Depoliticizing Oil Industry and Economics

The fourth ministerial meeting of OPEC and non-OPEC partners ended with oil producers pledging commitment to the oil production decline deal, effective, economical and safe supply and fair investment in the petroleum industry. The participants agreed on the resolution adopted following the 171st meeting  of the OPEC Conference in November 2016 requiring 1.2 mb/d cut from OPEC output and 600 tb/d that from non-OPEC output.

The main winner of the 4th ministerial meeting was the oil market and the Organization of the Petroleum Exporting Countries.

Despite politically motivated pressure from the Trump administration to divide oil producers, OPEC maintained unity and solidarity to reach an agreement serving the interests of all stakeholders.

The final statement's insistence on the return of confidence and fair investment into petroleum industry indicated the foresight of participants and their perception of risks resulting from stymieing development of oil industry under unacceptable political pretexts.

As Iran's Minister of Petroleum Bijan Zangeneh told reporters, no OPEC or non-OPEC country has significant oversupply and the exit of each of major oil producers could inflict a big shock on the oil market, which would not benefit any party.

The oil market is a fragile economy-oriented market whose orientation depends on economic indicators.

Under such circumstances, the most important responsibility upon both producers and consumers would be to depoliticize oil market.

Market stability and oil supply security depend on future cooperation and interaction and protection of interests of all beneficiaries. Only under economy-based planning, will sustained economic growth be guaranteed to bring welfare, calm and peace to people all across the globe.

Sweet End to Breathtaking Meeting

Iran Demand Included in OPEC Decision

The 174th Meeting of the OPEC Conference was held in Vienna, Austria, on June 22, 2018.

"Noting that OPEC Member Countries have exceeded the required level of conformity that had reached 152% in May 2018," OPEC said in its final statement. "Accordingly, the Conference hereby decided that countries will strive to adhere to the overall conformity level of OPEC-12, down to 100%, as of 1 July 2018 for the remaining duration of the above mentioned resolution and for the JMMC to monitor and report back to the President of the Conference."

This might be the most important part of OPEC statement. The Iranian delegation to OPEC Conference struggled hard for its inclusion in the final statement. To that end, Iran's Minister of Petroleum Bijan Zangeneh stormed out of the Joint Ministerial Monitoring Committee (JMMC) meeting when 1 mb/d output increase was suggested. Iran was determined to veto any increase in OPEC output.

June 19, 2018, Hotel Kempinski

Kempinski Hotel is swarmed with journalists desperately waiting for Iran's Minister Zangeneh. They preferred Zangeneh's remarks to OPEC Secretary General Mohammad Barkindo's gala dinner.

"Oil is not a weapon to be used as a political tool against certain countries. OPEC is not a political organization either, and must condemn any use of oil as a weapon or tool against certain countries," said Zangeneh upon arrival in the Austrian capital where OPEC Headquarters is located.

It was about 8 pm local time when Zangeneh arrived in the hotel and was immediately flooded by questions from journalists who were asking about US President Donald Trump's meddlesome remarks against OPEC.

"OPEC is not an organization to follow the US president's instructions. Mr. Trump thinks he can impose his views on OPEC and by resorting to imposition of sanctions against two key members threaten the market. That is why he expects OPEC to reconsider its decisions in order to help calm down prices," he said.

Zangeneh reiterated the necessity for depoliticized oil market, noting: "Iran will oppose any OPEC oil output hike if decided by the 174th meeting. Discussing OPEC output increase will be a green light to US decisions, while we are not faced with imbalanced oil market and we don't need to enhance production."

The Iranian minister was determined in making such remarks at a time Russia and Saudi Arabia, both initially favoring oil output hike, could supply a total of 19 mb/d of crude oil.

June 20, 2018, Hofburg Imperial Palace

Minister Zangeneh made a strongly-worded statement on the first day of 7th OPEC International seminar which was not attended by Saudi Minister of Energy Khalid al-Falih. 

"The United States cannot expect OPEC to act against two of its founding members. On the contrary, OPEC is an independent, mature and responsible organization, expected to strengthen its unity and authority in accordance with its Statute, support de-politicizing the market, and condemn such unilateral actions that disrupt the natural trend of oil market," said Zangeneh.

"Oil market analysts ask an important question: How should a measure by OPEC to replace the production of its members whose production has declined due to imposition of unilateral and illegal sanctions be interpreted? It would be hard to think of anything but giving a carte blanche to US to continue such illegal sanctions, pressuring OPEC and use oil as a political tool in international relations?” he asked.

Zangeneh added: ""Such unilateral actions clearly means threatening companies and banks active in the market, and putting pressure on them."

The Iranian minister said: "I would like to reiterate that, in our view de-politicizing the oil market is vital for market stability and its stakeholders."

He added: "Moreover, I believe, as demonstrated in 'Declaration of Cooperation', OPEC has set an excellent example in demonstrating the power of a win-win cooperation that benefitted the producers, consumers, and promoted market stability, energy security and world economic growth."

He said: We do believe that all oil market players need to admit that market fundamentals should dominate the market and play a determining role in it."

"The current price hike is mainly due to some political tensions injected into the oil market. The role of some manipulations in the supply and demand statistics in this equation is insignificant," said Zangeneh.

June 20, 2018, OPEC Headquarters

While leaving Kempinski Hotel to attend JMMC meeting, Zangeneh said: "I need someone to explain me why we should increase production in a balanced market."

The JMMC meeting was delayed due to a 45-minute meeting of Zangeneh and Russian Minister of Energy Alexander Novak. In the meeting, Zangeneh voiced his opposition to any agreement for oil output hike. The Iranian minister made it clear that no agreement would be reached if there are calls for oil output hike.

Zangeneh walked out of JMMC meeting where Russian and Saudi ministers had expressed their firm determination for a higher oil output.

The JMMC, where Russian, Saudi, Omani and Algerian ministers sit, had approved 1 mb/d oil production hike prior to the 174th OPEC ministerial meeting.

After leaving the meeting angrily, Zangeneh said: "This meeting was ceremonial and was unlikely to lead to any conclusion."

June 21, 2018, OPEC Headquarters

Before the meeting of 174th OPEC Conference, Zangeneh and Falih went into a one-on-one meeting. All eyes were fixed on the door of the room where the 45- minute private meeting of the two ministers was held. After the meeting, Zangeneh, standing alongside Falih and Saudi Crown Prince Salman bin Abdul Aziz, said: "With Mr. Falih, we discussed every issue very frankly."

That meeting might be the reason for OPEC to take output hike off agenda despite US pressure.

The American president called on OPEC twice to boost output in order to push prices down.

OPEC ministers reached agreement much sooner than expected. OPEC reached agreement on member states' full compliance with the November 2016 deal. That was what Iran's delegates had been fighting for.

"Reaffirming OPEC’s continued commitment to stable markets, the mutual interest of producing nations, the efficient, economic, and secure supply to consumers, and a fair return on invested capital, and noting the overall improvement in market conditions and sentiment and the return of confidence and investment to the oil industry;

Recalling the 171st OPEC Conference resolution issued on 30 November 2016 for a production adjustment of 1.2 mb/d;

Accordingly, the Conference hereby decided that countries will strive to adhere to the overall conformity level of OPEC-12, down to 100%, as of 1 July 2018 for the remaining duration of the above mentioned resolution and for the JMMC to monitor and report back to the President of the Conference."  Prior to leaving OPEC Secretariat, Zangeneh said: "The decision made by OPEC today was what I insisted upon on the very first day, i.e. conforming OPEC's previous accord."

June 22, 2018, Kempinski Hotel

President Trump once again called on the Organization of Petroleum Exporting Countries to increase output.

"Hope OPEC will increase output substantially. Need to keep prices down!" he wrote on Twitter.

Zangeneh responded to Trump, saying: "He does not know that except for a few, nobody in OPEC is happy with him."

"Of Course, I don't believe that Trump does not favor high oil prices. He wants to pretend that he is opposed to high oil prices because I've heard that gasoline price at $4 a gallon is a red line in the US," said Zangeneh. "He wants to say it is not the result of his policy and blames OPEC for it. That is while the price hike is due to Trump's behavior. OPEC cannot do more."

"Trump is making two mistakes; first, he imagines that he will soon see government change in Iran. That is a very big mistake. His other mistake is that he thinks there is major spare capacity for production in the world. This is also a mistake," said Zangeneh.

Asked about Russia's stance in favor of oil output hike, the Iranian minister said: "We have to understand reality. Never forget [former British Prime Minister Winston] Churchill's famous phrase which he said when asked how he had made alliance with his strategic enemy Russia in World War II; 'A nation has no permanent enemies and no permanent friends, only permanent interests'.”

"I've always said that no country is either our brother or our enemy forever," he said. "We should regulate our ties with other nations based on our own interests."

June 23, 2018, Vienna Airport

Zangeneh left Kempinski Hotel for Vienna airport after an intensive meeting. He managed to bring to an end a complicated oil game initiated by Trump, Russia and Saudi Arabia.

Now Iran's oil sector is facing the obstacle of US sanctions.

OPEC Pays Attention to Market Stability

US President Donald Trump's criticism of OPEC and his call for the OPEC to reduce oil prices made the 174th ministerial meeting of the Organization of the Petroleum Exporting Countries a very sensitive one. During the meeting, OPEC had to choose between serving OPEC interests and pleasing Trump.

But the OPEC final statement made it clear that the Organization finally stuck with the October 2016 decision to cut production quotas.

Russian Minister of Energy Alexander Novak said after the end of the joint ministerial meeting of OPEC and non-OPEC producers that 1 billion barrels of oil had been cut from oil stocks.

"It can be easily imagined where the market would have been at the moment, in case we had not taken the 2016 action," said Novak.

He also referred to a similar decision made by non-OPEC countries in following the ministerial committee, saying: "That shows this group of countries have reached consensus and they can make decisions which the market needs."

After the 174th ministerial meeting, some media in Vienna said OPEC had agreed to lift output in a bid to calm down prices.

But Saudi Minister of Energy Khalid al-Falih said some of countries involved in the OPEC-non-OPEC agreement would increase their production to reach quota levels, which did not mean supply was overtaking demand.

Noting that the main objective was not to lift prices, but to stabilize market, he said arrangements were being made to avert the 2014 oversupply which harmed investors and producers.

Falih has warned that the world could face a supply deficit of up to 1.8 mb/d in the second half of 2018 and that OPEC's responsibility was to address consumers' worries.

"We want to prevent the shortage and the squeeze that we witnessed in 2007-2008," Falih said, referring to a time when oil rallied close to $150 per barrel.

United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazroui said: "As a group we can meet the 100 percent compliance. As individual countries, it is challenging."

Al-Mazrouei said that OPEC had made “the best choice” in balancing the interests of its members and other producers.

 “How is it allocated? I think that is not yet decided due to the fact that there are discrepancies between certain countries. It would not make sense if we allocated production to a country that cannot produce the relevant amount, so we avoided having allocations from that perspective,” he said.

Iraqi Oil Minister Jabar Ali al-Luaibi said the new agreement would positively affect the market.

He said Iraq would comply with OPEC decisions, adding that his country would stick to its oil production and exports level as of July 1.

 

Phase II of Condensate Refinery Launched

Iran Gasoline Output up 12 ml/d

Phase II of Iran's gas condensate refinery in Bandar Abbas was inaugurated by President Hassan Rouhani.

The Bandar Abbas Gas Condensate Refinery, known as Persian Gulf Star, will see its Euro-5 gasoline output increase by 12 ml/d.

Increased gasoline production was a strategic policy pursued by the Rouhani administration to reduce dependence on imports. Over the past five years, Iran has raised its gasoline output by 45%.

"Over this period (past five years), Euro-4 and Euro-5 gasoline production has increased 12 to 13-fold," Rouhani said in his opening remarks.

Phase I of the refinery become operational in April 2017. Rouhani expressed hope that Phase III of the treatment facility would come online by next March.

He criticized the growing consumption of energy, particularly gasoline, in Iran, saying: "Iran is home to 80 million with a daily gasoline consumption of 80 million liters. Should we manage to save on gasoline consumption and contain overconsumption, we will become a gasoline exporter."

He said that the Iranian Ministry of Petroleum had managed to increase gasoline production and boost export of petroleum products like gasoil, end Iran's dependence on Turkmen gas imports and inaugurate more phases of the South Pars gas field over the past five years.

"We take pride in all these achievements," said the Iranian president. 

Euro-4 Gasoline Up 14-Fold

Iran's Minister of Petroleum Bijan Zangeneh said the United States was targeting Iran's gasoline rationing scheme before imposing sanctions.

"The biggest step was taken [to counter US sanctions] with the construction of Persian Gulf Star refinery," he added. "Had this project not been launched, we could hardly export 360,000 b/d of gas condensate, which is fed into this refinery."

The minister said Phase II of Persian Gulf Star would help produce 24 ml/d of gasoline at this facility.

Referring to Euro-4 gasoline production in Iran, Zangeneh said: "Euro-4 gasoline production in 1392 (calendar year to March 2014) was 3.4 ml/d, which reached 28 ml/d in 1396. This figure will increase 14-fold to 54 ml/d this year (1397)."

"Furthermore, regular gasoline production in Iran has been raised from 59.5 ml/d to 90 ml/d," he said.

Zangeneh said Iran's annual gasoline production growth averaged 8 to 9 percent.

"In 1391, 63.5 ml/d of gasoline was consumed in the country, which recently reached 83.5 ml/d. Of course, it will increase in coming months," the minister added.

He said Euro-4 gasoline and gasoline were being distributed in all big cities in Iran.

"Ninety-four gas stations are distributing Euro-4 gasoline and gasoil all across the country. The number will reach 200 over two months," he added.

Zangeneh said the hydrogen treatment unit of Tabriz refinery would become operational in August with a daily output of 6 million liters of gasoil.

"The hydrogen treatment unit of the Bandar Abbas refinery is coming online in October with a daily output of 12 million liters of Euro-4 gasoil. Operating hydrogen treatment section of the Isfahan refinery for Euro-4 production is on the agenda," he added.

The Iranian minister of petroleum also said that the Lavan refinery had seen its Euro-4 gasoline production grow 2 ml/d.

Zangeneh said the Siraf refining project, which includes eight small gas condensate refineries, would require 480,000 b/d of gas condensate. "We are envisioning selling its stocks to public," he said.

100 ml/d Gasoline Output Capacity

Ali-Reza Sadeq-Abadi, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), said the distillation unit of Phase III of the Persian Gulf Star refinery would come online in October.

He said Iran's gasoline production capacity would reach 100 ml/d by December, adding that Phase III of the refinery would increase Euro-5 gasoline production capacity by 12 ml/d.

"We are trying to produce 80 ml/d of Euro-5 gasoline and get closer to the target production capacity of 100 ml/d," said Sadeq-Abadi.

He said that the Persian Gulf Star refinery would help supply the feedstock needs of petrochemical plants.

"Had Persian Gulf Star not been launched it would become tough to sell 240,000 l/d of South Pars gas condensate after probable re-imposition of sanctions," said Sadeq-Abadi, who is also a deputy minister of petroleum. "Therefore, this refinery has more advantages than daily gasoline production."

"Our goal in supplying extra gasoline is to have strategic stocks and we have no plan for exports," he said.

Sadeq-Abadi referred to the 74% share of Iranian engineering and manpower in the Persian Gulf Star refinery construction, saying: "The remaining 26% of the project was the outcome of foreign engineering and purchase. However, the commissioning of the refinery was 100% Iranian."

Sadeq-Abadi said the refinery's petroleum products were valued at $24 million.

Built near the Bandar Abbas oil refinery, the condensate refinery is fed by 360,000 b/d of condensate.

Once fully operational, the facility would be producing 36 ml/d of gasoline, 14 ml/d of gasoil and 3.37 ml/d of jet fuel.

 

Parsi Oil Sent to European Country

A 500,000-barrel cargo extracted from West Karoun has been exported from Bahregan to a European nation this month.

The crude oil loading and export operations were arranged and conducted by administrative divisions and carried out by offshore and onshore operation sections.

Ali Kardor, CEO of National Iranian Oil Company (NIOC), had earlier spoken about Iran's crude oil consumption in East Asia, saying: "The heavy crude oil extracted in Bahregansar and ultra-heavy crude oil extracted in West Karoun are of interest to East Asia. These countries blend Iran's heavy crude oil with gas condensate so that it becomes cost-effective for them."

The ultra-heavy crude oil produced in West Karoun is carried via Omidiyeh pumping station to Bahregan to be stored and prepared for export through Bahregan SBM.

In light of the Azadegan oil delivery to Bahregan for exports and projections for more export tankers, there were earlier plans to secure facilities in order to counter air pollution.

Iran to Sell Electricity to Georgia

Iran plans to sign an agreement for selling electricity to Georgia, the CEO of National Iranian Gas Company (NIGC) said.

"We consider about 10% of electricity swapped with Armenia for sales to Georgia, for which a contract is to be signed soon," Hamid Reza Araqi said.

"In return for Iran's gas imports, Armenia generates and delivers electricity to NIGC. We are likely to sell a portion of this electricity to Georgia," he added.

Touching on negotiations between Iran and Georgia for selling electricity to this country, Araqi said: "Negotiations have been conducted between the two nations for Iran to export electricity generated in Armenia, to Georgia. An agreement is set to be signed soon to that end."

"Of total electricity we receive from Armenia, 10% is planned to be sold to Georgia," said Araqi.

Based on the agreement signed between Iran and Armenia, more than 1 mcm/d of gas is exported to Armenia in return for electricity delivered to Iran. The electricity is first delivered to NIGC prior to being passed on to Tavanir Power Distribution Company.

Gas, Iran Strategic Leverage

Iran's Deputy Minister of Petroleum for International Affairs and Commerce Amir-Hossein Zamani-Nia said gas constitutes a strategic lever in Iran's hands.

"Iran should export its surplus gas to Europe and other nations and use gas as a strategic lever to expand its influence in the world," he said.

"In gas exports, we have to pursue strategic interests and benefits. If our gas production overtakes our domestic consumption we definitely need to export gas to Europe and other nations," he added.

"Owing to its current position in the world and sitting atop the world's largest gas reserves, Iran can use gas as a strategic lever and expand its influence," said Zamani-Nia.

He said Russia had guaranteed its energy economics through selling gas to Europe. "Gas may guarantee our long-term interests and help us expand our strategic influence in this regard," he added.

Gasoline Output up 18 ml/d

CEO of National Iranian Oil Refining and Distribution Company (NIORDC) Ali-Reza Sadeq-Abadi said Iran's gasoline production in the first quarter of the current calendar year (started March 21) grew 18 million liters a day (ml/d) year-on-year.

Some refineries were being overhauled over this period, he said, adding: "The overhaul of refineries was unique in light of reduced costs and time and no accident."

He said that despite unpredictable events like gas, electricity or water cut to some refineries, "we fulfilled our commitments to reach the average production of 78 ml/d of gasoline."

He expressed hope that Iran's gasoline production would increase over the coming three months when overhaul of refineries comes to an end.

Overhaul operation at Iranian refineries has led to gasoline output hike. Ali-Reza Amin, CEO of Shazand oil refinery, said overhaul of the treatment facility increased its gasoline production to 16.5 ml/d.

"Euro-4 gasoline production at Shazand refinery increased from 8-12 ml/d to 16.5 ml/d," he said, adding that no accident was recorded during the overhaul.

Noting that distillation, liquefied gas, catalytic conversion, viscosity reduction and kerosene treatment sections had been overhauled in Phase 1, he said: "The time needed for the overhauls was respectively 27 days, 19 days, 21 days, 26 days and 23 days."

Amin said that overhaul was last done in 2013 at the Shazand refinery, adding that local contractors and manpower were instrumental in the overhaul operation. Eighty percent of manpower hired for the refinery overhaul were from the city of Shazand who had undergone health, safety, environment (HSE) training.

He said that two more phases of overhaul of this refinery would be done this year, adding that in each phase, four to six sections will be overhauled.

Petrochemical Sales at $1.2bn

Persian Gulf Petrochemical Industries Co. (PGPIC) generated $1.2 billion by selling petrochemicals during the first quarter of the current calendar year (started March 21), the company's CEO said.

"Without any restrictions, we continue supplying necessary hard currency within the framework of our commitments," Jafar Rabiei said.

Addressing a ceremony for commissioning a petrochemical fraction separation unit in Assaluyeh, he said: "The petrochemical industry and PGPIC, from the very beginning of notification of economic and foreign currency policy, expressed its readiness to help ease current conditions, and it has done its utmost to fulfill its commitments with regard to product exports."

He said that not a cent of the $1.2 billion offered by PGPIC was traded outside the foreign exchange integrated system.

"Foreign currency supply has increased year-on-year, and we will continue to provide currency without any restrictions within the framework of our obligations," said Rabiei.

Taqi Sanei, CEO of Nouri Petrochemical Plant, said LTE was the second development project at the petrochemical plant for separating light and heavy fractions to produce HLTE and LLTE.

Noting that LTE loading and sale was limited, he said: "The two new products obtained from LTE conversion could be sold and loaded on ordinary tankers."

He put at 65% the share of Iranian manufacturers and contractors in this project.

Q1 Gas Exports Up 9%

Iran's gas exports to neighboring countries increased 9% year-on-year to 3.3 bcm during the first quarter of the current calendar year (started March 21), the dispatching director of National Iranian Gas Company (NIGC) said.

Mehdi Jamshidi Dana said gas delivery to power plants, gas injection to oil reservoirs and total exports during the first quarter showed significant growth year-on-year.

"Gas delivery to power plants reached 19.2 bcm, up 4.7% year-on-year," he said.

He added that extraction rate from gas reservoirs over this time grew to 60.8 bcm.

Jamshidi Dana also said that sweet gas injection into oil reservoirs reached 3.7 bcm, up 2.7-fold year-on-year.

According to Jamshidi Dana, after the remaining 100-kilometer section of the Iran Gas Trunkline 6 (IGAT6) became operational, gas injection started. The completion of the 100km section of IGAT6 in the new Iranian year would be instrumental in exporting gas to Iraq and supplying gas sustainably to western Iran.

IGAT6 is being used for gas export to Baghdad. The same trunkline is to supply gas to Basra, too.

No Indemnity to Total

Iran's Minister of Petroleum Bijan Zangeneh said France's energy giant Total would not receive any indemnity if it decided to pull out of the South Pars gas field development project.

"The structure of new oil contracts is such that if implementation of contract becomes impossible for the foreign party to contract, and announces this issue it can pull out, but it will not be indemnified until the project has been completed," Zangeneh said.

He was referring to the development of Phase 11 of South Pars gas field by a Total-led consortium comprising China's CNPC and Iran's Petropars.

He said that under the terms of the agreement, CNPC would take over if Total quits.

"Total has not yet pulled out of the agreement," he said, adding that its 60-day deadline was being numbered.

"Total is unlikely to win US waiver for presence in Iran, but if the second company, the Chinese firm, also decides to leave the project, the third company will take over," said the minister.

Zangeneh said Total had spent $60 million in this project, adding that the Iranian parliament and government agreed on the necessity of attracting foreign investment and technology for developing the petroleum industry.

"There was no discrepancy between the parliament and government and Hydrocarbon Resources Monitoring Committee, in which senior officials from three branches of government sit, had considered the agreement to be in the best interests of the country," he added.

Zangeneh also touched on the 174th ministerial meeting of the OPEC Conference, saying the meeting endorsed the resolution adopted during the October 2016 meeting on cutting 1.2 mb/d from output.

He said that OPEC's May output was 780,000 b/d less than the agreed level.

"If you refer to the OPEC 174th statement, you will see that despite alleged 800,000 b/d increase in the OPEC output, there is no such figure therein," he added.

"Some governments intend to send positive signals to the market or the US. It has nothing to do with the OPEC decision. The criterion has been the statement signed by the 14 OPEC members," said Zangeneh.

He said that OPEC accepted Iran's proposal, adding: "Iran had suggested that arrangements should be made for any extra production after members reach 100% compliance."

Zangeneh said the latest OPEC statement was clear and transparent.

"Iran will follow up on the implementation of this decision and if any country interprets the decision differently, OPEC will be officially notified," he said.

Zangeneh said Russia told the OPEC meeting, it could no longer continue being committed to production cut agreement. "Russia's justification for increased

Phase II of Condensate Refinery Launched

Iran Gasoline Output up 12 ml/d

Phase II of Iran's gas condensate refinery in Bandar Abbas was inaugurated by President Hassan Rouhani.

The Bandar Abbas Gas Condensate Refinery, known as Persian Gulf Star, will see its Euro-5 gasoline output increase by 12 ml/d.

Increased gasoline production was a strategic policy pursued by the Rouhani administration to reduce dependence on imports. Over the past five years, Iran has raised its gasoline output by 45%.

"Over this period (past five years), Euro-4 and Euro-5 gasoline production has increased 12 to 13-fold," Rouhani said in his opening remarks.

Phase I of the refinery become operational in April 2017. Rouhani expressed hope that Phase III of the treatment facility would come online by next March.

He criticized the growing consumption of energy, particularly gasoline, in Iran, saying: "Iran is home to 80 million with a daily gasoline consumption of 80 million liters. Should we manage to save on gasoline consumption and contain overconsumption, we will become a gasoline exporter."

He said that the Iranian Ministry of Petroleum had managed to increase gasoline production and boost export of petroleum products like gasoil, end Iran's dependence on Turkmen gas imports and inaugurate more phases of the South Pars gas field over the past five years.

"We take pride in all these achievements," said the Iranian president. 

Euro-4 Gasoline Up 14-Fold

Iran's Minister of Petroleum Bijan Zangeneh said the United States was targeting Iran's gasoline rationing scheme before imposing sanctions.

"The biggest step was taken [to counter US sanctions] with the construction of Persian Gulf Star refinery," he added. "Had this project not been launched, we could hardly export 360,000 b/d of gas condensate, which is fed into this refinery."

The minister said Phase II of Persian Gulf Star would help produce 24 ml/d of gasoline at this facility.

Referring to Euro-4 gasoline production in Iran, Zangeneh said: "Euro-4 gasoline production in 1392 (calendar year to March 2014) was 3.4 ml/d, which reached 28 ml/d in 1396. This figure will increase 14-fold to 54 ml/d this year (1397)."

"Furthermore, regular gasoline production in Iran has been raised from 59.5 ml/d to 90 ml/d," he said.

Zangeneh said Iran's annual gasoline production growth averaged 8 to 9 percent.

"In 1391, 63.5 ml/d of gasoline was consumed in the country, which recently reached 83.5 ml/d. Of course, it will increase in coming months," the minister added.

He said Euro-4 gasoline and gasoline were being distributed in all big cities in Iran.

"Ninety-four gas stations are distributing Euro-4 gasoline and gasoil all across the country. The number will reach 200 over two months," he added.

Zangeneh said the hydrogen treatment unit of Tabriz refinery would become operational in August with a daily output of 6 million liters of gasoil.

"The hydrogen treatment unit of the Bandar Abbas refinery is coming online in October with a daily output of 12 million liters of Euro-4 gasoil. Operating hydrogen treatment section of the Isfahan refinery for Euro-4 production is on the agenda," he added.

The Iranian minister of petroleum also said that the Lavan refinery had seen its Euro-4 gasoline production grow 2 ml/d.

Zangeneh said the Siraf refining project, which includes eight small gas condensate refineries, would require 480,000 b/d of gas condensate. "We are envisioning selling its stocks to public," he said.

100 ml/d Gasoline Output Capacity

Ali-Reza Sadeq-Abadi, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), said the distillation unit of Phase III of the Persian Gulf Star refinery would come online in October.

He said Iran's gasoline production capacity would reach 100 ml/d by December, adding that Phase III of the refinery would increase Euro-5 gasoline production capacity by 12 ml/d.

"We are trying to produce 80 ml/d of Euro-5 gasoline and get closer to the target production capacity of 100 ml/d," said Sadeq-Abadi.

He said that the Persian Gulf Star refinery would help supply the feedstock needs of petrochemical plants.

"Had Persian Gulf Star not been launched it would become tough to sell 240,000 l/d of South Pars gas condensate after probable re-imposition of sanctions," said Sadeq-Abadi, who is also a deputy minister of petroleum. "Therefore, this refinery has more advantages than daily gasoline production."

"Our goal in supplying extra gasoline is to have strategic stocks and we have no plan for exports," he said.

Sadeq-Abadi referred to the 74% share of Iranian engineering and manpower in the Persian Gulf Star refinery construction, saying: "The remaining 26% of the project was the outcome of foreign engineering and purchase. However, the commissioning of the refinery was 100% Iranian."

Sadeq-Abadi said the refinery's petroleum products were valued at $24 million.

Built near the Bandar Abbas oil refinery, the condensate refinery is fed by 360,000 b/d of condensate.

Once fully operational, the facility would be producing 36 ml/d of gasoline, 14 ml/d of gasoil and 3.37 ml/d of jet fuel.

South Pars Sees Output Hike

Under the first administration of President Hassan Rouhani (2013-2017), 10 standard phases of South Pars gas field came online.  Now efforts are under way to accelerate the development of SP13, SP14, and SP22-24 of the giant offshore gas field, which Iran shares with neighboring Qatar. Plans are under way to complete the development of SP13 and SP22-24, as well as the offshore section of SP14 before the end of the current calendar year next March. Completion of the refinery of SP14 is scheduled for next calendar year.

At the beginning of the current calendar year, SP14 started producing 500 mcf/d, which is expected to double over coming three months. Meanwhile, the refineries of SP13 and SP22-24 are expected to become operational by next March.

Iran is currently recovering 570 mcm/d of gas from South Pars, which is set to increase 120 mcm/d by March. South Pars is known to be the world's largest gas reservoir.

2nd Sweetening Train in SP13

A consortium- Petro Paydar Iranian, MAPNA and Sadra companies- is in charge of developing SP13. The development plan aims 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 condensate and 400 tonnes a day of sulfur.

The second gas sweetening train of the refinery of SP13 has come on-stream with an output of 7 mcm/d. Once fully operational, it will process 14.2 mcm/d of gas (500 mcf/d) to be fed into national gas trunkline. The first train of gas sweetening in this refinery had come online last March.

Payam Motamed, director of SP13 development project, has said: "The first sweetening train of this project is currently treating 9 mcm/d of sour gas supplied by SP 6-8 to be fed into national trunkline."

Once the second sweetening train comes online, the refinery of SP13 would be ready to run at its half capacity in processing sour gas.

If two other sweetening trains are completed to bring the total number of processing trains to four, the final gas production capacity of SP13 will exceed 50 mcm/d. After the completion of installation operations and the startup of platforms in this phase by November, gas production from the offshore section of SP13 will start to replace sour gas supplied by SP 6-8.

SP22 Platform Installed

SP 22-24 are being developed rapidly to produce 56 mcm/d of sour gas, 50 mcm/d of methane, 2,900 tonnes a day of LPG, 2,750 tonnes a day of ethane, 75,000 b/d of gas condensate and 400 tonnes a day of sulfur.

The platform of SP 22 was recently installed in the Persian Gulf by Iranian technicians.

Farhad Ijadjoo, director of SP 22-24 project, said the platform was expected to become operational by next November.

The SP 22 platform has required 33,000 inches (diameter) of pipe laying, 82,355 meters of electricity cable and instrumentation as well as 3,830 meters of tubing. It comprises 57 mechanical and processing equipment.

It is the first platform for the production and transfer of hydrocarbon from SP22-24. This platform would help increase sweet gas production from South Pars by 14.3 mcm/d 500 mcf/d), equal to half of a standard phase output.

The three other main and satellite platforms of this phase are also under construction; the 24A satellite platform, platform 23 and 24B satellite platform are respectively 94.5%, 91.2% and 84.2% complete.

The two major platforms of SP 22 and SP 23 are connected to 24A and 24B satellite platforms by two pipelines.

The gas recovered from these platforms will be delivered to the onshore section of refinery to be processed and fed into national gas trunkline.

Platform 24A Pre-Commissioned

The SP 22 platform has 11 wells whose drilling is now over. Once seven wells have been completed and the platform has become operational, gas production will start from SP 22 platform.

Meantime, operations for the construction and pre-commissioning of Platform 24A are over. This satellite platform is expected to be installed in the Persian Gulf by next month. It is connected to the main platform of SP 22 via a pipeline measuring 18 inches in diameter. Once the 22A and 24A platforms have been fully installed, the capacity of recovery from this phase will reach 28 mcm/d.

Based on plans, platforms 23 and 24B are expected to be ready enough by October to be loaded out for installation.

Connecting Pipeline Operational

A pipeline has become operational to connect the refinery of SP 4 and SP 5 to SP 6-8 by carrying 3 mcm/d of sour gas. The capacity of pipeline transmitting sour gas pipeline from SP 6-8 to the refinery of SP 4-5 is 11 mcm/d, which may reach 13 mcm/d, if more feedstock is needed.

This pipeline was built to support offshore platforms of SP 4-5 and use the capacity of SP 6-8 and facilitate sweetening in the refinery of SP 4-5.

The connecting pipeline, which is 1,700 meters long, was ordered by the Pars Oil and Gas Company (POGC) and built by Sanat Saze Samin Co.

Currently the offshore section of SP 4-5 is under operation with a capacity of 56 mcm/d of sour gas from South Pars gas field.

500MW Power Plant Planned in West Karoun

Development of jointly owned oil fields in the West Karoun area in western Iran remains a priority for the Iranian Ministry of Petroleum. Iran is currently recovering more than 350,000 b/d of oil from these fields, which is expected to reach 1.2 mb/d in coming years. A major requirement for reaching such production levels would be to have a secure and sustainable power network. Due to power shortages in southern Iran, the National Iranian Oil Company (NIOC) decided to build an independent power plant, as well as its utilities in West Karoun with a rated capacity of 500MW. That would help generate enough electricity for oil fields there.

Mehdi Najjarian, manager of the West Karoun power plant development project, told "Iran Petroleum" that the first gas-fueled unit of the power plant would come online soon.

The following is the full text of the interview Mr. Najjarian gave to "Iran Petroleum":

Why was this power plant decided to be built?

The West Karoun area oil fields are currently producing more than 350,000 b/d of oil, which would increase to 1.2 mb/d in the future. Producing at such level would require a sustainable power distribution network. The construction of power plant in West Karoun, decided by NIOC, is expected to supply power to the Azadegan, Yaran and Yadavaran oil fields, NGL 3200 project, LPG plant and the West Karoun pumping station. Since NIOC had no experience of building high-voltage power plants, the project was awarded to experienced MAPNA under a 20-year BOO agreement worth €350 million.

How many units does the power plant have and how much electricity is it expected to generate?

The West Karoun power plant is a combined cycle power plant with a 500MW capacity. MAPNA (the contractor) is financing this power plant. NIOC will supply gas feedstock, at a rate of 110,000 cubic meters a day of sweet gas, to MAPNA in return for electricity. The power plant has two gas-fueled units and a steam-fueled unit. One gas-fueled unit is becoming operational soon. The second gas-fueled unit and the steam-fueled unit would come online in 2019. The two gas-fueled units are currently 84% complete, while the steam-fueled unit has had 15% progress.

How much is the power plant's output?

Based on our agreement with MAPNA, the power plant's output is envisaged at 48%. But in light of Minister of Petroleum [Bijan] Zangeneh's insistence on boosting the power plant's output, MAPNA has decided to modify its power plant systems in the hope of raising the output to 52%.

Why did NIOC decide to set up an independent power plant in West Karoun?

As you know the West Karoun power plant is located near Ahvaz and the oil fields in West Karoun need high loads. Before we decided to build a power plant there, we wondered if the Ahvaz Power Distribution Co. had the ability to supply 500MW of electricity to the oil fields. They said they couldn't afford it due to power shortages there. Therefore, we decided to build our own power plant independently in order to supply secure and sustainable electricity to our projects and facilities.

What is the outstanding feature of this power plant?

Secure and sustainable power generation for the West Karoun oil fields; since the North Azadegan and Yadavaran oil fields are currently using diesel fuel to generate electricity. As soon as the gas-fueled unit comes online, the diesel unit will stop working. Once electricity transmission lines come on-stream we will be able to supply power to the North Yaran oil field and the West Karoun pumping station.

How many power distribution posts will be available?

We have 150 kilometers of 230KV power transmission lines and 6 posts. The transmission lines are 70% complete, while the post is 90% ready.

Have all the three turbines been manufactured by MAPNA? Has any foreign party been consulted?

Two gas turbines have been manufactured by the company. The steam turbine had to be modified because of NIOC insistence on higher output, which is expected to be developed for the first time in Iran. Therefore, in collaboration with an Italian company, MAPNA decided to manufacture this turbine. The technology used in steam turbines is incorporated in their rotors which are delicate. We hope that this technology would be transferred to Iran so that future steam turbines would be domestically built by MAPNA. The manufactured steam turbine is currently in the final phases of testing. It will become operational next year.

What percentage of the equipment used in the turbine is domestically manufactured?

Nearly 85%.

To what extent do you trust the sustainability of the West Karoun power plant?

Given the fact that the West Karoun power plant is dual-fueled, in case power supply to one circuit is cut, the second circuit becomes active. In case both of them fail, Khuzestan Power Distribution Company has agreed to supply power to the fields.

Can Khuzestan Power Distribution Company meet all your power needs?

No! Khuzestan power network is facing shortages; therefore, we manage consumption and prioritize power distribution to the oil fields in order to keep oil production from any failure. Of course, based on our estimate of the West Karoun power plant output, we don't worry about power shortages. We have even predicted that in case the development projects in the West Karoun oil fields come online, we may have talks with MAPNA for the second phase of development of the West Karoun power plant in order to add 500MW to the power plant's capacity. Of course, the second phase development of this power plant is only in the phase of forecast and we have not yet drawn up any plans for a second phase.

In construction of the West Karoun power plant which sectors do we need foreign cooperation in?

Iran is among successful countries in terms of building power plants, and MAPNA has a brilliant record in this regard. But when it comes to controlling power plants and installing sophisticated relays we have not yet been able to transfer technology. In this sector, we need to cooperate with foreign companies. Currently, we are cooperating with three companies which own related technologies.

How many power distribution posts will be available?

We have 150 kilometers of 230KV power transmission lines and 6 posts. The transmission lines are 70% complete, while the post is 90% ready.

Have all the three turbines been manufactured by MAPNA? Has any foreign party been consulted?

Two gas turbines have been manufactured by the company. The steam turbine had to be modified because of NIOC insistence on higher output, which is expected to be developed for the first time in Iran. Therefore, in collaboration with an Italian company, MAPNA decided to manufacture this turbine. The technology used in steam turbines is incorporated in their rotors which are delicate. We hope that this technology would be transferred to Iran so that future steam turbines would be domestically built by MAPNA. The manufactured steam turbine is currently in the final phases of testing. It will become operational next year.

What percentage of the equipment used in the turbine is domestically manufactured?

Nearly 85%.

To what extent do you trust the sustainability of the West Karoun power plant?

Given the fact that the West Karoun power plant is dual-fueled, in case power supply to one circuit is cut, the second circuit becomes active. In case both of them fail, Khuzestan Power Distribution Company has agreed to supply power to the fields.

Can Khuzestan Power Distribution Company meet all your power needs?

No! Khuzestan power network is facing shortages; therefore, we manage consumption and prioritize power distribution to the oil fields in order to keep oil production from any failure. Of course, based on our estimate of the West Karoun power plant output, we don't worry about power shortages. We have even predicted that in case the development projects in the West Karoun oil fields come online, we may have talks with MAPNA for the second phase of development of the West Karoun power plant in order to add 500MW to the power plant's capacity. Of course, the second phase development of this power plant is only in the phase of forecast and we have not yet drawn up any plans for a second phase.

In construction of the West Karoun power plant which sectors do we need foreign cooperation in?

Iran is among successful countries in terms of building power plants, and MAPNA has a brilliant record in this regard. But when it comes to controlling power plants and installing sophisticated relays we have not yet been able to transfer technology. In this sector, we need to cooperate with foreign companies. Currently, we are cooperating with three companies which own related technologies.

How many power distribution posts will be available?

We have 150 kilometers of 230KV power transmission lines and 6 posts. The transmission lines are 70% complete, while the post is 90% ready.

Have all the three turbines been manufactured by MAPNA? Has any foreign party been consulted?

Two gas turbines have been manufactured by the company. The steam turbine had to be modified because of NIOC insistence on higher output, which is expected to be developed for the first time in Iran. Therefore, in collaboration with an Italian company, MAPNA decided to manufacture this turbine. The technology used in steam turbines is incorporated in their rotors which are delicate. We hope that this technology would be transferred to Iran so that future steam turbines would be domestically built by MAPNA. The manufactured steam turbine is currently in the final phases of testing. It will become operational next year.

What percentage of the equipment used in the turbine is domestically manufactured?

Nearly 85%.

To what extent do you trust the sustainability of the West Karoun power plant?

Given the fact that the West Karoun power plant is dual-fueled, in case power supply to one circuit is cut, the second circuit becomes active. In case both of them fail, Khuzestan Power Distribution Company has agreed to supply power to the fields.

Can Khuzestan Power Distribution Company meet all your power needs?

No! Khuzestan power network is facing shortages; therefore, we manage consumption and prioritize power distribution to the oil fields in order to keep oil production from any failure. Of course, based on our estimate of the West Karoun power plant output, we don't worry about power shortages. We have even predicted that in case the development projects in the West Karoun oil fields come online, we may have talks with MAPNA for the second phase of development of the West Karoun power plant in order to add 500MW to the power plant's capacity. Of course, the second phase development of this power plant is only in the phase of forecast and we have not yet drawn up any plans for a second phase.

In construction of the West Karoun power plant which sectors do we need foreign cooperation in?

Iran is among successful countries in terms of building power plants, and MAPNA has a brilliant record in this regard. But when it comes to controlling power plants and installing sophisticated relays we have not yet been able to transfer technology. In this sector, we need to cooperate with foreign companies. Currently, we are cooperating with three companies which own related technologies.

 

Gazprom to Develop Changuleh

Iran holds 102 oil and gas fields, 28 of which are jointly owned with neighboring countries. The joint onshore fields are shared with Iraq, while the offshore ones are located in the Persian Gulf and the Sea of Oman.

Due to the limited lifecycle of shared fields, the Iranian government has made significant efforts on the development of the jointly owned reservoirs in a bid to enhance their 7% share in national oil output. Meanwhile, the government economic plans require the oil sector to bring the country's crude oil production capacity to more than 5.7 mb/d over four years. Therefore, it may be argued that a tough mission has been sketched out for the petroleum industry. Changuleh is one of the important oil fields which Iran shares with Iraq. This untapped oil field has attracted foreign companies. Three big Russian firms and a Croatian company have offered to develop it.

Changuleh was among oil fields which Iran offered for development under the new framework of oil contracts, known as the Iran Petroleum Contract (IPC), several years ago in Tehran.

Changuleh is estimated to need $2.2 billion in investment to undergo development. Such related activities as 3D seismic test, location of wells and infrastructure activities like cleanup and construction of access roads have been carried out. The Changuleh development will start as soon as new investor has been determined.

According to studies, 19 wells need to be drilled in this field for recovery. The field is to be developed in two phases. Phase 1, which involves early production, will lead to the output of 15,000 b/d. Phase 2 will bring the output to 50,000 b/d. 

Changuleh was primarily considered to be independent, but analysis of 3D seismic data proved its shared status.

Phase 1 development of Changuleh, which is forecast to last 40 months, will involve the drilling of four wells and workover on two existing exploration wells. In parallel with Phase 1 development, a 100km pipeline as well as oil and gas separation facilities will be built.

Phase 2 development, which is set to last 60 months, will involve the drilling of 13 new wells plus infrastructure installations, production unit and pipelines.

Located near the Azar oil field in the Anaran block, Changuleh is shared with Iraq's Badra oil field.

The Anaran oil block was discovered in 2005 by Norway's Statoil Hydro and Russia's Lukoil. Located 20 kilometers southeast of the city of Mehran in Ilam Province, Anaran was estimated to hold recoverable reserves of 400 million to 650 million barrels of crude oil.

Changuleh holds about 3.4 billion barrels of oil in place with an API gravity of 22. For the early production phase, two production wells will be drilled while two existing wells will be worked over.

A separator, transmission pumps, diesel-fueled generator for power supply, evaporation pool, flare, stream pipes and wellhead equipment are among requirements for early production.

A non-disclosure agreement was signed last year between Iran's OIEC and Russia's Gazprom Neft for the development of the Azar and Changuleh oil fields. The agreement was endorsed by the National Iranian Oil Company (NIOC).

Meetings are to be held to discuss technical, financial, legal and contractual aspects as well as modalities of participation in the consortium set up for the development of the field. Initial commercial assessments will be done in order to remove ambiguities.

In order to carry oil from Changuleh in the early production phase at the rate of 15,000 b/d, a 130-km pipeline with 8 inches  in diameter has been used.

According to the Petroleum Engineering and Development Company (PEDEC), early production from Changuleh and assessment of hydrocarbon potential of this field would allow the final recovery of 65,000 b/d.

Oil Price; Parameters and Players

The 174th OPEC Conference ended despite the backdrop of sharp discrepancies between OPEC members and non-OPEC oil producers engaged in a production cut deal to shore up prices.

Some nations like Russia and Saudi Arabia favored gradual rise in oil production while Iran, Iraq, Venezuela and Algeria were against any output hike.

Despite such differences between oil producers, they shared one major concern; oil price. One group favored production hike for the maintenance of current prices, while another group linked price stability to output rollover.

Add to these, political motivations like discrepancies between OPEC member states and the US influence.

In light of the impact of OPEC decisions on global oil markets, a review of aspects of OPEC and non-OPEC agreement would project an image of prospective oil prices.

Different Motivations

OPEC members along with non-OPEC allies had decided in the November 30, 2016 meeting to cut their combined output to 32.5 mb/d. This decision took effect on 1 January 2017, which was extended during next meetings. Owing to this agreement over the past 18 months, energy markets reached stability and oil prices went from $27 per barrel in 2016 to about $80 per barrel in 2018.

From the very beginning, the main objective of this project was to bring oil prices back to their genuine levels. That is why some countries were expected to remove obstacles to production enhancement, as soon as prices go upward. This issue was the main topic of the 174th OPEC meeting.

Saudi Arabia, OPEC's largest oil exporter, and Russia, world's largest oil producer, were unanimous on leaving the production cut agreement gradually. Of course, each of them were pursuing their own objectives by offering to increase output.

Russia is seeking more benefits in order to fix its domestic economy. The Russians believe that limiting supply for a long period may encourage the Americans, who are not party to the agreement, to boost domestic production. In the meantime, the Saudis are trying to follow US schemes for reducing energy prices and supplanting Iran's oil in the market after sanctions take effect on Tehran.

The US's decision to re-impose sanctions on Iran following its withdrawal from the 2015 nuclear deal means Iran would be denied any share of oil production hike. That would please Saudi Arabia which is locked in a regional rivalry with Iran.

US Role

Since Richard Nixon's term onward, all US presidents have failed to make good on their promise of energy self-sufficiency in the country. Such promise has always been backed by public opinion and both Democrats and Republicans. However, gas price hike in recent months due to oil price growth in global markets has posed a serious challenge to the Trump administration's policy of self-sufficiency in the energy sector. Furthermore, it has rendered other popular measures particularly tax exemptions, which proved to be ineffective, because although the US has increased its domestic oil production it relies on imports for about 40% of its oil consumption, which makes up 20% of its trade balance deficit. Therefore, energy price hikes which are threatening the revival of US economy in the Trump administration may significantly affect the November 2018 midterm elections in the United States. That is why the US government is worried about the negative impact of gasoline prices on domestic political developments, and undertook serious efforts to influence the OPEC ministerial meeting's outcome in favor of oil output increase.

While President Donald Trump was hopeful that OPEC would significantly increase its oil production in order to keep prices low, some member states like Saudi Arabia were acting as US proxy in the group. However, the US failed to achieve its goals within OPEC, because the final agreement required full compliance with the agreement achieved in 2016. That was much below what such big consumers as China and the US expected from OPEC to help drive prices down.

Prices Up or Down

OPEC and non-OPEC oil producers are faced with myriad challenges in deciding to increase output because any upward change in daily production would be reserved to states which are able to lift their output. Most OPEC and non-OPEC producers like Venezuela, Mexico, Angola, Azerbaijan, Algeria, Iraq, South Sudan, Gabon and Equatorial Guinea could never raise their output; therefore, the genuine increase in production will be much less than expected. Although no quota has been set for different countries in output hike, it seems that Saudi Arabia would raise its output by 245,000 b/d, Russia 160,000 b/d, Kuwait 80,000 b/d, Oman 35,000 b/d and the United Arab Emirates 80,000 b/d.

If during the months leading to the adoption of this decision by OPEC, some nations like Saudi Arabia had violated this agreement and supplied more oil on the market some countries like Venezuela and Algeria were experiencing sharp drop in oil production. Therefore, the combined OPEC and non-OPEC output was still below the ceiling agreed upon by the producers.

Therefore, if the countries' compliance to oil production cut exceeded 100%, in some cases the total output would be respected. Under such circumstances, the new OPEC-non-OPEC decision could only supply an extra 400,000 to 600,000 b/d on the market, which would not be sufficient to replace Iran's oil when US sanctions come into effect. That would even affect global energy prices.

Even in case 1 mb/d is produced and exported, this figure will be 800,000 b/d below the 2016 agreed upon ceiling and could not bring back conditions to the time before 1.8 mb/d had been cut from oil supply.

Meantime, demand has exceeded the annual growth rate of 1.5% over the past two years and global oil consumption is largely expected to reach 100 mb/d this year. The issue indicates that the oil production ceiling set in the OPEC and non-OPEC agreement could not fill voids which currently exist in the market.

 

Repsol Finds Oil Offshore Gabon

Repsol and partner Woodside have discovered oil in the Ivela-1 exploration well in the Luna Muetse (E13) block offshore Gabon, according to Spectrum Geo.

The well intersected a 78-m (256-ft) gross oil column, a month after a Petronas discovery in presalt sands in the Boudji-1 well in the nearby Likuale (F14) block.

In a separate development, Spectrum and Shearwater GeoServices have signed an agreement concerning provision of Shearwater Reveal software to Spectrum’s seismic imaging division.

Reveal is said to facilitate rapid testing of advanced workflows and parameter selection, which improves productivity. The programming interface will allow Spectrum to insert its own proprietary technologies into the same environment for seamless workflows.

2---More Oil Proven Offshore Thailand

Tap Oil has issued an update on development drilling at the Mubadala Petroleum-operated Manora oil field in the northern Gulf of Thailand (permit G1/48).

The MNA-21 well, drilled from the Manora platform, has reached TD of 2,164 m (7,100 ft) MDRT.

Petrophysical interpretation of well logs shows total net oil pay of 56 ft (17 m). The main objective 490-60 sand is developed in the updip location with 44 ft (13.4 m) net pay, and one additional sand at the 500 level encountered 12 ft (3.6 m) net pay.

The main objective of the well was to provide a northern up-dip production point in the 490-60 reservoir found in MNA-18.

Casing has been set and a suspension string will be run in hole pending well completion.

The rig has now skidded and spudded the MNA-20 development well. It will then undertake a program that will involve installing selective zone completions with electric submersible pumps for production.

3---Drilling Resumed in Western Australia

Quadrant Energy has spudded the Phoenix South-3 appraisal well offshore Western Australia.

According to partner Carnarvon Petroleum, the rig has completed the ‘ready to operate’ process and has finished drilling the 42-in. hole in preparation for running surface casing.

The 42-in. surface hole was drilled to around 240 m (787 ft) ahead of setting the 36-in. conductor, slightly deeper than Phoenix South-2 in order to accommodate heavier casing strings.

Following setting of this conductor, the rig will drill the 26-in. hole, and then set and cement the 20-in. casing. Operations should take around 10 days to complete.

The main goal of Phoenix South-3 well is to assess gas and condensate potential in the Caley Member within a large, faulted anticlinal closure that was partly penetrated by Phoenix South-2.

Although the latter well encountered gas and condensate it was unable to drill through and evaluate this formation. Phoenix South-3 well has been designed to address this issue.

The location is around 560 m (1,837 ft) north-northeast of Phoenix South-2. The well will target a closure that could contain up to 489 bcf of gas and 57 MMbbl of associated condensate.

Carnarvon also expects to encounter sandstones within the Hove Member that may be hydrocarbon-bearing. Drilling to TD of 5,500 m (18,044 ft) MD should take around 90 days - Quadrant’s plan of staged drilling just above and through the Caley reservoir section will make progress here slower than through the other sections of the wellbore.

4---Guyana Makes 8th Oil Discovery

ExxonMobil and its partners have achieved an eighth deepwater oil discovery in the Stabroek block offshore Guyana.

The Longtail-1 exploration well, spudded by the drillship Stena Carron late last month in 6,365 ft (1,940 m) of water in the southeastern part of the block, penetrated around 256 ft (78 m) of good-quality, oil-bearing sandstone reservoir. It was drilled to a subsurface depth of 18,057 ft (5,504 m).

Longtail-1 is 5 mi (8 km) west of the Turbot-1 discovery well. ExxonMobil assesses combined gross recoverable resources at more than 500 MMboe. On completion of the well, the Stena Carron will drill Hammerhead-1, 9 mi (14.5 km) southwest of the Liza discovery.

ExxonMobil now plans to bring in another exploration vessel to operate in parallel to the Stena Carron on various prospects in the block.

Another drillship, the Noble Bob Douglas, is completing initial stages of development drilling for the Liza Phase 1 project. Development here will comprise 17 wells connected to an FPSO with capacity to produce up to 120,000 b/d of oil, with start-up anticipated in early 2020.

The Phase 2 concepts are similar to Phase 1 and involve a second FPSO with 220,000 b/d capacity. A third development on the Payara field is set to follow Liza Phase 2, lifting gross production from the block above 500,000 MMb/d by late 2023.

ExxonMobil affiliate Esso Exploration and Production Guyana Ltd. is operator and holds 45% interest in the Stabroek block. Hess Guyana Exploration Ltd. holds 30% interest and CNOOC Nexen Petroleum Guyana Ltd. holds 25% interest.

5---Norway Needs Larger Hydrocarbon Finds

The Norwegian Petroleum Directorate (NPD)’s newly issued 2018 Resource Report for Exploration says new and larger discoveries are needed to sustain production offshore Norway at current levels after the mid-2020s.

The report highlights the substantial remaining potential for oil and gas on the Norwegian shelf, both in mature and less explored areas.

Improved understanding of the areas, better data, new work methods and technology could all help deliver further profitable discoveries, the authors add, if the industry steps up exploration.

According to NPD exploration director Torgeir Stordal, the report shows that after more than 50 years of activity offshore Norway, around 55% of the anticipated oil and gas resources remain to be produced, while just under half have not yet been discovered.

The estimate for undiscovered resources is 4,000 MMcmoe: around two-thirds are likely to be found in the Barents Sea, with the remainder distributed between the North Sea and Norwegian Sea.

Stordal said the industry had shown considerable interest in Norway’s most recent licensing round, and that exploration was picking up after a few quieter years.

In recent years the discoveries have been smaller than before, and it has proven more difficult to find new oil and gas deposits. However, new technology has provided better data and better tools, and these have contributed to new insights and new exploration concepts, the report found.

“This development will continue. The combination of better geotechnical expertise and digital technology will probably become the key to identifying new resources in the years to come,” Stordal said.

 Rosneft to Lift Global Oil Market Share

Russia’s Rosneft , the world’s top listed oil producer by output, has an opportunity to boost its market share if there are shortages on the global oil market, Chief Executive Igor Sechin said.

Rosneft, with BP and Qatar among its shareholders, accounts for around 40 percent of Russia’s total oil production and is key to Moscow sticking to its commitments under the global oil output cut deal by OPEC and some non-OPEC countries.

 “Today, the market is quite united in expectations of the structural oil deficit in the next 10 years, as growing demand comes along with a fall in production,” Sechin told a Rosneft shareholders meeting.

Sechin, Russia’s most influential oil executive and a close ally of President Vladimir Putin, said an oil deficit of around 700-750 million tonnes a year was estimated by 2025.

His presentation said that to avoid a global shortage, 15 million barrels of oil per day (bpd) in new production globally would be needed.

OPEC+ countries - the cartel’s members, plus another 10 major producers including Russia - meet in Vienna this week to discuss a possible increase in production.

“For Rosneft ... such a situation creates a unique opportunity to increase global market share,” Sechin said.

He did not say by how much Rosneft was ready to increase its production if the group decided to ease global cuts from July 1.

Alexander Novak, Russia’s energy minister, has said Moscow would propose a gradual increase in oil output across the group by 1.5 million bpd from next month.

Current global curbs stand at 1.8 million bpd, of which Russia has pledged 300,000 bpd. Rosneft’s oil production was at 4.52 million bpd last year.

Rosneft plans to increase its oil and gas output to 330 million tonnes of oil equivalent by 2022, Sechin told the Rosneft shareholders meeting, with new oil and gas projects expected to yield 87 million tonnes of oil equivalent.

Without giving figures, Sechin also promised shareholders a “material” increase in dividends for 2018, saying the board of directors would meet soon to discuss parameters of a share buy-back announced by the company earlier.

Rosneft paid around 50 percent of its net profit in dividends on last year’s results.

Earlier this year, Qatar agreed to increase its stake in Rosneft to almost 19 percent after buying out Swiss trader Glencore almost entirely from their two-year-old joint venture.

Faisal Alsuwaidi, a Qatari representative on the Rosneft board of directors, said Qatar may consider increasing its stake further, thouigh there were no immediate plans to do so. He said the company was “a good investment”.

Qatar’s sovereign investment fund QIA, together with Glencore, bought 19.5 percent of Rosneft for 10.2 billion euros ($11.8 billion) during the Russian firm’s partial privatisation in 2016.

Poland to Route Baltic Pipe Gas Line Via Sweden

Poland’s gas grid operator Gaz-System has decided to route the undersea section of its Baltic Pipe project which will connect the country to Norwegian gas deposits and reduce reliance on Russian deliveries through Swedish waters, it said.

Gaz-System said this was the most preferable route for the 275 kilometre-undersea part of the gas pipeline between Niechorze in Poland and Faxe South in Denmark, considering potential environmental impact and security.

“This is an important moment as from today very specific technical work will be conducted,” Piotr Naimski, the government official responsible for power and gas infrastructure told a press conference.

The alternative, “southern”, route that was also considered would have run through the German exclusive economic zone of the Baltic Sea.

“The southern route was a zigzag route, as the number of constructions to bypass, including wind farms, was significant. It will be much easier to build the pipe through Swedish waters,” Naimski said.

The Baltic Pipe will cross the existing Nord Stream pipe, which brings gas to Germany from Russia, and possibly its planned second line Nord Stream 2.

Construction work of the undersea section is expected to start in June 2020. Poland wants the pipeline to be completed in 2022 when a long-term deal between state-run gas firm PGNiG and Russia’s Gazprom expires.

In other attempts to diversify sources of supply, Poland opened its first liquefied natural gas (LNG) terminal on the Baltic Sea, which it plans to expand, and PGNiG has been buying more and more gas from sources other than Gazprom.

Naimski said the 10 billion cubic metre (bcm) capacity of the Baltic Pipe and 7.5 bcm capacity at the LNG terminal plus Poland’s own production would be enough to meet Polish gas demand which is currently around 16 bcm a year.

Australia No Longer Faces Gas Shortfall

Australia no longer faces a looming gas shortage, thanks to government pressure on exporters to divert gas into the domestic market and reduced demand forecast for gas-fired power, according to the latest estimates from the nation’s energy market operator.

 “No supply gaps are forecast before 2030 under expected market conditions,” the Australian Energy Market Operator said in its annual outlook for gas.

The outlook is starkly different from a year ago, when dire warnings from the market operator about potential shortfalls in eastern Australia from 2018 onward prompted the government to threaten to curb liquefied natural gas (LNG) exports.

The nation’s three east coast LNG plants, operated by Royal Dutch Shell, ConocoPhillips, and Santos , averted those curbs by promising to plug the expected deficit.

Their moves, combined with greater availability of LNG on the global market, the start-up of a new pipeline from the Northern Territory to Queensland, and growth in wind and solar power diminishing the need for gas-fired power, have eliminated the feared shortage.

 “Alongside international market changes, newly committed electricity generation resources have resulted in a favourable increase of gas availability for the east coast market,” AEMO executive general manager David Swift said in a statement.

More than 4,000 megawatts of wind and solar power are due to start up in the next two years, which should ease demand for gas-fired power except when renewable generation is low, he said.

AEMO cut its gas consumption forecast for 2019 by 55 petajoules from its last estimate made in September, while increasing its gas production outlook from fields in the southern states by 16 PJ.

In September, it had predicted a supply gap of between 54 PJ and 107 PJ for 2018, or up to 17 percent of market demand.

An extra eight PJ of gas has also been freed up for the local market as a global LNG glut has given overseas buyers more supply choice, AEMO said.

While producers told the market operator output would increase from southern gas fields, AEMO’s forecasts “still show that further exploration and development will be needed to meet demand from as early as 2022,” Swift said

Small US Oil Producers Face Output Squeeze

As pipelines out of the largest U.S. oil field reach capacity in the coming months, further depressing West Texas crude prices, smaller producers will have to slow or shut-in production, according to oil executives.

Soaring production in U.S. shale fields has driven output to a record 10.47 million barrels per day (bpd) this year and any cutbacks would hurt companies recovering from 2014’s crude-price drop.

Oil in Midland, Texas now sells for about $6 a barrel less than the U.S. benchmark, compared with $1.50 less in January. It was $13 under the U.S. benchmark in May.

Global oil and Asian product market, June

The physical market came under quite marked pressure over the first half of June with prompt assessments moving to a wider discount versus forward assessments. This has reportedly been driven by a buildup of floating volumes around the ARA hub. Pressure is currently disproportionately weighing on Brent, and though balances remain generally supportive, this specific factor is expected to act as a drag on prices in the near term.

But during second half of June, prices regained some of the week’s losses as OPEC members reached an agreement to reduce the level of their conformity to 100% rather than 160%, and  raise output. In other words, according to  the news broadcasted on the  discussions at the 174th meeting of the OPEC Conference held on 22 June, in Vienna, Austria,OPEC-12 will strive to adhere to its overall conformity level under the OPEC / non-OPEC deal down to 100%, resulting in additional production of around 700,000 b/d.

Despite continued declines from Venezuela and some slight decline from Iran due to US unilateral sanctions, OPEC output  is forecast  to be some 400,000 b/d higher in Q3 compared to Q2.

Some market analysts  assume a mild impact from the sanctions on Iranian output later this year, but over 2019 supply recovery is expected. More specifically, there might be a temporary drop of some 350,000 b/d by the end of this year, but the impact is set to be limited to 100,000 b/d on annual average y-o-y in 2019.

 Asian Product Markets

Light Distillates (gasoline, naphtha)

The naphtha market is being dragged down by the wider weakness in the gasoline complex. With mogas oversupply likely to persist over the coming weeks and limited additional demand expected from the petchem side, the naphtha cracks remaining under pressure. 

In Asia, turnarounds are set to peak this month, and Chinese demand growth in particular is likely to see more upside ahead in light of steam cracker additions earlier this year. This should help limit the downside cracks going forward and support arb flows from West to East.

Gasoline cracks fell strongly over the last month, as crude intake picked up and higher retail prices almost certainly weighed on demand. Regional inventory levels remain high and are now well above the five-year average, providing further pressure on the east of Suez gasoline complex. Meanwhile, there are strong signals that global gasoline oversupply will continue through the summer ahead.

Middle Distillates (gasoil, jet fuel)

Gas oil/diesel cracks in the Asia have been on a downward trajectory over the past few days as strong crude intake growth in Asia is creating a surplus in supply, although the pull on arb volumes from the West remains firm. Some further pressure seen as refiners continue ramping up runs, while the start of the monsoon season in Southeast Asia starts pressuring diesel demand in India (-60,000 b/d m-o-m in June). Additionally, competition from US and Russian diesel exports in the European market should increase. China as an increasingly bearish factor for the rest of the year with preliminary data showing another strong month of product exports in May and with marginal observations pointing rather towards a relaxation of government control over export levels.

 Jet/kero cracks fell recently amid strong supply growth and seasonally weakening demand for kerosene. However, relative strength versus last year is persisting, with a firm pull on arb volumes from Europe and US West Coast providing a floor. Asian jet/kero demand increased by 120,000 b/d y-o-y over January-April and strong demand growth is forecast to persist firmly above last year.

Fuel Oil

Singapore fuel oil cracks are entering their seasonally strongest period of the year and this has already shown up in healthier cracks. Supply-side support is coming from decreasing fuel oil yields, as more residue is channeled into asphalt production – although strong crude intake growth is preventing supply from falling too low. On the demand side, support is coming from increased power generation demand in the Middle East.

However, the upside in cracks is forecast to be limited given the point that steeply backwardated market structure should see a significant shedding of stocks over the summer. This is also underpinned by a forecast lengthening in the Asian balance of 100,000 b/d over  H2-2018 relative to H1.

Pakistan ramped up fuel oil imports to 120,000 b/d in May, much higher than the 15,000 b/d seen over the first four months of the year. Tender data indicates that the trend should continue over the summer, albeit at lower (<90,000 b/d) levels. Pakistan’s fuel oil purchases have an outsized role on the Asian fuel oil market as the country imports low-viscosity material, something that impacts the Singapore viscosity spread by tightening availability.

Libya Oil Perspective

Iman Nikzad

Libya has long been known as the most important producer of crude oil in Africa. Sitting atop 48 billion barrels of proven oil reserves, the North African nation comes 9th among oil-rich countries in the world.

Like many other petrostates, Libya depends on petrodollars to run its economy. Oil revenues account for more than 90% of Libya's total revenue. According to the latest report released by Libya's Central Bank, the country saw its oil revenue jump from $5 billion in 2016 to more than $14 billion in 2017 – still far from more than the $50 billion the country earned before plunging into civil war.

Despite the more than double increase year-on-year in Libya's oil revenues, the country is still struggling with liquidity shortage and unprecedented depreciation of its national currency, largely affecting Libya's petroleum industry and development plans.

The governor of Libya's Central Bank recently said that the unrest in the country had shaved $160 billion off its oil revenue over recent years.

Libya joined the Organization of the Petroleum Exporting Countries (OPEC) in 1962. It was producing about 3 mb/d of crude oil in the 1970s. However, its oil output went on a downward trend in the following years to drop to 1.65 mb/d of light and sweet crude oil, supplied by six oil fields, by 2011 before the outbreak of civil war.

As the country plunged into civil war, its oil production fell to below 400,000 b/d. Libya was planning to bring its oil production to 1.7 mb/d in 2013 and 2.2 mb/d in 2023.  

$18bn Investment

According to sources with precise knowledge of the matter, Libya would need $18 billion in investment to reach its production targets. After tensions subsided in 2017, Libya lifted its oil production to four-year highs. Last year, Libya was producing 820,000 b/d of oil, the highest average level in three years.

The Libyan Central Bank reported that the increase in the country's oil production in 2017 helped halve national budget deficit to $7.7 billion. The Sharara oil field, which holds 80% of Libya's oil reserves, produces the bulk of Libya's oil.

Libya's National Oil Corporation (NOC) is running Sharara in partnership with Spain's Repsol, France's Total, Austria's OMV and Norway's Statoil. Other energy majors operating under joint ventures with NOC in oil production are Italy's Eni and American companies ConocoPhillips and Hess.

Oil Destination

According to official data, non-distant European countries constitute 85% of Libya's oil export destinations. Before the outbreak of civil war there, Libya was delivering 403 million barrels a year of crude oil to Europe, supplying 11% of Europe's crude oil needs. Libya was known to be the third largest supplier of crude oil to Europe after Norway and Russia.

Libya Oil Fields, Pipelines and Refineries

Libya has five oil refineries capable of processing 380,000 b/d of crude oil.

Except for Libya's largest oil refinery Ras Lanuf, all other treatment facilities are operational. Ras Lanuf, which stopped processing five years ago, is expected to come online anew in the second half of this year. Libya exported 34,300 b/d of petroleum products in 2016.

NOC plans to increase Zawiya's refining capacity by 30,000 b/d to 150,000 b/d. The national company also intends to raise the Ras Lanuf capacity to 380,000 b/d and the Tobruk capacity to 30,000 b/d.

NOC is also planning to build a 30,000-barrel-a-day refinery in southern Libya although no timeframe is given for the project due to ongoing unrest in the country.

Output Hike

Given what was said above and on the basis of crude oil production-consumption balance in Libya, it may be argued that this country would have no option but to redouble its efforts for increasing its crude oil production.

Libya, along with Nigeria, has been excluded from OPEC-required production cut, due to the two nations' unstable conditions, they can raise their output to any level without facing any restrictions. This issue is also viewed as a challenge to the production cut agreed upon by OPEC - non-OPEC oil producers which signed the "Declaration of Cooperation".

Libyan oil officials have announced plans to reach 1.5 mb/d oil production by end-2018. It may look unlikely for Libya to reach 1.5 mb/d production in the short term on technical grounds (production decline is even likely due to low security levels); however, if domestic tensions are contained Libya has potential to increase its production.

Oil analysts believe that in case Libya manages to lift its output while other key elements of oil market remain unchanged, the oil prices would be forced to go on a downward trend. That is why Libya's oil production in the current year would be a key factor in the OPEC and global oil supply.

Anyway, in case Libya increases its oil production at a sustainable level, it will either join the proponents of the strategy of OPEC limited supply and decrease its crude oil production gradually or opt to maintain its output level due to unplanned production decline by some OPEC member states and the special conditions of some producers like Venezuela and Nigeria in order to remain exempted from the OPEC production cut quota.

It is still too early to conclude that Libya is making efforts to supply more crude oil in the market.

E&P Firms Rejuvenate Iran Oil Industry

After the Iranian Ministry of Petroleum cleared Iranian Exploration & Production (E&P) companies to form partnership with Iranian and foreign companies for the development of oil and gas fields in Iran, some of them moved to sign memorandums of understanding with the National Iranian Oil Company (NIOC) to conduct feasibility studies on the fields. Some have even gone further to sign agreements.  These companies hope to be partner with foreign companies in developing big fields, while they expect to become project operator in the development of small fields which need not much investment and no sophisticated technology.

E&P companies are expected to learn development of technology through working alongside leading international companies. However, Iranian firms need to modify their structures and get ready to assume their new responsibility within the framework of E&P companies and learn how to work in such business environment with a view to operating projects abroad.

"Iran Petroleum" has interviewed several senior managers of Iranian E&P companies to shed some more light on their latest activities.

MOU Signed with Foreign Financers

CEO of the Iranian Offshore Engineering and Construction Company (IOEC) Abdol-Qasem Rahmani said several MOUs, worth between $400 and $500 million, had been signed with foreign financers for the development of oil and gas fields.

Referring to structural changes and the approaches of these companies over the past two years to become E&P companies, he said: "The drilling section of the company managed to drill 22 wells in Phase 14 of South Pars [gas field] in less than 700 days, which is a record."

He said that IOEC had undergone structural changes in recent years with a view to becoming an E&P company. For instance, new divisions like oil and gas reservoir operation and studies have been established in the company.

Rahmani believes that converting general contractor companies into E&P companies would require a long process of conversion.

Noting that IOOC had proposed the development of three onshore oil and gas fields to the Office of Deputy CEO of NIOC for Engineering and Development, he said: "We are in the process of signing agreement with an Iranian consulting company to study these three fields. In the meantime, we are in talks with three foreign companies for their partnership in the development of these fields."

"Under new oil contracts, foreign companies have to join Iranian companies for developing oil and gas fields. Therefore, we announce our financial readiness for such cooperation. We have so far signed several MOUs with $500 million with foreign financiers to that effect," he added.

Readiness to Develop 5 H/C Fields

CEO of Drilling Company International (DCI) Fazel Jamalzadeh said that Petroiran Development Company (PEDCO) had offered to develop the Siri, Mansouri, Susangerd, and Danan oil fields, as well as Phase 2 of the South Pars Oil Layer.

He said that PEDCO had worked for two decades alongside such big oil companies as France's Total, Italy's Eni, Royal Dutch Shell and Norway's Statoil and gained a lot of experience.

He added that the establishment of DCI was per se a first step for it to become an E&P company. DCI currently owns two offshore drilling rigs, he said.

Jamalzadeh said that Iranian E&P companies would gradually see their competition pick up speed, adding: "Therefore, Iranian and foreign companies must be provided with equal chances for competition, so that domestic companies would be able to work with foreign financers within the framework of new oil contracts."

"PEDCO is currently in talks with several Asian companies for carrying out EPDF projects to get financing. Fortunately, these negotiations have led to the signature of MOU," said Jamalzadeh.

He said PEDCO had found its foreign partners to operate oil and gas projects in Iran, adding: "We are currently waiting for NIOC to award projects. There is also an MOU signed by us and NIOC for studying Susangerd and Danan fields. Therefore, we have focused on these fields."

Jamalzadeh said the MOU for the development of Siri and Mansouri fields had been presented to the client pending approval.

MDP for Susangerd Development

CEO of IDRO Oil Nasrollah Zarei said that viewpoints of his company and Austria's HOT Engineering GmbH about feasibility studies conducted on the development of the Susangered field had been submitted to the Arvandan Oil and Gas Production Company.

"We will soon submit the final copy of MDP (Master Development Plan) for this field to the client," he said.

Zarei referred to the signature of MOUs with NIOC for conducting feasibility studies on the Susangerd, West Paydar and Cheshmeh-Khosh oil fields last year, saying: "We have decided to focus on the Susangerd field. That is why we signed an agreement with Austria's HOT Engineering. Training workshops have since been held in Iran with their collaboration on enhanced oil recovery."

He said that IDRO Oil had signed MOUs with India's ONGC and Russia's Zarubezhneft to conduct feasibility studies on the Susangerd field. He added that technical meetings with the Russian company had reached the final stage.

"IDRO has always been willing to serve as operator in the Susangerd project and it has made huge efforts for financing. We have had good talks with Chinese financiers," said Zarei.

"To finance the development of the Susangerd field, IDRO will use domestic credit, Bank of Industry, Mine and Trade, National Development Fund of Iran and domestic banks," he said.

Talks with Russian, Chinese Firms

CEO of Global Petro Tech Kish Company Ahmad Qale'bani said: "We are currently in talks with our Russian and Chinese partners for financing projects over a two-year period."

He said his company's offshoots – Asr Kish, Sarvak Kish, Global Dubai and Persia Kala – had become active.

"Last year many structural changes were made in this company and operational activities were assigned to Asr Kish," said Qale'bani.

He said that Global Petro Tech Kish Company was in talks with NIOC to develop the Sumar, Esfandiar and Changuleh fields, adding: "We are currently waiting for NIOC to study our proposals for these fields."

Regarding financing future projects of Global Petro Tech Kish Company, he added: "Currently, we are in talks with our Russian and Chinese partners for two-year deferred payment to finance the projects. Meanwhile, we have reached good results in our talks with a European investor for the development of the Sumar field."

Qale'bani pointed to the Iran Petroleum Contract (IPC) terms of contract regarding partnership between Iranian and foreign companies, saying: "We hope that infrastructure capabilities developed in the private sector during years of sanctions will be used effectively within the framework of these contracts."

Talks with Zarubezhneft

CEO of Ghadir E&P Holding Abdorreza Hosseinnejad heaped praise on Iranian Minister of Petroleum Bijan Zangeneh for his initiative to establish E&P companies, saying the outcome of such initiative would be seen in the future. He said that E&P companies did not exist in the country before."Now a good opportunity has been created for the growth and progress of companies that are able to step into exploration and production," he added.

Under IPC terms, he said, Iranian companies have to hire a foreign partner equipped with advanced technology. Meantime, for the development of big fields, foreign companies are required to have an Iranian E&P company as partner.

"Such interaction with international companies will result in the growth and progress of domestic companies and their technical and operational standards. The companies which have been cleared by NIOC are able to become E&P companies, which would help them participate in future development projects both inside and outside of the country," said Hosseinnejad.

He said diversifying international partners in the petroleum industry and choosing a variety of companies from different countries would bring about more certainty for investors.

Referring to Ghadir's cooperation with Russia's Zarubezhneft, he said: "Russia's Zarubezhneft has been endorsed by NIOC as a qualified foreign company in the E&P sector. It has good technical and international experience in the petroleum industry and will be able to meet our technological needs for engineering and production from reservoirs."

"The company has had successful experience in enhancing the recovery rate, new methods of drilling, countering asphaltene and making field development economical," said Hosseinnejad.

"Furthermore, since investment in upstream petroleum industry projects needs big sums, Unit International of Turkey will be involved in these projects for financing and investment," he added.

"After going through various stages and accepting mutual terms and conditions, we signed an outline agreement. The Russian and Turkish companies are ready to sign deals with us in order to cooperate with us in any of the fields," said Hosseinnejad.

Planning for Ab Teymour Field

Bahram Masoudi, director of marketing at Iran Ofogh Industrial Development Company (IOID), said an agreement had been signed with a foreign company for cooperation in Ab Teymour oil field.

"For presence in this project, we will focus on foreign financing," he said.

"For financing this project, our company is focused on foreign financial resources and we have signed an agreement with a British consulting company for financing of this project," he added.

Masoudi said that IOID had three decades of experience in offshore and onshore fields like those located in the West Karoun area along the border with Iraq.

IOID had signed more than 17 agreements with Italy's Eni for logistic services in the development of Darquain oil field. "Now that Eni has left Iran, IOID has been in charge of maintenance of oil installations in the Darquain field for more than eight years."

He said that IOID was providing technical and engineering services to China's Sinopec and CNPC in the West Karoun area.

"After we were recognized as an E&P company, we registered a company under Ofogh Energy because we have been assigned missions which require us to undergo major structural changes," said Masoudi.        

He said that holding training workshops and seminars in cooperation with European knowledge-based companies for the realization of E&P companies' objectives was instrumental.

"Recently we presented our own proposals for the development of two oil fields in the West Karoun area to NIOC," said Masoudi.

Regardless of the US's withdrawal from the 2015 nuclear deal signed between Iran and six world powers, remarks by Iranian E&P companies indicate that Iran's petroleum industry continues to remain attractive to investors. Iranian E&P companies are also preparing themselves to get engaged in this sector.

E&P companies owe their survival to application and development of modern technologies. Therefore, Iranian E&P companies would be able to open a window for the transfer of technology into Iran's petroleum industry.

Growing global demand for oil has increased recovery from resources, subsequently cutting into reserves and causing decline in natural production.

Therefore, the challenge faced with by E&P companies is not bound to exploring new oil fields. It also involves boosting production from operating fields. New solutions are needed in order to overcome both challenges.