The world oil market, over the past one year, has experienced unprecedented

price decline and widespread instability. That has posed a challenge to major oil producers due to considerable dependence of their annual budget on oil revenues. The current price decline, mainly emanated from the Covid-19 outbreak, will not last for good; however, it would set alarm bells tolling for oil producers to adopt more realistic policies, and make better thought out plans in order to wean their budget off oil for creating new value chains in the refining and petrochemical sectors. For oil producers, the petrochemical industry represents an unrivalled opportunity to end crude oil sales. It can serve as a point of departure for generating value-added and guarantee their measures for development.With a more realistic look at future it would be easy to predict that very soon, oil and petroleum products would not enjoy the status they have today, offering a reason for concentration on the petrochemical industry.Petrochemical products could not be replaced easily in the near future. Even from a social perspective, the petrochemical industry can contribute to economic dynamism through creating job opportunities steadily.A review of news on Iran’s petroleum industry, even over recent weeks, indicates that Iranian oil policymakers have been focusing on the development of the petrochemical industry.Four new projects – Kimia Pars Middle East, Urea Unit of Lordegan Petrochemical Plant, Olefin Unit of Ilam Petrochemical Plant and triple PET exports – along with a 35% growth in Iran’s petrochemical output are indication of how Iran’s Petroleum Ministry is concentrating on the petrochemical industry to diversify its sources of income and put an end to its dependence on oil sales. Petchem Opportunity for Oil Producers

Obituary: Hossein Kazempour Ardebili

Iran’s long-serving governor for OPEC Hossein Kazempour Ardebili, who died in May, was a key figure in the Islamic Republic’s petroleum industry. He was a seasoned negotiator who proved to be instrumental in many decision-makings by the Organization of the Petroleum Exporting Countries (OPEC).

Kazempour Ardebili was known as the architect of the international affairs department of Iran’s petroleum ministry. Addressing the memorial service held for him, Minister of Petroleum Bijan Zangeneh said he was a “reliable friend”, and Foreign Minister Mohammad Javad Zarif described him as “humble and brave”.

In the words of his friends, Kazempour Ardebili always won concessions through negotiations thanks to his stronger reasoning and arguments.

OPEC Secretary General Mohammad Sanusi Barkindo, in his message of condolences, said “Hossein's commitment and dedication to OPEC throughout his life's work were not only markers of his personal qualities, but those of the great nation which he so ably represented throughout the years”.

“His expertise and experience were central to OPEC's many achievements and its greatest successes. Hossein was a champion of the Declaration of Cooperation that has brought unparalleled recognition and respect for OPEC, as evidenced by our proactive leadership in confronting the severe market downturn resulting from impact of the COVID-19 pandemic,” read his message.

Prominent Diplomat

Kazempour Ardebili had survived the June 1981 bombing at the headquarters of the Islamic Republic party in Tehran. He served as minister of commerce from 1980 to 1981. Then he served as deputy minister of foreign affairs for economy for four years prior to becoming deputy minister of petroleum for international affairs and Board member at National Iranian Oil Company, which he held for five years.

Kazempour Ardebili was appointed Iran’s ambassador to Japan in 1990 and remained in this post for five years. In 1995, he was named Iran’s governor for OPEC and remained in the post until the end of the second term of Mohammad Khatami in 2005. During President Mahmoud Ahmadinejad’s tenure, Kazempour Ardebili stepped down when Gholam-Hossein Nozari was appointed minister of petroleum.

He was again reappointed Iran’s governor for OPEC in 2013.

Oil Price Revival

Mehdi Assali, Iran’s former national representative to OPEC said Kazempour Ardebili’s first term as Iran’s governor for OPEC (1995-2008) coincided with such developments as an increased number of financial markets determining oil prices, increased number of oil producers and oil-thirsty China’s entry into the oil market, and above all shale oil and gas production in the US. Assali said Kazempour Ardebili was instrumental in the revival of oil.

Cut Exemption

When Kazempour Ardebili started his second term in office in 2013, Iran was redoubling its efforts to regain its market share lost due to sanctions. Efforts undertaken by Zangeneh and Kazempour Ardebili to win exemption from oil production cuts for Iran marked history.

UN sanctions against Iran had destabilized the country’s position within OPEC and Kazempour Ardebili took office under such circumstances.

Assali said: “Due to UN sanctions against Iran and the country’s halted oil exports, OPEC members agreed on a total production ceiling instead of setting quotas for member states. Since the sanctions had sharply cut Iran’s oil production and exports, Saudi Arabia and fellow members were free to increase their production and even take Iran’s share in the market without being accused of non-compliance. This proposal had been made by some OPEC member states who had benefited from the inexperience of Iran’s OPEC governor who was coincidentally presiding over the OPEC meeting.”

With Kazempour Ardebili back in office, an objective sought by Iran was to revive Iran’s interests and strengthen its position within the OPEC. Iran was exempted from production cut because when the country was under sanctions fellow members had increased their output, thereby driving down oil prices and boosting shale oil.       

Declaration of Cooperation

Kazempour Ardebili’s endeavor was not limited to defending Iran’s interests in OPEC. He firmly believed in a stronger OPEC position in the global oil market. As the representative of a founding member of OPEC, he was instrumental in the drafting of the OPEC Long-Term Strategy (LTS) which is being reviewed every five years.

In a column, Assali wrote: “The first draft of the LTS, in light of OPEC Statute, the strategic long-term objective envisaged for OPEC was to maximize the interests of member states including achievement of proper oil prices; however, in the revised document, Saudi Arabia, along with friendly nations, insisted on the elimination of the objective of maximizing oil revenue and leading the market in the direction of proper prices.”

“But Iran insisted that this strategy has to focus on maximizing long-term oil revenue of member states through fair prices. We had defined fair prices as optimal for both producer and consumer. The price was considered high enough to make investment in this sector attractive, while it was at a level not to leave any negative impacts on the global economic growth,” he wrote.

Iran achieved such success without having any special privileges. Iran’s growing clout with OPEC was impossible without any increase in oil production and exports. In the oil markets, barrels speak.

Assali believes that Kazempour Ardebili managed to make Iran a key and influential state in drawing up OPEC’s strategic documents and influence the oil market.

Another role played by Kazempour Ardebili was his role in the Declaration of Cooperation, which Barkindo highlighted in his message.

Kazempour Ardebili was also instrumental in the election of Mohammad-Hossein Adeli as secretary general of the Gas Exporting Countries Forum (GECF) for two consecutive terms in 2013.  

In his message of condolences, Yury Sentyurin, GECF Secretary General, said: “Mr. Kazempour's legacy with a focus on strengthening international stability and cooperation, altogether with promoting secure and environmentally friendly energy systems is highly praised by the professional community. Being devoted to the soft power of diplomacy, he has made indeed meaningful tribute in ensuring energy security and advocating positive development on global energy markets.”

Legacy

Kazempour Ardebili-engineered Declaration of Cooperation remains marked in the history of OPEC. Under that declaration, OPEC member states and allies have so far removed historic number of barrels from their output in a bid to help stabilize oil markets.

Addressing the 179th OPEC meeting, Barkindo said the OPEC meetings missed Kazempour Ardebili.

OPEC+ Extends Deal to Shore Up Prices

OPEC and allies agreed in their June 6 meeting to extend a recently-reached deal on cutting their production to help boost prices that have suffered due to falling demand following the coronavirus outbreak.

The statement comes shortly after OPEC and non-OPEC allies, known as OPEC+, agreed to extend their deepest round of production cuts in history to take roughly 10% of oil supplies off the market through to the end of next month.

Oil prices have surged since some of the world’s most powerful oil producers brought in a production cut of 9.7 mb/d starting on May 1. The move was designed to prop up prices at a time when the coronavirus pandemic had led to an unprecedented demand shock in energy markets.

The output cuts from OPEC+ were initially scheduled to be scaled back to 7.7 mb/d from July 1 through to the end of the year

But the new deal means the group will now cut 9.6 mb/d through to the end of July. The figure is 100,000 b/d lower than the previous agreement because Mexico said it remained committed to the terms of the original deal and subsequent reduction in cuts.

Iran’s Minister of Petroleum Bijan Zangeneh after the OPEC ministerial meeting said that balance would be restored to the oil market once the entire global economy would recover.

Zangeneh said oil producers that had not complied with the previous OPEC+ production cut had promised to compensate for their non-compliance in coming months so that “the supply glut in the market would be reduced and prices would recover”.

He said Brent prices’ growth to above $40 a barrel showed that OPEC had made proper decisions.

“In the long-term, as far as the global economy does not recover and the world does not get rid of negative economic growth, demand for oil will not increase and oil prices will not be balanced. But so far OPEC+ agenda has been correct,” he added.

Covid-19 Specter

The 179th OPEC ministerial meeting and the 11th OPEC+ meeting were held through videoconference due to the specter of the coronavirus outbreak. The global economy has shrunk and demand for oil has declined due to Covid-19. Various nations are easing down their lockdown, but the market remains oversupplied.

Based on the 179th ministerial meeting’s remarks, the global economy is set to contract 3.4%. Major economies like the US, Japan and Britain would see their economy contract and only China would experience positive growth.

Economic shrinkage tells oil producers that demand for oil is falling. Demand for oil was down 9 mb/d in the first quarter of the current calendar year compared with the previous quarter, causing worries among investors in the petroleum industry. OPEC’s estimates show that capital expenditure would decline 23% in 2020.

In the OPEC+ emergency meeting in April, oil producers agreed to remove 9.7 mb/d from their production. Iran and Venezuela, due to US sanctions, and Libya, due to domestic crisis, were exempt from any output cut.

But Mexico, whose share in the cut was 100,000 b/d, said it would no longer cut this amount from its production.

In their Declaration of Cooperation signed in April, the 23 OPEC+ countries had agreed to cut 9.7 mb/d from their output in May and June, 7.7 m/d for the next six months and then 5.8 mb/d for 16 months.

Iraq, Nigeria, Kazakhstan and Angola were reported to have not complied with May’s production cut.

Non-Compliance

Iran’s Zangeneh said the countries that had not respected their production cuts would compensate in the coming three months in order to help prices recover.

He said that non-OPEC would account for 40% of production cuts with Russia holding a 10% share.    

The International Energy Agency estimated that roughly 25% of demand was drained from the market in April as confinement measures brought mobility to a near standstill for billions of people across the globe.

Two days after the OPEC+ meeting, Saudi Arabia and Russia said the success of the energy alliance’s latest production cuts relies on all members complying with the terms of the deal.

“We have no room whatsoever for lack of conformity,” Saudi Energy Minister Prince Abdulaziz bin Salman said during an online press conference.

Those that failed to conform to the OPEC+ deal in May and June should compensate with extra cuts from July through to September, Prince Abdulaziz said.

Russian Energy Minister Alexander Novak said via an interpreter that he fully agreed with his Saudi counterpart. “I can say that overall conformity levels are extremely high, considering the magnitude of the cuts and how bad the situation is.”

“We have spent a lot of time discussing full conformity and how this will be compensated because the success of the deal and the success of our efforts rest on all countries doing their part,” he added.

Compliance Mechanism

Zangeneh said OPEC and non-OPEC oil producers had 90% compliance with the deal.

He said that market price was the only factor forcing member states to remain committed to their obligations.

“Oil prices, market performance and reactions are the only mechanism for OPEC and OPEC+ in implementing their decisions,” he added.

Spokesperson of Iraq’s Ministry of Oil, Assem Jihad, said in a statement, “Despite the economic and financial circumstances that Iraq is facing, the country remains committed to the agreement.”

The spokesperson emphasized that Iraq had remained strong advocate over the years of all efforts that help in restoring stability and balance to the oil market.

Nigeria’s petroleum ministry said Abuja backed the idea of compensating for its excessive output in May and June.

Iraq produced 520,000 b/d above its quota in May, while overproduction by Nigeria was 120,000 b/d, Angola’s was 130,000 b/d, Kazakhstan’s was 180,000 b/d and that of Russia was 100,000 b/d, OPEC+ data showed.

The OPEC+ joint ministerial monitoring committee, known as the JMMC, will meet monthly until December to monitor the market, compliance and recommend levels of cuts. JMMC’s upcoming meeting is scheduled for 18 June.

Prince Abdulaziz bin Salman told the videoconference of OPEC+ ministers that confidence would be restored to market through active commitment.

He said: “Demand is returning as major oil-consuming economies overcome pandemic lockdown. But we are not out of the woods yet and challenges ahead remain.”

Novak said the oil market remained fragile, adding that the gradual end of lockdowns and subsequent economic overture was helping improve demand for crude oil.

Iran New OPEC Governor

Amir-Hossein Zamaninia, Iran's deputy petroleum minister for international affairs and commerce, was appointed Iran's governor for OPEC, replacing the recently deceased Hossein Kazempour Ardebili.

The appointment was signed off by 13 OPEC ministers during the 179th meeting of the OPEC videoconference held on June 6. OPEC governor serves as a member country's top envoy to the organization's secretariat.

Zamaninia holds a law degree from the US and has been involved in Iran’s nuclear negotiations with world powers for years under Foreign Minister Javad Zarif.

Kazempour who was Zangeneh's right hand in OPEC died May 16 of a brain hemorrhage, leaving major shoes to fill at a critical time

Oil Prices Rally following OPEC+ Deal

Oil prices gained more than $10 in May as OPEC member states and their partners started removing 9.7 mb/d from their total output in a bid to help shore up prices following low demand due to the coronavirus outbreak.

On average, the 13-member Organization of the Petroleum Exporting Countries (OPEC) pumped 24.77 mb/d this month, down 5.91 mb/d from April’s revised figure.

In May, they delivered 4.48 mb/d of the pledged reduction, equal to 74% compliance.

Deal Effective

OPEC and its non-OPEC allies, known as OPEC+, agreed to cut supply by a record 9.7 mb/d from May 1. OPEC’s share, to be made by 10 members from their October 2018 output in most cases, is 6.084 mb/d.

May’s output would be the lowest by OPEC since 2002, excluding membership changes since then, Reuters survey records show. The biggest drop in supply came from Saudi Arabia, which pumped a record 11.7 mb/d in April.

United Arab Emirates and Kuwait also cut back sharply, sources in the survey said. Both had also pumped at record rates in April.

Iraq, a laggard in making cuts in 2019, curbed output according to the survey following reduced exports from the south of the country, although at 38% its compliance was much lower than that of the Persian Gulf OPEC members.

Another laggard, Nigeria, made only 19% of its promised reduction, the survey found.

Venezuela and Iran reduced output in May, while Libyan supply rate was steady. All three were exempt from voluntary cuts because of US sanctions or internal issues limiting production.

Trump, Saudi King Discuss Oil

U.S. President Donald Trump and Saudi Arabia’s King Salman spoke on the phone on May 8 and "reaffirmed the strong United States-Saudi defense partnership," the White House said, amid tensions over Saudi’s oil output.

"The two leaders agreed on the importance of stability in global energy markets, and reaffirmed the strong United States-Saudi defense partnership. The president and King Salman also discussed other critical regional and bilateral issues and their cooperation as leaders of the G7 and G20, respectively," said White House spokesman Judd Deere.

Saudi Thirst

Saudi Arabia along with Kuwait and the United Arab Emirates increased their production in March, causing a sharp decline in oil prices. According to OPEC’s monthly review, the trio added more than 2 mb/d to their April output. Saudi Arabia accounted for 1mb/d, UAE for 100,000 b/d and Kuwait for 80,000 b/d. The Saudi government also called on fellow OPEC members, as well as non-OPEC partners to further reduce their production.

Putin, MBS Talk

Russia and Saudi Arabia agreed on May 28 to closely coordinate on the OPEC+ output cuts deal, two weeks ahead of a crucial meeting of the group.

The talks between President Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman come as Russia was said to be determined to start easing oil-output cuts in July, as agreed by OPEC+ in April.

Kremlin spokesman Dmitry Peskov said that Russia would analyze the global oil market before deciding on any potential changes in the OPEC+ agreement.

Putin and Bin Salman exchanged views about the situation in the world energy market, the Kremlin said in a statement. They “noted the importance of joint efforts” and agreed the nations’ energy ministries would closely coordinate.

Russia Fulfills Pledge

           Russia reached the output level pledged by the world's largest oil producing countries, also known as the OPEC+ alliance, as the country reduced its oil production by 2 mb/d.

"The OPEC+ deal worked out and Russia has achieved the targeted indicator we agreed on, which is 2 million barrels of reduction per day," Russia's Energy Minister Alexander Novak was quoted as saying by a source with knowledge of his speech delivered at a State Council meeting.

Due to output cuts in other countries, global oil supply has already dropped by 14 to 15 mb/d so far, said Novak, expressing his expectations to see global crude demand and supply balancing out in the next two months.

"The OPEC + deal allowed us to reduce production evenly across all countries in a regulated way, if there weren’t a deal, the reduction in demand would not go away, a chaotic slump in demand would affect Russia," TASS quoted the minister as saying.

 US Rig Count Still in Freefall

The U.S. rig count was down 17 rigs in a week to 301, with oil rigs down 15 to 222, gas rigs down 2 at 77, and miscellaneous rigs flat at two, according to current data from Baker Hughes.

Year on year, the U.S. rig count is down 683 rigs from last year’s 984, with oil rigs down 578, gas rigs down 107, and miscellaneous rigs up to two.

The U.S. Offshore Rig Count is flat at 12 and down 11 year-over-year, according to Baker Hughes.

Meanwhile, in Canada the rig count dropped one rig to 20, with oil rigs down one to seven and gas rigs flat at 13. The region is down 65 rigs from last year’s 85, with oil rigs down 37 and gas rigs down 28.

Oil Prices Rally

Oil posted its biggest monthly advance on record, just a few weeks after prices made a dramatic plunge below zero.

Crude surged about 88 per cent in May, with U.S. futures rising above US$35 a barrel for the first time since March, driven by massive supply curbs by producers across the world. Still, prices are well below levels at the beginning of the year, and demand that was crushed by the coronavirus crisis may need to show a sustained improvement for the rally to extend further.

OPEC, Russia Agree

OPEC, Russia and allies agreed to extend record oil production cuts until the end of July, prolonging a deal that has helped crude prices double in the past two months by withdrawing almost 10% of global supplies from the market.

The group, known as OPEC+, also demanded countries such as Nigeria and Iraq, which exceeded production quotas in May and June, compensate with extra cuts in July to September.

OPEC+ had initially agreed in April to cut supply by 9.7 mb/d during May-June to prop up prices that collapsed due to the coronavirus crisis. Those cuts were due to taper to 7.7 mb/d from July to December.

Petchem Revenue Topped $14.5bn

The CEO of National Petrochemical Company (NPC), Behzad Mohammadi, has said that the petrochemical sector earned Iran $14.5 billion in revenue last calendar year to March 2020.

Mohammadi said last calendar year was marked with success for petrochemicals production as production forecasts came true.

He said the petrochemical output reached 31 million tonnes last calendar year, 23 million tonnes of which was exported and the rest was supplied on domestic markets.

Mohammadi noted that petrochemicals prices dropped 30% on average last calendar year year-on-year, adding that petrochemicals exports earned Iran $9.5 billion while domestic market purchased $5 billion of petrochemicals.

The official said that Iran’s petrochemicals production saw 6% growth during the first 50 days of the current calendar year year-on-year. That is while the Covid-19 outbreak had slashed demand. Demand for petrochemicals was down 40% due to lower demand for crude oil in the world. Mohammadi; however, said the conditions are improving.

Iran’s petrochemical industry is moving towards stability and remains a key segment in Iran’s economy. It is noteworthy that the Persian Gulf Petrochemical Industries Company (PGPIC), a major petrochemical holding with a big share in petrochemicals production and exports, was slapped with US sanctions last year. Mohammadi said the major impact of US sanctions targeting PGPIC was the imposition of additional costs on exports, particularly in the transport sector.

No Production Hitch

Despite all restrictions imposed by the Covid-19 outbreak on the global economy, Iran’s petrochemical industry plans to operate 16 projects with a total investment of $12 billion in the current calendar year. Once operational, these projects would bring Iran’s petrochemical production from 31 million tonnes to 37 million tonnes. However, the main question which remains is whether or not these projects would be affected by the Covid-19 outbreak.

Mohammadi said 4 projects were likely to be delayed due to Covid-19outbreak, but 12 projects will definitely come on-stream to add 20 million tonnes to Iran’s petrochemicals output.

Iran’s petrochemicals production capacity currently stands at 66 million tonnes, which would at worst, reach 86 million tonnes by next March.

Focus on Investment Packages

In addition to completing petrochemical projects, several methanol projects would come online by March 2022. Many worry about the economic viability of methanol projects.

“To resolve this issue, investment packages for using surplus methanol to produce propylene and supply national needs are focused on this product,” said Mohammadi.

He called for more steps to be taken in the petrochemical industry for a smarter development of the petrochemical industry. These projects are on the agenda for petrochemical development in the methanol, propylene, ethylene and benzene sections.

These projects would cut foreign imports, create prosperity and attractive jobs in the downstream sector of the petrochemical industry and improve the value chain and supply products of higher value.

Propylene Shortages

Iran would make up 4% of world propylene production by 2025, while this figure will be 18% for the entire world, 21% in China, 17% in the US and 16% in Saudi Arabia.

Minister of Petroleum Bijan Zangeneh has already offered solutions for compensating for propylene shortages. “By setting up two propylene lines – one extending from northern Iran to southern Alborz and one extending from Assaluyeh to central Fars – an extended propylene chain could be created,” he said.

Mohammadi has put at 175,000 tonnes, the amount of propylene Iran currently needs. In other words, with the production of 985,000 tonnes of propylene by Iranian refineries and petrochemical plants, 175,000 tonnes more is needed. Iran’s propylene production is planned to reach 1.95 million tonnes by 2024, while the country would be faced with 700,000 tonnes of propylene shortages.

2 Propylene Lines in Iran

Two propylene production lines are envisaged for the production of 3-3.5 million tonnes of propylene in the country. The first pipeline extends from Assaluyeh to Marvdasht, which would be operated by NPC. Propylene would be produced from surplus methanol in Assaluyeh to be injected into a 430km pipeline. It would then be transported to a storage hub in Marvdasht to be used in the development of a propylene chain in Fars and Isfahan provinces, as well as some cities in other provinces.

The second pipeline would extend from Neka to Damghan. The propylene produced from natural gas would be stored in Damghan to be used for the development of downstream industries in North Khorasan, Khorasan Razavi, South Khorasan and Semnan provinces.

NPC would be also operating the GTPP project in Eslamabad Gharb in order to expand the propylene chain. These projects will be GTPP or MTP, which would help end Iran’s propylene imports.

Mohammadi expressed hope that this project would be started under the 12th administration. He said this project would push petrochemical industry development towards smart development and help produce higher-value products based on domestic needs.

Propylene Chain and Petchems

In Iran, propylene is merely converted to PP and EH2. By 2025, Iran would be producing four derivatives from propylene.

By implementing leading industries, 12 products would be manufactured from propylene. In the meantime, all MTP and GTTP projects would be implemented using technical knowhow provided by Petrochemical Research and Technology Company (PRTC).

Mohammadi said the MTP project in Assaluyeh would have a 470,000-tonne capacity, while the GTTP project would have a 120,000-tonne capacity. PRTC owns the licenses of both projects, thereby dispensing with the need for foreign technology.

Diverse Products with High Value-Added

Iran has experienced a big jump in its petrochemical production over the past seven years. There are other projects under way to help enhance petrochemicals supply. However, the key point is whether there is demand for these products.

Mohammadi said: “We need to remain vigilant about what is happening across the world. We must know where we are or where they are.”

“By making efforts towards development of technical knowhow, we need to push the petrochemical industry towards more diversity in products of high value-added with a view to completing the supply chain in order to make the petrochemical industry more attractive,” he said.

Mohammadi said: “We need to follow the world in order to have a proper assessment of development. Blind development and implementing projects with long yields should be excluded as they would lose their attractiveness in the world after several years. Therefore, we need to move towards an intelligent development of the petrochemical industry in order to survive in the global market.”

Value Chain, Petchem Missing Link

Javad Asghari

Iran’s petrochemical industry is 55 years old now. It has seen its production capacity grow 21%, the number of petrochemical plants increase nine-fold, its output grow 33.5 times and petrochemical exports rise 37 times. Whereas downstream chain has not developed as expected, there is still a long way ahead for more profitability. Powerful countries are buying raw materials like methanol, ethylene or urea to convert them into final products and sell them back to us at higher prices.

Many experts believe that what is going on in the petrochemical sector is the result of implementation of Article 44 of the Constitution and privatization of petrochemical plants.  

Propylene, Missing Link

Iran’s petrochemical industry has experienced significant jumps in its upstream sector over recent decades. Iran’s non-oil exports to world markets mainly comprise products derived from petrochemicals. However, market actors have long been concerned with propylene and polypropylene shortages as they constitute the main material in the development of petrochemical value chain.

Iran’s minister of petroleum, Bijan Zangeneh, recently said increased propylene production is in favor of developing the petrochemical value chain.

Zangeneh touched on the packages of investment for leading industries of downstream petrochemical sector, saying they would be soon submitted to government.

He said: “We can work in the benzene, ethylene, methanol and propylene sections. The methanol and propylene units overlap largely and due to propylene shortages in the country we can create a major propylene chain by extending one propylene line from northern Iran to Alborz and one from Assaluyeh to Fars Province.

Behzad Mohammadi, CEO of National Petrochemical Company, said the top priority of the petrochemical industry was to implement packages of projects pertaining to methanol, propylene, ethylene and benzene.

Iran would see methanol surplus after new project would come online and therefore the extra methanol could be used for propylene production.

By 2025, propylene would have a 4% share in Iran’s petrochemical production, far below the world’s 18%, China’s 21%, the US’s 17% and Saudi Arabia’s 16% share.  

Two propylene production lines are envisaged for the production of 3-3.5 million tonnes of propylene in the country. The first pipeline extends from Assaluyeh to Marvdasht, which would be operated by NPC. Propylene would be produced from methanol surplus in Assaluyeh to be injected into a 430km pipeline. It would then be transported to a storage hub in Marvdasht to be used in the development of a propylene chain in Fars and Isfahan provinces, as well as some cities in other provinces.

The second pipeline would extend from Neka to Damghan. The propylene produced from natural gas would be stored in Damghan to be used for the development of downstream industries in North Khorasan, Khorasan Razavi, South Khorasan and Semnan provinces.

These projects are such important that First Vice President Es’haq Jahangiri, during a recent visit to the Petroleum Ministry, said a propylene line, once operational, would mark the history.

Over recent years, ethanol conversion level in Iran has jumped significantly. Across the world, 60-70% of ethylene is converted into varieties of polyethylene and glycol as well as to non-polyethylene polymers. Therefore, polyethylene-dependent industries have been developed in the country, while propylene-dependent chemical industries have not been developed. That is while propylene products are raw materials for a big chain of downstream industries. The downstream products of propylene and polypropylene go beyond polyethylene and ethylene. That is why Iranian and foreign experts believe that propylene shortages are to blame for the non-development of downstream industries related to propylene.

Propylene is like caviar for the petrochemical industry. It is the second basic material for the petrochemical industry in terms of consumption in the world, just behind ethylene. More than 92 million tonnes of propylene is supplied on the market annually.

Propylene is another key petrochemical product, which is used as the feedstock for various polymers and middle products. The main derivatives of propylene are polypropylene, acrylonitrile, propylene oxide, phenol, oxo alcohols, acrylic acid, isopropyl alcohol, oligomers and other various products. They are used in electronics, car manufacturing, construction and packaging industry. Propylene comes next to ethylene in terms of wide consumption in the world.

Iran would see its methanol production grow 25 million tonnes over five years. Kaveh methanol, Marjan methanol and Bushehr methanol projects are in their final stage with 97%, 80% and 60% progress, respectively. Completion of these three projects would add 5.61 million tonnes to the current methanol production capacity over two years to 10 million tonnes.

Iran Eyes PVM

Iran’s petrochemical industry is set to become propylene-oriented. That is why no new permits are issued for building methanol units in Iran unless new grades are to be launched.

The increased methanol production comes at a time while Iran would be supplying 25 million tonnes of methanol on global markets over five years, far more than the 16 million tonnes the market can absorb.

Concerns are growing about the future methanol market while converting gas to methanol, methanol to propylene and subsequently propylene to polypropylene would generate a high value-added.

In Iran, it is now possible to convert natural gas to methanol. At Petrochemical Research and Technology Company (PRTC), a pilot project with an annual capacity of 120,000 tonnes a year has been successfully implemented for transforming methanol to propylene.

The Arak division of PRTC also plans to convert propylene to polypropylene. PRTC managers and experts hope to launch a 130,000-tonne polypropylene unit that is currently in the pre-commissioning phase.

PRTC has in its propylene-via-methanol (PVM) demo developed a polymer-grade propylene with purity over 99.6% at the Mahshahr research center. It is the most used polymer grade in the petrochemical chain.

Oil and gas draws its highest value-added from the petrochemical industry. Iran is currently producing over 60 million tonnes of petrochemicals, the bulk of which is exported to earn Iran hard currency revenue.

Ammonia and urea have been largely produced over recent years. Petrochemical plants have converted ethane to ethylene to finally supply polyethylene polymers. Once the petrochemical chain is completed, this industry could be brought into the mainland to allow for sustainable job creation.

Article 44 of the Constitution does not envisage any possibility for direct investment in the petrochemical sector. Therefore, investment must be directed towards completing the value chain and developing the existing technologies. More engineering companies should be established in the country for the generation of more value-added.

Downstream Sector to Double Iran Income

The head of the Iran Export Confederation has said that completing the petrochemical sector’s value chain would double the current $20 billion revenue from petrochemical exports. Of course, when it comes to exports, financial estimates are not the only things to be taken into consideration. Transfer of knowhow and technology should be the priority for development and export projects so that Iran’s energy advantages would be used while new export markets would be created. Export-oriented production has to be taken into account in the talks with foreign companies and move in a direction for new investments to facilitate exploration of new markets.

Iran is drawing up its petrochemical industry development plan. In this plan, in addition to concentration on the implementation of projects, feedstock receipt, production and export, special attention is paid to diversification in the value chain and supply of products for which Iran depends on imports.

Iran has always focused on diversification in petrochemical production, as well as completing the value chain in the petrochemical industry. However, systematic complications have prevented achievement of favorable results. On one hand, there is no accurate system to explain requirements for the expansion and completion of the value chain while on the other, inclination for exports due to higher income has prioritized exports over value chain expansion by petrochemical companies. That along with the privatization of the petrochemical industry in Iran has further overshadowed the value chain.

Value chain completion would boost the value of petrochemical products’ mix. Under the 5th Five-Year Economic Development Plan, Iran’s petrochemical industry would focus on the production of basic chemicals or polymers, but petrochemical development would require projects to complete the value chain and supply products of higher value-added to feed downstream petrochemical industries.

Therefore, completing the production chain, more diversity in the production and upgrading the value of petrochemicals’ mix would help this goal materialize, which would help improve Iran’s exports level both quantitatively and qualitatively in addition to supplying domestic needs. One objective of Iran’s petrochemical industry by 2025 is to become the region’s top petrochemical power.

Petchem Role in Stock Market

In the petroleum industry, petrochemical companies have gained fame for their early and fast yield. Some experts say the rate of return of investment in petrochemical projects is six years.

Under circumstances of sanctions and Covid-19 outbreak, where many petroleum industry companies had to restrict or even halt their production, petrochemical companies continued their normal production and supply of products. That proves the petrochemical sector remains a reliable industry.

The experience of previous years in the mercantile exchange shows that petrochemical companies have often distributed attractive dividends among shareholders. That is why some petrochemical companies are attractive to investors looking for annual profits. Such features have also pushed people to direct their investment to the stock market.

Stock market indices have been on upward and downward trend; however, petrochemical stocks have always shown to be spared any decline. That explains why petrochemical shares are largely attractive.

Economists believe that state assets listing would give rise to such economic benefits as profitability, removing budget deficit, encouraging people to invest in the stock market, deepening the capital market and preventing any market bubble.

The capital market is largely prosperous these days. With the listing of state assets on this market, people are encouraged to invest in the stock market and their capital would not move towards gold and foreign currency. Moreover, people would get further familiar with the capital market and their knowledge of finance would grow.

Successful Players

Petrochemical stocks are warmly welcomed in the stock market. The Pars, Nouri and Shahid Tondguyan petrochemical companies were the first petrochemical companies to list on the stock market successfully. Now, more petrochemical companies are subscribing to the stock market with at least six of them being subsidiaries of the Persian Gulf Petrochemical Industries Company (PGPIC).

Arya Sasol Petrochemical Company was expected to list on the stock market in March, but the Covid-19 outbreak created some restrictions. However, the important issue is that even news of petrochemical stocks listed on the stock market would shake the market. Among 40 top companies named by the Securities and Exchange Organization (SEO), there are some petrochemical companies. The reason for this selection is the significant improvement in their financial performance.

Shazand Petrochemical Company, Pars Petrochemical Company, Kermanshah Petrochemical Industries Company, Pardis Petrochemical Company, Kharg Petrochemical Company, Persian Gulf Petrochemical Industries Company, Zagros Petrochemical Company, Maroun Petrochemical Company and Ghadir Petrochemical Company are among the 40 companies with big impact on the stock market last calendar year.

Those who follow stock market developments should know that petrochemical stocks have become influential in everyday trading. However, the effectiveness of petrochemical companies in the stock market and initial public offering that have breathed fresh life into the stock market are owing to decisions made by the Downstream Petrochemical Industries Development Department.

Owing to cooperation and interaction between this department and the Ministry of Industry, Trade and Mine as well as the Iran Mercantile Exchange, a transparent and lucrative market is seen.

Jafar Rabiei, CEO of Persian Gulf Petrochemical Industries Company, has said that the Arvand, Bu Ali Sina and Bandar Imam petrochemical companies would soon list on the stock market.

Noting that the capital market was warmly welcomed, Rabiei said: “The stock market is not a place for people to become rich overnight. Anyone entering the stock market hastily will undoubtedly suffer losses.”

He added: “The stock exchange has a higher yield compared with other markets. Certainly those who are eying long-term investment of more than one year would make more gains in the stock exchange than in the gold, foreign currency and other parallel markets.”

Regarding alleged bubbles in the stock market index, he said: “A small segment of money stock has so far entered the capital market and there is still hot money that has yet to enter this market. I don’t believe that the government has deliberately intervened to make the stock market index green in a bid to sell its own stocks. Rather, I believe that the capital market convinced the government to sell its own stocks on the market. Put simply, the market attracted the government, which was a positive development. The government was finally convinced to offer its shares on the market. I believe that we have very good stocks in the market that have yet to reach their natural prices because they are still being traded below the net asset value (NAV).”

“Investment and holding companies enjoy good potential for growth. They will make very good profits and distribute high dividends so that people would be able to purchase stocks at lower prices,” he said.

Rabiei said PGPIC was holding about 40% of Iran’s petrochemical market. PGPIC is also accounting for 40% of Iran’s petrochemical exports.

PGPIC and subsidiaries hold about 12% of the capital market. Their share exceeds 42% in the chemical industries.

He said that PGPIC is a major player in the capital market and it has already offered many of its subsidiaries on the stock market. He added that the remaining companies would list on the stock market in the current and next calendar year.

“We plan to bring three more companies into the stock market: the Arvand Petrochemical Company, which is known as the PVC giant in the country, Bu Ali Sina Petrochemical Company, which is similar to the Nouri Petrochemical Company, and the big aromatic plant in Mahshahr,” he said. “After that, we would be able to introduce the Bandar Imam Petrochemical Company, the largest petrochemical company in the country, on the stock market.”

Rabiei said: “I don’t think that anyone has suffered losses after purchasing shares of Pars Petrochemical Company, Nouri Petrochemical Company and Shahid Tondguyan Petrochemical Company. However, nobody should purchase or sell stocks emotionally.”

“If those who purchased these stocks wait at least one year I am sure that they will make big profits out of PGPIC’s newly-offered stocks. Nobody has to worry about the index slipping into the negative territory for several consecutive days. That’s natural for the stock market and I assure you that good days are awaiting the stock market,” he said.

Petchem Stocks

The bulk of petrochemical companies’ stocks may be in the hands of a bigger petrochemical firm. In other words, these stocks are negotiable by these companies. However, as long as the market conditions are bullish it would be lucrative for other shareholders, too. Therefore, this issue must be taken into consideration in the purchase of stocks. Many companies would be faced with restrictions in production, distribution and sales in coming months. Petrochemical companies would continue their work and global developments also show that this bullish trend would continue. Therefore, these companies would be able to remain highly lucrative options in the capital market. Most items petrochemical needs are polymer products that exist in the country and most petrochemical companies do not need to communicate with foreign entities. That would be instrumental in blunting the impact of sanctions on the Iranian economy and facilitating circumvention of sanctions.

Countdown for the World’s Largest Ethylene Pipeline in Iran

Iran has picked its petrochemical industry as a means of reducing raw substances sales with a view to creating sufficient value-added. The petrochemical industry has over the past decade been through a period of growth and development.

One of the major petrochemical projects cashed in on largely today is the West Ethylene Pipeline (WEP) that would feed a number of petrochemical plants lying on its way.

Bijan Zangeneh, Iran’s minister of petroleum said recently that WEP would be virtually the third petrochemical hub in the country behind Assaluyeh and Mahshahr. The petrochemical industry has over recent years been taken into serious consideration more than ever due to acceptable productivity and hard currency generation. WEP is Iran’s largest petroleum industry investment for development in the west of the country. Once all petrochemical plants located on the WEP route become operational, it would be possible to deliver final products to neighboring countries: Turkey and Iraq.

Iran’s petrochemical industry, which is currently on its path towards growth and development, would need to complete its value chain. Concurrently with the development of the upstream sector and the commissioning of South Pars gas field phases, the downstream segments of this key industry must be taken into consideration as a national strategy. In order to guarantee a balanced petrochemical development, measures are needed for creating downstream industries across Iran. Iran is currently constructing the largest ethylene pipeline in the world in a bid to develop its petrochemical industry and create higher value-added from ethane.

WEP’s maximum capacity is three million tonnes. So far, five compressors have been installed on this pipeline. Compressors aside, the pipeline has so far cost IRR 12,000 billion. The total investment made in the plants located on the WEP path reaches $3.5 billion. The investments currently under way total $1.2 billion.

WEP is the most important project dating from the 4th Five-Year Economic Development Plan. This key petrochemical project was aimed at making up for underdevelopment in western provinces, job creation, engagement of the private sector, motivating the process of production and upgrading technology in the oil sector. Adopted in 2002, the project was expected to come online by early 2008. However, due to technical problems and lack of budget allocation, so far it has only had 80% progress.

Currently, 5,000 persons are directly working in the petrochemical plants under construction in western Iran. Once they become operational, 3,000 more jobs would be created.

Whereas upstream plants are located on WEP’s path, downstream industries are expected to quit raw substance sales by supplying diverse petrochemical products.

Once operational, WEP would have capacity to carry 3.5 million tonnes of ethylene – 2.5 million tonnes of which would be supplied from South Pars and 1 million tonnes from Gachsaran. A total of 12 petrochemical plants would be fed.

Western Iran, New Petchem Hub

The sections crossing Hamedan, Dehdasht, Mamesani, Boroujen and Kazeroun are yet to start. Tabriz Petrochemical Plantthe same as Ilam Petrochemical Plant has been connected to WEP. The 2,700-km WEP pipeline would feed 11 petrochemical plants including Kermanshah, Andimeshk, Lorestan, Kordestan, Miandoab and Mahabad. The Kavian, Lorestan and Mahabad petrochemical plants as well as the Kermanshah polymer plant are already operational. The ethylene produced by the Kavian plant is delivered to the Kermanshah Petrochemical Plant.

WEP carries the Kavian plant’s products with a view to developing the petrochemical industry in western Iran.

Iran’s petrochemical industry, which has been growing fast over recent years, will enter a new phase next year as petrochemical plants come online.

Western Iran can become a reliable petrochemical hub in the future due to the development of the petrochemical industry and planning for downstream industrial projects. Products supplied by these plants would meet the domestic needs and serve exports, as well. Ilam petrochemical plant has already come on-stream. Operations are also under way in western Iran for building three more petrochemical plants. The planned commissioning of several new petrochemical plants in western Iran would eradicate deprivation and create development infrastructure in underdeveloped areas.

Due to the full support of the National Petrochemical Company (NPC), WEP is currently in its final stage.

Abbas Sha'ri-Moqaddam, a former CEO of NPC, said that a major challenge in the way of this pipeline was local obstructions in the provinces crossed by this pipeline.

The second phase of the Kavian plant is now ready and waiting to receive feedstock. The WEP project would create new job opportunities in the area. In the meantime, commissioning of several petrochemical plants on the WEP path would create job opportunities in the neighboring provinces.

Phases 1, 2 Complete

Thanks to support by the minister of petroleum and cooperation on the part of the judiciary and police in Khuzestan Province, the last obstacle in the way of completing WEP was removed and the challenge to the construction of the power transmission line of Compressor N. 3 in Ahvaz Province was overcome. Phases 1 and 2 are now complete. In these phases, the main principle was “coordination and synchronization” with other plants located on the path. None of operational petrochemical plants were likely to be waiting for WEP to receive feedstock; rather, the two phases came online several months prior to the commissioning of the petrochemical plants so that they would receive their ethylene feedstock.

Phase 3 under Way

Operations for completing Phase 3 of WEP have started. During the first days of the current calendar year, a 150km section of the pipeline, stretching from Miandoab to Tabriz, came online. It is noteworthy that 143 km of this pipeline belonged to National Iranian Oil Products Distribution Company (NIOPDC). The second section is connected to the Dena area, which is 60 kilometers long stretching from Siah Makan to Gachsaran Petrochemical Plant. The necessary environmental permits have been obtained and the contractor has been chosen. The objective behind this project is to carry ethylene from the Gachsaran olefin plant to the main WEP route. Because the Mamesani, Kazeroun, Dehdasht and Boroujen petrochemical plants located on this route have yet to be completed, the Gachsaran ethylene plant would be temporarily connected to the main pipeline. However, whenever these projects become 40% complete, the government or NPC would start building the sections allocated for ethylene delivery. This project is aimed at helping the Gachsaran petrochemical plant.

Compressor stations 2 and 7 are located in Siah Makan and Gachsaran, respectively. Constructing these two stations began last February and is likely to be over in two years.

Given the possibility of ethylene surplus in WEP, 1.8 million tonnes of ethylene supplied by the Kavian and Morvarid petrochemical plants are being delivered to petrochemical plants located on the WEP path. With Kavian’s 2-million-tonne, Gachsaran’s 1-million-tonne and Morvarid’s 150,000-tonne capacity, there would be a 3.15 million-tonne production capacity in the future. If Gacsharan ethylene plant becomes operational while consumer plants don’t, there would be possibility of ethylene surplus, in which case, the ethylene supplied by the Gachsaran petrochemical plant would be swapped with the ethylene produced by the Kavian plant so that the surplus would be exported from Assaluyeh.

The third connection will carry ethylene from Sanandaj to Bu Ali Sina Petrochemical Plant through a 190-km pipeline. But as long as the project is not 40% complete, it will not start.

During the construction of the third phase of WEP, 400 job oppotunities would be created. Phase 1 is expected to come online by 2023.

WEP feeds petrochemical plants located in Khuzestan, Fars, Lorestan, Kohguiluyeh Boyer Ahmad, Chahar Mahal Bakhtiari, Kurdestan, Kermanshah, West Azarbaijan, East Azarbaijan, Ilam and Hamedan provinces. Production of some alcoholic substances, products for agricultural purposes and chemicals are among advantages of WEP. Ethylene cylinders are popular today, showing the significance of ethylene.

WEP can provide the biggest services to the economy of western Iran. This pipeline and the plants located on its path have potential to process and supply products of high value-added and to be instrumental in Iran’s economic growth, removing unemployment and creating revenue for western Iran.

Chief among advantages of developing downstream petrochemical projects along with such major projects as WEP, are acquiring bigger profits through creating a permanent market for petrochemicals, supplying products to match market needs and be more profitable, helping national job creation plans, and presenting an alternative to petrochemical development plans in various parts of the country.

Iran Trebles PET Exports

 CEO of Shahid Tondguyan Petrochemical Company Reza Qasemi Shahri said polyethylene terephthalate (PET) exports tripled last calendar year on an annual basis.

Addressing the Annual General Assembly of the company, he said: “Last calendar year, some 1.14 million tonnes of varieties of PET chain products were produced at Shahid Tondguyan Petrochemical Company,” he said.

“We exported about 46,000 tonnes of products to world markets, which was three times higher year-on-year,” he said.

He added that last calendar year was the year with the biggest output since commissioning petrochemical company.

“During the first four months of last calendar year, it was possible to produce more than 100,000 tonnes of products at this petrochemical company and we registered a 109,000-tonne output capacity,” he said.

Shahri also said that during a five-month period, the plant produced at full nominal capacity. He said the company’s plan was to increase output with a view to supplying domestic industrial needs and completing value chains.

He touched on the sales and export of more than 618,000 tonnes of products in domestic and international markets, saying: “Domestic PET sales reached 573,000 tonnes last calendar year, the highest in four years.”

Shahri said the jump in products had been achieved after fully supplying domestic needs and registering highest ever records in sales.

SP1 Platform Overhaul Ends

Mehdi Rajabi, director of production operations at South Pars Phase 1 platform, announced the completion of annual overhaul.

“With the conclusion of the overhaul, gas production at this platform reached the full capacity of 28 mcm/d,” he said.

Noting that the overhaul operation lasted 28 days, Rajabi said that the overhaul was done according to the predetermined schedule.

He said that no serious challenge was caused by the Covid-19 outbreak within the Pars Oil and Gas Company (POGC).

Rajabi said safe and sustainable gas production in winter was the major objective of the annual overhaul of South Pars platforms. He added: “In ongoing annual overhauls, segments of pipelines were reported to be in critical conditions after examination by the technical inspection unit of the Directorate of Production and Operations.”

“Following the supply of equipment, various teams particularly welders, installers and operators, the platform started full operation,” he added.

Loading Arm Separated at Kharg Terminal

Abbas Assadrouz, CEO of the Iran Oil Terminals Company (IOTC), has announced the completion of operations for separating the loading arms of a jetty in the Kharg oil terminal for overhaul.

He said that the loading arm number 2 of the eastern jetty of the terminal was separated by IOTC experts based on their pre-determined schedule.

He added that the overhaul was aimed at improving crude oil exports by developing infrastructure and equipment in the largest export terminal in the country.

Assadrouz underlined the necessity of supporting domestic manufacturing, saying the loading arm would be transferred to the mechanical reparation workshop at the Kharg oil terminal so that further action would be taken for separating defective sections and replacing them with new and domestically-manufactured ones.

The overhaul of this arm includes separation, dismounting, transfer to workshop, dismantling, inspection, replacement, assembly, transfer and reinstallation.

RIPI Inks Two MOUs

The Research Institute of Petroleum Industry (RIPI) has signed two memorandums of understanding (MOUs) with two Iranian companies in a bid to assess the capabilities of fledging groups and providing research services.

The first MOU was signed between Jafar Tofiqi, director of RIPI and Kambiz Sedqianizadeh, CEO of Farab Oil and Gas Projects Development Company, for assessing the capability of knowledge-based companies and helping supply their lab needs.

Cooperation for marketing and development of business by knowledge-based companies and startups, establishing communications with oil, gas, refining and petrochemical projects operators are targeted at this MOU.

Furthermore, RIPI would identify the technological needs and cooperate throughout commercialization in order to help market technological products.

Farab Oil and Gas Projects Development Company will identify qualified groups for setting up startups and their empowerment.

 Balaroud Oil Field Awarded to NIDC

 Abdollah Mousavi, CEO of National Iranian Drilling Company (NIDC) said the state-owned firm had won the tender bid held for the development of the Balaroud oil field.

He said seven Iranian companies had bid for the development of the Balaroud field. NIDC was announced winner after technical review of its proposal.

Located in Khuzestan Province, Balaroud would be developed in two phases.

Mousavi said the development project was estimated to cost € 41 million, adding: “Development of this field will include location, water transfer as well as the downhole services of rig supply and providing technical and drilling services.”

Highlighting NIDC’s capabilities in drilling services, as well as integrated technical services and the company’s experience of drilling at Balaroud, he said: “Drilling six development wells using two heavy drilling rigs over 24 months is envisaged. A third drilling rig is also likely upon agreement between NIDC and National Iranian South Oil Company (NISOC).”

Iran Turkey Gas Exports to Resume in July

Iran expects gas exports to Turkey to resume by mid-July at the latest, a senior Iranian gas official said June 7, following an explosion on a pipeline in Turkey that forced supplies to be suspended at the end of March.

Mehdi Jamshidi-Dana, former director for dispatching at state-owned National Iranian Gas Company and now interim caretaker of its Gas Transmission Company, also said NIGC rejected a claim from Turkey that the suspension of supplies represented a force majeure event.

“We predict that the repair of the Iran-Turkey gas pipeline will end in the month of Tir (July 21) and gas flow will resume,” he said.

Turkey's energy ministry and gas importer Botas have not made an announcement on progress in repairing the pipeline, but Jamshidi-Dana said Turkey had claimed the pipeline explosion was a force majeure event, meaning Ankara could avoid paying for gas not taken under the two sides' 25-year take-or-pay contract that came into effect in 2001.

The explosion on the line took place on March 31, but repairs had still not been completed despite work following such attacks usually taking around three to seven days, Jamshidi-Dana said.

"Iran has announced in writing that it does not accept this is a force majeure event. In several correspondences, we said Iran is ready to repair this pipeline within eight days but the Turkish side didn't welcome that," Jamshidi-Dana said.

Turkey imported 7.7 bcm of gas from Iran in 2019, or some 17% of its total gas imports, under the long-term contract that allows Ankara to buy 9.6 bcm/y.

International Arbitration

Jamshidi-Dana warned that Iran could take the issue to international arbitration if it was not resolved, but stressed that "friendly relationship and professional acting by Turkey" would mean Tehran would not take the matter that far.

Talks for an extension of the contract meanwhile are underway, he said, though progress was being impacted by the global pandemic situation.

"Negotiations to sign new contract are being carried out slowly because of the coronavirus outbreak. But our examinations show that imports of Iran's gas have advantages for them. It's still not clear what a new contract would be. But Turkey undoubtedly needs to import gas from Iran," Jamshidi-Dana said.

 Planning for Investment in PSEEZ

 Iraj Khorramdel, CEO of Pars Special Economic Energy Zone (PSEEZ), has announced the planned establishment of a trauma center in the near future.

“This calendar year, we are determined to attract investment in various industrial sectors,” he said.

“Thanks to the interactive approach between the petroleum industry in South Pars and senior officials in Bushehr Province, we would provide the best services to local communities,” he said.

He added: “This year we are determined to attract investment in various industrial sectors. Many domestic industries have shown inclination for investment in PSEEZ. Through investment in South Pars, we will see significant jump in job creation, production and national wealth generation.”

“We have prioritized construction and completion of a trauma center because it is a major need for people and industry in South Pars, which will start soon. Another healthcare measure would be to complete and equip Toheed Hospital in Jam city in partnership with National Iranian Gas Company (NIGC) to engage medical specialists and subspecialists,” he added.

Khorramdel touched on planning for upgrading scientific and academic infrastructure in Bushehr Province, saying: “Feasibility for the establishment of a branch of the Petroleum University of Technology, setting up a technical college in Kangan, setting up an incubator in cooperation with the Office of Vice President for Scientific Affairs and planning to scientifically empower teachers are among measures whose arrangement is under way.”

Four New Plants to Boost Petchem Output

The production capacity of country’s petrochemical industries will be increased by 107,000 tonnes after launching four new petrochemical projects.

Upon $103 million worth of investment in petrochemical industry, country’s production capacity of petrochemicals will soar as much as 107,000 tonnes at large.

Chief Executive of Iranian Investment Petrochemical Group [IIPG] Rasoul Ashrafzadeh made the remarks and revealed the construction operation of four petrochemical projects with $103 million worth of investment.

Once these four giant petrochemical projects are launched, 107,000 tonnes would be added to the current production capacity of petrochemicals in the country, he added.

He pointed to budget allocation for the implementation of these projects and added, “These projects will be launched in less developed and disadvantaged areas in the country.”

Launching the aforementioned petrochemical projects would generate new employment opportunities as well, he emphasized.

Elsewhere in his remarks, Ashrafzadeh pointed to these four petrochemical projects which include methyl amine in Sonqor, caustic soda flakes production plant in Mahshahr, crystal melamine production plant in Lordegan and poly-aluminum chloride production plant in Urmia.

NIDC Drilling Exploration Wells

National Iranian Drilling Company (NIDC) is proceeding with its plan to drill a total of 14 exploration wells, NIDC official Reza Mehdipour said.

Mehdipour said the drilling of a third exploration well had ended, while operation was beginning for a 9th onshore exploration well.

“The drilling of Well Arman-1 in Khuzestan Province started in November 2018 after installing Fath-32 drilling rig,” he added. 

Mehdipour said the drilling projects were going on schedule owing to cooperation between NIDC and Directorate of Exploration of National Iranian Oil Company (NIOC).

“After drilling ended in Arman-1, the drilling rig was moved to a new location in Genaveh and the drilling of an exploration well started,” he added.

“Of a total 14 wells, 9 wells have been drilled. Two wells in Khuzestan Province and one well in Fars Province have been completed. The drilling of six other wells is under way in the provinces of Khuzestan, Bushehr and Kohguiluyeh and Boyer Ahmad by Fath 31, 32, 33, 40, 74 and 89 drilling rigs,” said Mehdipour.

“In implementing the 14 exploration wells, 32,300 meters of drilling has so far been recorded. Up to year-end, four more wells will be completed,” he said.

Mehdipour said a major achievement of these projects was the discovery of the giant Eram gas field in Fars Province after drilling Dang-1 exploration well by Fath-33 and the discovery of the second largest oil reservoir in Khuzestan Province, known as the Namavaran oil field.

Domestic Companies to Study ICOFC Fields

CEO of Iranian Central Oil Fields Company (ICOFC) Ramin Hatami said the company would assign feasibility studies on eight of its fields to domestic companies.

He said the decision was a strategic obligation in the development of oil and gas fields.

“Pursuant to notification by the Petroleum Ministry and Board of Directors of National Iranian Oil Company (NIOC) regarding the policy and strategy for development and maximum efficient recovery (MER) from oil and gas reservoirs, comprehensive studies on Tabnak, Shanol, Varavi, Aghar and Dalan gas fields as well as the Naftshahr, Sarvestan and Saadatabad oil fields will be assigned to domestic consulting engineering companies in five packages to determine reservoir properties, developing subsurface and surface models, predict the field performance, make calculations and present development plans and enhance recovery,” said Hatami.

“Studies for seven other oil and gas fields run by ICOFC have already been assigned to other companies and their results will be announced in coming months,” he said.

ICOFC runs 84 oil and gas fields in the 11 provinces of Ilam, Bushehr, Chahar Mahal and Bakhtiari, Khorasan Razavi, Khuzestan, Fars, Qom, Kermanshah, Kohguiluyeh and Boyer Ahmad, Lorestan and Hormuzgan. So far 13 gas fields and 13 oil fields have become operational.

Petchem Output Capacity Up 35%

The head of National Petrochemical Company (NPC), Behzad Mohammadi, said Iran’s annual petrochemical production will increase 35% in the current Iranian calendar year (ends on March 20, 2021).

He said that the operation of 16 petrochemical projects in the current year will increase the production capacity of the petrochemical industry by 35%.

He pointed to the plan of enhancing the production capacity of propylene in the smartening process of the petrochemical industry and put the current production capacity of propylene in the country at more than 950,000 tonnes.

Presently, the country is facing a shortage of propylene and for this reason, planning has been made for increasing production capacity of propylene in petrochemical industry, he stated.

“We have targeted production of 12 strategic products from propylene in the current year, based on which the demand of downstream industries will be met,” he added.

The deputy oil minister further pointed out that 16 petrochemical projects, valued at over $11 billion, will be put into operation in the current year.

He called the current year as a prosperous and golden year for Iran’s petrochemical industry and added, “according to the scheduled program, a number of 16 petrochemical projects will be inaugurated by yearend but it is likely that three to four of these projects would be put into operation with delay due to the outbreak of coronavirus pandemic.”

The official had previously said that making the petrochemical industry smart is the only way for a stable presence in the global markets.

Mohammadi reiterated, “In the petrochemical sector we should have a global view.”

He also emphasized moving in the way of attracting more investors to this industry.

The official further mentioned the production of petrochemical products in the past Iranian calendar year (ended on March 19) and said, “Last year was a successful year in terms of petrochemical production, there was no problem in this due, and the projected annual output was achieved.”

According to Mohammadi, the petrochemical industry is not like the oil industry and it is practically unsanctionable.

“For oil, the ways of selling and the costumers are specific and limited but that is not the case with petrochemicals. There are hundreds of holdings which are eager for buying our diverse petrochemical products”, the official has told "Tehran Times" reporter in a press conference on the sidelines of the 24th Iran International, Oil, Gas, Refining and Petrochemical Exhibition (Iran Oil Show 2019).

“However, we are holding meetings with our customers to explore various aspects of possible impacts of the U.S. sanctions on our trade", he adde

Zangeneh: Sanctions Didn’t Halt Our Projects

Iran’s President Hassan Rouhani inaugurated the installation of the first jacket of Phase 11 of the massive South Pars gas field.

Addressing the ceremony, Minister of Petroleum Bijan Zangeneh said that the offshore activities of the South Pars gas field would be over this calendar year (started on 20 March 2020).

“The implementation of South Pars development projects was coincided with financial difficulties and we had to endure low oil prices,” he said.

Development of the South Pars gas field started in 1997. After 22 years, South Pars is in the final stage of development with the installation of 11B jacket. A total of 27 development phases have been defined for South Pars, whose completion would allow for the recovery of nearly 80 mcm/d of sour gas. This gas will be then processed to be injected into the national gas trunkline or to feed petrochemical plants.

Iran is currently recovering 700 mcm/d of gas from South Pars, which would reach 750 mcm/d by next March. The increase in gas recovery from South Pars comes at a time the US imposed tough sanctions on Iran’s petroleum industry following its unilateral withdrawal from the 2015 nuclear deal. Consequently, many companies stopped cooperating with Iran and France’s Total and China’s CNPCI pulled out of the SP11 project.

In 2017, Total agreed to develop SP11 at the head of a consortium comprising CNPCI and Petropars. However, following the restoration of sanctions, the two foreign companies quit. According to Zangeneh, the Total-led consortium had spent $100 million on the project before leaving Iran.

The project was then assigned to Petropars that has the experience of development other phases of South Pars. Petropars is a qualified Iranian company in oil and gas projects.

The SP11 project, worth more than $4 billion, is aimed at the recovery of 56 mcm/d of gas. Pressure compression technology is needed in this phase because South Pars would be faced with production decline in coming years. According to Zangeneh, $2.4 billion of the contract’s value was specifically for the compression platform.

Projects Active

Zangeneh said the South Pars gas field was a God-given blessing for the Iranian nation, adding that production from South Pars had increased from 280 mcm/d in 2013 to 700 mcm/d now. He added that another 50 mcm/d would be added to the giant field’s output this calendar year.

Zangeneh said Iran’s gas recovery was now proportionate to its share of South Pars which is shared with Qatar.

No $100 Oil

Zangeneh said South Pars had been developed in recent years in the midst of sanctions. He added that the brief period of no sanctions following the Iran nuclear deal allowed for importing huge quantities of necessary commodities.

He said that 17 phases of South Pars were incomplete when the Rouhani administration took office. “Now, all the incomplete phases except for the refinery of SP14 are now complete.”

Noting that all offshore activities will end in the current year, the minister said: “These activities have been done while we were faced with financial problems and we had no $100 oil. Of course, National Development Fund of Iran (NDFI) was of great help to us.”

SP11 Recovery in 14 Months

Zangeneh touched on the installation of the 11B platform jacket on its location, saying: “With the installation of this $25 million jacket, it would become possible to drill 12 wells while five wells are planned to be drilled.”

He said that no production platform would be built for this jacket.

“With the installation of this jacket and drilling of five wells, it would possible to recover 14 mcm/d from this phase in 14 months,” he said.

Zangeneh said onshore and offshore pressure compression was being studied, adding that relevant studies would be completed in October or November to allow for decision-making.

“What’s more is that we will not be stopped by sanctions. We will go ahead despite all these sanctions and all of our projects including joint fields, the Goreh-Jask project, West Karoun development projects and petrochemical projects are active,” he added.

350,000 Persons-Hours of Safe Work

Hamid-Reza Masoudi, CEO of Petropars, said 350,000 persons-hours had been spent on building this jacket, which he said, was accident-free. He added that the jacket had been designed and built fully by Iranian designers, consultants and contractors.

He said that after the installation of this jacket, a drilling rig would be mounted for drilling five wells to allow for the recovery of 500 mcf/d of rich gas.

The SP11 development project in locations A and B is under way with each location having 12 wells and two platforms each with a production capacity of 1bcf/d.

According to planning, five wells would be first drilled in the location of Platform 11B for the recovery of 500 mcf/d of gas. Primary production from this platform is expected to start next year.

In order to accelerate the development of SP11, construction activities in the first location of gas production in this project are based on maximum use of available installations, spending minimum costs and allocating shortest possible time.

Developing Persian Gulf Fields to Avert South Pars Output Fall

 As Iran’s Petropars starts developing Phase 11 of the giant South Pars gas field with a view to making first recovery in 2021, Iran would be soon completing development of all phases of this offshore field which it shares with neighboring Qatar.

South Pars saw its output reach 700 mcm/d in 2019 and Minister of Petroleum Bijan Zangeneh’s promise of Iran outperforming Qatar in South Pars recovery came true.

Now, in a bid to guarantee sustained production from South Pars that supplies more than 75% of Iran’s gas, pressure fall-off in coming years has to be avoided.

Mohammad Meshkinfam, CEO of Pars Oil and Gas Company (POGC), has said developing other fields in the Persian Gulf would help avoid a sudden drop in the South Pars production rate in coming years.

Reservoir pressure fall-off and reduced output in South Pars is unavoidable in coming years. Therefore, POGC, which is tasked with developing Persian Gulf gas fields, has to remedy the situation. Apart from South Pars; North Pars, Farzad A, Farzad B, Golshan, Ferdowsi, Kish and Belal are the fields that POGC is tasked with their development. However, the point with developing all these blocks is that some of them are jointly-owned with other countries and therefore maximum recovery from them would be highly significant for the Petroleum Ministry. Sustainable production for at least 25 years has to be guaranteed from now.

National Iranian Oil Company (NIOC) envisages a short and a long-term solution to prevent pressure fall-off in the reservoir and guarantee sustainable production in the South Pars field.

Acid job, perforation, workover of wells, drilling new wells, and laying new pipes between platforms are among short-term solutions, while concentration on the development of blocks surrounding South Pars is a long-term solution.

Based on the planning made, the  gas produced in Belal field whose development agreement was signed with Petropars last year, and the gas produced in Phase 1 of the Kish gas field would be transmitted to the platforms of SP12 to offset possible production cut in this phase.

Furthermore, comprehensive studies and planning have been under way to guarantee sustainable gas production at South Pars. Infill drilling, installing compressors, extending offshore pipelines and building new platforms are among options.

South Pars holds 14.2 tcm gas, i.e. 8% of the world total gas reserves, and 18 billion barrels of condensate. Iran holds a 15% share in this field.

Until 2013, Iran was producing below 300 mcm/d of gas from its sector of the joint field. However, Iran brought its production to 700 mcm/d by 2019. Relying on this volume of production, Iran did not have to worry about any gas supply cut in recent years. The country even envisaged exporting gas and producing liquefied natural gas (LNG).

Pressure fall-off is a natural phenomenon. Preventive measures are needed now. Drop in production in this field; however, may not be tangible enough.

Gas recovery from south Pars is based on the gas expansion mechanism. In other words, gas production from this reservoir would be synonymous with a gradual decline in the reservoir pressure, which is natural in all gas reservoirs. However, such natural and sustained decline in the gas pressure would continue until it reaches the minimum pressure needed for the transfer of gas from sea to onshore refinery. After that, due to the impossibility of any further decline in pressure, gas production will start falling until the well stops producing.

Meshkinfam said that pressure fall-off started ever since production began in all South Pars platforms.

Except for Platform A and Platform C of SP12, its gas production currently stands at 82 mcf/d and 230 mcf/d, respectively.

When new platforms of SP11, SP13, SP14 and SP22-24 come online, the initial drop will not be tangible, but after five years, Iran will reach a point where such decline in output would matter.

SP12 Output Falling

Pressure fall-off in SP12 will be faster than that of other phases. Like many other oil and gas fields, South Pars is a non-homogenous field with its own specific reservoir thickness and features. In the central parts of the field, gas layers are thicker, while the reservoir rock is more suitable for gas storage and transmission. However, as we approach the phases closer to the reservoir, the gas column will become less thick while the reservoir features will be weaker. On the basis of this rule and based on information gained from the appraisal wells drilled in SP12, it was forecast from the very beginning that production from the platforms of this phase would happen in a shorter period of time.

SP12 was officially inaugurated in 2014. It has since been producing gas. However, Meshkinfam has said as gas production from Platform C of SP12 is nearing its end, this platform would be detached from this current location to be installed in SP11 in 2021. Furthermore, the gas produced at SP12 would be transferred to the onshore refinery of this phase through connecting this platform to the existing offshore pipeline.

Meshkinfam has reiterated that the remaining seven wells would be drilled after the operation of production platform so that the envisaged 1bcf/d output would materialize.

Oil Price Fall Winners

 Shuaib Bahman

 Although some nations may have welcomed the oil price decline in global markets, some others see the persistence of such a trend as a serious threat. Among nations looking favorably at the oil price decline, political and economic motivations are high. Political or economic interests may require a nation to welcome a decline in oil prices. Over recent months, when oil prices have somewhat declined, some countries and companies emerged as beneficiary while some others suffered gravely.

Economic equations are simple to understand. Any seller selling a commodity at a higher price would make bigger gains; nevertheless, any buyer buying at as much lower price as possible would make gains, too.

However, the market does not necessarily follow this simple logic all the time. Sometimes, purchasing a commodity at lower prices may call a halt to its production or fail to cover all its production costs. Global markets follow the same logic. For oil consumers, purchasing at lower prices may be a blessing and opportunity, but in the long term energy production would suffer losses. Furthermore, countries across the world are economically interdependent and any low revenue from oil sales by producers would affect their trade transactions with consumer nations. Since most oil producers depend on oil revenue any decline in their sources of income would erode at their power of purchase.

Based on this logic, oil consumers seem to be benefiting from oil price decline in global markets, but they would be faced with numerous economic challenges in the long term. The issue is not limited to transaction of commodities between producers and consumers; it also covers a wide spectrum of challenges. For instance, if a factory fails to sell its commodities it would have to lay off labor and in this way many jobs would be lost. That would have long-term economic, social and even political consequences.

Therefore, despite the fact that a short-term fall in oil prices could help complete strategic reserves at low prices consumers would not benefit in the mid-term and long-term. That is why most consumers follow the logic of market and prefer balance to low-cost oil. This logic does not apply to all consumer nations as some countries may benefit from this opportunity for higher consumption while being indifferent to its consequences. That is also true for producers. Some producer nations, instead of using the supply and demand logic for the market rebalance, try to compensate for their income shortages by selling more oil, which would finally bring down prices. Saudi Arabia is a case in point. It did not agree to reduce its oil production level and even sold oil at reduced prices.

Therefore, the market logic does not always respond to the political will of producers and consumers and for whatsoever reason they may prefer low prices to market rebalance, in which case the market would need more time to return to the point of balance.

New Winners

Throughout the recent oil price decline due to the Covid-19 pandemic and the failure of OPEC+ to reach agreement, new groups of winners emerged to benefit from the existing circumstances.

These new winners may be classified under the following categories:

The first group comprises nations whose oil production has declined for numerous reasons. Countries like Iran and Venezuela, under US sanctions, and Libya, engulfed in internal crisis, have had to supply less oil. They have not been forced to sell oil at lower prices and they may be considered as winner. In fact, the economy of these countries has suffered a less severe shock than other producers because in recent years they were less dependent on oil revenue compared with other producers.

The second group comprises traditional oil producers. The decline in in oil prices in global markets means shale oil production is no longer economical and shale oil has been partly removed from the global markets. Therefore, the traditional producers of oil may be seen as winners of the oil price decline, specifically because their strong rivals have had to limit their shale oil production and therefore any long-term investment in this sector is faced with serious challenges.

The third group comprises companies that had managed to buy oil at low and even negative prices. For instance, the day oil prices turned negative will likely be remembered as the climax of the darkest period ever for the petroleum industry, but for one lucky trading house it was a lifetime opportunity.

While many rushed to liquidate positions and cover margins as the May contract neared expiration, BB Energy, a medium-sized trading house based in London, bought 250,000 barrels of the West Texas Intermediate crude futures for May delivery, according to a person with knowledge of the situation. The WTI contract closed at minus $37.63 on that day.

As the information is confidential and on the condition of being anonymous, a person said BB Energy had an edge: It was one of the few with available space to store oil. The opportunity for the trading to take delivery of the oil was a rare prize given the dearth of storage to hold plentiful supplies of oil across the country.  

 The volume they purchased was some 10% of the 2.43 million barrels that were ultimately delivered physically for May, according to Nymex.

It is unclear how much it paid for the barrels and if it’s still holding on to them or not. But the well-timed trade means BB Energy has emerged as one of the clear winners of the fallout in oil, which has roiled global markets and economies dependent on the liquid asset.

The fourth group comprises nations with onshore and offshore storage capacity. They seized on the moment to store as much oil as they could. According to official data, oil storage was the highest-demanded part of the energy market in recent months. In fact, low prices convinced many countries to fil their storage tanks in a bid to make more gains. Therefore, the countries with storage facilities made highest gains from oil prices and they managed to fill their energy strategic reserves.

China & OPEC: Cooperation for Restoring Balance to the Oil Market

 Shuaib Bahman

As oil prices experience a sharp decline, experts precisely look into supply and demand status to propose a remedy for restoring balance to the global oil markets. Studying oil supply and demand would require assessing the situation of major producers and consumers across the world.

On the producer side, the Organization of the Petroleum Exporting Countries (OPEC) enjoys a significant position. On the consumer side, China is a leading country in the world. Due to weaker demand for oil on the part of China and Covid-19 spread, global markets suffered severely. Following the coronavirus outbreak, demand for oil fell sharply in the world.

In the first look, OPEC – the largest oil producer group – seems unlikely to have any significant cooperation with China – the largest oil consumer. However, these two sides have long been in interaction without acknowledging it publicly. OPEC and China have on many occasions exchanged views about oil market issues.

Cooperation under Present Circumstances

China’s growing economy and industry, over recent decades, have sharply enhanced the country’s energy consumption, making China the largest oil importer in the world. China currently depends on imports for 70% of its oil needs. Despite all its significant economic and industrial progress, China still depends on other nations for meeting its energy needs. That is why Chinese leaders have always sought to develop proper cooperation with oil producers and big international bodies like OPEC.

The oil market is currently faced with the challenge of low demand due to the Covid-19 outbreak with prices dropping to their record lows over recent years. Therefore, the issue of OPEC-China cooperation takes up added significance due to the following reasons:

First, China is a top consumer, mainly importing oil from OPEC member states. Therefore, any cooperation between leading consumers and major bodies like OPEC would help restore balance to oil markets in the world.

Second, China’s economic contraction emanated from coronavirus pandemic has impacted oil consumption at the international level. However, under the present circumstances, an improvement in health conditions in China is improving business and production in this Asian giant. Therefore, China would regain its status as a top consumer of energy in the world, which would mean higher demand for oil in the global markets. In fact, China’s return to its energy consumption patterns would help global support for the petroleum industry and partly allay OPEC’s demand concerns in the market.

Third, contrary to imaginations that China should have been happy with the oil price decline, it welcomed the agreement reached between OPEC and its partners to significantly reduce total output, because China is well familiar with the logic dominating the market and it knows quite well that in case oil prices remain low on the long-term, many producer nations would see their purchase power decline, and China would lose its market in these countries. Therefore, China favors balance restoration to oil market in the shortest possible time.

Fourth, although the US – itself a major oil consumer – has shown strong willingness to join producers and consumers, it constantly threatens producers including OPEC member countries. Therefore, cooperation with China would largely alleviate US pressure on OPEC states.

In light of ongoing US-China trade war, any conflict between these two big economies would impact other markets. China’s unwillingness to purchase energy from the US is one of the potentially challenging issues for the administration of President Donald Trump.

Advantages of Cooperation

Financial and energy markets are more than ever interdependent today. That makes cooperation between China and OPEC inevitable.

Leading consumer nations long feared that political developments and tensions or technical problems may hinder extraction, production, refining and transfer of oil, the major concerns in global markets have now spread to producers. Oil producers are currently afraid of falling demand in global markets. For consumers, any challenge to energy supply could expose these countries to serious threats. For producers, any decline in consumption and market imbalance would pose serious challenges.

Producers have long sought to maintain energy supply levels in a bid to guarantee energy security; however, consumers have now embarked on fresh efforts to restore balance to global markets. To that effect, China, in cooperation with oil producers, is trying to take action in favor restoring balance to the oil market.

Heavily depended on crude oil imports, China needs widespread cooperation with OPEC in order to maintain its energy security. In fact, due to its growing energy needs, China constantly depends on oil supply. In case any problem emerges in this cycle, China would suffer the most economic losses. Therefore, it needs strong communications with oil producer nations. In the meantime, cooperation with OPEC member states could allay China’s major concerns about possible lack of access to energy.

For its part, OPEC needs the cooperation of countries like China with a view to regulating the market and restoring balance to the oil markets. Therefore, China-OPEC cooperation would have advantages for both.

BPC Awarded Offshore Uruguay Block

Uruguay’s national regulatory agency ANCAP has awarded Bahamas Petroleum Co. (BPC) an exploration license for the AREA OFF-1 block.

This follows a period under which BPC had to demonstrate its technical and operational credentials in order to qualify as an approved offshore operator.

During the initial four-year exploration period for OFF-1, the company will reprocess around 2,000 km (1,242 mi) of legacy 2D seismic and perform new geotechnical studies, at an estimated cost of around $200,000/yr.

There is no drilling commitment for the initial period.

ExxonMobil Joins Petronas in Suriname Block

Petronas Suriname Exploration & Production B.V. (PSEPBV) has completed the farm-down of 50% of its participating interest in block 52 offshore Suriname to ExxonMobil Exploration and Production Suriname B.V.

Block 52 covers an area of 4,749 sq km (1,834 sq mi) in the Suriname-Guyana basin. Water depths range from 50 to 1,100 m (164 to 3,609 ft).

Following the farm-down, PSEPBV as the operator of block 52 holds 50% equity, while ExxonMobil holds the remaining 50%.

Emeliana Rice-Oxley, Petronas’ vice president of Exploration, said the company plans to drill a well on the block in 3Q 2020 and acquire 3D seismic data.

UK Offshore Sector Should Step Up Net Zero Efforts

Britain’s Oil and Gas Authority (OGA) has called for the UK offshore industry to move faster in helping the government achieve Net Zero greenhouse gas emissions by 2050.

The authority said its established goal of maximizing economic recovery of the UK’s remaining oil and gas can be compatible with the transition to Net Zero, and the industry has the skills, technology, and capital needed to devise suitable solutions.

But the industry should go also go further in reducing its own carbon footprint, the OGA warned, or risk losing its social license to operate.

The OGA has opened to consultation proposed revisions to its strategy. These and concepts assessed in the UKCS energy integration project could make a significant contribution to achieving Net Zero, it claims, both through carbon capture and storage (CCS) and CCS plus hydrogen

 Qatar Petroleum in Ivory Coast Farm-In Agreement

 Qatar Petroleum has entered a farm-in agreement with Total to acquire a 45% participating interest in blocks CI-705 and CI-706 in the Ivorian-Tano basin offshore the Republic of Côte d’Ivoire.

The two blocks cover an area of about 3,200 sq km (1,236 sq mi), and present multi-target hydrocarbon prospects in water depths ranging from 1,000 to 2,000 m (3,281 to 6,562 ft). They are 35 km (22 mi) from shore and about 100 km (62 mi) from the Foxtrot, Espoir, and Baobab fields.

Saad Sherida Al-Kaabi, the Minister of State for Energy Affairs, president and CEO of Qatar Petroleum said, this is company’s first investment in Côte d’Ivoire.

Melbana to Operate in Offshore Australia

Melbana Energy has secured approval from Australia’s National Offshore Petroleum Titles Administrator for a 12-month suspension of a work program on the WA-488-P permit in the Bonaparte basin offshore northwest Australia.

Permit Year 3 has at the same time extended by a year to Dec. 21, 2023.

The permit includes the Beehive prospect, a carbonate build-up with prospective resources of up to 388 MMboe, covered by 3D seismic survey. Melbana has continued planning/permitting arrangements for an exploration well, despite the withdrawals of Total and Santos from conditional farm-in agreements.

Vitol Veteran Ian Taylor Dies at 64

Ian Taylor, who built Vitol into the world’s biggest oil trader, has died from pneumonia at the age of 64, the company said, after surviving bouts of cancer and a stroke last year.

From drinking with Fidel Castro to providing billions of dollars to Kazakhstan, Taylor was known as a risk taker who even flew to Libya during the 2011 uprising against Muammar Gaddafi.

In 1995 the Oxford University graduate became CEO of Vitol, which with Britain’s blessing supplied the opposition in Benghazi with vital fuel in exchange for crude oil cargoes.

During Taylor’s time in charge, Vitol also carried on trading Iranian fuel oil in 2012, despite U.S. sanctions.

Glencore’s CEO Ivan Glasenberg said Taylor was “one of the last of the pioneers that helped transform the oil trading industry”, adding that he would be missed.

Described by his successor Russell Hardy as “exceptional”, Taylor became one of Britain’s richest businessmen and in 2007 stepped in to save Scottish fabric maker Harris Tweed Hebrides.

“He combined energy and a determination to succeed with humility, humour and humanity,” Hardy said in a statement.

A Conservative party donor who turned down the offer of a knighthood from former British Prime Minister David Cameron, Taylor was chairman of the Royal Opera House until 2019.

After starting his career at Shell in 1978 and working in South America and southeast Asia, Taylor joined privately-owned Vitol in 1985, turning the once modest Dutch fuel dealer into a global trading .operation

Norway’s Aker BP, Equinor Approve Investments

Norwegian oil companies Aker BP and Equinor said they would go ahead with several offshore projects, a day after politicians increased tax incentives for the industry.

The ruling minority government and the main opposition parties agreed to allow oil companies to shield temporarily part of their income from taxes to spur investments and save jobs.

Aker BP has awarded a 1 billion Norwegian crowns ($106.44 million) contract to oil service firm Kvaerner to build an unmanned oil platform for the Hod field.

The Norwegian billionaire Kjell Inge Roekke controls both Aker BP and Kvaerner.

Aker BP had previously decided to postpone the project, citing the need to preserve cash, after the COVID-19 pandemic crushed oil demand and lowered prices.

“The Hod development in the Valhall area is the first project to be launched as a direct result of the tax changes,” Aker BP said in a statement.

Majority state-owned Equinor said it would go ahead with investment totalling almost 1.5 billion crowns to connect its offshore installations at the Gina Krog and Sleipner fields to an onshore grid to cut carbon emissions.

Equinor awarded oil service firm Aibel a 160 million crowns contract to electrify Gina Krog, and a 400 million contract to electrify Sleipner, projects that could provide hundreds of jobs.

Equinor said the tax changes, backed both by ruling and the main opposition parties, would stimulate investment and help to maintain activity in “a challenging period”.

Germany Earmarks €500mn for Electric Car Charging

The German economy ministry wants to earmark 500 million euros ($567 million) from Berlin’s bumper stimulus package to support the roll-out of charging stations for electric cars, two government sources told Reuters.

The sum, part of 2.5 billion euros specifically aimed at expanding electric vehicle infrastructure, will be targeted at private users, including households and builders, the sources said.

Berlin aims to install about one million public charging spots by 2030, up from 27,730 currently, a key step in addressing consumers’ concerns about the driving range of battery-powered cars, which so far account for just 0.6% of vehicles on German roads.

U.S. Oil Refiners' Shares Rebound

Wall Street is betting on a strong recovery from the coronavirus pandemic by pouring money into shares of U.S. oil refiners, even though demand for gasoline, jet fuel and diesel remains well below seasonal lows.

Shares of Valero Energy Corp and Marathon Petroleum Corp were trading at their highest levels since the first week of March. Brokerage Wells Fargo raised its price target on certain independent refiners, saying demand was on an upswing as lockdowns ease across the United States.

“The stock market has definitely priced in an incredibly strong recovery,” said Warren Pies, energy strategist at Ned Davis Research. “Probably more than is taking place.”

Thai PTT Delays Decision on $5.7bn Ohio Petchem Plant

Thai chemical company PTT PCL said its U.S. unit expects to decide in the next six to nine months whether to build a proposed $5.7 billion plant called an ethane cracker in Ohio, putting off a decision it had said would likely come in the first half of 2020.

“While the pandemic has prevented us from moving as quickly as we would like within our previous timeline, our best estimate is for a final investment decision by the end of this year or in the first quarter of next year,” Toasaporn Boonyapipat, President and CEO of PTT’s PTTGC America (PTTGCA) unit, said in a statement.

TEPCO Renewable to Spend $9-18bn on Green Power

TEPCO Renewable Power, a unit of Tokyo Electric Power Company Holdings, plans to spend about 1-2 trillion yen ($9-18 billion) to develop 6-7 gigawatts (GW) of offshore wind and hydroelectric power projects by 2035, its president said.

“We aim to boost our profit to 100 billion yen in 2030 from 40 billion yen now” through the investments, Seiichi Fubasami, president of TEPCO Renewable Power, told Reuters in an interview.

Its parent TEPCO, which has been struggling to restart nuclear power stations after the Fukushima disaster of 2011, said in 2018 that it will develop 2-3 GW of offshore wind power each at home and abroad, and 2-3 GW of hydroelectric power overseas to help renewable energy become a core power source.

 Two Major Libyan Oilfields Reopen

Two major oilfields in southwestern Libya have reopened after months of a blockade that shut off most of the country’s crude production, costing billions of dollars in lost revenue.

The state-owned National Oil Corporation (NOC) confirmed some production had resumed at the 300,000 barrel per day (bpd) Sharara oilfield, shut for more than four months.

Two engineers at the field told Reuters production was gradually restarting.

El Feel, a field linked to Sharara, reopened, an engineer there told Reuters. There was no immediate confirmation from the NOC regarding the field, which previously produced 70,000 bpd.

The resumptions follow a rapid military retreat by forces loyal to eastern-based commander Khalifa Haftar, whose allies had blockaded oilfields and ports since January, shutting off most of Libya’s production.

NOC said in a statement that production at Sharara had restarted “after lengthy negotiations ... to reopen the Hamada valve, which had been illegally closed last January” but did give further details.

The valve, on the pipeline running from Sharara to the northern oil terminal of Zawiya, was reopened and crude flowing from Sharara reached the terminal, the Petroleum Facilities Guard said.

Production at Sharara will start at 30,000 bpd and output is expected to return to full capacity within 90 days, NOC said.

Sharara is operated by NOC in a joint venture with Spain’s Repsol, France’s Total, Austria’s OMV and Norway’s Equinor. NOC declared force majeure on loadings from the field in January.

US Sanctions on Rosneft Remain Effective

Russia lowering its direct stake in top oil producer Rosneft will not alter its exposure to U.S. sanctions, a U.S. Treasury spokesman told Reuters.

State holding company Rosneftegaz has lowered its 50.33% direct stake to 40.4% with subsidiary RN-NeftKapitalInvest taking 9.6% and Rosneft unit RN-Capital 0.33%.

“The reported change in Rosneft’s ownership does not alter the basis for its inclusion on the SSI List,” a U.S. Treasury spokesman told Reuters.

“The change... does not alter the Treasury Department’s concerns with respect to a broad range of Russian malign activity globally, and we will continue to use our sanctions authorities as appropriate in response to that activity.”

The United States added Rosneft and other Russian entities to its “Sectoral Sanctions Identifications List” (SSI List) in 2014 over Russia’s role in the Ukraine crisis.

Inclusion in the list, overseen by the U.S. Treasury’s Office of Foreign Assets Control, means U.S. persons are barred from engaging with those firms in mid-to-long term new debt or providing assistance for deepwater, Arctic offshore or shale projects.

International shareholders in Rosneft, headed by Igor Sechin, a longstanding ally of Russian President Vladimir Putin, include BP with a 19.75% stake and Qatar with 18.93%.

As the three Rosneftegaz entities combined hold 50.33% of Rosneft and give the state control of the company, Rosneft will still be able to develop offshore blocks at home, said Yaroslav Karnakov, a partner at law firm Nortia GKS.

Gasoline Rises As U.S. Oil Producers Shut Wells

Energy companies evacuated 10% of production platforms and shut nearly 30% of offshore oil output, pushing gasoline prices higher, as Tropical Storm Cristobal entered the U.S. Gulf of Mexico.

Cristobal was located 535 miles (860 km) south of the mouth of the Mississippi River and moving north at 13 miles per hour (21 km per hour), according to the U.S. National Hurricane Center (NHC).

Equinor ASA, BP PLC and Occidental Petroleum Corp halted production and evacuated offshore staff, while Murphy Oil Corp and Royal Dutch Shell PLC evacuated some platforms, the companies said.

Operators evacuated 65 offshore facilities and moved seven drill rigs out of the storm’s path, according to offshore regulator Bureau of Safety and Environmental Enforcement.

Well shut-ins took out 544,814 barrels per day of oil and 601 million cubic feet of natural gas production, BSEE said.

Spot Gulf Coast gasoline prices rose a half a penny as buyers acquired contracts in case the storm disrupts the market, traders said.

The Miami-based National Hurricane Center issued tropical storm and storm surge warnings for areas from Louisiana to Ocean Springs, Mississippi. Winds were 40 miles per hour (64 km per hour) and expected to reach 60 miles per hour (96 km per hour) before landfall, according to NHC forecaster Richard Pasch.

Cristobal was forecast to strike central Louisiana after passing through U.S. offshore oil production areas.

Malaysia Names Petronas New CEO

Malaysia’s prime minister appointed the finance chief at Petroliam Nasional Bhd (Petronas) to take over as chief executive at the state energy company, at a time when lower oil prices and the coronavirus pandemic have hit the firm’s profits.

The government of premier Muhyiddin Yassin has made a series of management changes at state-owned companies and government agencies since coming to power in March following the unexpected resignation of his predecessor, Mahathir Mohamad.

Tengku Muhammad Taufik Tengku Aziz, currently chief financial officer will take over from Wan Zulkiflee Wan Ariffin as Petronas CEO from July 1, the prime minister’s office said.

Wan Zulkiflee, who led Petronas for five years, will join the struggling national carrier Malaysia Airlines as chairman, Muhyiddin’s office said.

The changes at Petronas come as the new coronavirus outbreak has wreaked havoc on energy demand and dampened oil prices, forcing the company to review costs and capital expenditure.

The chief executive’s position at Petronas, which is fully owned by the Malaysian government, is a prime ministerial appointment.

Wan Zul, as he is commonly known, is a Petronas veteran, joining the company in 1983 as a process engineer and working his way up through the ranks.

He took over as CEO in 2015 and led the company through a period of tumultuous oil prices.

Benchmark Brent crude plunged to near 12-year lows soon after he took over, prompting Petronas to cut $12 billion from costs and thousands of jobs for the first time.

District 4, Beating Heart of Iran Gas

Mehdi Mehrabi

Sustained gas supply in northeastern Iran was always a major cause of concern for Iranian gas industry officials mainly due to Turkmenistan’s non-compliance with its commitments to Iran. The district 4 gas transmission area has become key in Iran’s gas distribution as it feeds northern and northeastern provinces.

Mohammad Kamel, CEO of Gas Transmission Operations District 4, has spoken to "Iran Petroleum" to outline the activities under way in District 4.

First of all, could you please tell us about gas transmission operation in District 4?

Holding about 33.8 tcm of naturalgas, equal to 16% of the world’s reserves, 48% of the Middle East’s and 38% of OPEC members’ total gas reserves, Iran is ranked the first in the Middle East and the second in the world in terms of gas reserves. Therefore, the country enjoys a special status in the energy sector. In the meantime, the safest and most appropriate way for gas transmission would be to lay out pipelines. To handle gas distribution while preserving this national asset, the Iran Gas Transmission Company (IGTC) has been divided into 10 districts. District 4 with more than 5,600 km of pipeline, seven production centers and three gas compressor stations covering more than 320,000 of land, is the second largest gas transmission zone, tasked with guaranteeing sustainable gas distribution in the provinces of North Khorasan, South Khorasan and Khorasan Razavi and part of Semnan Province. District 4 gas transmission is the beating heart of eastern Iran. District 4’s gas is supplied by the Iran gas trunkline, as well as Shahid Hasheminjejad refinery. Our mission is sustainable transmission of clean and safe gas across the zone. Transmission of about 100 mcm/d of natural gas to more than 75 cities and major consumers including Shariati power plant, Mashhad power plant, Tous power plant, Neishabour power plant, Shirvan 1 power plant, Shirvan 2 power plant, Ferdowsi power plant and Qaen power plant, Bojnourd petrochemical plant, Khorasan steel mill, Mashhad cement plant, Jajarm casting plant, aluminum industry, Zavareh cement plant, Qaen cement plant as well as Neishabour steel mill.

How much gas has been transmitted from District 4 over recent years?

Given the extent of territory covered by the district, about 28.9 bcm of gas was transmitted from this district last calendar year.

How are safety conditions of pipes, leak detection and pigging?

Based on monthly schedules we regularly inspect pipelines in order to ensure the safety of pipes. Last calendar year, more than 5,400 km of pipe underwent leak detection. Furthermore, in a bid to guarantee the stability of gas transmission, 89km of pigging was done in the pipes.

What has been done with regard to fighting the coronavirus outbreak?

Despite the outbreak of Covid-19, gas supply has continued without any halt. Crisis management committees have been set up to take action against the coronavirus outbreak, collective activities like training courses, cultural meetings. In addition, congregational prayer rooms and restaurants were shut down to contain the virus spread. Telecommuting for at-risk populations and those with underlying diseases, reducing staff, cancelling non-emergency assignments, shutting down guesthouses, holding meetings through videoconference and respecting social distancing are among the major policies adopted for containing the Covid-19 outbreak.

Among effective measures undertaken for preventing the pandemic, employees’ clock in, offices, corridors, elevators,

, stores, yards and restaurants are being disinfected, the temperature of all staff is  being measured every day, food is distributed in disposable recipients. In addition, masks, gloves and hand sanitizers are being distributed among staff and families, and computers and telephones are disinfected regularly. Regarding education materials, the staff have become familiarized with the novel coronavirus through pamphlets, text messages and contents available on the company’s website. The staff were encouraged to stay home and not leave home for unnecessary affairs. The HSE affairs department of District 4 also provided education materials to staff and their families through social media.

Dasht station is among installations with unique network maneuvering. Would you please provide approaches for the operation of this station?

The Dasht gas compressor station was launched in 2016 and since the operating staff were not experienced enough in operating these turbocompressors they took steps towards sustainable gas transmission.

Dasht station can receive gas from several points. In light of these multipurpose conditions for gas supply to northern and northeastern provinces, gas capacity at Hasheminejad refinery and the Shourijeh  gas storage facility, Dasht gas compression station have certain conditions regarding gas transmission drills, technical conditions are conducive to better gas transmission. These technical conditions highlight the operational flexibility of the zone in gas supply to north and northeastern Iran. The gas stations which are in operation now, allowed us to reverse gas transmission from northern Iran to Khorasan Razavi Province and prevent gas cut in the province.

What are your plans for developing cooperation with domestic companies with regard to supplying necessary items and equipment?

Given the potential of Iranian youth and manufacturers, we have tried to make sure about the domestic manufacturing and supply of all items and equipment. Cold cutters, air obstruction systems, fully hydraulic grease pumps, hot taps, spare parts for line break systems and the test equipment have been sourced domestically. We have become self-sufficient in the manufacturing and supply of equipment.

What did you specifically do last calendar year? Have you made any plans with regard to this year’s slogan?

In the oil and gas industry, the focus has been always on the potential and expertise of Iranian manpower. Every day we have made progress and undoubtedly, international sanctions will further accelerate our progress. Therefore, benefiting from the services of domestic companies has been always helpful. Under the present circumstances, we are ready to engage domestic companies in the manufacturing of equipment needed for gas transmission. The major activities carried out last calendar year in District 4 included sharing technical knowhow with manufacturers and suppliers through defining the process of self-sufficiency for imported and strategic items, exchanging technical views with manufacturing companies and communicating with parks of science and technology (signing MOUs with Mashhad’s Park of Science and Technology), signing agreements for building equipment and spare parts. Last calendar year, 162 counts of purchases were made from domestic manufacturers for IRR 45 billion.

A new chapter has started in IGTC’s self-sufficiency. What has been specifically done in District 4?

A self-sufficiency committee has been set up to help benefit from the innovation and creativity of staff. The committee comprises young and creative experts. Important measures have been undertaken, like electronic cards used in operating dresser-rand turbocompressors. The manufacturer of these cards had stopped supplying these cards in 1990, and without them it was impossible to use these compressors. We finally managed to produce more than 45 kinds of cards in the country. After that we moved to manufacture most control systems. About 80% of control equipment for turbocompressors is manufactured domestically. Another self-sufficiency measure taken was manufacturing a stand for the overhaul of turbines, which saved about € 500,000. Building a chamber for turbines also saved about € 250,000. Domestic lubricants were also used instead of the oil, each barrel of which cost 4,000 dollars. Welding trucks, hydraulic cold cutters, transforming pneumatic cold cutters to hydraulic systems, cathodic protection monitoring and control, switching supply instead of rectifiers, providing hardware, providing infrastructure for distance control of automatic valves, demagnetizers, hot taps and line breaks are cases in point.

Danan, Cheshmeh-Khosh Investment Potential

Danan oil field in Ilam Province is located along Iran’s border with Iraq. It lies 80 kilometers northwest of Andimeshk and 30 kilometers southeast of Dehloran. The field incorporates Bangestan and Asmari reservoirs.

In this field, Ilam and Sarvak formations – measuring 85 and 750 meters thick, respectively – form Bangestan Reservoir whose thickness is 835 meters.

At present, 26,000 b/d of crude oil is being extracted from Danan field before being carried to the Dehloran production center through pipeline. After being sweetened, it is pumped through a 52-kilometer pipeline to the Cheshmeh-Khosh desalination unit.

Danan is administered by Iranian Central Oil Fields Company (ICOFC). A variety of scenarios have so far been envisaged at National Iranian Oil Company (NIOC) for the development of the Danan field. The broad lines for the development of the Danan field (scenarios categorized under natural depletion, water injection and gas injection) have been submitted and experts have offered their views.

In studying the Danan field, once the reservoir’s properties are examined, a static and dynamic model is designed and the performance of the reservoir is studied under different scenarios. Natural depletion scenario includes drilling new wells, including vertical and directional wells, and gas injection scenario involves returning gas to an injection well in the reservoir.

These studies have indicated that in the gas injection scenario, oil production wells face the problem of high GOR, while in water injection scenario, due to the low permeability of reservoir rock the volume of injected water is limited; therefore the recovery rate could not be improved.

Thus, the best scenario for the development of the Danan field is natural depletion which involves drilling new wells with high diversion and spudding directional wells in order to establish further contract with the rock reservoir. Application of this method will require a fewer number of wells than vertical drilling.

The contract for exploration and development of Danan block was signed between NIOC and a Vietnamese company in March 2008 for exploration and development activities, identification and evaluation of hydrocarbon deposits in this block and winning cooperation of top international companies in the upstream sector after issuing tender bids. The Vietnamese party has so far invested more than $20 million in this block.

Meanwhile, MAPNA Group and Iranian Central Oil Fields Company have signed a contract for improved oil recovery (IOR) in the Danan field.

MAPNA Group's assignments will include drilling of eleven vertical wells, design and execution of acid fracturing operation, and geophysical services (3D seismic survey, data processing, and interpretation) in an area of 230 square kilometers, as well as skid mounted desalination with a capacity of 10 thousand b/d, and construction of a 55-km pipeline.

New Technology Needed in Cheshmeh-Khosh

Cheshmeh-Khosh which was explored in 1964 and started production 11 years later is one of old fields in western Iran. Its current output stands at 18,000 b/d and its gas production stands at 3.3 mcm/d.

Cheshmeh-Khosh which is 52 kilometers south of Dehloran and 70 kilometers west of Andimeshk is located in Ilam Province in western Iran.

The oil produced from this field is processed before being carried to Ahvaz-3 production plant through a 153-kilometer pipeline. This oil is finally brought to Kharg Island to be exported through the Kharg oil terminal or to feed refineries.

Cheshmeh-Khosh is run by ICOFC and it currently needs investment and state-of-the-art technology in order to preserve and enhance its output.

It has two reservoirs in the Asmari and Bangestan formations. The Amsari formation is made of sandstone with favorable reservoir properties, while the Bangestan formation is over 700 meters thick.

Currently, oil is extracted from the Asmari reservoir while the Bangestan formation is to produce 20,000 b/d. The recovery rate of Asmari would be 27% to 35%, while the Bangestan reservoir would have a 6-8% recovery rate.

The Cheshmeh-Khosh field’s crude oil production capacity stands at 18,000 b/d on average, while 115 mcf/d of natural gas could be extracted from this field.

The desalination unit of Cheshmeh-Khosh is operating at a nominal capacity of 181,000 b/d now.

ICOFC officials have said that new production technologies would be used in the Cheshmeh-Khosh field.

Currently, oil recovery is merely made from the Asmari reservoir. Plans are under way for up to 20,000 b/d recovery from the Bangestan formation. Branched and horizontal drilling, as well as hydraulic fracturing has been proposed for recovery from the Asmari field.

The enhanced oil recovery (EOR) methods proposed for both reservoirs include water and gas injection.

Sumar, Dey & Sefid Zakhour Investment Attractiveness

Sumar oil field, which was discovered in 2009 in the western province of Kermanshah, is jointly owned by Iran and Iraq. It holds 475 million barrels of crude oil in place, 70 million barrels of which is recoverable.

Whereas Sumar field is shared with neighboring Iraq, the National Iranian Oil Company (NIOC) has prioritized its development.

But when Iran decided to develop it, Iran's petroleum industry was under international sanctions and it had to award the contract to Iranian companies under an EPCF agreement. The contract envisaged drilling two wells, building stations for transmission and separation of oil and gas, and establishing pumping and gathering systems. Production from Sumar was initially expected to start two years after the start of operations with Phase 1 output at 5,000 b/d and Phase II output at 10,000 b/d, but this objective was not achieved.

However, the Iranian Central Oil Fields Company (IOFC), which administers Sumar, drilled one well which produced 3,000 b/d. The oil produced from this field is being carried via a 23-kilometer pipeline to Naftshahr production/desalination unit.

In preliminary assessment report on the Sumar oil field in 2009 and 2010, development of the field in Asmari Formation with an initial output of 5,000 b/d from four wells was envisaged.

In the study conducted for the transfer of oil from the Sumar oil field to the Naftshahr production and desalination unit, installation of multiphase pumps, and a single-phase transmission system including a separator, pump and compressor fitted with OLGA and PIPESIM were envisaged.

The preliminary studies indicated that at most 5,000 b/d of pre-salt oil could be processed at the Naftshahr production and desalination unit. But as long as non-salt oil is being produced, processing of the entire oil is possible in the old unit.

Drilling three new vertical fields in Asmari Formation, workover of an oil production well, installing a 25-kilometer offshore streamline stretching from wells to manifold, acquisition of land and drilling of well, setting up manifold and two-phase separation system, purchase and installation of single-phase pumping system with a capacity of 10,000 b/d, 123 horsepower and 550 pam external pressure, laying out 23-kilometer pipeline to carry 10,000 b/d of oil to Naftshahr production and desalination unit, installing 48 kilometers of power supply lines and a 1.5MW electricity station stretching from Naftshahr to satellite manifold and Sumar wells are among the most important equipment and facilities needed for Phase 1.

According to initial estimates, IRR 25.593 billion plus $67.38 million in investment is needed for the development of this field.

Dey & Sefid Zakhour

The Dey and Sefid Zakhour fields are among newly discovered gas reservoirs in Iran. The close distance between the two fields has led officials to consider their development together.

The duo currently needs investment and state-of-the-art technology. Iran has offered Dey and Sefid Zakhour for investment.

The Sefid Zakhour anticline is located north of the Dey anticline, 150 kilometers southwest of the southern city of Shiraz.

Dey and Sefid Zakhour are estimated to hold 6.2 tcf and 6.5 tcf of gas in place, respectively. The two fields were discovered in 2005 and were said to contain 11.4 tcf of gas. With a recovery rate of 75%, 8.5 tcf of gas may be extracted from them.

In order to complete exploration data in this field, 2D seismic testing was conducted in 2003 and the results were analyzed and interpreted. Sefid Zakhour anticline was said to have potential for production. Drilling operations started and the first exploration well was spudded at a depth of 5,271 meters.

The Exploration directorate of the National Iranian Oil Company (NIOC) explored sweet gas in different layers of Kangan Dalan.

Sefid Zakhour is estimated to hold 205 million barrels of condensate in place with a recovery rate of 35%.

According to the NIOC Exploration Directorate forecasts, in case 17 wells are drilled 30 mcm/d of gas may be recovered.

Sefid Zakhour anticline is located around 30 kilometers south of the city of Qir.

The planned development of Dey and Sefid Zakhour fields in Fars Province is expected to provide 15.1 mcm of gas and 10,000 barrels of condensate.

Wellhead equipment, stream pipelines, green space and processing unit are envisaged in the development projects.

Establishment of a center for gathering and separation, laying out pipelines, installations for Farashband processing unit and drilling projects are among activities considered for this project.

The next objective sought by these projects is to develop the Farashband refinery to create a gas processing capacity of 21 mcm/d. The refinery processing capacity is planned to increase 5 mcm/d, while the produced gas would be injected into the Iran Gas Trunkline 2 (IGAT2). Meantime, gas condensate will be transferred to the Shiraz refinery.

A refinery is envisaged for the two fields in two phases under engineering, procurement, construction (EPC) framework. Phase 1 is already complete and Phase 2 is under way.

Acquisition of land for laying out pipelines and drilling wells, completing the existing two wells, drilling and completion of 11 new fields, purchase of commodities and activating wellhead installations, laying out wellhead pipelines, setting up a gas and condensate separation center, installation of two pumps to transfer condensate from Sefid Zakhour, purchase and installation of pig running system, installation of line break valves, establishment of logistics camps, power supply, acquisition of land for the refinery, development of Farashband refinery including dehydration and gas condensate stability units, hydrocarbon dew point regulation unit, low-pressure gas recovery compressors, and installation of pumps to carry liquids from the refinery to Taheri Port are among the most important equipment needed in the upstream and downstream sectors of this project.

According to initial estimates, Dey and Sefid Zakhour would need IRR 8615.4 billion plus $519.5 million in investment.

Due to the decline in the flow of feedstock into Fajr Jam refinery and the plan to get feedstock from neighboring fields, delivery of gas produced in Sefid Zakhour to Fajr Jam refinery is among the most important plans for domestic gas supply.

NISOC Output Capacity Up

Negar Sadeqi

Iran’s minister of petroleum, Bijan Zangeneh, recently said that despite the outbreak of the novel coronavirus, oil and gas production in Iran had not faced any disruption. Among Iranian oil production companies, National Iranian South Oil Company (NISOC) enjoys a special status because of its large contribution to Iran’s production.

Ahmad Mohammadi, CEO of NISOC, tells "Iran Petroleum" that production from the oil fields run by this company had seen their output exceed the target by 10,000 b/d despite the impact of sanctions and the current restrictions. He has also said that as soon as sanctions have been lifted, NISOC would be able to bring production back to the pre-sanctions levels quickly.

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

How did the Covid-19 outbreak affect NISOC’s development projects?

The Covid-19 outbreak slowed down, to some extent, the development projects as soon as it struck. It is noteworthy that our conditions differed with that ofthe others in dealing with the coronavirus, as we were also under sanctions. Therefore, we had to multiply our efforts in a bid to minimize the impacts of both the coronavirus and the sanctions. We were faced with a tough task in not halting activity in NISOC-run fields. However, we proceeded with our activities through well-thought planning.

Many oil companies in the world have halted their development activities due to the sharp decline in oil prices. Does NISOC plan to follow suit?

The petroleum industry is an international one and we cannot separate ourselves from others. NISOC accounts for supplying more than 80% of Iran’s oil, which is earmarked for domestic consumption and exports. In order to maintain the production capacity and enhance output, development activities within EPC/EPD project should continue. Furthermore, we always think of providing development infrastructure for the day the sanctions have been lifted on Iran’s petroleum industry. In the meantime, NISOC’s production is largely spent on feeding refineries. Therefore, we cannot say that the petroleum industry is experiencing unprecedented conditions because oil prices have plummeted to very low prices and therefore we have to halt our development projects. Despite so many problems we are faced with, we will proceed with these projects to keep the business environment and employment alive and crate development infrastructure. Of course, it has to be noted that the methodology of sanctions has changed this time and has become more complicated. We are in the midst of an economic war. Oil production and export is really complicated and difficult, add to this the Covid-19 outbreak.

Given the reduction in oil production emanated from the Covid-19 outbreak, how long will it take the oil output to rebound to the pre-sanctions levels?

According to arrangements, in case sanctions have been lifted, we will restore about 70% of oil production in less than a month and 100% in three months to the pre-sanctions levels.

Which project has been affected most by the Covid-19 outbreak?

It is really tough, particularly for our colleagues working in operation zones to work with the Covid-19 spread. In all crises and emergency situations, we focus on two points: One is our main and natural task of safe and sustainable production, supporting production and sparing staff any damage and the other one is to help people and communities living around facilities to respect their social responsibility. With the Covid-19 outbreak, we have concentrated on respecting all health protocols and our colleagues, particularly those living far from their families, are trying their best to guarantee safe and sustainable production in oil-rich zones in southern Iran. Furthermore, we have provided help to people living near facilities and installations. The Covid-19 outbreak has sure slowed down EPC/EPD projects as many specialists and service workers who used to come from neighboring cities and provinces were faced with restrictions. Despite all this, NISOC’s oil output was 10,000 ahead of plan because no workover project has been halted over this period of time.

What would happen to NISOC’s 28 packages with the Covid-19 outbreak and petroleum industry sanctions?

In six packages, two wells have so far been completed and five others are to be completed soon. Therefore, a total of seven wells would be completed soon and the rigs installed on these wells will be moved to the location of new wells.

The successful bidders for 9 other packages are known. Preparations are under way for six packages and the fate of remaining packages will be known soon. I hope that construction starts in some of them in the summer.

What stage is the Parsi and Paranj agreement in now?

We are receiving necessary permits for the Parsi and Paranj fields' development. At the same time, we have held talks with MAPNA so that we would sign an agreement for logistics before the agreement takes effect. Given MAPNA’s potential, I hope that we will soon see production logistics work start in parallel with the required arrangements for the implementation of the agreement.

99.99% Safety in Pipeline Transmission

The Iranian Oil Pipelines and Telecommunication Company (IOPTC) transmits millions of liters a day of a variety of petroleum refined products via over 14,000 kilometers of underground pipeline and many pumping stations to feed refineries producing gasoline, gasoil and kerosene among other products before delivery to the storage facilities of National Iranian Oil Products Distribution Company (NIODPC).

Qasem Arab Yar-Mohammadi, CEO of IOPTC, said: “As its name suggests, the company has two tasks: handling pipeline and telecommunications affairs. They complement each other and they are important alike.”

He said that the primary task assigned to IOPT was to transmit crude oil, and supply feedstock to oil refineries.

“The crude oil received from National Iranian Oil Company (NIOC) or National Iranian South Oil Company (NISOC) is sent to refineries as feedstock via transmission installations (pipelines and pumping stations). In the next step, refined products, including gasoline, gasoil, fuel oil and kerosene, are carried to NIOPDC storage facilities for distribution,” he said.

Yar-Mohammadi said telecommunications was key to the transmission of petroleum fluids. Therefore, he added, the microwave, wireless and fiber optic network of IOPTC is independent.

“The safety coefficient of this section at IOPTC is 99.99%, which means minimum disruption in the telecommunications system of the company,” he said.

Yar-Mohammadi said that due to the sensitivity of job assigned to IOPTC for the transmission of crude oil and petroleum products, this company has not been privatized.

IOPTC covers 12 zones, monitoring 14,000 kilometers of pipeline and a large number of pumping stations located on various routes.

He said: “Each area is managed independently. Except for macro policy-making like specific projects requiring the approval of the Board of Directors, other affairs are decided upon independently.”

He added that all these areas were following a single objective, which is sustainable transmission of fluids via pipeline.

128bn Liters of Oil Fluid

Yar-Mohammadi said IOPTC handled the transmission of 128.59 billion liters of crude oil and petroleum products last calendar year.

“Over that period, more than 68.615 billion liters of crude oil (or 431,579,000 barrels) was carried to oil refineries while more than 49.422 billion liters of petroleum products was delivered to NIODPC storage facilities for distribution and more than 10.552 billion liters was carried to southern ports for exports,” he said.

Transmission Sustainability

Yar-Mohammadi said that preventive maintenance was key to the transmission process. He added: “Sustainability in the transmission of crude oil and petroleum products depends on overhaul, preventive maintenance, removing defects and technical monitoring.”

“Without considering the aforesaid points, no sustainability in pipeline transmission could be envisaged. Ordinary and smart pig running are monitoring tools and methods which are instrumental in the sustainable and safe transmission of fluids via pipeline,” he said.

The official noted that intelligent pig running would detect corrosion inside the pipeline.

He said a European company conducted pig running in IOPTC pipelines in 2004, adding it was similar to cardiac angiography.

He said that pigging would provide very precise information about the interior of pipelines, adding that it would help detect any obstacle to the sustainable transmission of fluids inside pipes.

Yar-Mohammadi said that despite strict pig running, pipeline transmission had been done without any halt.

He added that talks were under way for signing agreements for a 2,100-km and a 2,800-km pipeline pigging.

Yar-Mohammadi said one of the aforesaid projects would be assigned to an Iranian knowledge-based company this year. “Signing an agreement with this knowledge-based company would be a show of support for Iranian companies, as well as domestic development of this costly technology which has been monopolized by foreign companies,” he added.

Yar-Mohammadi added that nearly 5,000 kilometers of pipeline would be pigged in the current calendar year.

Reliance on Domestic Manufacturing

Yar-Mohammadi said extensive efforts were under way in Iran for the development of smart pig running technology, adding that it would not be far-reaching.

“Once, we did not have anything specific to IPTC. We largely depended on foreign companies and we had to purchase foreign tools and equipment,” he added.

The official said the conditions had changed a lot and turbines were being manufactured domestically.

Yar-Mohammadi said that in most sectors of the petroleum industry, including pipeline and telecommunications, dependence had ended.

“2MW electro-engine, pumps, electric boards and pipes are manufactured in the country. Sanctions are harmful and have had consequences, but they brought us blessings, too”, he said.

“The sanctions pressure pushed us to explore more domestic potential for manufacturing. Today, domestic manufacturing is an instruction while effective and constructive steps have been taken for domestic manufacturing,” he said.

Yar-Mohammadi said 80% of IOPTC needs was supplied domestically.

Iran Energy Exchange Rallies Amid Covid-19

Farzin Savadkoohi

The Iran Energy Exchange (IRENEX) has always been a good instrument for Iran to enhance the volume of its gasoline exports. Last calendar year to 20 March, it helped Iran raise its gasoline exports 2.5 times. Competitive pricing and oversupply have brought a sigh of relief to speculators who can always cash in on the refined product on the energy exchange floor.

If gasoline constitutes the bulk of IRENEX trading, one may simply conclude that IRENEX would be able to bring about good days to speculators through refined products trading.

Reformed prices and reduced consumption at home was the main reason why gasoline exports proved successful. In fact, marketing processes went ahead smoothly under the aegis of brokering industry, thereby raising expectations for further exports of gasoline and other petroleum and petrochemical products through IRENEX.

Processing Lucrative on IRENEX

Petrochemicals market players remember well that last calendar year to 20 March all oil products offered on the IRENEX floor was traded successfully, particularly when refineries set aside their separate pricing.

Hamid Hosseini, spokesman for the Iranian Oil, Gas and Petrochemical Products Exporters’ Union (OPEX), had earlier said: " under conditions where the trading of products has become transparent thanks to the IRENEX mechanism, buyers from neighboring nations managed to purchase whatever they needed. However, the point here is that oil products are traded in Iranian national currency, IRR. Trading in IRR would not earn Iran any hard currency under the present circumstances.

Hosseini had said this issue was being followed up on by Bijan Zangeneh, minister of petroleum.

According to Hosseini, Zangeneh had recommended that IRENEX use any solution, if possible, for trading oil products in foreign currency so that the revenue would be paid either in bills or in drafts.

“That could eliminate the IRENEX weakness regarding trading in IRR. selling oil in IRENEX is associated with various challenges: transportation, insurance, documents and fund transfer,” he said.

No Covid-19 Impact

The outbreak of the novel coronavirus changed many global equations. That left somewhat harmful impacts on the oil market, driving oil prices down significantly. Nobody expected IRENEX to keep working under such circumstances. However, like other exchange markets in Iran, IRENEX did not take the Covid-19 outbreak seriously and experienced an upward trend in its trading so that both buyers and sellers would be satisfied with trading.

Due to lockdown in most parts of the world for protection against Covid-19 and stagnation in global oil and products markets, a big oil price shock caused global markets to crash. However, Iran’s IRENEX did not stop and recorded significant figures as if there were not Covid-19.

During the week leading to 17 April 2020, despite a sharp decline in gasoil prices due to smooth sales in preceding weeks, National Iranian Oil Products Distribution Company (NIODPC) deemed it appropriate to launch the products mix trading and offer new products.

Significant Sales

In the same week, oil products earned $86 million, a significant figure for IRENEX under coronavirus conditions. Some details were as follows:

295,000 barrels of gasoline 87 offshore for $3,345,300

295,000 barrels of gasoline 91 offshore for $4,672,800

Basic mix of 6 cargoes of 295,000-barrel gasoline 87 and 6 cargoes of 27,000-barrel high-density fraction from the Bandar Abbas Gas Condensate Refinery for $61,284,600

300 tonnes of gasoline (5,000 ppm) of Isfahan destined for Afghanistan for $1,080,000

When other products are added, the total will be more significant. In that prosperous week, IRENEX earned $85,812,820.

IRENEX’s profits were not limited to that certain period of time. The conditions were satisfactory in the following week, too.

In a new achievement for IRENEX, the residues of the distillation tower of a refinery were exported.

Ali Hosseini, CEO of IRENEX, recently said that the first cargo of refined residues in the distillation tower of the Imam Khomeini Oil Refinery (IKOR) had been exported through trading on the IRENEX international floor. A total 10,000 tonnes of residues was traded for $144.33 per tonne.

IRENEX continued to record trading of hydrocarbon products in the following weeks. Iso-recycle and iso-feed products and solvent 402 of the Tabriz oil refinery, the isofeed of the Shiraz oil refinery, the heavy fraction and industrial liquefied gas of the Bandar Imam petrochemical plant and the naphtha blending of the Bandar Abbas oil refinery and the raffinate of the Bistoun petrochemical plant were traded on the IRNEX international floor. In a single day, 9,891 tonnes of various hydrocarbon products yielded nearly IRR 328,683,000,000 in the physical market of IRENEX.

These developments in the capital market inspired hope into Iran’s hydrocarbon products and IRENEX trading. Therefore, it seems that Iran’s oil policies have been effective particularly in this sector and therefore IRENEX trading would not stop due to unexpected events.

More Significant Role of Oil in Capital Market

While the global petroleum industry is faced with serious stagnation at a time of oil price crash due to the Covid-19 outbreak, oil products warm welcome on IRENEX is of high importance. That can be good news at a time of bottlenecks created by international sanctions against Iran.

Maybe that is why President Hassan Rouhani has recently instructed Minister Zangeneh to facilitate the presence of petrochemical companies and oil trading in IRENEX.

The president has called for a stronger presence of oil and petrochemical companies in the capital market, as well as facilitating arrangements required in this regard.

Rouhani also touched upon the sales of state-owned companies’ stocks on the capital market with a view to upgrading IRENEX, noting that oil and petrochemical companies needed to become more and more active in IRENEX.  

The president also called on the Petroleum Ministry to follow up on the progress of oil projects, saying amid tough and unfair sanctions on the country, the Petroleum Ministry could accelerate projects in order to help materialize the slogan of “jump in production” as instructed by Supreme Leader Ayatollah Ali Khamenei.

In light of all events transpiring IRENEX these days, it may be concluded that the conditions are satisfactory at the time of the Covid-19 outbreak and the sharp decline in oil prices. IRENEX continues to remain attractive despite all these challenges.

Isfahan Refinery Frustrated Sanctions

Farzin Savadkoohi

Isfahan is known as a historical city with tourist attractions. However, it has been home to a key oil refining facility. The Isfahan Oil Refining Company (IORC) is currently supplying 20% of Iran’s refined petroleum products, a key contribution to the energy sector. Therefore, bottlenecks emanated from sanctions have failed to leave any negative impacts on the refining sector in this ancient city.

Isfahan’s oil refinery started work in 1989. Refining crude oil, supplying refined products and feeding petrochemical and other downstream sectors are chief among the major activities of this refining facility.

Isfahan refinery is also feeding the Sepahan Oil Company, Isfahan Petrochemical Plant, Arak Petrochemical Plant, Jay Oil Refining Company and Iran Chemical Industries Investment Co. (ICIIC).

Standard Output

A major approach pursued by this major refinery is to supply petroleum products in compliance with international standards. Senior officials at this refining facility express hope that it becomes the excellent supplier of refined petroleum products by 2021. That is why IORC is the second leading refining company in Iran. According to the ranking of  Industrial Management Institute (IMI) expert group, of a total of 500 companies evaluated in 2019, IORC is ranked the second in terms of sales in general and the first in terms of petroleum products sales.

Morteza Ebrahimi, CEO of IORC, told "Iran Petroleum" that IORC was upgrading its main products including gasoline and gasoil as part of its social responsibility activities, as well as activities for upgrading social health and supplying environmentally friendly fuel.

To that effect, a gasoline production plant came online in 2013. Two years later, it started operating at full capacity to supply 12 ml/d of Euro-4 gasoline.

He cited a distillation unit, a liquefied gas unit and several environmental projects among new projects at this refining facility, saying: “The full capacity of IORC is 375,000 b/d. After the startup of the distillation unit and a liquefied gas unit, this capacity is distributed in three distillation units, thereby reducing overload.

He said that more distillation units would add to the longevity of equipment and significantly reduce repair costs.

Ebrahimi said the main objective was to improve the functionality of IORC throughout its work process.

He said in this way the refining capacity does not increase because the refinery would see its refining capacity cut by 15,000 b/d. But in general terms, this refining unit would significantly reduce costs.

Ebrahimi said following the commissioning of a third distillation unit, the visbreaker units were put out of service.

“Such modifications would reduce production rate of fuel oil which is a harmful fuel and rather than that would supply mass amounts of valuable products like gasoline, gasoil, kerosene and jet fuel,” he added.

Gasoline Output Hike

Ebrahimi said in case of any further national need for gasoline production, the two adjacent visbreaker units may be used and then the company’s feedstock supply would increase 60,000 b/d to 70,000 b/d.

“A gasoil production project was approved in 2011 for producing Euro-5 grade gasoil. Once operational, this project would supply more than 22 ml/d of Euro-5 gasoil. Currently, 2 ml/d of Euro-5 gasoil is available for urban commuting,” he said.

Ebrahimi said that the quality of gasoline produced at the Isfahan refinery, currently at 12 ml/d, had been upgraded to Euro-5.

Enumerating other companies, he touched on a gasoil production company, gasoil off-site utilities, DM water section, steam boilers, modernization of power supply system and gasoline production units’ communications lines.

“So far, loading platforms, a pumping station and a wastewater treatment system have been launched in Shahin Shahr. Other active projects at Isfahan refinery are a 230/33 KV station, utilities for domestic projects, water cooling tower reconstruction, natural gas decompression station and RHU, he said.

Equipment 70% Domestically-Sourced

Ebrahimi said the refinery’s procurement unit started work in 2001 in order to provide domestically-manufactured equipment for the facility. It has largely been involved in supplying refining equipment, particularly rotary machinery like turbine, pump, compressor and toothed wheel. Eighty percent of equipment needed in the Isfahan refinery is sourced domestically.

Light Products Loading

Ebrahimi said 18 loading platforms had been built at the refinery for handling such products as isorecycle, solvent and vacuum bottom. Covering 1.5 ha of land, it cost more than IRR 600 billion.

The platforms are arranged in nine rows; six platforms handle light products (like solvents) and six others handle heavy products (like vacuum bottom and isorecycle).

RO-Based Waste Treatment

The Isfahan refinery has undertaken numerous measures to serve the environment. Ebrahimi said the granulated sulfur production unit of the refinery with a capacity of 300 tonnes a day had come on-stream as part of efforts to remove environmental pollution during the process of solidification, storage and packaging of sulfur.

The granulated sulfur unit would preserve the quality of product while accelerating the rate of production.

Furthermore, the first national environmental project on wastewater treatment had come online with a capacity of 750 cubic meters per hour.

According to plans, transfer and treatment of wastewater in Shahin Shahr has been done in partnership with two domestic companies in three steps: building a pumping station, operating a transmission line to the refinery and building a treatment station on the site of the company. This facility was built over a period of 24 months and cost more than IRR 1,000 billion.

Ebrahimi said the Isfahan refinery was the first refining company in Iran using reverse osmosis technology in wastewater treatment.

Sludge Converted to Cement

With a view to reducing environmental pollution, Payam Noor Isfahan University operated a research project on using the sludge recovered from the wastewater treatment unit of the Isfahan refinery at the Ardestan cement manufacturing plant under supervision of the provincial Department of the Environment. The project was assigned by IORC.

Bandar Abbas-Tehran Oil Pipeline Shortened

Construction of pipelines in Iran to transmit oil and petroleum products is as old as the petroleum industry in the country. In fact, ever since oil was discovered, extracted and processed in Iran, the issue of transmitting crude oil and petroleum refined products went ahead in parallel with each other, thereby making it impossible to make any distinction between oil transmission and pipeline construction. For Iran’s petroleum industry, there was no doubt that building a pipeline would facilitate the projected supply of petroleum products.

The first pipeline in Iran came online in 1910, two years following oil discovery in Iran. In 1911, the first oil pipeline stretching from Masjed Soleiman to Abadan was ready for operation. Due to the significance of oil pipeline for the petroleum industry, development projects for building pipelines became operational one after another. Since around one hundred years ago, construction of oil pipeline in Iran has not stopped. There is currently 14,000 km of pipeline across Iran, serving as the artery of Iran’s oil. This extended network is equipped with the most advanced industrial telecommunications equipment and manned by Iranian experts. It guarantees sustainable distribution of crude oil and refined petroleum products across the country.

In October 2000, the Iranian Oil Pipelines and Telecommunications Company (IOPTC) was established as a subsidiary of the National Iranian Oil Refining and Distribution Company (NIORDC).

Feeding Refineries

Transmitting 123 billion liters of petroleum products a year, supply of feedstock to seven refineries and several petrochemical plants, supplying fuel to several power plants and distribution of 400 ml/d of petroleum products as part of self-sufficiency campaign and domestic manufacturing of 70% of equipment were part of IOPTC achievements.

All refining facilities in Iran have managed to implement their activities owing to extended pipelines serving Iran’s petroleum industry.

Twelve pipeline zones across the country distribute crude oil and petroleum products. But one project is instrumental. The pipelines carrying oil and petroleum products to Tehran and then to northern parts of the country are strategic. Big projects are connected to Tehran as a direct hub of oil and petroleum products.

Invisible Project

The pipeline industry may not be visible because of its nature. Pipes are laid underground and they are not visible. Therefore, one may easily ignore the efforts of those involved in pipe manufacturing.

The pipe network crossing Tehran was initially designed to carry 180,000 barrels of products, or 27.5 million liters of liquid hydrocarbon. In the next phase, this capacity increased to 205,000 barrels, or 30 million liters.

The important aspect of this project is that before implementation of this project there was no pipeline serving Kashan, a city in central Iran.

The new pipeline will even shorten the route for the transfer of petroleum products from Bandar Abbas Gas Condensate Refinery and Bandar Abbas Oil Refinery and Hormuz Oil Refinery to Tehran and on to Northern provinces.

The construction of this 414-km pipeline has saved costs in distribution, not to mention its role in serving other cities than Tehran. The project has two pumping stations in the cities of Naein and Kashan and a terminal in Tehran.

Reliance on Domestic Manufacturing

In this project, 50,000 tonnes of pipeline was used and 80% of equipment was sourced domestically. In fact, the project once more underlined Iran’s oil transmission industry potential and provided that Iranian industrialists consider no borders when it comes to transmitting petroleum products. One major feature of the project is its fully Iranian implementation, which was impossible until several years ago without foreign help.

Qasem Arab Yar-Mohammadi, CEO of IOPTC, told "Iran Petroleum" that the Naein-Kashan-Rey pipeline and 10 storage tanks with a total capacity of 300 million liters in Naein were aimed at completing the chain of petroleum products transmission from Bandar Abbas in southern Iran to the Rey oil terminal near Tehran.

“The Naein-Kashan-Rey pipeline is in fact the extension of the Bandar Abbas-Naein pipeline which then diverted to Isfahan and then Tehran. But the new pipeline cuts 150 km from the previous route, which is an outstanding feature of this project,” he said.

Arab Yar-Mohammadi said two 63KV power supply posts in Naein and Kashan, as well as a 6-km high-voltage power transmission line are among the utilities of the pipeline project.

“The pipeline is also equipped with leak detection system,” he added.

He said that refined petroleum products including gasoil, kerosene and gasoline were also being supplied from three refineries in southern Iran to Tehran and northern cities.

“The project was assigned in 2013 by IOPTC to National Iranian Oil Engineering Company (NIOEC) to handle it,” he added.

Arab Yar-Mohammadi said that a 99-km pipeline extending from Yazd to Naein had been under way in parallel with the Rey pipeline by IOPTC experts.  

Environmentally Friendly Project

The Naein-Kashan-Rey pipeline project is a fully environmentally friendly project. The pipes used in the project would inflict minimum damage on the environment.

The startup of this pipeline project would dispense with more than 1,500 oil tankers carrying products on roads. That would reduce environmental pollution and reduce the possibility of road crashes, not to mention heavy traffic congestion on inter-city roads.

The commissioning of the Naein-Kashan-Rey pipeline project is a sign of maturity in Iran’s pipeline industry.

Crude oil and refined petroleum products are transported across Iran in 14,000 kilometers of pipeline with pipes’ diameters varying between 4 and 32 inches. There are also 49 routes, 110 transmission centers and 9 pressure reduction stations guaranteeing fuel distribution across Iran.

Relying on its records and experience, IOPTC is now able to handle much bigger projects, which is too much for an industry subject to unjust sanctions.

Iran Sports Owing to Oil Industry

Arash Jafari

Ismaeil Kaboutaran joined National Iranian Oil Company (NIOC) sports in 2004 after winning national championship title. He has also won the Asian championship title in track and field. He has a brilliant record in volleyball and football, not to mention his expertise in bodybuilding. He has also obtained certificates for training in the volleyball, bodybuilding, track and field, swimming and life guard sectors. For eight years, he was the head of the sports department of Iranian Offshore Oil Company (IOOC).

He has been recently named acting head of Department of Health, Physical Exercises and Social Responsibility of the Ministry of Petroleum. The following is the full text of "Iran Petroleum" interview with him.

As a national champion and athlete, how do you assess sports in the Ministry of Petroleum? How do you plan to upgrade its status?

Sport has a long record in the petroleum industry. It would not be exaggeration if we say that Iran’s sports sector owes to the petroleum industry’s fundamental and influential activities. Such disciplines as golf, tennis, swimming, horse riding, football, water polo first emerged in the oil sector.

Sports activities are instrumental in the petroleum industry policies due to their role in safeguarding and upgrading the health of petroleum industry staff. I feel compelled to take steps in this direction, and undoubtedly the strategies and plans of this department would be in line with such policies.

Do you have any plans to promote sport for all? What is your priority?

We often talk about promoting sports for all and we easily forget it. What matters is that development in every sector requires numerous factors, ranging from infrastructure to human resources and financial issues. All actors are required to join hands and move towards development. [Minister of Petroleum Bijan] Zangeneh’s emphasis on sports and health has clarified the relevant policies and path. Of course, development in the proper sense of the word is very tough; however, I hope that the way would be cleared for us. For instance, expanding infrastructure in sports can become more diverse by presenting more sport activities to let us attract a broader spectrum of staff into sports activities. For instance, we cannot force those interested in rock climbing to opt for football or volleyball. In short, development needs all-out support.

What are you plans for basic sports and for children? Do you identify talents?

Identifying talents and growing them are two important tasks with regard to basic sports and children. Champion teams are required to allocate a 70% share to the children of staff of petroleum industry. Therefore, we have to take basic sports seriously.

Would you please explain about approaches for identifying talents in sports?

We need to examine the conditions of people to see if they meet requirements for individual or team sports. In identifying talents, you need to evaluate the physical and mental conditions of individuals to see which discipline may suit him.

It is noteworthy that talent has nothing to do with skills. It depends on physical conditions and individual movements. All across the world, skill is not the only factor focused upon; rather, individual skills and movements should be also taken into consideration. If one is capable enough he would receive training for skills.

Olympiads were a way to show off sports in the petroleum industry. Don’t you think that their suspension is harmful?

Given the present circumstances, prioritizing sports activities is our main task. Absorbing as many persons as possible from the petroleum industry family is the top priority of this department. I would like to add that as conditions improve, there would be planning for the revival of Olympiads like in previous years.

What are your plans for championship sports?

All across the world, major and capable companies step into championship sports in order to support championship teams. However, the issue of championship is different in oil. The petroleum industry’s approach vis-à-vis championship sports are associated with social responsibility.

What do you think of women’s sports? Do you have any plans for improvement?

In sports, policies are equal for men and women. Every policy envisaged for men would apply to women, too. I would like to note that we hold a special view vis-à-vis women in some cases. Due to special conditions dominating women’s sports, we need to support them.

How do you see the petroleum industry’s sport horizon?

I am optimistic. Sport is facing ups and downs everywhere in the world and we are no exception to this rule. However, I am sure that conditions would improve shortly.

Any words for conclusion?

I would like to offer my sincere gratitude to my predecessors. I am the inheritor of the strong fundamentals laid earlier in the petroleum industry’s sports. Relying on my experience, knowledge and communications with the petroleum industry’s sport, I will try my best to improve conditions in the petroleum industry’s sport.