of optimal allocation of feedstock to petrochemical production plants including ethylene and propylene,  paying special attention to safety and environment, and planning overhaul have all led to the materialization of projects to achieve significant production capacity in the petrochemical sector.

Over this period, all ethane recovered in the South Pars zone along with the natural gas produced there have served as the main feedstock for petrochemical units, leading to the creation of significant value in the national economy. As a result, Iran's revenue from petrochemical industry increased from IRR 32,000 billion in the calendar year 1386 (March 2007-March 2008) to around IRR 300,000 billion by the end of the calendar year 1395 (in March 2017). That is forecast to cross IRR 350,000 billion by the end of the past calendar year (in March 2018).

Moreover, Iran's foreign currency revenue from petrochemical industry increased from $6.4 billion in the calendar year 1386 to $10 billion in the year 1395, which is set to reach $11.5 billion by the end of the calendar year 1396. It is noteworthy that due to the fall in oil prices, petrochemical products have experienced a decline in value across the globe in recent years. Therefore, petrochemical revenues have been affected.

 

Q: Petrochemical market has seen major changes in recent years in the world. What has Iran's petrochemical industry done with regard to building new plants in order to catch up with ongoing changes?

A: Following a roadmap worked out for this purpose and in light of the country's huge gas production after the development of South Pars gas field, efforts have been put into establishing natural gas-fueled plants and perpetuating the production chain, particularly the polymer chain. For that purpose, the bulk of new projects are focused on converting gas to propylene and polyethylene with a view to generating more value-added and developing downstream industries along with creating jobs in the country.

 

Q: What are Iran's petrochemical production plans up to 2025? What is the source of feedstock for them?

A: We are currently facing shortages in ethane, ethylene and propylene supply in the petrochemical industry. Of course, after remaining phases of South Pars come online, NGL and other feedstock supply projects become operational we will reach the nominal capacity of feedstock production in coming years. Furthermore, as new ethane and ethylene consuming projects come online by the private sector during the 6th Five-Year Development Plan, which are dependent on sufficient financing, the production chain in the upstream feedstock sector would be completed.

In case the international atmosphere improves and the provisions of the JCPOA (Iran's nuclear deal with six world powers) are implemented, due to valuable hydrocarbon resources including natural gas and ethane, in case regulatory petrochemical projects become operational by the NPC, more than $80 billion in investment would be made in this industry over the coming six to seven years.

Franco-Iranian Oil Industry HSE Workshop

In the aftermath of implementation of Iran's nuclear deal with six world powers and concomitant renewed interest by foreign companies for cooperation with Iran's petroleum industry, the Iranian Ministry of Petroleum was prompted to benefit from the achievements of leading international companies in the health, safety and environment (HSE) sector.

The first HSE workshop was held in Tehran in cooperation with the French Embassy's Business section in Iran. The event was inaugurated by France's Ambassador Francois Senemaud and Iran's top deputy minister of petroleum Marzieh Shahdaei.

Paying attention to training manpower, prioritizing human resources in HSE issues and the significance of HSE in monitoring operation were among major points highlighted by speakers during the two-day event.

Co-sponsored by the Office of Iran's Deputy Minister of Petroleum for International Affairs and commerce, the HSE workshop was held February 27-28.

The objectives sought throughout this event included familiarizing Iranian petroleum industry managers with the latest HSE achievements of top oil and gas companies and application of management and technical approaches to improve the HSE output.  

The issues discussed throughout the workshop mainly pertained to the HSE role in design, preventing damage, management of physical assets, promoting the HSE culture, behavior-based safety, oil and gas blowout prevention and new environmental issues.

The companies represented in the event were Total, Axens, Artelia, IFP, B.V., Kerdos Energy, Amethyste, Gas Viewer, Path Control and GESIP among others.

Iran Determined to Renovate Equipment

In her opening remarks, Shahdaei described the petroleum industry as high-risk everywhere in the world.

"In all moments, working in the oil industry is high-risk due to the nature of work. The risk is extremely high in Iran's petroleum industry due to decrepit installations," she said.

"When an accident happens in the petroleum industry a single factor will not be to blame; rather we have to pin the blame on a chain of factors including neglecting instructions, disregarding regulations, mismanagement, decrepit equipment, poor education and so on," said Shahdaei.

She reaffirmed the Iranian Ministry of Petroleum's determination to renew equipment now that sanctions have been lifted due to the implementation of the Joint Comprehensive Plan of Action (JCPOA).

She also underscored the need for preventive work to minimize damage emanated from accidents, saying: "There are many approaches in this sector and we should benefit from all experiences instead of waiting for a crisis to occur and then seeking a solution."

Reiterating that leading international companies have always sought effective solutions to oil and gas industry accidents, Shahdaei said: "Benefiting from the knowledge and experience of these companies through holding workshops and training courses for petroleum industry experts and staff is a must."

Referring to the use of risk assessment methods, she called for the adoption of "tough regulations" in order to make the workplace safer.

Shahdaei specified vetting of professional competence, training manpower, management of physical assets, paying attention to environmental issues and updating technologies in the petroleum industry as important issues which must be focused upon.

She said establishment of process safety management (PSM), risk assessment and workplace safety were among the most important preventive measures.

 

Environmental Obligations Binding

 

The French ambassador highlighted the necessity of respecting environmental regulations.

Senemaud said that the Paris Agreement (COP21) required its signatories to honor environmental obligations.

"In addition to the HSE obligations in all sectors we have to take into consideration training manpower and motivating them, because training is instrumental in this sector," the top diplomat said.

Senemaud also referred to the significance of oil and gas market in Iran and the Ministry of Petroleum's success in bringing dynamism to the industry, saying: "During my visit to Assaluyeh and the South Pars projects, I was impressed by the development of infrastructure in this zone."

He said that in the wake of the lifting of sanctions, Iran and France have resumed oil and gas cooperation. Senemaud said France bought more than €2 billion worth of oil from Iran in 2017.

The diplomat said significant investment was being made in the development of Phase 11 of South Pars by the French energy major Total and its partners.

Noting that France would continue to support the development of activities in Iran's oil and gas sector, Senemaud said: "I hope that Iran-France cooperation would go on in the oil and gas sector and we would be able to cooperate in the revival of Iran's oil and gas sector."

 

HSE, a Behavioral Issue, Not a Cultural One

 

Dominique Boutin, from Sofregaz, had a presentation about reducing workplace accidents.

Boutin, who had visited South Pars one day before the conference, said the idea is to minimize the number of accidents in workplaces.

"Iranian companies have done quite well with regard to HSE issues," he said.

Boutin added that the South Pars facilities did not represent Iran's petroleum industry. "Therefore, the volume of activities carried out in this sector may not be the same in all sectors of petroleum industry."

He said that Sofregaz could cooperate with Iranian companies on reducing workplace accidents during implementation of projects, as well as in operating facilities.

Boutin highlighted "behavior-based safety" approaches, saying: "I believe observing that HSE issues rather than being a cultural issue is a behavioral one. When a behavior is not proper it has nothing to do with culture."

He called for the promotion of culture of safety, saying: "There is an approach according to which if we can predict accidents we will be able to reduce the number of accidents during work. But most of times many accidents are rooted in our behavior. Therefore if we manage to correct our behavior we will be able to institutionalize the culture of safety."

"In order to make sure about the outcome of activities on a real-time basis we will need HSE measurement indices to measure the activities. That would help prevent accidents and lower work risk," said Boutin.

He said that administrative control and supervision, as well as training manpower were among tools of HSE observation. He added: "We know that workers must be equipped, but we have to train them to behave properly on-site."

"Of course, HSE training is required to be alongside standardization. Furthermore, those who are chosen to train human resources are required to be competent for this purpose," he added.

Boutin referred to the strategy of continuity at work, adding: "We are required to carry out corrective measures in the process of work. The management should supervise this issue regularly in order to improve and see recycling."

He said that reforms were part of management.

"We believe that management does not mean letting affairs go ahead on themselves. The more the management's supervision the more effective the outcome will be," he said.

Boutin underscored the significance of responsibility in HSE business, saying: "We have to regularly monitor accidents and constantly supervise this issue because accidents do not give any alert and they occur suddenly. Therefore, we should not ignore our responsibility and imagine that our job will be done only by constant supervision."

"Meantime, HSE policymaking must be transparent and clear. That would help company chief establish links between HSE and the structure of project," he said.

Boutin said HSE at workplace included all sectors and was not bound to any specific domain.

"We have to require contractors to respect maximum HSE obligations and regularly report data so that we would see which accidents happen in different sections. That would help us find out whether accidents have increased or not," he added.

Boutin also referred to communication between contractors and operators, adding: "Operators are required to supply safety equipment to contractors. It would be better if a third party would be involved to adapt the requirements with what is on the ground."

He said that Europe had set instructions to verify the adaptation of activities and responsibilities.

Highlighting the significance of human factor, Boutin said: "Accident would make sense when a group of people work somewhere. Our objective is to change the behavior of people in order to prevent accidents."

He said that "all accidents are preventable."

 

Risk Reduction Level

 

Philippe Reveau, project manager at the HSE section of Artelia, was the next speaker. He first presented data about Artelia and its activities and staff.

Artelia of France is operating projects abroad: in Europe, Africa, Asia and America. Artelia's activities are mainly in Europe.

Reveau said Artelia is mainly active in risk management, adding that his company attached great significance to "full compliance to laws and regulations in each country". He also highlighted "periodical, regular and systematic reviews and industry standards compliance".

"Before starting a project we often conduct environment studies and assess risks like impacts on the environment and seismic testing risks. Then, we study management and crisis management projects," said Reveau.

Referring to risk studies conducted prior to the implementation of projects, he said: "By risk assessment we will be able to examine the impact of implementation of the project on the environment and examine problems and find solutions to them."

Reveau echoed Boutin's remarks about the significance of manpower in projects, saying: "In the first step, we need to identify the path we have to go through for the implementation of the project. We have to take into consideration the fact that manpower is always the top priority for us."

He said every report drafted on risk assessment is required to specify objectives. "In our separate assessment of our own objectives we have to make clear what would happen after an accident takes place. In the meantime, we need to examine scenarios for countering accidents and measure the probability of occurrence of accidents in a bid to minimize them," said Reveau.

"One of our objectives is to reach an acceptable level in risk reduction. Therefore, we have to make predictions and then design models," he added.

 

Workplace Accidents

 

For his part, Total's Terry Cooper outlined the French giant's activities regarding workplace safety, saying the number of accidents had significantly declined. He noted that Total registered 925 consecutive days without any fatal accidents in exploration and production projects.

He said he had witnessed a large number of risks during his visit to Phases 2 and 3 of South Pars gas field. He added that good HSE job had been done in Phase 2 of the giant offshore reservoir.

Highlighting the significance of manpower in the implementation of projects, Cooper said he had been told on the site of South Pars that accidents had declined and they were mainly emanated from human error.

Cooper said paying attention to HSE was "a strong commitment of management" at Total.

He added that safety-related behaviors are closely monitored by the management.

He said everyone had to make efforts for safety to be prioritized. Cooper said regulations and instructions had to be explained to everyone while different sections had to be visited regularly.

Of course, he added, all sections may not be visited. Cooper said closed circuit cameras were of great help to inform staff of what is happening in and around the site of the project.

Cooper said the cameras would provide "a clear understanding of the environment", help "improve the way instructions are given to the staff", help ensure that staff would "comply with the rules" and help "improve our safety on site".

He said that Total had declined a "Perfect Day" which required all staff to find answers to questions and design scenarios.    

"Each actor (from the affiliate management to the teams on site), commits

IHSE in Iran; Strengths and Weaknesses

Foreign speakers at the Franco-Iranian HSE workshop said Iran, a country with extended petroleum industry, still needed to undertake some essential measures in terms of occupational safety.

Dominique Boutin, head of engineering at Sofren Group, told Iran Petroleum on the sidelines of the event that Iranian service workers in the giant offshore South Pars gas field were not sufficiently equipped.

"There are two things I have seen there. I had the impression that the workers on the site were not sufficiently equipped with personal protection gear. [Second], I'm not sure if the staff are trained to understand the HSE instructions," he said.

Boutin, who drafted the project quality plan for Sofren Group's Sofregaz to implement its flare gas gathering project in South Pars, said he would meet one-on-one with Iranian companies involved in the project to "tell them his expectations of HSE plan."

"I've drafted the project quality plan which refers to all project management documents and a document which is HSE management plan. We need to tell them our expectations of HSE plan," he added.

Boutin, however, said that the HSE system installed in Phases 2 and 3 of South Pars by France's energy giant Total seems to be well operated, and lead to "excellent results" in terms of occupational safety.

He said to assess the quality of HSE in Iran, he had to know exactly what existed on the ground before taking the following step.

"I need to know exactly the things as they are. First of all we have to be clairvoyant to see the things as they are,'" he said, adding that the next step would consist of giving "suggestion on how to be and finally to verify how they have changed and if they have met our expectations."

He reaffirmed his views on the significance of personal "behavior" and that the issue of culture may be implicated erroneously.

"Culture does not prevent us from having good results in terms of safety. That's the first thing. It's a question of behavior and not culture. Behavior in safety leads us to good results," said Boutin.

He also underscored the significance of qualified manpower, saying technology needed good service workers to succeed.

"Good tool does not make a good worker. Technology is important, but a beautiful car does not make a driver good," he said.

 

Decrepit Installations

 

ARTELIA is an independent engineering, project management and consulting group that operates in the following nine markets: environment, industry, building construction, water, energy, maritime, multi-site projects, transportation and urban development.

ARTELIA provides services to private clients (industrial groups, developers, investors, building contractors, banks, insurance companies, etc.) as well as to public clients (government departments, local authorities, public bodies, international funding agencies, etc.).

In the Oil &Gas industry sector, Artelia works in the following areas:

Safety Design Studies: process safety studies (HAZOP and HAZID), preliminary risk analysis, preparation of regulatory safety reports / technological risk assessments (TRA), risk modelling (PHAST, etc.), nautical QRA, QRA, etc.
Environmental Baseline Studies and Environmental and Social Impact Assessments: air, water and soil quality, noise, biodiversity, for offshore, coastal and on-shore environment.
Emergency preparedness & crisis management: preparation of Emergency Response Plans, Site Contingency Plans, Oil Spill Contingency Plans, organization of Large Scale Exercises, delivery of crisis management training sessions.

 

Philippe Reveau from Artelia said a lot had to be done in Iran in terms of risk assessment. He told “Iran Petroleum” that most installations in Iran's petroleum industry were outdated, this point involve a potential risk aggravation (occurrence and severity of accidents).

"For the moment, there is still too much to do. The installations in Iran are mostly ageing. And as far as risk assessment is concerned that is still a lot to do," he said.

Reveau recommends defining a common regulatory framework for all operators in terms of risk assessment. This may involve the development of regulatory texts and associated methodological framework. A "methodological guide for development of risk assessment" to be put at the disposal of service workers would harmonize the steps taken by operators in terms of risk assessment.

He noted that even the "least probable risks" had to be taken seriously, citing the example of a devastating earthquake which may strike at any time.

Reveau said that Artelia is able to help governments to adopt regulations on HSE requirements. 

 

Prevent 'Poor Cousin'

 

Terry Cooper. HSE manager of Total, highlighted the necessity of occupational safety, saying: "Don't let major risks and poor safety become the poor cousin."    

Speaking to “Iran Petroleum”, he gave a positive assessment of "occupational safety" measures at South Pars which he had visited the day before the workshop.

"They seem to manage very well the occupational safety," he said.

Cooper, however, said the "weak point" with HSE at South Pars was the lack of a "safety process management system".

He said that "elements" for such system already existed in the giant gas field, which he said needed to be integrated.

Cooper reiterated the significance of hiring local manpower in projects. He said that it was "essential" for Total to "maximize local content" in every country it operated projects.

"So if there are Iranian companies that have the capability. we need to use those first," he said, adding that weaker companies had to be helped and trained to comply with the required standards.

 

"Based on the standard process that we have, we design new projects to codes and standards, and international best practice, but that's not a guarantee that you know your risks and how to manage them," said Cooper.

He added that Total's risk assessment code made necessary calculations to see if there is any risk of fire or explosion.

Cooper said HSE matrices were key in risk assessment, adding: "1,000 to 2,000 scenarios [may be worked out] and so we put all those scenarios in a risk matrix."

He said the scenarios in the "green" area of the matrix showed lower risk of accident, while those in the "red" area had to be countered immediately.

Cooper said the "green" area showed the situation was under control, while the danger zone may herald a deadly accident with environmental spill.

To reduce risks, he said: "We should see first of all if the risk can be eliminated. If you can't eliminate them what measures could be put into place to reduce the likelihood of that event occurring."

He warned that thinking of solutions in the 11th hour for reducing a risk could cost operators dearly as they would lose "big money".

Cooper also said: "We are not perfect in Total. We have that process in place, but we don’t do it always as early as it should. But we are improving."

 

Hengam Facility to Process 80 mcf/d Sour Gas

 

Iranian President Hassan Rouhani inaugurated in early March the gas processing facility of the offshore Hengam gas field, which Iran shares with Oman in the Persian Gulf waters. The facility has capacity to process 80 mcf/d of gas.

With the startup of this facility, which is the complementary link of development of Hangman, flare gases will no longer burn off; gas will go to Qeshm Island for consumption or will be fed into national trunk-line for distribution. The project is implemented in harmony with the environmental policies of the Iranian Ministry of Petroleum.

Hangman oil field is located in the Strait of Hormuz, more specifically 45 kilometers from Qeshm Island. Iran owns 80% of Hengam with the remaining 20% located in Omani territorial waters.

Hengam is estimated to hold around 700 million barrels of oil in place with its natural gas reserves estimated at 2 tcf.

Development of Hengam is planned both offshore and onshore by the Iranian Offshore Oil Company (IOOC). In the offshore sector, the development project includes three wellhead platforms, 10 wells and a pipeline carrying oil as far away as Qeshm Island, while in the onshore sector; it incorporates an oil processing plant, oil pipelines carrying oil from land to processing facilities and the Bandar Abbas oil refinery.

The special features of Hengam include its special reservoir rock and fluid, as well as its production of Iran's lightest and the best crude oil.

 

Processing 80 mcf/d Gas

 

The first phase of development of Hengam field started in January 2008. Two years later, it became operational. The second phase of the project started in October 2010 for processing associated petroleum gas recovered from Hengam. But the depreciation of Iran's national currency against the dollar, restrictions on money transfer and the toughening of sanctions delayed the project until its recent inauguration by the Iranian president.

The startup of this processing plant would allow the desalting and dehydration of 80 mcf/d of sour gas up to 3 ppm.

Before the implementation of this project, 14,000 boe/d of gas was flared at Hengam. Now gas flares will be turned off.

Hamid Bovard, CEO of IOOC, said implementation of this project would save Iran more than $700,000.

 

One-Year Capital Return

 

Mohsen Paknejad, deputy CEO of the National Iranian Oil Company (NIOC) for production affairs, said around $100 million was invested in this project.

"In light of value-added generated through processing and consumption of gas produced from this field, this amount of investment is forecast to return in less than one year," he said. "Furthermore, it would bring about numerous environmental achievements to the largest islands of the Persian Gulf."

After the end of construction and installation operations, the pre-commissioning of the gas processing facility started last December. Over 70 days, all processing units, infrastructure and utilities including desalting and sweetening units, pipelines, storage tanks, boilers and compressors became operational without any accidents in full compliance with the pre-startup safety review (PSSR) regulations. The PSSR operation was carried out in February with the injection of sour gas (18,000 ppm sulfur content) into the processing facility to be converted into gas satisfying standards set by the National Iranian Gas Company (NIGC). Around 70 mcf/d of associated gas has since been delivered to the NIGC to feed industries and power plants rather than being flared off.

 

Qeshm Gas Fields Development

 

Qeshm Island, accommodating 17 offshore and onshore petroleum fields including Hormuz, Hengam, Tosan, Gorzin, Salkh, Doustkouh and Taftan, has potential to become an energy island in the Persian Gulf area and the Strait of Hormuz. Studies conducted so far on the hydrocarbon fields of Qeshm Island are indicative of the existence of 40 tcf of gas and 4 billion barrels of crude oil in place.

"In the future, with the development of other gas fields in the Qeshm area, we will be able to use the processing capacity of this plant," said Paknejad, adding that it would reduce the cost price of development of new fields for production.

Bovard said the crude oil processing capacity in Qeshm Island was more than 45,000 b/d, adding: "We can use such capacity to develop other oil fields located on Qeshm Island with minimum costs."

 

Feedstock for Industries

 

Gathering associated petroleum gas, NIOC would be able to supply fuel and feedstock to various industries, particularly power stations which have a power generation capacity of 130 MW. Petrochemical plants located on Qeshm Island could also receive necessary feedstock. Therefore, the gas processed at Hengam processing facility would supply the needs of Qeshm power plant and MAPNA water/electricity power plant in Qeshm Island, and even Bandar Abbas power plant and Khamid cement factory outside the island. Before this gas processing facility became operational, Gorzin field's gas was the only source to feed the power plants and the cement factory.

"All stages of designing, manufacturing, installation, startup and operation of these facilities have been handled by Iranian contractors, manufacturers and consultants," said Bovard.

 

3 Platforms Due Ready

 

Ali Hassani, manager of Hengam development project, said maximum hiring of Iranian companies was an advantage of the gas processing facility. He added that more than 70% of items needed in the facility had been supplied by Iranian companies.

He said the outstanding feature of this project was no-flaring, as well as environment protection in Qeshm Island.

Hassani said that Hengam power station would come online in less than three months.

He also said that three wellhead platforms were under construction for Hengam, expected to be ready in the new Iranian calendar year.

"This field is gradually switching fr

IP/69-2

US Oil Policy; Certain Objectives

 

By Shuaib Bahman

 

Amid efforts by both OPEC and non-OPEC oil producers to adopt certain initiatives like the production cuts and output freeze to shore up oil prices, the Trump administration is sparing no effort to sway global markets by supplying more oil.

Such policy is pursued by the US President Donald Trump against the backdrop of Washington's desire for oil price hike in a bid to justify its shale oil recovery.

Oil price fall could by no means justify the commerciality of shale oil production in the United States. The question to be answered is why the US is proceeding with an approach in conflict with its objective of justifying the production of shale oil.

According to the US Energy Information Administration forecasts, by the end of 2019 US oil production will reach 11 mb/d. Such oil production level, which is expected to be achieved due to the Trump administration's insistence on shale oil production, will give rise to numerous consequences, the most important of which are as follows:

 

Production of 11 mb/d of oil would help the US overtake world's largest oil producer Russia.
The projected increase in US oil production will cut its imports by 20% over a decade and will reduce its dependence on external oil.
The forecasted production hike will help the US switch from a net importer since 1953 to a net exporter of energy after 2022.
An 11 mb/d oil output will help the US disengage itself from the 1970s-style oil crises and enjoy more freedom of action in its foreign policy.
If materialized, such production hike will strengthen the US role in global markets.

 

 

Certain Objectives

 

The Trump administration is pursuing the following objectives under the pretext of its energy policy:

 

Enhanced oil production in the US will give rise to influential political and economic consequences inside the country. That can help Trump make good on his election campaign pledges and pave the way for his reelection in the next presidential race because more oil production will create job opportunities particularly in rural areas. The US is currently exporting 1.7 mb/d of crude oil plus 3.8 bcf/d of natural gas. When oil production rises, the US will see its exports grow. That will in turn result in the development of energy transmission lines and related facilities, thereby creating job opportunities and causing economic prosperity in remote rural areas of the country. In addition to the aforesaid points, oil production hike will reduce energy price in the United States. Gasoil and gasoline prices, which experienced ever high peaks, would fall by 37%. Furthermore, oil production hike could replace coal with shale gas in the power stations and allay the environmental concerns of opponents of Trump by capping GHG emissions. Therefore, what the US is pursuing in oil and gas sector will create jobs, increase welfare and boost US role in world markets, which could be all assessed on the ground of materialization of Trump's election promises.

 

One of the covert objectives of the Trump administration in the oil supply increase decision and concomitant oil price drop may be Washington's attempt to acquire Saudi oil giant Aramco, which the Arab kingdom is listing on stock market in a bid to plug its huge budget deficit. Given the fact that the Saudi stock market is too small to accommodate a big company the size of Aramco, its stocks are likely to be introduced to the New York Stock Exchange. Aramco is valued at over $2,500 billion, five percent of which is still bigger than the total value of Britain's BP and France's Total – both energy giants in Europe. In its calculation of Aramco's stocks value, the Saudi government takes into account the value of national oil and gas reserves, which means Riyadh's plan to sell ownership of Saudi oil and gas reserves to foreign parties. Under such circumstances, oil price decline could chip away at the value of Aramco stocks to prepare the ground for Trump to buy shares at low prices through his companies. Such deal would be concluded while Saudi Crown Prince Mohammad bin Salman will have to grant major concessions to the Americans in order to be able to succeed his father and push ahead with his so-called reforms. The heir to the throne in Saudi Arabia has practically lost the support of princes and Wahhabi scholars there and he could not push ahead with his ambitions plans without the support of foreign governments. What strengthen such speculation are recent remarks by Saudi Arabia's Energy Minister Khalid al-Falih who, when asked whether Saudi Arabia was worried about Trump's pledge of energy independence, replied: "We have no problem with the growth of American indigenous oil supply. I have mentioned repeatedly, as long as they grow in line with global energy demand, we welcome them." The minister added: "President Trump has policies which are good for the oil industries and I think we have to acknowledge them." These remarks by the Saudi oil official come while his country has not hidden its objective to counter shale oil production at least over the past two years. Therefore, a deal is likely to be under way between the Trump administration and the Saudi government, based on which Riyadh would drop its opposition to the US shale oil production to pave the way for lower oil price in  the world markets.

 

Perspective

 

Although a decline in oil prices may adversely affect the US revenues from shale oil extraction, higher production of unconventional oil would be highly advantageous for the Trump administration. On one hand, Trump will be able to deliver on his election campaign pledges while on the other, he will be able to exercise control over world markets. The US government is no longer willing to remain a mere consumer in the world, as has been its case over the past decades. The US intends to step into production and export in a bid to spare the country threats of energy crises unfolding all across the globe. That would also play into the US's hands as a tool for containing partners and rivals. For instance, by winning a toehold in the oil export market, the US would influence the energy policies of European countries, Russia, China and Saudi Arabia.

IP/69-12

 

1-Senegal Subsea Studies Project Commissioned

 

Woodside has awarded Wood three contracts to perform subsea and flow assurance studies supporting the SNE field development in the Rufisque, Sangomar and Sangomar Deep Offshore blocks off Senegal.

Bob MacDonald, CEO of Wood’s Specialist Technical Solutions business, said: “We have significant operational, design and verification experience in West Africa and look forward to applying our flexible concept evaluation and design optimization solutions to support Woodside in the development of this important deepwater project.”

Cairn Energy, SNE’s current operator, said a tender process was under way with FPSO and subsea infrastructure vendors, with a redeployed FPSO viewed as the preferred development option. The partners are seeking a vessel with a production capacity of around 100,000 b/d.

The first phase of the development will focus on the lower S500 reservoirs, with up to 25 wells targeting around 240 MMbbl.

Subsequent phases, likely to follow two to four years after phase one, will target roughly 250 MMbbl in the S400 upper reservoir, with potential gas export.

Geophysical, environmental baseline and geotechnical surveys have all been completed, and work has started on project debt financing.

The exploitation plan, which will outline the full development plans and options, should be submitted later this year, coinciding with the process of transferring operator status for the development to Woodside.

Assuming government approval by the end of 2018, and the subsequent field investment decision, first oil should flow sometime between 2021 and 2023.

Evaluation continues of further exploration opportunities around the SNE discovery where there is substantial untested prospectivity, Cairn added.

This summer the company plans to spud its first operated exploration well in the UK offshore sector on the Ekland prospect.

It is also participating in the Tethys well which has reached TD, and the recently spud Raudåsen exploration well offshore Norway.

 

 

2-Infill Drilling Lifts Thailand Oil Output

 

Average oil production last year from the Wassana field in the G10/48 concession in the Gulf of Thailand was 4,377 b/d, according to operator KrisEnergy.

In October, the facilities were shut down briefly to allow replacement of the produced water return line, a floating hose roughly 100 m (328 ft) long, between the CALM buoy and the floating storage and offloading vessel.

Production was then shut in for a further period in November for the arrival of the PV Drilling I jackup, in preparation for a six-well infill drilling program.

Two infill horizontal wells, A-20H and A-22H, subsequently came on-stream in December, lifting gross production to 5,875 b/d from 12 producing wells, and four further infill wells, A-18H, A-19H, A-23H and A-25H, were completed and brought online last month.

As a result, production should rise to around 7,000 b/d from 16 producing wells, once optimization measures are completed.

The company is a partner in the offshore Nong Yao oil field in G11/48 in the same region. Here six infill wells were drilled, with 22 wells producing at the end of 2017. Two additional infill wells are scheduled to go online by the end of this month, and four more will likely be drilled later this year.

 

 

3-INPEX Awards Contract Offshore Australia

 

INPEX has awarded Wood a five-year contract, with extension options, to perform brownfield engineering services for the Ichthys project.

This applied both to the offshore production facilities, 220 km (137 mi) offshore Western Australia, and the onshore LNG processing facilities in Darwin, Northern Territory.

Wood’s Perth branch will manage the program and will support the execution of brownfield works, as well as providing technical assistance.

The company also has a five-year contract, issued in September 2016, to provide subsea engineering services to support Ichthys LNG.

Quadrant Energy has contracted two of Maersk Supply Service’s Starfish-class anchor handling vessels to support its drilling campaign offshore Western Australia.

Beginning in March, the Maersk Master and Maersk Mariner will support Quadrant Energy’s Phoenix South and Van Gogh drilling campaign that will initially cover three wells for a duration of 150 to 200 days. The vessels will support Transocean’s semisubmersible rig DD1 with supply and anchor handling duties.

 

 

4-PEMEX Appraising Zama Discovery

 

Talos Energy, Premier Oil, and Sierra Oil & Gas are in talks with PEMEX on appraisal drilling of last year’s Zama oil discovery in the Sureste basin offshore Mexico.

The Zama-1 well in block 7 encountered a continuous oil-bearing interval of more than 335 m (1,100 ft) with up to 200 m (656 ft) of net oil-bearing reservoir in upper Miocene sandstones with no water contact.

Premier estimates 1.2-1.8 Bbbl in-place, with recoverable resources in the range of 400-800 MMbbl. This includes volumes that potentially extend into a neighboring block operated by PEMEX.

The discussions concern a pre-unitization agreement to progress the appraisal program, set to start later this year or in early 2019 on block 7.

The partners are negotiating an option for a rig for this purpose, while PEMEX has indicated that it intends to appraise the Zama structure on its license via a well this spring.

In addition, seven vendors have submitted pre-front-end engineering design (pre-FEED) scoping studies to assist appraisal planning and to identify additional data that needs to be acquired in the drilling programs.

Premier also has a carried 10% interest in offshore block 2, extendable to 25%. Here the partners are assessing which prospect should be drilled first, probably in 2019.

Offshore Brazil, Premier has interpreted the final processed broadband seismic data across all three of its Ceará basin blocks and identified the best prospects.

Planning is now under way for a potential drilling campaign in 2019 or 2020, with good progress on securing environmental and drilling permits.

Across the Atlantic, Premier is a partner to Petronas in the deepwater Chinguetti field off Mauritania, where production was recently shut down for good.

The FPSO is being prepared for sail away and a drillship has mobilized to the field to start a six-month campaign of temporary suspension of the wells, starting with the water injectors. Permanent abandonment of the wells should follow in 2019 (government approval is still pending for the field abandonment and decommissioning plan).

In addition, Premier and its partners are drawing up a program to abandon suspended exploration and appraisal wells on the previously relinquished offshore Banda and Tiof discoveries.

 

 

5-GSP to Drill Three Wells Offshore Greece

 

Energean Oil & Gas has awarded GSP an EPCI and drilling contract for the production expansion program at the Prinos concession offshore western Greece.

The newly launched Epsilon field development will comprise an unmanned wellhead platform (Lamda) and three inter-connecting pipelines to the existing Prinos Delta platform.

GSP’s work scope includes drilling of three wells at the Lamda platform location in the Aegean Sea, with the jackup GSP Jupiter, and project management, construction, transportation and installation engineering, procurement, construction, installation, pre-commissioning and start-up of the Lamda platform and associated pipelines.

Energean recently signed with BP an extension to the latter’s long-term off-take agreement for the Prinos field to November 2025.

In an unrelated development, the jackup GSP Saturn arrived at the Port of Constanţa last month following a tow from Rotterdam and through the Bosphorus into the Black Sea.

It will undergo a reclassification process ahead of a drilling campaign in the Black Sea and the Marmara Sea offshore Turkey.

The GSP Saturn is a four-legged, self-elevating jackup, which last underwent an upgrade/reclassification program at the GSP Shipyard in 2013.

-Aramco, Shell Sign LNG MoU

 

Saudi Aramco signed various memoranda of understanding (MoUs) at last week’s UK-Saudi CEO Forum in London.

This was staged to promote business and cooperation between the UK and Saudi Arabia, and to coincide with an official visit to the UK by Crown Prince Mohammed bin Salman.

Aramco and Shell agreed to jointly pursue international gas business opportunities, including upstream development, liquefaction projects and other parts of the gas value chain.

Another MoU with Imperial College London should lead to the creation of joint projects targeting frontier technologies and developments in chemical engineering, petroleum and geoscience, mechanical engineering, and advanced materials.

A third MoU is with Cambridge-based welding/materials engineering specialist TWI. This should lead to formation of the Non-Metallic Innovation Center at TWI alongside National Structural Integrity Research Centre, a partnership with various academic institutions, research centers, energy companies and composite materials manufacturers.

Aramco staff also signed a commercial agreement with Aberdeen-based Downhole Products, designed to strengthen Aramco’s drilling operations.

Aramco president and CEO Amin H. Nasser, speaking at the forum, pointed out that his company had committed to a major investment program over the next 10 years. “This includes a number of large world scale projects where British businesses can play a major role,” he said.

“With Vision 2030, I believe there are more opportunities for collaboration and partnerships, not only in the oil and gas sector but also in infrastructure, manufacturing and services industries…

“Saudi Aramco has nearly 4,000 registered British vendors and contractors. In the last 10 years we have spent nearly $10 billion in services and materials contracts with British service providers.

“We currently have more than 200 active contracts with British companies. The businesses range from engineering and construction, drilling equipment, power generation machinery and quality management services.”

 

 

 

China's Hires Crude, Gasoline Traders in Singapore

 

Hengyi Industries International Pte Ltd has hired two oil traders who will start work in March and April as the company bulks up its Singapore trade operations before its new refinery starts up, three trade sources said.

Crude oil trader Kirk Zhong will join Hengyi next week from ChemChina, while gasoline trader Gan Wan Dong, formerly with Japanese refiner JXTG Nippon, will join in April, one of the sources said.

Hengyi is building a $3.4 billion refinery-petrochemical complex in Brunei that could start trial runs by end-2018 or early 2019. It opened its Singapore trade office last year, aiming to grow its staff strength to 40 this year.

A Hengyi spokesman declined to comment on staffing. Zhong did not respond to a request for comment. Gan could not be contacted.

The company is the trading arm of privately-run Chinese company Hengyi Group, which owns Shenzhen-listed Hengyi Petrochemical, a major synthetic fiber producer in China.

 

 

3-Repsol to Open 200 Fuel Stations in 2018 in Mexico

 

Spanish oil firm Repsol announced it would open 200 gasoline stations in Mexico in 2018, with plans to open a similar number annually in coming years to attain up to 10 percent market share in five years.

Maria Victoria Zingoni, Repsol’s downstream director, said at a news conference that the company will invest a total 8 billion pesos ($430 million) over the coming years in building new fuel stations and infrastructure, taking advantage of a fuel sector that is opening up after a sprawling energy overhaul in 2013.

“Mexico is a country that is growing ... that is in the midst of the process of opening up due to the energy reform, and in which demand for fuels is growing,” Zingoni said.

Repsol joins a growing list of companies, including Royal Dutch Shell, BP and Exxon Mobil, which have flocked to Mexico’s fuel sector, seeking to take advantage of a government liberalization of gasoline prices and the retail fuel sector.

Following a 2013 constitutional overhaul of the energy sector that ended state-owned oil firm Pemex’s decades-long monopoly, private companies can now brand gas stations and sell non-Pemex brand gasoline and diesel, as well as imported fuels.

The opportunities are huge for the private sector in the fuel market of Latin America’s second-biggest economy, with Mexico now one of the world’s biggest gasoline consumers and the top foreign importer of U.S. gasoline.

 

 

 

4-China's Xinjiang Goldwind Signs First Brazil Contract

 

 

Brazilian fuel distribution company Petrobras Distribuidora SA forecast a drop in fuel imports this year from 2017 partly due to a more aggressive pricing policy by state-run Petroleo Brasileiro.

Speaking on a conference call to discuss quarterly results, Chief Executive Ivan de Sá also cited falling margins for companies that typically import fuel.

“The difference between this year and last is that gains from fuel imports are a lot lower,” de Sá said, mentioning a more hawkish stance by Petrobras, as the state-run oil company is known, to market its products.

He did not say by how much fuel imports would fall.

Petrobras Distribuidora, which is majority-owned by Petrobras, beat fourth-quarter profit estimates, as it maintained strong profit margins despite slipping market share.

Its shares opened 4 percent higher on the São Paulo Stock Exchange, at 23.30 reais, after the results and an announcement that it would pay 1 billion reais ($306.5 million) in dividends.

In its first earnings report since a December initial public offering, the company posted net income of 531 million reais, well above a consensus estimate compiled by Thomson Reuters.

Petrobras raked in more than 5 billion reais late last year when it floated a 30 percent stake in the unit.

 

5-Direct Energie Targets 3mn Clients

 

Direct Energie, France’s third-biggest power vendor, said it aims for 3 million client sites by the end of this year and confirmed its target to win 4 million clients by 2020.

Last year, Direct Energie won 949,000 clients on a gross basis but lost more than half as many to competitors, winning 495,000 sites on a net basis. Its total client base grew 24 percent to 2.56 million sites.

In 2016 - when regulated tariffs for corporate and municipal clients ended at the start of the year - the firm won 782,000 client sites gross and 472,000 net, and saw its total client base grow 29.7 percent to 2.06 million sites, from 1.59 million in 2015.

Direct Energie and other new entrants in the electricity retail market offer competitive power prices to win market share mainly at the expense of former monopoly EDF.

Energy regulator CRE said earlier this week that since the start of 2016 more than 100,000 residential clients per month are dropping EDF’s regulated tariffs and switching to alternative suppliers like Direct Energie.

At the end of September 2017, alternative suppliers had won 5.43 million of 32.27 million residential client sites, or a market share of 16.8 percent.

Direct Energie said its 2017 core earnings rose 21.2 percent to 142.7 million Euros as revenue rose 16.2 percent to 1.97 billion Euros. Its net profit more than halved to 52 million Euros from 123.6 million, mainly due to deferred taxes.

 

 

6-U.S. Crude Stocks Up: EIA Report

 

U.S. crude stocks rose, but refined product inventories fell more than expected, with gasoline demand rising to a seven-month high, the Energy Information Administration said.

Crude inventories rose by 5 million barrels in the week to March 9, compared with analysts’ expectations for an increase of 2 million barrels.

Production rose as well, with U.S. output hitting 10.38 million barrels a day, a new weekly record; all-time daily output measured on a monthly basis broke a 47-year record in November.

 “Commercial crude stocks in the US have been recovering and are at their highest level since December 2017. The trend will be supported by the country’s persistently high oil output, which in turn remains a worry for countries participating in the OPEC-led output-cut agreement,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London.

The sharp fall in products inventories comes even as refineries ratcheted up activity in what is typically the season when refiners start to do maintenance. Gasoline stocks fell by 6.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.2 million-barrel drop. Gasoline demand hit its highest level since August 2017, the EIA said.

Distillate stockpiles, which include diesel and heating oil, fell by 4.4 million barrels, versus expectations for a 1.5 million-barrel drop, the EIA data showed.

Refinery crude runs rose by 432,000 barrels per day, EIA data showed. Refinery utilization rates rose by 2 percentage points.

Net U.S. crude imports fell last week by 407,000 barrels per day.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 338,000 barrels, EIA said. That’s the first increase in stocks at the storage hub in 12 weeks, but overall inventory levels remain low at that location.

 

 

7-Oil Majors Give In to Investors

 

After almost three barren years for investors who have poured millions into the U.S. oil sector, producers are finally opening the floodgates to a wave of share buybacks that will return money to shareholders this year.

U.S. oil production topped 10 million barrels per day earlier this year, approaching a record set in 1970, but until recently many investors in the shale oil revolution were still waiting for their payday.

Since the beginning of year, 11 companies have promised buybacks, with six alone in the past three weeks including Devon Energy, Hess Corp and Noble Energy Inc. In all, companies have committed to buy back about $3.6 billion worth of shares since February.

The United States’ second largest producer Chevron Corp also weighed in last week, hinting it would start buying back shares if it produced stronger cash flow in 2018.

The payouts come courtesy of a combination of higher and more stable oil prices and pressure from investors.

U.S. West Texas Intermediate (WTI) has more than doubled, crossing $60 per barrel. Back in Feb. 11, 2016, oil fell to $26.05, its lowest in 13 years.

 “There was a time when the consensus was that we’d be stuck at around $45 a barrel for oil, and obviously conditions have improved since then,” said Derek Rollingson, a portfolio manager at ICON Advisers.

“There is a disconnection between commodity prices and returns from exploration and production companies.”

Before oil started to take a downturn in 2014, energy companies had spent billions of dollars in exploration and new projects. When oil fell below $30, producers in North America sought to raise cash by selling more shares, pushing down stock prices.

The S&P 500 Energy Index is down about 32 percent since mid-2014, when oil prices topped $100 a barrel.

Wall Street finally put its foot down last year here, with investors demanding a shift to dividends and share buybacks. Exxon Mobil was punished for ignoring the demands and focusing on its expansion plans.

“I’ve seen companies going to Boston to get yelled at. That’s how angry shareholders are,” David Beard, lead energy analyst at research firm Coker and Palmer, said.

Reacting to market sentiments, Hess and Devon said they would either buy back $1 billion worth of shares, or add that much to existing programs. Anadarko added a further $500 million to its $2.5 billion-share buyback program, while Noble Energy authorized a repurchase of $750 million.

For Hess, the announcement was also a way to avoid a skirmish with activist hedge fund Elliott Management ahead of nominations for its board.

Elliott, which owns more than 6 percent of Hess, had criticized the company for “continuing underperformance,” but supported the buyback program earlier this month.

 

 

8-Azeri Oil Fund to Boost State Transfers

 

Azerbaijan’s national oil fund SOFAZ plans to transfer up to 50 percent more money to the state budget this year than in 2017, it said.

The $36-billion fund holds the ex-Soviet country’s proceeds from oil contracts, oil and gas sales, transit fees and other revenue.

It transferred 6.1 billion manats ($3.6 billion) to the budget in 2017; a sum it said would rise to up to 9.2 billion manats this year.

Azerbaijan’s economy was hit by the mid-2014 slide in the price of oil, which with gas accounts for about 75 percent of state revenues and 45 percent of gross domestic product.

It stabilized last year, growing 0.1 percent as oil prices rebounded and the service and agriculture sectors expanded.

SOFAZ will allocate this year’s additional funds to agriculture, health and education and infrastructure projects, it said in e-mailed answers to questions from Reuters.

SOFAZ said it planned to add to its holdings in real estate, in which it began investing directly in 2012, towards a target allocation of 10 percent of total assets under management.

“So far over half of this allocation has been invested and the plan is to continue the investments in 2018 and beyond,” with the focus on property in major developed Asia Pacific, European and the U.S cities, it said.

The fund’s 2018 budget projects revenues at 11.56 billion manats and spending including transfers at 9.73 billion, based on an average oil price of $45 per barrel.

Last year’s spending was 11.016 billion manats and revenue 12.138 billion, beating forecasts as oil prices rose.

 “We managed to close the year with a surplus of $637 million” instead of a deficit of around $2.4 billion, the fund said.

 

 

9- Eni Wins UAE Offshore Oil Deal

 

Eni has signed agreements covering shares in two production concessions offshore Abu Dhabi.

One is for a 5% stake in the Lower Zakum offshore oil field, while the other is for a 10% share in the offshore oil, condensate and gas fields of Umm Shaif and Nasr.

Eni is paying $875 million in total for these positions. In both cases, the duration is 40 years.

Lower Zakum, 65 km (40 mi) offshore, began production in 1967. The targeted output is 450,000 b/d.

Umm Shaif and Nasr are 135 km (84 mi) offshore, with combined targeted production of 460,000 b/d.

In both cases, state oil company ADNOC operates with a 60% interest.

Tom Quinn, senior research analyst, Middle East Upstream, at Wood Mackenzie, said: “Eni is very strong in North Africa, but has traditionally been under-exposed to the Middle East when compared to its peers.”

Recently, the company has entered frontier exploration blocks offshore Oman and Lebanon – Quinn described these as “high risk but potentially high reward.

 “To balance this, the ADNOC deal provides low-risk, long-term barrels, and lays the foundation for Eni’s Middle East portfolio.”

He added: “This is the first award by ADNOC to a major [in Abu Dhabi’s offshore concession renewal process], and shows it is looking to find a balance in its strategic partners between companies from major buyers, such as Japan and India, and IOCs with technology and project delivery expertise.”

Eni has agreed to sell 10% of its interest in the Shorouk concession in the Egyptian sector of the Mediterranean Sea to Mubadala Petroleum for $934 million.

The permit contains the giant Zohr gas field which started production last December, 28 months after its discovery.

Eni, through its subsidiary IEOC, currently holds a 60% stake, in partnership with Rosneft (30%) and BP (10%).

Completion of the transaction remains subject to the fulfillment of certain conditions, including all necessary authorizations from Egypt’s authorities.

Zohr is currently producing 400 MMcf/d, and is set to gradually ramp up to plateau output by the end of 2019.

 

 

10- Argentina Free-Market Reforms Put to Test

 

Oil majors are evaluating bids for offshore exploration rights in Argentina, a major change in a country that sent Spanish energy giant Repsol packing six years ago and has seen little offshore exploration for decades.

To secure bids, Argentina will need to show it has moved beyond its historical fluctuations between free-market policies and left-wing populism and that it has made progress in lowering costs for energy firms.

Oil companies including Shell and Statoil told Reuters they are looking at bidding in the auctions, to be held later this year, and a government official said Exxon and Chevron have also shown interest.

The country faces fierce competition to attract the billions of dollars of investment needed to develop deepwater reserves. Brazil, Ecuador, Mexico and neighboring Uruguay will all auction offshore blocks in 2018 after undertaking oil market reforms or revising contract terms to facilitate the entry of the world’s top energy companies.

For Big Oil, the potential access to Latin American energy reserves is unprecedented. In many countries now opening, including Argentina, resource nationalism has long barred their entry or limited opportunities.

Six years ago, former populist President Cristina Fernandez expropriated Repsol’s stake in Argentina’s state-owned oil company YPF SA. The move sent chills through both the energy industry and the entire private sector.

Interviews with oil industry executives, consultants, geologists and officials point to optimism for Argentina’s upcoming auctions and for President Mauricio Macri’s government, which has sought private sector and U.S. government help in structuring the process.

“Growing confidence in the current government’s policies - their focus on trying to create an environment that is attractive for investments - has been the big change,” Shell’s head of deepwater Wael Sawan told Reuters on the sidelines of an industry gathering in Houston. “It’s that focus that has created more interest by the sector to say ‘why not, let’s look at this.’”

The auction will be a test of company confidence in the longevity of Macri’s reform agenda because it can take a decade between an initial investment in offshore exploration and the first production.

Argentina will take bids for three offshore basins from July through November. Exploration rights for blocks in the 130,000-square km Argentina Basin, 90,000-square km Malvinas West Basin and 5,000 square kilometers in the Austral Basin are on offer.

While little exploration has been done outside the Austral basin, YPF has identified 22 million barrels of oil equivalent for further investigation, upstream head Pablo Bizotto said at an event.

 “There is a lot of interest from large companies - Chevron, Exxon Mobil, Shell,” Daniel Redondo, the secretary for strategic energy planning in Argentina’s Energy Ministry, told Reuters on the sidelines of a recent event.

Consultancy Bain & Company, on a contract with the government to gauge interest, last year interviewed more than 60 companies, including “all the majors” and independent explorers including Anadarko and Hunt Oil, said Diego Garcia, a Buenos Aires-based Bain partner. Colombia’s Ecopetrol may bid in the auctions, its chief executiv

IP-67/crude market

Global oil and Asian product market, March

Oil prices have somehow pulled back compared with the highs of over US$70/bbl seen earlier this year, but this is of no surprise. February and March market have been influenced by bearish headwinds.

March has also progressed as expected, with a heavy refinery maintenance period weighing down on crude demand, and seasonal nadirs in global products demand resulting in oil stocks in days cover creeping higher.  However, despite these headwinds, a rumbling is being heard in the not-so-distant future from a tidal wave of bullish news that is about to hit the market.

US President is pushing forward with plans to impose tariffs on steel and aluminum imports. Potential retaliation from trade partners is creating a real risk for a trade war, which could have significant impacts on economic growth.

 

The ousting of Rex Tillerson as US Secretary of State and replacement with CIA director Mike Pompeo and having new team member John Bolton as national security adviser herald a switch to a more hawkish US foreign policy, particularly in terms of a possible discontinuation of waiving sanctions on Iran.

Despite inventory built during first half of March, US crude stocks fell during second half as refineries boosted output, while gasoline and distillate stocks drew.

The relative tightness in US oil stocks has played a significant role in price buoyancy over the last few months. This has occurred against a backdrop of hugely reduced net crude imports. However, there are a couple of obstacles on the horizon to the continuation of this trend .

 

The other bullish factor is refining margins which remained largely undeterred from changing crude prices, staying largely within a $6 to $7 per barrel range. The crude intake is expected to have remained high overall, with available January figures posting strongly as far as y-o-y growth is concerned.

 

 

Asian Product Markets

Light Distillates (gasoline, naphtha)

Gasoline cracks have trended sideways over the past month. Refinery maintenance in Asia peaked in March, with over 2 million b/d of CDU capacity offline over the month, slightly higher y-o-y before falling significantly m-o-m and y-o-y in April. Alongside robust demand growth, this has pushed Asian gasoline balances through March to their tightest point in over five years, almost 100,000 b/d tighter y-o-y. Some price pressure should arrive through Q2 with the commissioning of the 200,000 b/d Nghi Son refinery in Vietnam and second phase of Persian Gulf star refinery 120,000 b/d , which is likely to cut Vietnamese and Iran's gasoline imports substantially.

Prompt naphtha rose to its highest against forward values in more than two months . Exports by UAE's state-owned Adnoc have been lower than usual for March due to unspecified reasons, while demand from northeast Asia has been firm.

 

Middle Distillates (gasoil, jet fuel)

North Asian gasoil margins eased, as the seasonal strength of the past few months waned. But a slew of upcoming refinery turnarounds in the region are expected to tighten spot availability.

Nonetheless, global market tightness, particularly in North America, is likely to foster a strong pull from the West of Suez region on Asian Arab barrels.

 

Jet fuel margins firmed despite waning seasonal demand, on improved arbitrage flows to the US west coast. Demand emerged from Taiwan and Kenya, which together sought almost 950,000 barrels of May-delivery jet.

According to the latest weekly data, Japanese implied kerosene demand fell substantially in the second week of March, allowing for inventories to recover to above  the 2017 levels. Cracks  are expected to stick close to or above the 5-year average over the coming month as strong demand growth and limited spare refining capacity to produce additional middle distillates should keep the Asian and global market notably tight.

 

Fuel Oil

Asian HSFO cracks have crept up slightly since the end of February but remain a firm $10/ton below last year, so far in March. Weaker demand in the region has been somewhat offset  by weaker purchasing from key supply regions such as Europe.

This has seen the arbitrage spread to bring HSFO from Europe to Asia continue weaker    y-o-y.

Significant lower demand y-o-y in Asia, the Middle East, and globally in Q2 is still expected. We see this continuing to keep cracks lower y-o-y. We continue to suppose that while lower power generation needs are certainly a main factor in demand declines this year, buying for storage is also likely to be on the decline. Indeed a look at fuel oil forward curves continue to trend towards strong backwardation in H2-2019 and 2020, as  based on our expectations the IMO 2020 implementation will lead to a plunge in demand for HSFO.