OPEC Coherence Key to Market Stability

Kasra nouri

Director General of Public Relations

Six decades have passed since five big oil producing nations founded OPEC in September 1960. The primary objective behind the establishment of the Organization of the Petroleum Exporting Countries was to safeguard the interests of oil producers against colonial policies of big oil companies that had artificially kept oil prices low owning to their technological knowhow and dominance of transport network. However, OPEC was founded to coordinate and integrate member states’ oil policy and explore the best way to protect collective interests and find options for oil price stability.

Despite all ups and downs, OPEC has since been instrumental in the oil market stability, fair pricing and bringing balance to supply and demand with a view to ensuring sustainable supply.

Six decades on, OPEC remains an influential organization whose significance is seen in sitting atop more than two-thirds of global oil reserves and finding partners across the globe.

The decision by OPEC and allies, collectively OPEC+, in December 2016 for cooperation showed that OPEC remained an organization favoring justice and stability.

Financial market speculators are seeking today to play the role of the Seven Sisters by imposing unrealistic prices to cause chaos in the market and harm both producers and consumers. OPEC remains the sole body capable of bringing an end to such chaos and restoring stability to oil markets through cooperation and cohesion.

However, OPEC is faced with myriad challenges. They include the enhanced role of financial markets in oil price control, political rivalry in the oil sector and global economic depression caused by the Covid-19 outbreak.

Add to those challenges the US’s use of oil as a tool for political pressure and imposing sanctions on oil producers that would in the long term disrupt oil production and supply.

The only solution to all these problems is what Minister of Petroleum Bijan Zangeneh said: OPEC coherence.

Enhanced cooperation between OPEC member states and cohesion between producers and consumers would provide the best solution towards stability and balance in the market. That would empower all parties to be involved in long-term industrial, economic and social planning.

OPEC Turns 60

Successful Past, Sustainable Future

In September 1960, the representatives of the five founding members of the Organization of the Petroleum Exporting Countries (OPEC), i.e. Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, held a four-day conference in the Iraqi capital Baghdad. The conference gave rise to OPEC as a permanent intergovernmental organization.

The five countries were holding 67% of global oil reserves and 36% of world oil market. OPEC’s Statute was adopted in the January 1961 meeting of the producer group before being endorsed by UN Security Council Resolution 6363 on November 6, 1962.

These countries were later joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), Angola (2007), Equatorial Guinea (2017) and Congo (2018).

Ecuador suspended its membership in December 1992, rejoined OPEC in October 2007, but decided to withdraw its membership of OPEC effective 1 January 2020. Indonesia suspended its membership in January 2009, reactivated it again in January 2016, but decided to suspend its membership once more at the 171st Meeting of the OPEC Conference on 30 November 2016. Gabon terminated its membership in January 1995. However, it rejoined the Organization in July 2016. Qatar terminated its membership on 1 January 2019.

This means that, currently, the Organization has a total of 13 Member Countries.

 It is stipulated in the Statute that “any country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of Member Countries, may become a Full Member of the Organization, if accepted by a majority of three-fourths of Full Members, including the concurring votes of all Founder Members.”

The Statute further provides for Associate Members which are those countries that do not qualify for full membership, but are nevertheless admitted under such special conditions as may be prescribed by the Conference.

Today, OPEC members account for 40% of global oil production and 60% of global oil trade. The Organization is celebrating its 60th anniversary against the backdrop of the Covid-19 pandemic that has sharply slashed demand for oil, and has subsequently caused a price slump.

OPEC has definitely played a constructive role in the oil market management over the past six decades. Recently, many maintained that OPEC is no longer as effective as it was and it could no longer control the oil market. However, OPEC decisions aimed at restoring the market stability showed that this organization was still a key player. The decisions and policies of OPEC over recent months and years have been aimed at interacting with consumers and balancing global oil prices. That has been in harmony with OPEC member’s oil production quota in proportion to supply and demand.

Over the past ten years, OPEC has cut its production in order to shore up prices. To that end, OPEC and its allies closed ranks to find a solution for the market stability. The OPEC+ agreement still stands.

Preventing oil shocks, breaking the monopoly of major oil companies over the market and the petroleum industry and controlling oil resources and achieving a reasonable level of revenue are some of positive impacts of OPEC.

Today, oil prices are set based on market mechanisms and physical transactions in the market; however, OPEC’s policies and decisions have always affected the global oil market and it could be concluded that OPEC has tried its best in the market management in favor of producers, consumers and investors.

OPEC makes plans with a view to achieving sustainable revenue, securing supply and demand. Due to their geographical location in three continents, OPEC member states have had to reach mutual understanding and upgrade their ties.

According to OPEC’s Statute, “the principal aim of the Organization shall be the coordination and unification of the petroleum policies of Member Countries and the determination of the best means for safeguarding their interests, individually and collectively.

“The Organization shall devise ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations,” according to the Statute.

OPEC Organs

The Organization shall have three organs: The Conference; the Board of Governors; and the Secretariat.

The Conference holds two Ordinary Meetings a year. However, an Extraordinary Meeting of the Conference may be convened at the request of a Member Country by the Secretary General, after consultation with the President and approval by a simple majority of the Member Countries. In the absence of unanimity among Member Countries approving the convening of such a Meeting, as to the date and venue of the Meeting, they will be fixed by the Secretary General in consultation with the President.

The Board of Governors is composed of Governors nominated by the Member Countries and confirmed by the Conference. Each Member of the Organization should be represented at all Meetings of the Board of Governors; however, a quorum of two-thirds is necessary for the holding of a Meeting and making decisions.

The Secretariat carries out the executive functions of the Organization in accordance with the provisions of the Statute under the direction of the Board of Governors. OPEC’s Secretariat was initially based in Geneva, but in 1965 it was moved to Vienna where its headquarters is based.

The Conference appoints the Secretary General for a period of three years, which term of office may be renewed once for the same period of time. This appointment takes place upon nomination by Member Countries and after a comparative study of the nominees’ qualifications.

The Conference elects President and an Alternate President at its first Preliminary Meeting. The Alternate President will exercise the responsibilities of the President in his absence, or when he is unable to carry out his responsibilities. The President holds office for the duration of the Meeting of the Conference, and will retain the title until the next Meeting.

As a founding member, Iran is trying its best in favor of its national interests in the global market through active presence within OPEC. However, over recent years, unilateral sanctions have exerted double pressure on Iran’s petroleum industry. Iran’s Foad Rohani was the first secretary general of OPEC from 1961-1964.

Iran has so far hosted OPEC conferences three times: in 1961, in 1971 and in 2005. The country has also presided over OPEC Conference nine times.

Iran’s Minister of Petroleum Bijan Zangeneh is the doyen of OPEC now.

Zamani-Nia: OPEC should Protect Members by Relying on Partnership

 Roya Khaleqi

 Iran’s OPEC governor Amir-Hossein Zamani-Nia says all member states of the Organization of the Petroleum Countries should oppose and decry – both in words and deeds – the use of oil as a political tool for exerting pressure and imposing embargo on oil producers.

In an interview, Zamani-Nia said following six decades of activity, OPEC’s role in the market has been institutionalized, adding that it has become mature and effective enough in dealing with various political and economic developments.

He said the future of demand for oil remained uncertain due to the outbreak of the novel coronavirus.

Referring to cooperation between OPEC and non-OPEC producers, he said: “As long as the nations involved in this cooperation have a common understanding of challenges lying ahead and have approaches for countering them, this cooperation may continue.”

Asked about if Iran would exit OPEC, he said: “Iran is a founding member of OPEC. It has done a lot for protecting and upgrading the Organization in the international oil area, over sixty years. Exaggeration aside, Iran remains one of the most important OPEC member states, whose membership has given credit to the body. Iran and OPEC are not separable and expressing some remarks about exit from OPEC would please our enemies would run contrary to our national interests and would damage our country’s prestige in cooperation within international bodies.”

The full text of the interview is as follows:

 How do you see OPEC at 60th anniversary of its foundation?

The 60th anniversary of establishment of OPEC has coincided with key events that highlight more than ever the role and standing of the Organization in global economic developments and particularly in the global oil market. The impacts and consequences of global economic recession caused by the coronavirus outbreak on the oil market and the major oil producers’ expectation from OPEC for decision-making and action based on the prevailing conditions indicate that the Organization, relying on its own tools, plays a significant role in restoring stability and balance to the market, and helping improve conditions in favor of producers, consumers and global economy. In other words, the outbreak of the coronavirus in the year coinciding with the 60th anniversary of establishment of OPEC marks a turning point for OPEC and its member states to prove themselves through intra-organizational cooperation, as well as interaction with non-OPEC producers for countering an international extensive challenge and realizing the joint objective of restoring stability and balance to the oil market and global prices.

 During its sixth decade of foundation, OPEC pursued both market share policies (in 2014 and briefly in March and April 2020) and price policy (Declaration of Cooperation). What do you think of this policy and its consequences?

During six decades of activity, as mentioned in its Statute, OPEC has based its policies and plans on the objective of restoring stability and calm to the global oil market. To that end, the tools in OPEC’s hands have been used through making efforts to either preserve its market share or to upgrade oil prices. OPEC’s 2020 measures and policies have not been outside the past rules. OPEC has used all tools at its disposal for stability and balance in the oil market, depending on the market circumstances and requirements. OPEC’s 2020 policies and measures are not outside the organization’s past rules. Depending on the oil market circumstances and needs, OPEC has used every tool at its disposal for reaching stability and balance.

 Is there once more the likelihood of a price war between Russia and Saudi Arabia, similar to March 2020, pushing Russia to quit the Declaration of Cooperation (DoC)? Russia seems to be seeking to control shale oil prices through price mechanisms, but Saudi Arabia is not.

It has to be noted that OPEC+ cooperation within the framework of the DoC was something unprecedented in the history of world oil market and OPEC. Huge efforts have been made by the signatories for protecting the declaration. Differences of view and absence of friendly atmosphere are natural in international cooperation because every nation prioritizes its own interests and makes effort to secure them with every tool or method. That may even spell an end to cooperation. The OPEC+ DoC is a voluntary cooperation which any OPEC or non-OPEC country may decide to quit or dishonor as was the case with Mexico. However, as long as OPEC+ signatories pursue the joint objective of restoring stability and balance to the oil market, one may be optimistic about the continuation of this cooperation. So is the case with Russia. Russia is one of the largest oil producers in the world. It pursues its own views and interests in the oil market, which are not necessarily in full compliance with OPEC’s views and policies. However, the measures undertaken by this country ever since the start of OPEC+ DoC are indicative of this country’s firm will and determination to contribute to the stability of global oil market. The effective presence of this country alongside OPEC has been instrumental in cooperation between OPEC and non-OPEC since November 2016 in the management of global oil supply.

 What do you think are the most important concerns of OPEC in the long term?

Concerns about weakened global oil demand have always been a major cause of concern for OPEC and its member states. Either in the short or in the long-term, the issue of demand security is a major concern for OPEC. The outbreak of the coronavirus and its consequences for global economy may cause some important changes in the consumption paradigms and global demand for oil although the virus is expected to be short-lived. However, the mid and long-term impacts of such changes would be worrying. On the other hand,

changes in the global energy mix and moving in the direction of using clean energy instead of fossil fuel would be a major cause of concern for OPEC in the long term, which would give rise to significant consequences for the oil market and OPEC member states in competition for guaranteeing their quota in the global oil and energy market.

Oil demand is forecast to be falling as conventional and unconventional oil is being supplied simultaneously on the market. It seems that we are entering the era of oil glut. How long will oil prices remain low?

Any prediction on the future of oil price is as tough and almost impossible as the current complications in the global oil market, especially at a time when the global oil market is under strain from weak demand and supply glut mainly due to the coronavirus outbreak and the ensuing fall in global oil consumption. In early 2000s, everyone talked about the era of oil abundance and peak oil, but we saw that new trends came to dominate the oil market, which increased oil demand to more than 100 mb/d. As long as the world economy has not returned to pre-covid conditions, it would be impossible to resent any realistic outlook about the future of global oil demand. On a broader scale, the global oil price is affected by numerous political, economic and security parameters. Any change in these parameters would affect the future trends and levels of global oil prices.

What are low oil price challenges for OPEC nations which heavily depend on oil revenues? Which policy do you think these nations adopt?

The loss of a significant part of annual revenue and a reduction in the fiscal power of oil producing nations including OPEC about new investment in enhanced recovery would represent the most important challenge caused by low oil prices, which is affecting all oil producers. The solution for fighting these conditions is to reduce surplus costs in the economy, boosting productivity and diversifying sources of income based on national economic capabilities, which must be used as the economic priorities of oil exporting nations under the current circumstances.

How can OPEC+ cooperation continue within the framework of the DoC? OPEC has lost a major share of the market in recent years due to increased decline in production, while at the same time the US has been supplying oil on the market.

About four years have passed since DoC took effect. Over this period of time, more than 10 joint ministerial meetings have been held while OPEC and non-OPEC countries in attendance. As far as cooperation between these two is concerned, cooperation may continue as long as the countries engaged in this cooperation have a common understanding of challenges lying ahead, and have solutions for countering those challenges.

Don’t you think that continuation of this policy would lead to OPEC’s collapse?

Cooperation between OPEC and non-OPEC countries has had many positive results, which should be taken into consideration when it comes to reviewing OPEC’s behavior and policy. These positive results include lower market stability, modification of the level of oil storage, particularly pre-covid and improvement in oil prices and revenue by OPEC member states. Without DoC, OPEC and non-OPEC countries would not have moved to modify the level of oil supply and while US oil production has increased, there was no guarantee for OPEC to maintain its market share. OPEC’s share of oil market is an institutionalized role that has taken shape over six decades in the face of various political and economic developments and that is why OPEC has reached the current maturity and influence. Definitely, it would lead OPEC in the future.

One of the major concerns of OPEC is the application of environmental and climate conditions against fossil fuel production in the world. What do you think of the significance of this issue?

Since mid-1980s, OPEC has been faced with uncertainty about the impact of the environment on global oil prices and it has taken this issue into consideration. The 1992 adoption of the United Nations Framework Convention on Climate Change pushed various organs including OPEC to pursue global environmental and climate changes with more sensitivity and this issue was included in OPEC’s 10 main challenges in its long-term strategy. This challenge affects long-term oil supply and demand at various degrees. Over the past 30 years, it has taken new dimensions as international organs and conventions been upgraded. Equally, it has affected long-term oil price developments and subsequently oil revenue from OPEC member states.

In a long-term horizon ending the current century, depending on the level of obligation and the level of application of environmental standards against oil production and consumption, sanctions and global extent and the level of development of alternative energy technology, global oil prices may experience different unstable conditions in the future. Of course, it has to be noted that environmental policies are first and foremost directed at the reduction of coal consumption. Coal made up a 27% share in the 2019 global energy mix.

As OPEC starts its seventh decade of life, an inevitable fact is the issue of energy transition, for which there is strong evidence. In your view, how can OPEC nations deal with this issue? Which approaches should countries like Iran adopt? Is it likely that a significant portion of Iranian oil reserves is abandoned uneconomically under the ground?

Over recent years, the issue of energy transition in the world towards green energies has been expanded within the framework of Sustainable Development Goals (SDGs) with environmentalists analyzing it in a conceptual framework as the solution to save humanity from the consequences of global warming. However, the fact is that the issue of “energy transition” within the framework of reducing dependence on oil was first raised by the Organization for Economic Cooperation and Development (OECD) after the second oil shock in the 1970s under the title of renewable energies or alternative fuel within the framework of a policy countering OPEC. Therefore, OPEC member states have already

experienced this phenomenon, albeit limited, and taken action for its management. OPEC has always taken this issue into consideration in its oil management policy that high oil prices may pave the ground for increased investment and development of energies to replace crude oil, and subsequently reduce OPEC’s share of oil market. In fact, OPEC has benefited from the advantage of producing low-cost oil price in dealing with the phenomenon of energy transition. On the other hand, OPEC and its member states have attended international forums and organizations in a bid to modify ambitious climate policies, and demand development of technologies that would be helpful in the green production and consumption of oil. Meantime, within the framework of “right to development” adopted by the United States, OPEC has proceeded with its talks for the transfer and development of technology and diversification of economy in the oil-dependent nations within the framework of talks on climate changes. In a general assessment, it must be said that the main strategy pursued by OPEC and its member states for the management of “energy transition” over coming years would be summarized in benefiting from advantages, managing the global supply of oil and showing active presence in international talks on climate.

In the meantime, it has to be noted that since two decades ago, some oil analysts have been talking about the end of oil era, and today there is talk of oil demand peaking over one decade. However, it is seen that oil constitutes the highest share of the energy mix. Based on the latest projections by OPEC Secretariat (Aug 2020), by 2045 the share of oil  in the world’s energy mix would be 27.5%, the highest among other energy carriers, and the natural gas share would reach 25%. In other words, over 25 years, oil and gas would totally constitute 52.5% of global energy consumption with renewable energies (solar and wind) accounting for only 8.7% despite their significant growth. It has to be taken into consideration that development of green energy technologies in recent years has increased their competitive power, particularly in power generation and a bright horizon is seen for this kind of energy in the electricity sector. However, oil consumption in the transport sector, particularly in large parts of the world with no access to new technologies and necessary finances, will continue to play the dominant role at least up to 2050. On the other hand, given the use of oil for non-energy purposes in the industry and human life, it would be pessimistic to think that after transition to clean energy, oil would become a stranded asset. However, it does not mean that we can be assured about the future of oil and oil revenues (in terms of market and price). A variety of threats and uncertainties exist about oil and the consumption of oil in the future as a special fuel in the light of climate change policies and consuming natural gas for heating and movement would be reliable only for the period of transition. In fact, the signs of the new energy era are drafted in the Nationally Determined Contributions (NDCs) presented within the framework of the Paris accord to the Secretariat of the United Nations Framework Convention on Climate Change (UNFCCC). It is clear that the evolution of energy policies towards carbon-free (green) energies target upgrading energy productivity and behavioral changes of consumers. Implementing such measures would require billions of dollars in annual investment and technology. Therefore, it would differ from one country to another over coming years. However, it could be imagined that the world would take fundamental steps for changing the scene of global energy with the help of novel technologies.

Many nations want Iran to leave OPEC? Is it time for Iran to do so?

Iran is a founding member of OPEC. It has made huge efforts over the past 60 years for upgrading and protecting the Organization in the international oil arena. Exaggeration aside, Iran is one of the most important member states of OPEC, whose membership has given credit to the Organization. In the meantime, Iran’s membership in an international organization for more than six decades despite all political and economic ups and downs, due to the country’s effective role in OPEC’s decision and policymaking, has boosted Iran’s prestige. Iran and OPEC are inseparable, and expressing such remarks about Iran’s OPEC exit would favor our enemies and are in conflict with our national interests. That would also damage our country’s prestige regarding cooperation within the framework of international bodies. Of course, our main criterion is to secure our national interests, and I think that OPEC membership and upgrading this Organization would be in the interests of the country. Now and in the future, when fossil resources would be put under strain, the value of solidarity among OPEC member states would become more tangible. It is noteworthy that we support OPEC as long as the Islamic Republic of Iran’s interests are secured on part with fellow member states. Otherwise, membership of no international organization is mandatory.

As the last question, how do you assess OPEC’s treatment of Iran and Venezuela, which are both founding members, on the 60th anniversary of the Organization?

During some periods in the history of OPEC, we have seen the imposition of political will and pressure from outside on OPEC and direct interference within its affairs. Unfortunately, that has happened due to support from some member states. Any use of oil as a political lever to pressure and sanction oil producers has to be unanimously rejected and decried by all OPEC member states. OPEC should protect its own interests and rights, as well as those of member states through reliance on cooperation and partnership.

OPEC Founders Achievements

 HeshmatollahRazavi

OPEC has turned 60. Such a long time. Why was OPEC established? What has it brought to the five founding members?

Views are somewhat united on why OPEC was formed. The most significant reason for the establishment of OPEC was the reduction of oil prices by multinational companies – known as Seven Sisters – and the reaction by the top five oil exporting countries to control oil production and set oil prices.

In 1959, i.e. one year before OPEC was established; multinational oil companies drove down oil prices, thereby causing a decline in the revenue gained by oil-dependent nations.

The same trend repeated itself in August 1960. That gave a fresh impetus to oil exporting nations to cooperate for the establishment of an organization whose objective would be to make fair revenue from selling oil. One month following this decline, i.e. in September 1960, the Organization of the Petroleum Exporting Countries was founded by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela during a Baghdad conference.

The main reason for the establishment of OPEC was purely technical: controlling oil production level.

Two persons were prominent in the establishment of OPEC: Venezuela’s Juan Pablo Pérez Alfonzo, Saudi Arabia’s Abdullah al-Tariki.

But establishment of OPEC was the outcome of efforts undertaken by developing nations to exercise their right of sovereignty over natural resources.

OPEC was established 15 years after the end of World War II. If we return to those years and examine international developments we would find out that a significant number of former colonies have gained political dependence over time, and UN member states have increased in number. Only during the 1950s, more than 40 nations – mainly newly-independent Asian and African – joined the United Nations. That was the cornerstone of the formation of the power bloc of developing nations within the UN.

These nations realized that despite gaining political independence the economic dominance of formerly colonized nations would remain in force. That was the starting point for a series of measures at the UN for sovereignty over natural resources. The UN General Assembly adopted resolution 1803 on the “Permanent Sovereignty over Natural Resources” in December 1962. The formation of a UN commission for this purpose was the product of demand by developing nations for sovereignty on natural resources. The commission recognized nationalization of natural resources, a trend that had already begun in developing nations. Iran had in 1951 nationalized its petroleum industry. Five years after that, Egypt declared the Suez Canal national.

The foundation of OPEC was in fact a collective action by the petroleum exporting developing nations in exercising the right of sovereignty on natural resources and cutting hands of colonial powers.

Therefore, the two factors of oil price decline by multinational oil companies and the growing number of developing nations within the UN and the General Assembly’s decision to support the economic independence of these nations constituted the main reasons for the establishment of OPEC.

In parallel, another key economic event in 1957 contributed to the idea of establishment of OPEC. It was the emergence of the European Economic Community (today’s European Union) in 1957, i.e. three years before OPEC’s establishment, by Germany, France, Italy, the Netherlands, Belgium and Luxembourg based on the Rome Statute. The technical objective sought by the EEC was to reduce tariffs among member states.

With the turn of time, the EEC and OPEC chose different ways. Those who first developed the idea of formation of the EEC maintained that the objective set for this community could help bring about welfare and peace in Europe. Among them was French Jean Monnet who maintained that by tying the German and French economies and spreading the advantages of economic cooperation would help eradicate war in Europe and prevent devastating wars like WWI and WWII that struck the continent.

For these theorists who focused on convergence in international relations, expanding economic cooperation within Europe could in the long term spread to the political, social, parliamentary, judicial, monetary, financial and even military sectors and help improve life and restore peace to Europe.

That was the beginning of convergence in Europe. Gradually, the number of EEC member states increased to 27. Throughout economic cooperation, free movement of commodity, capital, services and human resources materialized.

Geographical borders were almost removed. Citizens of member states could move freely within EU borders and a single currency – the euro – was uttered. The European Parliament and the European Court of Justice were set up and the EU was no longer a purely economic body; rather it replaced the EEC.

Cooperation between EU member states went from the economic sector to political and even military sectors. You must remember Federica Mogherini, the EU foreign policy chief, during nuclear talks leading to the 2015 Iran deal. The German mark and French franc gave way to the euro. For traveling to a group of European countries, one needed to apply for the Schengen visa.

Targeting a technical objective, i.e. reducing tariffs, the EU stepped on the long way towards peace and welfare. It was mainly thanks to the theorists favoring convergence in international relations. Today, rarely may someone imagine that Germany and France would ignore the economic benefits generated by such cooperation to enter into a new war over national interests.

OPEC Founders

But the history of relations between the five founding members of OPEC, despite the 62-year EU trend, has been based on conflict, and war, in various ways, has been an outstanding feature of relationships between the founding member states.

During the first two decades of OPEC’s foundation and during the reign of the Pahlavi dynasty, Iran-Iraq ties were filled with competition and suspicion. A variety of reasons were to blame, ranging from the domination of bipolar system on the world and the spillover of competitions into regional relations due to Iraqi territorial claims.

The 1975 Algiers treaty ended the territorial dispute between Iran and Iraq, but five years later, on the 20th anniversary of OPEC’s foundation and one year following the 1979 Islamic Revolution, imposed war started. An eight-year internecine war broke out, causing hundreds of thousands of deaths, destruction of oil installations and other infrastructure and the loss of oil revenue. One fall-out of the war was division within OPEC.

Saudi Arabia and Kuwait were involved in this rivalry and they financially supported Iraq during its war on Iran. The bulk of the oil wealth of four OPEC founding members was fueling the flames of conflicts.

Three years after the end of the imposed war, the founders of OPEC witnessed another war. In the early 1990s, Iraq invaded Kuwait. Another costly war ensued, during which three founding members, i.e. Iraq, Kuwait and Saudi Arabia, suffered huge costs as Kuwaiti oil wells were torched.

Almost a decade later, another war broke out. This time, backed by OPEC members Saudi Arabia and Kuwait and presenting the pretext of weapons of mass destruction, the US invaded Iraq, converting sanctions, insecurity and instability in Iraqi oil wealth to a comeuppance for Iraqi people. Iraq is now reeling from the war and sanctions to lift its output, regardless of OPEC quotas and built a new future based on oil wealth.

Iran-Saudi ties were as much dependent on rivalry before the Islamic Revolution as after. However, in the wake of the revolution, ideological rivalry was added.

Iran and Saudi Arabia have been engaged in proxy wars for more than one decade now, ranging from Iraq to Syria, Lebanon and Yemen. Economic costs have been imposed on two OPEC founders.

Since Iran is a more powerful rival, Saudi Arabia and to a less extent Iraq and Kuwait have turned to foreign powers, particularly the US, to ensure a balance of power.

The US’s interventions have given rise to a new problem in the export of oil by two other founding members of OPEC. In fact, three founders of OPEC, arguing that they remain committed to supplying oil to consumers, are cooperating with Washington in order to help US policy of oil sanctions on Iran pay off.

The implicit consequence of these sanctions has been a relative increase in oil prices and the cost-effectiveness of oil production in the US. The oil price rally and the possibility of increased production in the US allowed that country to fully impose Venezuela, the only founding member of OPEC in the US backyard.

As far as Iran is concerned, the lack of a well thought out and long-term oil strategy is the flipside of the coin US success in driving Iran’s oil out of the market.

A number of administrations that took office in Iran following the Islamic Revolution have favored high oil prices, as oil revenue has been the best and easiest way to finance the budget without having to engage the society in building a solid-based economic structure.

The proponents of high oil prices in Iran have on some occasions spoken of $250 and even $400 a barrel without understanding that the US would welcome increased oil prices in order to reach energy security.

It may be concluded that the policy of defending high oil prices in Iran has in the long-term been of help to prosperity in production by non-OPEC states and facilitated oil embargo.

Adeli: OPEC Politicized by Some Member States

Negar sadeqi

Mohammad Hossein Adeli, former secretary general of the Gas Exporting Countries Forum (GECF), has said some member states of the Organization of the Petroleum Exporting Countries have politicized the Organization. In an interview, he cites the examples of countries that did not hesitate to compensate for Iranian and Venezuelan share following their US sanctions on the two member states.

The following is the full text of the interview Adeli gave to "Iran Petroleum".

We are approaching the sixtieth anniversary of establishment of OPEC. Ever since its coming to existence, the Organization experienced many ups and downs. In your opinion, which were the turning point periods for the Organization and has OPEC been able to reach its planned objectives?

Let me first take this opportunity to congratulate OPEC members, especially those founders of OPEC on this sixtieth anniversary of establishment of the organization, which has really been effective in the world economy and in the energy scenes. On the episodes of OPEC, one may highlight some; in the 70s, of course there was an oil embargo in 1973 and 1974 which resulted in soaring of the prices and in making the oil market volatile. Also in 1979 because of the withdrawal of Iranian oil, due to the Islamic Revolution, again, there was a huge and sudden shortage of oil and this resulted in the hike in oil price. In 80s, the oil prices went down and was stabilized a bit but in late 80s the oil prices fell dramatically and of course it resulted into some economic hardship for oil producing countries. In 90s low oil prices stabilized but again, we had the financial crisis in 1998, which also adversely effected the oil market. In 2000, the oil prices started to gradually rise and peaked in 2008 and 2009; and it then stabilized until 2014 when again it fell down and stabilized in a normal range. Thus if one can somehow divide the episode of OPEC, one can say in 70s they had some sort of determination to take control of their sovereignty on oil and resulted into some dramatic developments in the oil market. In 80s, and 90s, of course the oil market was quite down because the consumer countries were playing actively in the market. Then, in 2000 the prices were again up but, since 2014, the oil market is constantly facing lots of volatilities. These challenges are emanated not only from the glut in the market, but also from global environmental consciousness, the rise of the gas, renewable energy, the tension between some countries in the middle east, as well as the competition among all energy producing countries such as USA, Russia and other OPEC and non-OPEC countries. Therefore, there are lots of factors that are impacting the oil market and making it as volatile as possible.

To what degree have members of the Organization been successful in converging their views and achieving their goals? To what degree have they been able to secure the independence of their decisions in OPEC?

In fact, in the first decade of the establishment of OPEC, cooperation level was higher among the members and most of them were somewhat adhering to the noble objectives of the Organization which was and still is to upgrade the wellbeing of their people and to accelerate the economic development of their country. But as a matter of fact, after 70s in the 80s and 90s, one may say that some OPEC members were not cooperating with one another and there were some sort of intervention or influence from the consuming countries and some OPEC members were quite aligning their decisions with those consuming countries. It was in this period that two groups in OPEC emerged. One of the groups consisted of those who were keen in increasing their revenues from their oil export to benefit their people and economy, and the second one consisted of those who were concerned about the volume of the oil in the market. The first group was oil price supporter, while the second pushed for market share and pouring more oil into the market. The champions of the first group were Iran, Algeria, Venezuela, Libya, Nigeria and Iraq, while the followers of the second group were Saudi Arabia, and the rest of Persian Gulf littoral States.  This is why OPEC was not that much effective or successful in meeting their own objectives and goals. As a result of dominance of the second group in OPEC the oil prices, in real terms, diminished and could not match the price inflation of exports of consuming countries which imported oil. For the time being, it is very difficult to define“the independence” of OPEC. One may say that the world economy and world energy have become so sophisticated that no single player or actor could really make decisions to change the whole market. Therefore, it needs some sort of consensus or cooperation among the players and actors of the global market. There are new ways and ways to maintain the independence or to achieve the goals.

This is why we see that OPEC and non-OPEC countries have come together and they are making some decisions together in order to really contribute to the stabilization of oil market.

How do you evaluate the solidarity among OPEC members in supporting each other? For instance, to what extent did OPEC members support Iran and Venezuela which are sanctioned by USA? And does it basically make sense for countries to extend support in oil market where everyone is fighting to get higher quotas?

Well, as I said in the early period of the establishment of the Organization, there used to be more unity and cooperation amongst the member countries. But in the past couple of decades with the external influences from the consuming countries and from competitors of OPEC, we see that such unity has been fading away. Not only there is some competition, but also one may see that politics are now well entrenched into the positions of some members.  Therefore, we see that when production of some members such as Iran and Venezuela are forcefully pushed out of the market, other members readily and sometimes willingly would jump to offset it and add to their temporary quotas. There is no willingness to sympathize with the sanctioned members and challenge the unjust pressure on their co-OPEC members. So one may say that the unity is very weak and no member may rely on the others to get support for such challenges. But one thing has now become some sort of rule. That is when the sanctioned countries are back into the market, then their share ought to be given back by those who took them before. This is some sort of cooperation that is expected to still exist among members.

HE Zangeneh as one of the highly experienced oil Ministers in OPEC, always believed that the oil share of those OPEC members which for whatever reason are left out of the market, should be allocated to other OPEC members and not among other non-OPEC, until they are back into the market and claim their shares. To what extent do you believe that under current circumstances such idea is feasible and executable?

Well, as I mentioned this is one of the areas where the members of OPEC may cooperate with each other. The past history in OPEC demonstrates that members who took the share of sanctioned or affected members when they were out of the market; the previously-sanctioned members gave back their shares when their situation became normal.  I think Minister Zangeneh’s view is quite practical and is the least expectation that a member or a founding member can expect from the others. I guess that the members should work together to make this option and this solution is quite practical. All members who have taken benefit from the lost market share of any member that has been pushed out of the market should cooperate and help the affected member to get back to normal conditions as soon as possible. I believe that this is a very reasonable position that Minister Zangeneh has taken and I believe that Iran and other OPEC members should push for such a position and make it as accepted rule among OPEC member countries.

Now that Iran has twice lost its market share during the past 10 years and currently is under U.S. sanctions, can one still regard it as an influential OPEC member? I ask this question referring to Minister Zangeneh’s frequent statements declaring that position of power of countries are based on their production capabilities and not on their reserves. Noting that globally Iran has the highest oil and gas reserves combined, but her production is low relative to its potential as well as experiencing strict limitation on oil export.

Well, I think it is reasonable to say that the effectiveness of the role of the members has very direct correlation with the production and market share. The more production and market share a member has, the more flexibility and maneuverability she would have in directing and affecting the oil market. But in the meantime I guess that the oil diplomacy or capacity to play a role is something beyond production levels, and some countries such as Iran have traditionally been experiencing such capacity in OPEC. As a matter of fact, let me take you to the history. Iran definitely inspired the world oil market in the developing countries in encouraging them to take control over sovereignty of their oil and natural resources.  This goes back to the time of Mossadeq when Iran Prime Minister Dr. Mossadeq managed to overcome the challenges and succeeded in the process of confrontation between Iran and the British oil company in the UN and also in the International Court of Justice. At that time it really inspired the world and when he returned from the United States where he attended the UN meeting and defended the position of Iran successfully, on his way back home he landed in Egypt, he was very much welcomed there and all historians agree that, the position of Iran inspired the third world in taking the sovereignty of their natural resources. Therefore, having this historical background, Iran was one of the founding members of OPEC and has always been pursuing a very active diplomacy in this organization and regardless of   the level of production; Iran has the capacity to play an effective role in OPEC. Although I believe that production and market share is practically the most fundamental factor in strengthening the position of the OPEC members, the diplomacy and the role of the member country is not limited to the relevant level, but it also goes back to the strength of the country, its history and its capacity regionally and globally. Iran is strong enough to have such a role.

To which years do you relate the most important turning point of Iran in OPEC? Can it be claimed that Iran has had an acceptable track record during past seven years in OPEC?

In fact, I guess that although Iran has experienced ups and downs in OPEC during the last four decades, yet in most of the time Iran has been successful in attracting the attention of some OPEC members in reaching consensus and defending oil prices vis-à-vis the other notion that was pushing for the market share. Therefore, one may say that Iran has been relatively successful in pushing for oil prices and oil revenues and this has been supported by many OPEC members, as well as people of these countries because this has at times resulted in boosting their revenues and making them richer and more capable to pursue their economic developments. But on the performance of Iran in the past seven years it could be argued that the past seven years has been the most difficult years for Iranian economy and on the top of that for Iran's oil sector. One can say that Iran has really been more successful than ever in responding to these challenges and creating some opportunities out of these challenges. Internally Iran’s economy has become more diverse and resilient than ever. But on OPEC challenges, Iran was quite successful in getting back its own share of the market and creating a precedence which was very difficult. Iran was out of the market for some years and had lost its market share, while other members had taken the share of Iran. It was up to Iran to defend its position to regain its market share. This was successfully done by Minister Zangeneh’s effective diplomacy. He should be definitely credited for such achievement.  It is fair to say that, this has now become a precedence, which will be quite helpful in the future. When, after the present time, it comes back to the market, there is a precedence. Those members who took Iran’s market share, should give back the share of Iran to her.This is not just for Iran, but for all those who are in the same position.

Do you think that there will come a day when OPEC and non-OPEC countries under the chapeau of OPEC Plus, will join together in order to prevent the dramatic drop of oil prices? How do you see the future of this agreement?

I guess that the world economy and the world of energy have become so much complicated and sophisticated that require some sort of coordination amongst all players. Although all the oil producing countries compete with each other, in order to contribute to the global economic development, one would say that we need some sort of harmony amongst the policies of the oil producing countries. Therefore, it is quite reasonable and wise to have such kind of cooperation, especially at the time that some producers have been creating many challenges nowadays. I guess now oil has become even more politicized than ever. Especially I should refer to the United States that is playing a political game in the oil and energy market and this has created confrontational environment and has adversely affected the stability of the oil market, as well as the stability of the economy of the oil producing countries. One could see and witness what happened to the most of the oil producing countries after 2014. It is widely believed that as a result of pressure exerted by the United States, Saudi Arabia hastily increased its production level and poured oil into the market with lower prices. This resulted in the fall of oil prices affecting the economies of all oil producing countries.  The irony was that Saudi Arabia itself suffered huge budget deficit. Still I guess that most of the Persian Gulf littoral states are suffering from the deficit which started from the fall of the oil prices after 2014. Therefore, such kind of harmonization or coordination could be assessed as reasonable.

Noting the Corona virus pandemic and that the time for improvement of global oil demand is unknown, what is the most threatening challenges for OPEC and its allies?

Well, in my opinion the most important challenge that OPEC members are facing now is lack of enough coordination and unity amongst OPEC members. It seems that OPEC members should be careful to prevent the malicious and confrontational policies pushed by Trump administration into the Middle East, not to spillover to the OPEC organization, and one can see that there are many challenges in this field. So, first of all OPEC members should come together and realize that they have a common responsibility and a common goal to meet. They are responsible towards their own people and if they want to really recover and prosper economically, they have to come together rather than challenging each other fiercely for the benefits of adversaries. This is number one. Number two, of course the oil market is facing another challenge from outside the OPEC and rest of the world. United States has increased its oil and gas production and using these two tools in advancing its adventurist foreign policies, which is very aggressive, and very coercive and in a unilateral way. The other challenge that of course the oil is facing, is that oil is a fossil fuel and the future belongs to the energies with less Carbon. So environmental issues and climate change as well as renewable energy are also another challenge. It is a fact that the share of fossil fuels in global energy basket is decreasing and this is another challenge that OPEC should face and gradually adapt to it.

OPEC Turns 60; Achievements, Survival and Challenges

Mehdi Assali

This year, the Organization of the Petroleum Exporting Countries (OPEC) is marking 60 years of its foundation. Every year an anniversary ceremony is held on September 14, i.e. the day of OPEC foundation, at the Secretariat of the Organization. In addition, this year a special ceremony was due to be held in Baghdad with OPEC Secretary General Mohammad Barkindo and heads of delegation of OPEC member countries in attendance to commemorate the 60th anniversary of OPEC establishment; however, despite all the required arrangements made by Iraq, due to global COVID-19 pandemic the ceremony was wisely agreed to be postponed to some other time.

An expert-level videoconference meeting had been held earlier on June 23, during which a large number of senior managers and exports from OPEC member states and other oil and energy producers exchanged views.

Barkindo said OPEC was an organization linking the past, the present and the future. He enumerated OPEC’s achievements six decades after its foundation, saying the group of petrostates had served its own member states and helped maintain a balance in the tumultuous oil market and stabilize the price of this vital energy product.

Experts and pundits present in the meeting underlined the necessity of OPEC’s involvement with the oil market, and exchanged views about the various aspects of its influence on the oil market and challenges lying ahead.

On a broader scale, we plan to highlight the performance and key experience of this organization during various periods of its activity and note its major achievements, as well as challenges it has already faced or it is set to face in the future.

Our review involves benefiting from 60 years of OPEC’s experience in interaction with other key actors of the petroleum industry, the impact of OPEC’s decisions on global economy, current challenges and influential future developments.

Review of 6 Decades of Activity

On September 14, 1960, the delegates of OPEC’s founding member states – Iran’s Fuad Rouhani, Venezuela’s Juan Pablo Pérez Alfonzo, Saudi Arabia’s Abdullah al-Tariki and Iraq’s Tala'at al-Shaibani – gathered in the historic conference in Baghdad and announced the foundation of OPEC.

The establishment of OPEC had extensive and positive ramifications for its member states and the oil market in general. At the beginning, there was little hope in the survival of this inter-governmental organization that had been established by several developing nations, particularly in the important oil market dominated by oil concerns. However, OPEC gradually won recognition in the oil market and painted a clear picture of the sovereignty of developing nations over their valuable resources. The main policy sought by OPEC member states over the past six decades has been to hold constructive talks with a view to reaching consensus on various issues, and this method has proven to be successful. One of the major reasons for this spirit of successful cooperation is a clearly-drafted Statute whose provisions are honored by all member states. Respecting OPEC’s Statute has led to consensus and cooperation among the founding members of OPEC in all ministerial conferences from the very beginning until now.

Over the past 60 years, representatives of OPEC member states have well realized that adapting their own states’ outlook and perspective with the common good of OPEC would finally serve their interests. In practice, it has also been proven that the member states’ interests would be pursued when they comply with the common goal of the Organization.

Some authors and Western government spokespersons have termed OPEC as an oil cartel, but the very fact is that OPEC has never been an economic cartel.

OPEC’s share of global oil production over recent years has been about one-third, while its share of oil market has been below 45%. Contrary to economic cartels, OPEC has not set divided markets between its member states as cartels do. OPEC has made efforts to maintain the stability of oil markets at fair prices for the most valuable energy carrier, i.e. oil.

For OPEC, a fair price is a price that would help attract necessary investment while preserving production capacity and responding to demand. But at the same time, such prices should not be so high to negatively affect the economic growth of oil consumers.

OPEC was in fact created to counter the “Seven Sisters” oil cartel, comprising Anglo-Iranian Oil Company (originally Anglo-Persian; now BP), Royal Dutch Shell, Standard Oil Company of California (SoCal, later Chevron), Gulf Oil (now merged into Chevron)

Texaco (now merged into Chevron), Standard Oil Company of New Jersey (Esso, later Exxon, now part of ExxonMobil), and Standard Oil Company of New York (Socony, later Mobil, now part of ExxonMobil). The Seven Sisters were dominating the oil markets from 1920 to 1970.  These seven oil giants had divided the oil markets among themselves and worked in collusion to set prices. They dominated approximately the entire oil market (outside the former Soviet Union), including upstream, refining and retail activities. They used to extract oil from oil-rich nations at lowest prices and paid very small portion in royalties. OPEC was established against the backdrop of falling oil prices. In the meantime, demand for oil as well as oil production was on the rise. That was not acceptable to petrostates.

When the Seven Sisters were dominating the oil market, oil production was carried out under concession contracts. Under these contracts, oil companies were awarded extraction and production rights, while the owners of oil resources received meager royalties.

Concession contracts had been designed within the framework of colonial relationships between Western powers and oil-rich nations in the Middle East, Africa and Latin America. One decade into its formation, OPEC was still trying to improve the legal and financial aspects of oil exploration and extraction contracts and was trying to pave the ground for the nationalization of oil reserves in the member states.

Iran was a leading country in fighting this anti-colonialist movement, whose struggles lead to the nationalization of the petroleum industry in early 1950s. Iran, as a founder member of OPEC, served as an example for other oil-rich countries to struggle for nationalization. This trend was completed in the 1970s as OPEC’s activities were in full swing and the member states had nationalized their petroleum industry. In the 1970s, Libya, Algeria, Iraq, Venezuela, Kuwait and Saudi Arabia moved to nationalize their petroleum industry. Without OPEC, oil-rich nations were unlikely to follow such a trend and struggle for oil nationalization. The UN General Assembly’s adoption of Resolution 1803 on the “Permanent Sovereignty over Natural Resources” put the seal of approval on the process of nationalization of the petroleum industry in these nations. Some countries owning other natural resources like cocoa and coffee sought in vain to establish OPEC-style bodies.

OPEC turned out to be specifically influential in the 1970s, during which OPEC was practically the most important player in the oil market and the main oil supply managing element. In the following .

decades, due to reasons which will be discussed later OPEC’s influence was weakened.

To understand such circumstances, it has to be noted that OPEC’s influence on the oil market (or any other similar organization like the Gas Exporting Countries Forum (GECF) and the gas market) is determined by three major parameters: OPEC’s oil market share, price elasticity of global demand for OPEC oil and price elasticity of supply by non-OPEC producers. In the 1970s, OPEC’s oil market share stood high (for instance in 1973 when Arab member states of OPEC imposed an oil embargo on the United States and several other nations, OPEC’s market share stood at 56%), the price elasticity of global demand for OPEC oil was extremely low due to few alternatives for OPEC oil and extremely high oil and energy intensity, and the price elasticity of demand for non-OPEC oil was extremely low. It meant that the technologies of that era did not let any quick increase in oil production to replace OPEC’s oil supply. For these reasons, OPEC was highly influential in the oil market in the 1970s. In the following decades, due to the relatively high oil prices, the efficiency of energy and oil consumption increased while in parallel other oil-rich nations like Norway, Britain and Canada became major producers. Consequently, OPEC saw its oil market share drop.

Since the late 1970s, there was growing concern that oil supply shortage might drive up prices. The 1970 Islamic Revolution and the 1980 outbreak of the imposed war on Iran added to those concerns. Therefore, consumer nations were forced to look for alternative sources of energy. In the meantime, industrialized nations expanded their crude oil and petroleum products storage facilities following the Arab oil embargo in order to create a buffer zone when oil exporting nations may decide to cut output. Shale oil production technology had yet to be developed and therefore coal consumption for electricity production increased.

For its part, OPEC set quotas for its member states in the early 1980s in a bid to prevent a supply glut in the market. OPEC’s production ceiling stood at 17.5 mb/d in that time.

Since mid-1980s onwards, Saudi Arabia ended its balancing role in the oil market and consequently, Saudi Arabia’s oil production cut policy for saving market prices was forsaken. The market faced supply glut that slashed prices.

The market and oil prices instability continued up to early 1990s. By the end of the 1980s, the Iraq-Iran war ended after eight years and both nations moved to increase their production. The Union of Soviet Socialist Republics (USSR) collapsed, causing disruption in the Soviet Union’s oil production level. Oil prices dropped significantly in the 1990s once more due to an economic crisis in Southeast Asian nations, as well as OPEC’s policy of oil market share preservation. This reduction continued until OPEC member states agreed to modify their output level to help stabilize the market. OPEC ministers’ agreement in Jakarta in 1998 on increasing production to preserve OPEC’s market share against the backdrop of an economic crisis in Southeast Asia – a major oil consumption zone – led to significant slump in oil prices and taught OPEC a big lesson. This experience was used later under other circumstances.

In the 2000s, more specifically until 2008, the world was faced with growing demand for oil, caused mainly by the fast global economic growth rate, particularly in China. Therefore, OPEC was increasing its production capacity in a bid to prevent any extreme shortage of supply or sharp increase in prices.

When the global economic downturn struck in the second half of 2008, demand for oil and energy fell sharply, driving oil prices down. Therefore, OPEC decided in its historic meeting in Algeria to reduce its supply. Owing to this decision, the oil market trickled back to stability and oil prices became reasonable in the second half of 2009.

Over recent years, particularly with the shale oil and gas production in the United States that made this country a major oil producer, scattered comments have spread about OPEC’s undermined position and even ineffectiveness in the oil markets. The Foreign Policy magazine in its October 2013 issue ran an article under the title “The End of OPEC”. Seven years have passed and despite unfavorable cycles in the oil prices,especially from 2014 to 2016 due to OPEC’s refusal to cut its production to preserve the market share in the face of increased US oil production and the 2020 cycle of Covid-19 pandemic and the unprecedented decline in demand for oil and subsequently declining oil prices, OPEC continues to stand tall and still remains influential in the oil market.

Over these years, OPEC’s role in talks with key energy consumers like China and India and other influential energy bodies like the International Energy Agency (IEA), establishment of the International Energy Forum (IEF) and the energy data initiative has been significant.

OPEC was also involved in the issue of energy poverty eradication as a global objective defined under the UN sustainable development program through “OPEC Fund for International Development” (OFID)’s investment in developing nations. OFID was established in 1976 by member states.

OPEC has also been engaged in UN climate change talks and it has offered support for the Paris climate deal. OPEC has encouraged its member states to make efforts for mitigating greenhouse gases emission.

OPEC has encouraged its member states to embrace economic diversification and energy saving in light of the harmful impacts of greenhouse gases caused by fossil energy consumption. In the leading producers and exporters of oil and gas, fossil fuel prices are normally lower than international levels.

Past Experience Helps Restore Market Stability

It has to be noted that the recent decline in oil prices was not caused only by the COVID-19 outbreak; rather it was the product of several other key factors in the oil

market.Overflown oil and petroleum products storage tanks in major oil consuming countries, significant increase in the US oil production, particularly from the Permian Basin in Texas and somewhat from the Bakken fields in North Dakota, and finally increased supply by other oil producers were instrumental. For instance, in 2019 Brazil, Norway, Canada, Russia and the United States altogether produced more than OPEC. Therefore, with the COVID-19 outbreak in early 2020 and the subsequent shutdown of economic activities, particularly international and inter-urban travels in industrialized nations, oil prices fell to their lowest levels since 1991. These structural changes along with unprecedented shocks like pandemics posed serious challenges to OPEC, particularly at a time when some key members like Iran and Venezuela are under unjust US sanctions and some others like Libya and Iraq are dealing with domestic political unrest. On the one hand, OPEC’s share in the oil market has been affected while on the other, the price elasticity of demand for OPEC oil and the price elasticity of supply by non-OPEC have increased. Therefore, OPEC has concluded that the best option for restoring stability to market would be to cooperate with non-OPEC producers with a view to increasing its market share and boosting its influence in the market.

Thanks to its experience over the past six decades – periods when oversupply has led to price slump – OPEC has learned a lot. The oil price cycle through 2014 to 2016 and particularly the recent oil price cycle caused by the COVID-19 outbreak inflicted serious harm on the oil prices.

In 2016, i.e. three years before the coronavirus outbreak, OPEC reached agreement with Russia-led group of oil producers to manage the oil market and restore stability to it. This agreement resulted in an important statement known as the “Declaration of Cooperation” between OPEC and 11 non-OPEC countries (they became 10 after Guinea joined OPEC). The OPEC+ agreement continued to remain effective in 2017. A modified version of the agreement was put into effect in 2018. In the aftermath of the COVID-19 outbreak and lack of coordination that led to a short-lived rivalry between Saudi Arabia and Russia over market share, OPEC and Russia-led non-OPEC stuck with the “Declaration of Cooperation” in April 2020 and made a historic decision to cut 9.7 mb/d from their output as of May 2010 for two months. The agreement was then extended for another one month. By implementing the agreement with non-OPEC producers, OPEC managed to avoid a deeper slump in oil prices. However, due to the huge supply glut of 15 mb/d to 20 mb/d of oil in the market, oil prices kept falling. The historic decision to cut 9.7 mb/d from oil production by OPEC+ in May and June was a result of OPEC’s longtime experience in restoring stability to oil markets. Along with partners complying with the “Declaration of Cooperation”, OPEC has become more influential in the oil market. Under such exceptional circumstances, OPEC managed even to win the agreement of two oil producers: Canada and Norway, although not being among OPEC+ states. Owing to such activities, the oil market crash was averted.

The report presented by OPEC Secretary General during the 20th videoconference meeting of the Joint Ministerial Monitoring Committee (JMMC) on July 15, 2020 showed 87% compliance with the May production cuts. According to the report, all countries complying with the “Declaration of Cooperation” had offered support for full compliance with the April 2020 agreement. It was also decided that the countries that had failed to adapt their production with the quotas adjust their production in coming months to make up for their delays. Despite a record glut of 29 mb/d in the oil storage tanks of industrialized nations during April, May and June (totally 270 million barrels), the ground has been paved for oil market stability due to a relative increase in oil demand over three months and the gradual decline in the number of oil floating storages. Since call on OPEC is estimated at 23.4 mb/d this year, down 5.9 mb/d year-on-year, it is clear that OPEC would remain committed to its production cut pledge until the global economy is back to normal.

OPEC Necessity and Consequences of OPEC Absence

Many oil market analysts have noted that without OPEC, the oil market would experience more instability and tensions. Since heavy fluctuations in the oil price would give rise to adverse consequences, the very existence of this oil producer body and its decisions for market stability would be of great significance and value for the global economy. OPEC’s spare capacity is much more important than the US shale oil capacity in absorbing shocks and maintaining the oil market stability. The bulk of US shale oil production cannot continue with prices below $40 a barrel, but OPEC can survive even with prices hovering around $20. Therefore, non-OPEC producers cannot continue to keep producing at low prices, but OPEC can. In any case, OPEC would continue to contribute to the oil market stability for the purpose of sustained production in the long-term by preserving its spare production capacity and maintain prices at levels to be profitable for oil producers in terms of production and sales. On this basis, OPEC’s spare production capacity is acting like a shock absorber to spare the global economy any harm. Without OPEC, these shocks would become much more devastating.

With regard to the experience of recent years, it becomes clear that the “Declaration of Cooperation” between OPEC and its partners has been important because of its quick reaction to market instability. Meanwhile, it has to be recalled that significant decline in OPEC’s oil supply at a time of capacity building would mean an increase in the volume of OPEC spare capacity. In other words, without OPEC, in the light of continued supply by OPEC and allies the world would see a big gap between oil supply and demand, which would push down prices sharply to harm both producers and consumers in the long-term. But as it

was noted, JMMC’s reports showed OPEC+ was 90% committed to its production obligations and was trying to reach full compliance. It has to be noted that in the global oil market, an actor like OPEC will remain influential if it can adapt itself with changing conditions in the oil supply and demand. That requires extending OPEC’s perspective and adoption of a strategy to proceed with upstream activities, while maintaining competitive superiority in production in comparison with other producers. Only through adopting such strategies can OPEC’s decisions influence the world economy and the welfare of energy consumers. Since OPEC’s spare capacity significantlycontributes to the market stability, the major challenge faced by OPEC is not economic stagnation or demand shortage, but economic prosperity and low capacity due to the lack of required investment. Energy is essential for human life, economic activities and national security. Energy supply in a stable environment is of high importance for economic development. Oil continues to have the highest share among energy carriers and it remains the largest commercial commodity in the world. By adopting an effective and realistic strategy, OPEC will be able to fulfil its role for the market stability.

Future Challenges

In order to remain influential in the oil and energy market, and even guarantee its own survival, OPEC is faced with major challenges. One of these challenges results from climate changes caused by fossil fuel production and consumption, which is directly linked with OPEC’s existence and survival. It seems that the international community, in recent years, has inevitably reduced coal, oil and even natural gas production and consumption in the transportation and construction sectors and has adopted policies to that effect. As signs of climate changes grow on a daily basis, the issue of protecting the environment takes up added significance and global efforts increase for making energy consumption more efficient in the vehicles and buildings and switching from the consumption of fossil energy carriers like coal, oil and natural gas to renewableenergies. Some experts say if the Earth’s temperature rise is to be curbed by 1.5 degrees Celsius over 30 years, consumption of fossil fuels particularly coal and oil have to be cut sharply and even reach zero.

Many cities in developed nations have already started planning to cut down to zero their fossil energy consumption over 30 years.

Climate changes under conditions due to any rise in the Earth’s temperature from its current levels could prove destructive for Earth and making the Earth uninhabitable. That could bring about serious consequences particularly for some parts of the Earth like in the Middle East where temperature is often above the global average. Therefore, some oil experts are referring to the current era as the last generation of oil. That poses a serious challenge for OPEC nations whose conventional oil reserves make up 75% of world’s total. As currently about 60% of OPEC member states’ revenue depends on the recovery and export of oil reserves, the significance of challenge to OPEC member states becomes clearer. These challenges highlight the necessity of expert discussions regarding the perspective of OPEC’s future. It seems that a three-point strategy could help OPEC overcome these challenges:

Necessary investment in oil production capacity along with the carbon capture and storage (CCS) technology development and using emitted carbon in oil and gas production and consumption;
Enhancing energy efficiency and diversifying the economy in OPEC member states for increasing non-oil exports and reducing dependence on oil; and
Using crude oil (and natural gas) not for supplying fuel and thermal needs in the transportation sector and buildings, but as raw materials for oil and gas-based commodities in the downstream industry, particularly petrochemical industries.

Such strategy would help stabilize OPEC member states’ economy which has always been affected by oil price fluctuations and its ascending and descending cycles. It can also extend the duration of using oil resource well into the second half of the current century. That would allow OPEC member states to make better use of their oil reserves and spend more time on reducing their governments’ dependence on crude oil export revenues.

Therefore, OPEC has to extend its research and focus further on innovations and initiatives related to the development of low-carbon fossil fuel technologies, CCS technologies and using carbon dioxide. To that end, OPEC may further cooperate with international energy research institutes and modern technologies’ think tanks studying energy issues. Supporting initiatives, as well as bilateral and multilateral cooperation for low-carbon oil technology and oil value chain projects and participating in global forums and international debates with the subject of setting regulations for using energy resources have to be take into consideration. Through the process of energy transmission, key uncertainties like the outbreak of the COVID-19 pandemic and its impacts on the oil markets are unavoidable. In the energy transmission process, rapidity in action, adopting expert decisions, governments’ well thought out support for the private sector and companies operating in energy technologies, as well as the orientation of investments are effective.

In general, uncertainties are increasing both in the supply sector due to quick changes in the production technologies and in the demand sector due to changes in the behavior of consumers and replacing alternative energy carriers. In the meantime, political and economic rivalries in the world are growing, which would add to uncertainties. Therefore, OPEC will have no option but to prepare itself for a totally different future. Reconsidering OPEC’s Statute to incorporate some new points which would be necessary for dealing with future challenges could prove fruitful. OPEC may define new missions for itself, including providing member states with help to diversity their economies and develop necessary technologies for low-carbon oil and gas recovery and leading member states throughout the energy transmission process.

OPEC can conduct targeted research on upgrading its capacity and efficiency in dealing with oil market shocks and upgrade its knowhow on management of critical conditionssimilar to what followed the COVID-19 outbreak across the globe. In short, OPEC has to take into account future challenges risks.

Future Challenges to Iran Oil Sector

The same conditions explained for OPEC as necessary to influence the oil market would apply to every single member state, including Iran. In other words, Iran’s share of global oil market (and within OPEC), the price elasticity of demand for Iran’s oil and the price elasticity of supply of oil by every other producer including Iran’s fellow OPEC producers are among factors which would determine Iran’s influence in the oil market.

Given the global oil production capacity of more than 100 mb/d versus Iran’s production capacity standing below 4 mb/d and the possibility of replacing Iran’s oil with that of other countries and the more flexibility of production technologies, it is clear that Iran cannot by itself influence the global oil market. Furthermore, it has already been observed that removing Iran’s oil from the global market, particularly under conditions of global economic stagnation, would cause the world no problem.

As over recent decades, despite the huge proven oil reserves in Iran, the country’s oil production capacity has not increased sufficiently due to the lack of necessary investment, Iran’s share in OPEC and global oil production has dropped. It was such that the US’s unjust sanctions imposed on Iran and the subsequent removal of Iran’s oil from the market did not have any impact on the oil market and oil prices remained unfazed.

That is why adopting a suitable strategy similar to the three-point one explained here would be necessary for the country. Iran is required to invest in developing its oil and gas recovery capacity and gradually shift away from crude oil exports towards producing and exporting petroleum products and petrochemicals.

I personally believe that it would be possible for Iran to create a 7 mb/d oil production capacity, 1mb/d of which would be exported as crude oil and the rest would feed refineries and downstream industries for supplying high-quality petroleum products, as well as petrochemicals. In parallel, it is necessary for the country to invest in developing efficiency upgrade technologies and energy saving, as well as CCS technologies in a bid to be able to use huge oil and gas resources in the best possible way over coming decades.

Due to structural reasons including the history of industrialization of Iran, the extent of Iran, young and educated population, Iran’s experience in global trading, Iran has more possibilities than fellow OPEC producers to diversity its economy. 

Iran can and should reform its financial system and taxation regime in order to reduce the government’s dependence on oil revenues so that oil and gas resources would be realistically used for national economic development.

Javad Yarjani Explains

How OPEC Became a Key Player in World Markets

Negar Sadeqi

Javad Yarjani, Iran’s former national representative to OPEC, has attended OPEC meetings for more than three decades. He served as the head of the Energy Division of OPEC Secretariat for five years.

In his account of OPEC’s 60-year record, he believes that Iran’s Fuad Rohani, who served as the first secretary general of the Organization of the Petroleum Exporting Countries, remains one of the most influential secretary generals OPEC has seen during six decades of activity. For Yarjani, Rohani managed to prepare OPEC for intensive talks with international oil companies and current Minister of Petroleum Bijan Zangeneh is the longest-serving minister among fellow ministers within OPEC.

In an interview, Yarjani recalls that in some OPEC meetings, the Iranian delegation was alone, but it managed to defend Iranian interests in the best manner.

We are at the 60th anniversary of foundation of OPEC. This Organization has seen ups and downs over these years. What do you think is the most important turning point of OPEC? When do you think OPEC has been weakened?

OPEC was not very influential in the oil market during its first decade of activity. It shot to prominence only after the political events transpiring the 1970s following the Yom Kippur War between Israel and Arabs that led to the Arabs’ oil embargo on Israel and more than quadrupled oil prices. In the following years, due to oil market conditions and political and economic developments, OPEC was undermined before gaining strength anew. OPEC reached its climax in 1975 during the Algiers summit. Following a final statement by OPEC on economic problems and poverty in the Third World, big Western nations were determined to undermine this powerful entity. The Islamic Revolution in Iran and then the Iraqi leader Saddam Hussein’s invasion of Iran gave rise to a big crisis in the oil market. Other oil producers failed to compensate for the absence of Iran and Iraq – both big oil producers – even by raising their production. Due to changes in the Saudi policy and oil market saturation, oil prices were down to $7 a barrel in mid-1980s.  It was a weakness for OPEC. Then, again on account of Saudi policy change, oil prices rose to $18. Saddam’s adventurism in Kuwait in the early 1990s posed a new challenge to OPEC. Subsequently, the first Persian Gulf War broke out and Iraqi forces were driven out and OPEC experienced tough conditions. Oil prices dropped again in the late 1990s, resulting in the victory of Hugo Chavez in Venezuela. Unlike his predecessors, Chavez offered wholehearted support for OPEC, thereby upgrading OPEC’s standing. Caracas hosted the second OPEC summit. It was proof of OPEC member states’ gratefulness to Venezuela’s new government and OPEC’s renewed strength. Oil prices rallied to $145 a barrel in the summer 2018 and OPEC failed to slash them. The prices fell below $30 in winter but OPEC managed this time to keep prices from further falling. OPEC also prepared the ground for a gradual increase in prices. Another period of weakness for OPEC was the 2014-2017 period. Oil prices were down to below $30 a barrel in early 2016. The only factor that put the oil prices back on the upward trend was the agreement between OPEC and non-OPEC producers in December 2016.

Who do you think were the most influential ministers and secretary generals of OPEC?

Through its 60-year history, OPEC has seen many ministers and delegates from various countries attending meetings. Over thirty something years which I have been attending OPEC meetings or during the five years where I was head of the Energy Division of OPEC Secretariat, I got to know many of them. Some of them were naturally more influential than others on OPEC’s decision-making. For me in person, Venezuela’s oil minister during the foundation of OPEC Perez Alfonzo, who is rightfully remembered as the father of OPEC, has been interesting although I know him only through his notes. He was a popular politician and jurist. He loved people and nature. His constant efforts for the establishment of OPEC to counter excessive demand by multinational oil companies came to fruition in 1960. In 1975 when he discovered extravagant spending by Venezuelan politicians in the importation of consumer goods and their ignorance of economic development warned that a dark period would be awaiting the nation if that trend continued for several decades. Alfonzo had likened “oil income” that was eating away the country like a termite to the “devil’s excrement”. Unfortunately, his predictions for his country and other crude oil-dependent nations came true.

Among few Saudi oil ministers who have attended OPEC’s meetings, Abdullah al-Tariki, who was billed as the Red Sheikh by multinational oil companies due to their maximalism, was a firm supporter of OPEC’s foundation and believed in its ideals. Due to his progressive thoughts, he survived only two years and spent the rest in Beirut and Cairo in self-exile. His successor Ahmed Zaki Yamani, a lawyer, defended his country’s national interests during a specific period of OPEC’s history. He was very influential in the oil market. He served as the Saudi oil minister for 25 years before being dismissed in 1986 due to his disobedience of the Saudi monarch regarding an $18 oil price agreement in the OPEC meeting. He then chose self-exile in Britain and is now heading a research center. Ali Naimi was also a successful minister in the convergence of OPEC’s decision-making with Saudi interests. He was forced to retire after 21 years of sincere service by Crown Prince bin Salman who is the real power-holder in that country due to his failure to force Iran to join the production freeze agreement.

During my service at the OPEC Secretariat, I got to know Dr. Lukman of Nigeria and Dr. Ali Rodriguez of Venezuela. Both of them served as minister and also secretary general of OPEC. Both had humanitarian personalities, which is rare in the rank of professional politicians of the present time.

Among OPEC’s secretary generals, many believe that Iran’s Fuad Rohani, the first secretary general of OPEC, was well educated. He served at the post for four years and was among the influential secretary generals. In those years, due to the geographical composition and history Iran had qualified people to run the Secretariat. Such persons as Mr. Movahed, who was a National Iranian Oil Company expert, prepared OPEC for intensive talks with international oil companies. According to diary of Dr. Fuad Rohani, which have recently been published, many .

Iranian officials including then prime minister Assadollah Alam were opposed to the establishment of OPEC and cooperation with fellow oil producers in countering oil companies, and he used to stonewall efforts to that effect. Alam had even shared the secret letters written by OPEC’s secretary general to the Shah with the British ambassador to Tehran.

Mohammad Barkindo, current secretary general of OPEC, was a student of Dr. Luqman. I know him since long time ago when he attended OPEC’s economic commission board (ECB) meetings. He is a seasoned secretary general. In addition to oil issues, he is well familiar with OPEC policymaking. He knows how to protect the interests of OPEC and influential nations, as well as his personal interests.

To what extent do you think OPEC members have preferred collective interests to individual interests? During the imposed war on Iran, some OPEC members backed Iraq and when Iran and Venezuela were sanctioned by the US, fellow members tried to supply oil to make up for shortages caused by oil sanctions on Iran and Venezuela.

Like many countries in inter-governmental organizations, OPEC member states may on many occasions ignore their short-term individual interests in favor of collective agreement. However, it does not mean that they are favoring collective interests over national interests; rather, they see it as an appropriate way to secure their national interests. Of course, in OPEC decision-makings, there are some issues which may initially seem to be harmful to national interests, but the fact is that a short period of loss would herald bigger objectives in the future. One case in point is OPEC’s decision in its November 1997 meeting in Jakarta to raise output despite financial crisis in Asia and lower demand for oil, which slashed oil prices. Later on, it came out that the main objective sought by Saudi Arabia by insisting on output hike was to defeat Venezuela’s planned oil output hike through getting help from Western companies. But a year later when Hugo Chavez won the presidential election, oil prices dropped. In November 2014, Saudi Arabia’s refusal to agree with OPEC’s oil output decline, sharply decreased oil prices. In early 2016, oil prices fell to below $30 a barrel from about $100 in 2014. Venezuela was harmed the most. Internal distinctions between Chavez’s successors further came to existence and the economic conditions in Venezuela were worsened. Therefore, I think that all nations seek their own interests and even if they appear to be favoring collective interests it is because of their harmony with their national interests.

Given your background of presence in OPEC’s meetings, do you remember any meetings where you had become disappointed with any decision to think that talks would end in failure as every country stick with its own position?

Disappointment with unanimity existed in most OPEC meetings and is likely to occur again if OPEC stays active. The participants in the OPEC ministerial conferences, particularly when ministers were meeting behind closed doors or when delegates failed to reach a final agreement after talking long hours, had always such feeling because sometimes the talks ended inconclusively. However, I think that the Iranian delegation’s share of these concerns has been higher than others because of Iran’s certain conditions.

Mr. Zangeneh is one of the longest-serving ministers in OPEC and no other minister is likely to serve longer than he has done. What do you think of Mr. Zangeneh’s role in OPEC’s decision-making? When does your outstanding memory of this date from?

Yes, that’s true. Mr. Zangeneh with 15 years of experience at Iran’s Petroleum Ministry is the longest-serving. By the end of the second administration of Hassan Rouhani, he would have served out four terms, i.e. 16 years of attendance at OPEC ministerial conferences. We hope that during the present tough conditions, which international observers agree that Iran is faced with the most crippling sanctions, everyone would make fair assessment of the performance of officials. If we want to have a general assessment of Mr. Zangeneh’s performance at OPEC, undoubtedly intensive talks with rivals that had no idea of Iran’s problems and instead had the best international advisors for running their affairs, could not have been with sweet memories and success. However, I can say for sure that he along with his team and particularly his close ally the late Hossein Kazempour Ardebili, won respect from friends and opponents and had very positive achievements for the country. Of course, we need to keep in mind that the sweetness of an achievement would be embittered when it is exposed to biased comments by political opponents.  Among the most important achievements of Mr. Zangeneh was in the 2016 ministerial meeting. Due to the breath-taking talks, the late Hossein Kazempour Ardebili was hospitalized. However, in the final ministerial meeting where long-drawn-out talks were under way, the final outcome was what Iran sought. Iran was exempted from any reduction in production and it was even authorized to raise its output to pre-sanctions levels. That cleared the way for Iran to enhance production and exports as of January 2017. However, Trump’s withdrawal from the JCPOA (Iran’s nuclear deal with six world powers) and the ensuing tough sanctions embittered the sweetness of this success.

Iran has lost its oil market share over the past 10 years and is now faced with US sanctions. Could Iran be still considered an influential OPEC member state?

Undoubtedly, OPEC’s internal power rather than resulting from the level of reserves; emanates from the production capacity and spare capacity. Of course, when a country is sanctioned, even with production capacity would lose its influence on OPEC decision-making. Many still believe that if the world had accustomed to for instance 4 mb/d, instead of 2.5 mb/d of Iran’s oil, the US sanctions could not have taken effect. Even for the 2.5 mb/d oil export, had we developed strategic relationships with top oil consumers, particularly the Asian powers: China and India, or any other economic power to sell oil in return for big projects like national railroads, modern agriculture, water desalination plant or such projects and we were indebted to them, the creditors would have imported Iran’s oil in a way or other in order to settle its debts. When during the first found of sanctions under the Obama administration, Iran’s oil exports were blocked, Italy’s Eni won exemption to import Iran’s oil in exchange for its investment in various projects in Iran. We hope that we would leave behind this tough period and learn from the past to convert underground wealth to tangible wealth.

Did you ever imagine that OPEC and Russia would one day reach agreement on preventing oil price fall?

During years when OPEC was in certain periods faced with the challenge of low global demand and supply glut, thereby causing price slump, major producers like Russia, Norway, Mexico and Oman were requested to contribute to reducing production and cooperating with OPEC. Despite promises put forward from time to time by these countries, such cooperation was never reliable and stable. The cooperation taken shape between OPEC and non-OPEC since the start of 2017 seems more serious than before and has positively affected prices. Of course, it has undermined OPEC’s role in market regulation. There is no way out of it and that is the price OPEC and member states have to pay in order to reach higher oil prices. Of course, the important thing for Iran is the removal of sanctions so that Iran would be able to regain its real status in the oil market and also within OPEC in the shortest possible time.

In your view, is OPEC still an influential body in the oil market? Given the role of renewable energies, can OPEC remain a major player in the oil market?

In the midst of the crisis caused by the COVID-19 outbreak, OPEC showed that it can still be an influential organization in the oil market. It seems that as long as oil remains a major source of energy for at least 20-30 years, OPEC would remain influential in the oil market balance. Of course, the oil market conditions will be very instrumental in OPEC’s role after the end of the COVID-19 crisis, and the future supply and export of oil by the two founding OPEC members, i.e. Iran and Venezuela.

South Pars Gas Output Up 420 mcm/d

CEO of Pars Oil and Gas Company (POGC) Mohammad Meshkinfam has said the current production capacity of the giant South Pars gas field had reached 700 mcm/d, up 420 mcm/d from 2013.

He said that the extra 420 mcm/d recovery materialized under the administration of President Hassan Rouhani.

“Our country has outdone Qatar in extracting gas from the jointly-owned South Pars gas field. That is a big achievement as two-thirds of this field lies in Qatar’s waters,” he added.

Meshkinfam said POGC had met 94% of its targets, adding that except for Phase 11, the offshore section of South Pars has been completed.

“Of 39 offshore platforms, 37 have been installed and of a total 13 designed refineries, 12 are running. Only the refinery of SP14 remains to be completed,” he said.

Meshkinfam said the second phase of South Pars development would start soon, adding that it would be more vital as it deals with the maintenance of recovery from the field which Iran shares with Qatar.

“The field is currently supplying the bulk of our energy needs,” he said.

Meshkinfam said plans were under way for the coming 25 years so that South Pars would supply 75% of Iran’s gas needs.

“Currently, 40% of feedstock for gasoline production is supplied by this joint field,” he said.

South Azadegan Well Drilling in Final Stage

The drilling of 21 wells has been completed in the Khuzestan Province (southwestern Iran) as part of a plan to develop the South Azadegan oil field, said Mohammad Khavarinejad, Operations Manager at National Iranian Drilling Company (NIDC).

According to Khavarinejad, it is envisaged in the plan for the development of the South Azadegan field to drill and upgrade 23 wells.

He emphasized that so far, 81,100 meters of drilling work has been carried out under this plan. He noted that 9 drilling rigs were used in this plan.

"The wells, the drilling and improvement of which has been completed, will be handed over to the Iran’s Petroleum Engineering and Development Company (PEDEC)," he said.

The manager said that in addition, the NIDC will drill 10 wells in the South Azadegan field.

In this regard, 3 drilling rigs have been installed. “About 12,000 meters of drillings will be carried related to 10 wells.

Drilling of these wells is scheduled to be completed through beginning next Iranian year (March 21, 2021)," he said. Khavarinejad so far, NIDC has drilled a total of 64 wells in the South Azadegan field.

Wellhead Platforms Loaded-Out for Hendijan

The director of engineering and construction at the Iranian Offshore Oil Company (IOOC) has said that two platforms had been loaded out to be installed in the Hendijan oil field.

Both had been built in the Bandar Abbas Yard, Ali Ahuchehr said, adding that installation of the platforms would help enhance production safety and prepare the ground for increasing the field’s oil output capacity.

“Technical operations for the preparation of installation of these two platforms, each weighing more than 1,000 tonnes, has started in the Hendijan field. Cutting operations have begun for the removal of temporary top drives installed previously. Then, two wellhead top drives, each for a 10,000 oil output, would be installed,” he said.

Ahuchehr touched on the safety of output after the installation of these platforms, saying: “This operation is under way under full safety and in full compliance with international standards for offshore operations. Contractors have been involved in full compliance with health and safety protocols.”

Karoun Oil Output Up 24,000 b/d

CEO of Karoun Oil and Gas Production Company (KOGPC) Gholam-Reza Mofidi has said the company’s production had increased 24,000 b/d.

KOGPC has a production capacity of 1 mb/d, operating the Ahvaz, Mansouri, Ramin and Ab Teimour oil fields. It is the largest operator in oil-rich areas of southern Iran.

KOGPC produces oil, gas, condensate as well as industrial water for oil installations. It also supplies drinking water to residential compounds.

“Given KOGPC’s 25% contribution to national crude oil production from the oil reservoirs that are more than 50 years old and in light of unjust sanctions, preserving the production capacity of the oil fields and processing facilities and pipelines for return to production ceiling in the shortest possible time would be the main objective of the company,” he said.

Mofidi said reliance on the valuable experience of human capitals of KOGPC and the capability of domestic suppliers of commodities with maximum compliance with environmental obligations would be among the main objectives of the company.

 2.6mb/d Refinery Capacity Generated

Minister of Petroleum Bijan Zangeneh has said that increased gas recovery from the giant offshore South Pars gas field had allowed for the creation of 2.6 mb/d of refining capacity.

He said recovery from South Pars had increased from 280 mcm/d in 2013 to 700 mcm/d, now.

“It is equivalent to the creation of 2.6 mb/d of refining capacity. If we wanted to build refineries we would have to build ten 260,000-barrel-per-day refineries in a bid to meet national needs,” he added.

Zangeneh said enhancing the refinery capacity rather than building refineries had served the environment and saved fuel.

“Thanks to work in South Pars, petroleum products exports rate has quadrupled since 2012” he added.

Zangeneh also highlighted the significance of gas supply to villages, adding that it would be helpful to the environment.

He said it would no longer be economical to strip bushes for fire.

Zangeneh said gas supplying projects were the product of correct decision-making by both government and parliament.

NISOC Meets Targets 100%, Despite Sanctions

CEO of National Iranian South Oil Company (NISOC) Ahmad Mohammadi has said that the company’s crude oil production and refinery feedstock supply programs had been met 100% despite US sanctions and the covid-19 outbreak.

Mohammadi said the Iranian petroleum industry experienced one of the toughest periods in the history, over the past two years.

“Despite the problems caused by sanctions and the coronavirus outbreak, the crude production and feedstock delivery to oil refineries had been done in full compliance under National Iranian Oil Company instructions both quantitatively and qualitatively,” he said.

Mohammadi said NISOC was supplying 90% of refinery feedstock across the country.

He said guaranteeing the quality of feedstock supply to refineries would be instrumental to the sustainability of energy and fuel production in the country.

“Under normal circumstances, this issue becomes important during peak consumption of fuel. But under the present circumstances, due to the tough sanctions slapped on the petroleum industry, arranging and ensuring sustained oil supply to refineries and high-quality production of fuel would be  a key factor, and oil-rich areas in southern Iran would be instrumental in the stability of the energy sector,” he added.

Mohammadi touched on the achievements of NISOC in the past one year, saying the company has been central to the supply of feedstock to petrochemical plants in Khuzestan Province, including Bandar Imam, Razi, Bu Ali and Maroun petrochemical plants, and guaranteed the value chain in the downstream sector by sustainable supply of gas and condensate.

“Furthermore, despite tough weather conditions and the coronavirus outbreak, the project for supplying synthetic oil produced from South Pars condensate in the onshore sector became operational within two months and fed to the Abadan and Isfahan refineries,” he said.

Mohammadi said: “All achievements related to safe production and sustainable supply of energy were made despite financial restrictions and unjust sanctions. Other development projects like enhanced recovery and flare gas gathering are under way.”

Sarkhoun, Qeshm Refinery Gas Output Up

The Sarkhoun and Qeshm gas refinery has increased its processing capacity, the refinery’s manager said.

Mohammad Hossein Norouzi said the refinery had a processing capacity of 14.4 mcm/d.

“Given the downward trend in production from the Sarkhoun reservoir since 2011, revising and updating data about this reservoir topped the agenda of upstream companies (Iranian Central Oil Fields Company, South Zagros Oil and Gas Production Company),” he said.

Norouzi said the Sarkhoun reservoir has experienced a rupture in 2019, adding that arrangement were made for sustainable production by the refinery.

“Following technical and engineering calculations, the operating pressure reduction test was carried out up to 45 Bar,” he added.

“Given the quick trend of production decline and its reduction to 3.5 mcm/d this year, gas injection was done for 72 hours on a trial basis,” he said, adding that further analysis proved the effectiveness of gas injection.

He said after one month, gas production increased up to 2 mcm/d, while other refined products like NLG and LPG increased 35% and 38%, respectively.

“Stabilizing human resources employment, particularly local corporate manpower numbering 1,000 persons is an achievement of this project,” he added.

Gas-Fueled Power Plants Save $75bn

CEO of National Iranian Gas Company (NIGC) Hassan Montazer Torbati has said gas supply to power plants has saved the country $75 billion.

He said in 2013, liquid fuel supplied 30% of power plant feedstock needs.

“Of a total 62 bcm of fuel consumed by power plants, 27 bcm was liquid fuel and 36 bcm natural gas. Had the same trend continued and South Pars output had not increased, we would have to consume at least 150 billion liters of liquid fuel at power plants. Therefore, thanks to gas-fueled power plants, we have saved $75 billion,” he added.

Montazer Torbati said without switching to gas at power plants, 2 million truckloads of kerosene, fuel oil and gasoil and 3.2 million gas cylinders had to be distributed.

Referring to gas supply to Kermanshah Province, he said that gas supply to cities and villages in the province had picked up speed in recent years.

“So far, about IRR 13,550 billion has been spent on gas supply in Kermanshah Province and another IRR 3,000 billion worth is being spent now,” he added.

Potassium Sulfate Operational at Urmia Petchem

The potassium sulfate section of Urmia Petrochemical Plant has come online to help complete the value chain and supply diverse products, the plant’s chief said.

Karim Deljavan said that the project had become operational without assistance of foreigners.

The unit has an annual capacity of 40,000 tonnes, he said, adding that the mix of products had become more diverse.

“The potassium production unit of the plant was added to produce chloric acid with a capacity of 50,000 tonnes a year. It is a raw material for poly-aluminum chloride. This project is also in line with the completion of petrochemical value chain,” he added.

Deljavan said launching production units like the potassium unit against the backdrop of US sanctions, and the outbreak of the coronavirus would be the only solution for the country to relieve pressure.

He said that domestic manufacturing companies had supplied the bulk of equipment and parts used in the potassium sulfate project.

Urmia Petrochemical Plant is a subsidiary of the Iranian Petrochemical Investment Group.

PGPIC Keeps Standing in ICIS Ranking

Iran’s Persian Gulf Petrochemical Industries Company (PGPIC) has maintained its standing as one of the top 40 chemical companies in the world in the ICIS 100 Top Chemical Companies in 2020, despite imposition of tough US sanctions on the company.

According to PGPIC, a report published by the ICIS Institute, which reviews the companies' 2019 performance, states that the sales of the world's top 100 chemical companies have fallen by 4.9 percent in the year due to increased market competition and excess production capacity compared to the previous year.

Moreover, the sales rate has fallen by 10 percent for 34 companies, the reports said, adding their margin of profits had reduced dramatically compared to 2018.

Interestingly, 10 of the top 100 companies in 2018 have reported net losses in 2019. The performance of PGPIC as the only Iranian company in this list, has been outstanding compared to the average performance of the top 100 companies in 2019, and its profit reduction percentage is much better than the average list and its regional competitor SABIC.

PGPIC is also ranked second in the investment cost index for the second year in a row, after BASF, which shows continuous investment in order to maintain and develop its competitive advantage in global markets.

Iran, 1st in World in Oil and Gas Discovery despite Inequalities: Official

The National Iranian Oil Company (NIOC) was ranked first in the world in completely unequal conditions due to the imposition of severe sanctions, said an NIOC official.

According to Seyed Saleh Hendi, the director of Exploration at the National Iranian Oil Company, who addressed a press conference on Saturday, and reviewed the recent report by Wood Mackenzie Institute on world oil and gas discovery statistics, "Despite facing cruel sanctions and in completely unequal conditions, the National Iranian Oil Company was able to occupy the first place in the world in terms of the amount of discovery of extractable hydrocarbon reserves."

He said that all over the world, with the reduction of oil prices or lack of budget in oil companies, the exploration sector is the first place where the budget is reduced, however, there was no reduction in exploration costs of Iran's oil industry in 2019.

He said the year abounded with exploration achievements and drilling of a total of 600 exploration wells in the year resulted in the discovery of more than 220 hydrocarbon fields or reservoirs worldwide.

According to Wood Mackenzie, the 2019 discoveries were twice as many as the 2018 discoveries, and the number of discoveries in 2019 was unprecedented in the last five years.

The director of exploration of the National Iranian Oil Company continued: "This report shows that exploration in the world is more inclined towards natural gas, as 75% of the discoveries in 2019 were dedicated to gas exploration."

According to Hendi, with the efforts of oil industry partners, especially the hardworking staff of the National Iranian Oil Company, the first and third ranks among the 20 major oil and gas discoveries in the world were allocated to Iran; likewise, Eram gas field with extractable reserves equal to 2.7 Billion barrels has become the world's first major discovery, and the Namavaran reservoir with the extractable reserves of 2.2 billion barrels of oil is the third largest discovery in the world in 2019.

He further said new exploration projects were being considered by NIOC in Gorgan and Moghan areas.

“We have no desire for sanctions, but we will not give up,” he said.

"We do not like sanctions," Hendi said. “We are reluctant to be targeted by sanctions and would like to work with the rest of the world in the open, but our exploration success has shown that we will continue to do so, even under the most severe sanctions.”

€4.7bn Oil Projects Inaugurated

President Hassan Rouhani recently inaugurated through videoconference a project for the development and optimization of gas dispatching center and IGAT-6 and IGAT-9, Phase 1 of the Bushehr Petrochemical Company and the 500-MW West Karoun combined cycle power plant and its related power supply facilities. The total investment made in these three projects stands at €4.7 billion.

Addressing the inauguration ceremony, President Rouhani highlighted the achievements of his administration in the gas, gasoline, gasoil and petrochemical sectors for the next administration.

“Owing to major work done in the joint oil and gas fields under the current administration, our gas production from joint reservoirs has increased 2.5 times and our oil production 6 times,” he said.

Rouhani said implementing such projects under tough conditions was significant, adding that the future administrations would benefit from the achievements of the present administration.

He also touched on US sanctions imposed by Donald Trump on Iran’s petroleum industry, adding: “Our oil production from the jointly-owned oil fields in West Karoun has increased from 70,000 b/d (in 2013) to 400,000 b/d (2020). Had this wicked person not come to power in the US, our production from these fields would have exceeded 1mb/d.”

Iran’s gas industry has recorded significant growth in the past seven years and Iran has managed to increase its gas production and raise its gas supply coverage to 95%.

Describing Iran’s gas distribution network as unique, Rouhani said Iran’s total gas production had gone from 600 mcm/d to 1 bcm/d.

Iran's next presidential election is set for June 2021.

Rouhani touched on the legacy of his two administrations for the next administrations, saying: “All South Pars phases, except for one phase, are complete. We have become self-reliant in gasoline, gas and gasoil production. When the next administration takes office, our petrochemical production capacity has reached 100 million tonnes from the previous 56 million tonnes with an export value of $25 billion from $11 billion. These are all the current administration’s gifts for the future administrations.”

Gas Export Capacity

Iran’s Minister of Petroleum Bijan Zangeneh also touched on the success of the petroleum industry in development and operation despite sanctions being in effect.

“Despite the toughest sanctions, the petroleum industry has been successful in operating production installations and has pushed ahead with development projects under such tough conditions,” he said.

Breaking down the €4.7 billion investment, Zangeneh said €3.1 billion was invested in the Iran Gas Trunkline 6, Iran Gas Trunkline 9 and their stations, €1.3 billion in the Bushehr petrochemical plant and €320 million in the West Karoun power plant.

He said the newly-operated gas projects would serve gas transmission and the stability of gas network.

Zangeneh said due to long distance between Iran’s main gas production centers in the south and the main gas consumption centers in central, northern, northeastern and northwestern areas, there is no option but to transmitting gas via pipeline.

“Transmission of 100 mcm/d of gas requires 156-inch pipe and several gas compressors. Construction of each kilometer of 56-inch pipe varies between $1 million and $2 million while each gas compressor costs €75 million. Therefore, in order to transfer 600 mcm/d of gas from Assaluyeh to other areas, we would need more than 6 trunklines and dozens of gas compressors,” he said.

Zangeneh said: of the €3.1 billion invested in IGAT-6 and IGAT-9, €1.4 billion had been provided by the private sector for a build-operate-transfer (BOT) project. “That enabled us to export gas to Iraq,” he added. Zangeneh said Iran was exporting 80 mcm/d of gas to Turkey and Iraq.

95% Covered by Gas Network

Zangeneh touched on the newly inaugurated national gas dispatching project, saying: “The National Iranian Gas Company’s dispatching was designed and implemented in 1997 when I joined the Petroleum Ministry. However, due to the extent of the gas network in the country, it was upgraded and renovated.”

Noting that the dispatching division was charged with commanding and monitoring the gas network, the minister said: “Gas refineries, gas compressors and gas pipelines all operate under the national gas dispatching center. The dispatching center makes decisions with all tools at its disposal and the information it receives regularly in any time of the day depending on the requirements.”

Zangeneh said there was more than 37,000 km of gas transmission line in Iran, adding: “Currently, nearly 94% of Iran’s population, small and large-sized industries and power plants are covered by the gas network. The dispatching center is tasked with maintaining gas pressure in the network to guarantee constant gas supply.”

Extension of NIGC’s dispatching center, laying 1,850 kilometers of IGAT-6 and IGAT-9 and five gas compressors are the projects that have already come online.

Hassan Montazer Torbati, CEO of NIGC, has said the data is updated every three seconds at the dispatching center of NIGC.

He said that the IGAT-6 and IGAT-9 crossing Iran’s western gas corridor would connect the central and western corridors and supply gas to western provinces from two ways.

He also touched on increased gas production at the giant South Pars gas field and its role in accelerating the operation of IGAT-6 and IGAT-9, adding: “This corridor carries gas from Assaluyeh to Miandoab and we plan to extend this line as far away as Bazargan if our gas exports are expanded.”

IGAT-6 can carry 110 mcm/d of gas from South Pars to western provinces. It can carry gas to Kurdestan Province after crossing Bushehr, Khuzestan, Lorestan, Ilam and Kermanshah provinces. IGAT-9 is 125 kilometers long with capacity to carry 60 mcm/d of gas. It starts from a spot 32 kilometers west of Behbahan and continues as far away as the Bazargan border and north of Makou. Construction of this pipeline stabilizes gas supply to cold provinces and offers an export privilege, not to mention its role in energy exchanges with regional nations.

Petchem Value Chain

Zangeneh also touched on the inauguration of Phase 1 of the Bushehr Petrochemical Plant, saying: “From the very beginning, the gas supplied from the refineries of SP6-8 was supposed to be fed into the Aghajari field in Khuzestan Province and we had no plan to sweeten gas of these phases. This sour gas (unprocessed gas) was supposed to be transferred to Khuzestan.”

“But the investor offered a proposal based on which part of the gas containing ethane and LPG would be left to the investor to be sweetened and separated for consumption,” he said.

Zangeneh also said that the next stage of investment in this plant was to build a methanol unit, a sweetening unit and a separator for €1.332 billion.

“In the second section of the Bushehr Petrochemical Plant, an olefin, polyolefin and MEG unit is to be built. So far, it has had 35% progress,” he said.

The minister said the project was an indication of economic resilience, focus on no-sale of raw materials and completion of the value chain.

“The gas that is separated and sweetened today is generally the most valuable ethane petrochemical feedstock that is added to the value chain in the country,” he added. 

The Bushehr petrochemical company, as one of the largest petrochemical plants in the Middle East, has been built in Phase 2 of Assaluyeh in Bushehr Province. This plant has three phases. Phase 1 includes gas sweetening units, ethane recovery, methanol production and related facilities. Phase 2 of Bushehr Petrochemical Plant receives 9.6 mcm/d of rich sour gas from the fourth refinery (SP6, 7 and 8) to supply 1.65 mcm/yr of methanol, 1.323 mcm/yr of methane, 850,000 tonnes/yr of ethane, 130,000 tonnes/yr of propane, 30,000 tonnes/yr of butane, 3,000 tonnes/yr of pentane plus and 125,000 tonnes/yr of sulfur. Ethylene, ethylene glycols, high-density polyethylene will be produced at Phase 2, and acetic acid and vinyl acetate will be produced in Phase 3.

Mohammad Hassan Tavallaei, CEO of Armed Forces Social Security Investment Company, said the gas fed into the plant is the sour gas which would be converted to downstream products. The Bushehr petrochemical plant is the only petrochemical plant in the country using sour gas for conversion to products.

Tavallaei said a plant receiving unprocessed gas to supply final products thanks to its full value chain was a turning point in the petrochemical industry.

West Karoun Oil Supply Jumps 6-Fold

The minister of petroleum referred to the West Karoun Power Plant as the third national project inaugurated at the ceremony. He said it was National Iranian Oil Company’s exclusive power plant for for providing the cluster of oil fields in the West Karoun area with electricity.

“In West Karoun’s fields, we have seen a 6-fold increase in production, jumping from 70,000 b/d to 400,000 b/d production capacity. With the completion of the next projects including Azadegan, Yadavaran and Yaran, the production capacity would reach 1 mcm/d,” he said.

Zangeneh said NIOC decided to build a power plant in Khuzestan Province in order to guarantee sustained power supply for oil facilities.

He said NIOC was paying 2.25 cents for power purchase from public power utility MAPNA.

“MAPNA built the power plant in West Karoun under a build-operate-own (BOO) system, and two gas-powered units of this project have become operational. Its steam section is under construction. NIOC has built the transmission network and stations,” he said.

NIOC plans to build a combined cycle power plant in West Karoun with a rated capacity of 500MW in order to supply power to the Azadegan, Yaran and Yadavaran oil fields, Gas and LPG 3200 plant, pumping station and production unit in West Karoun. The first and second gas-powered units of this power plant have become operational with a capacity of over 300MW. The Yadavaran and North Azadegan fields and the West Karoun pumping station have been connected to the power supply network.

Touraj Dehqani, CEO of Petroleum Engineering and Development Company (PEDEC), said sustained production, processing and transfer of oil from West Karoun required sustainable power supply, adding that the power plant built in West Karoun was for that purpose.

Focus on Joint Fields

Zangeneh, who was speaking to President Rouhani through videoconference, said the focus had been on the development of oil and gas fields Iran shares with neighboring countries. He said under the 11th and 12th administrations, production from West Karoun had jumped six times, while South Pars had seen its output grow 2.5 times.

The minister said such increase in oil and gas production could be felt in people’s everyday life, national development and improvement in the environment.

“Since 2013, 216 wells have been spudded in West Karoun’s fields while more than €6.2 billion has been invested there,” he said.

Annual Gas Exports at 16bcm

Minister Zangeneh also said that Iran would see its gas exports reach 16 bcm this year.

“As you know Turkey quitted receiving gas for 2-2.5 months due to a pipeline accident. 50mcm/d of gas is being exported to Iraq and they purchase less gas in the winter. We also pump some gas to Armenia. We have also expressed our readiness for gas delivery to Pakistan, but they refuse to buy Iran’s gas,” he said.

Regarding liquefied natural gas (LNG) exports, he said: “Due to sanctions, we failed to develop our LNG units, but we went towards building mini-LNG units, which was technologically possible. However, due to low LNG prices, the private sector is not interested in investing in mini-LNG units.”

Zangeneh said mini-LNG units would be used for domestic consumption, adding that railroads and locomotives were the best places for mini-LNG consumption.

“We can convert natural gas to LNG at railroad stations and deliver to them. That would end their gasoil consumption and would be economical for us. We have also held talks for trucks to be fueled with LNG,” he said.

The minister said the top priority in mini-LNG units were locomotives. “We can build several mini-LNG units at railway stations. We are in talks with the Islamic Republic of Iran Railroads, to that effect. We have also reached agreement with the Ministry of Road and Urban Development. Each party bears its own commitments. For instance, we (Petroleum Ministry) need to encourage investors and give them incentives, while the Railroads should build LNG tanks on locomotives and at entry points to supply diesel fuel.”

No Concessions to China

Zangeneh also referred to the Farzad-B gas field, saying an agreement for its development would be signed soon.

Asked about sidelining the Chinese in oil projects after news of the planned Iran-China 25-year agreement, he said: “I don’t understand why there is so much sensitivity about presence of China in this country. I think that foreigners are behind so much sensitivity. Anyone who says the MOU is unilateral and bad, may come and sign a similar one with us. If the British say this MOU is bad they can come and sign a similar MOU with us.”

“In our oil talks, we have no concessions to any party. Both parties have agreed to work together. We are ready to work with those interested in the oil, gas and petrochemical sector. But we are not committed to China. Nor is China committed to us. Both sides have shown interest in cooperation,” he said.

Zangeneh said: “as I mentioned earlier that any country except for the Zionist regime can come and work with us. I’m not head of state, but I say that if they are sure we have given concessions to the opposite party, we are ready to sign a similar MOU with them.”

Turkey Needs 130 mcm/d Gas

Asked about the discovery of a gas reservoir in Turkey and rumors of Turkish independence of Iran’s gas, Zangeneh said: “First of all, we need to know precise figures that would have the conformation of international technical bodies. If there is 320 bcm of gas in place, the recoverable part would be 220 to 23o bcm. “Now if this figure is divided by 20 years, it would equal 30-35 mcm/d. In the meantime, it has to be taken into account that investment at a 2,000 offshore depth would be costly, and require high technology.”

“If the figures are precise, 30 mcm/d of gas may be produced, which is important. But as far as we know Turkey currently needs 130 mcm/d of gas, which is imported mainly from Russia and Iran, and partly from Azerbaijan

Iran Eyes Top Regional Petchem Ranking

Despite all hardships imposed on Iran’s petroleum industry through US sanctions and the coronavirus outbreak, the Petroleum Ministry has been doing its most to spare any stagnation in the activities of this key sector. Over this period, several oil agreements have been signed while a number of petrochemical projects have come online.

Behzad Mohammadi, CEO of National Petrochemical Company (NPC), sees the current calendar year as the golden year of the petroleum industry as “17 projects would have come online” by the end of the current calendar (20 March 2020). That along with five other projects which have recently come on-stream, would rise Iran’s petrochemical production capacity to 91 million tonnes. Last year, Iran’s petrochemical production capacity stood at 66 million tonnes. The figure is set to reach 100 million tonnes by 2021, when the second administration of President Hassan Rouhani would bow out.

In the wake of the 1979 Islamic Revolution, the petrochemical industry has been through a difficult path. In 1997, Iran’s petrochemical products were valued at $1 billion. By bringing development projects into operation in the Bandar Imam Special Petrochemical Zone and Phase 1 of Assaluyeh, Iran brought its petrochemical production capacity to 56 million tonnes by 2013, valued at $15 billion.

The first jump in Iran’s petrochemical industry occurred during the 2013-2017 period. The second jump covers the 2017-2021 period, while a third jump is envisaged for the 2021-2025 period.

After the end of the second jump, Iran would see its petrochemical production capacity reach 100 million tonnes a year, worth more than $25 billion. In the third jump, the petrochemical production capacity will exceed 130 million tonnes annually, valued at $37 billion.

Solid Preparations

Iran’s Minister of Petroleum Bijan Zangeneh believes that solid preparations have been made for the future of the petrochemical industry, noting that these projects were not bound to just making planning, as some of them have made good physical progress. These projects would increase the value of petrochemical industry production from $12 billion registered in 2013 to $37 billion in 2025.

Mohammadi has taken a step further, sating Iran would dominate the region’s petrochemical industry after the third jump has materialized.

The Rouhani administration bows out in 2021. Some critics have said no new project had been started and no capacity building had been done under his double administrations. But statistics confirm exactly the contrary. In 2013, 46 petrochemical plants were operating with an annual production capacity of 56 million tonnes while 67 incomplete projects with an annual capacity of 59.4 million tonnes were transferred from the 10th to the 11th administration. Only 12 of them had physical progress of over 60%.

Mohammadi said the projects that had started under the 11th administration had a progress rate of 40-50%.

He added that each petrochemical project required four to five years to come online. “We are now in the 7th year of the [Rouhani] administration and some projects were legacy of the previous administrations that had to be completed.”

Legacy for Future Administrations

Mohammadi said it was natural to hand over some projects to future administrations for completion.

Citing an example, he said: “The Hegmataneh petrochemical project in Hamedan had started in 2017, but it was inactive until last year with 90% progress. But owing to negotiations with [Minster of Petroleum Bijan] Zangeneh for financing, this project is set to come online this year with an output of 40,000 tonnes of medical-grade PVC, which is being produced in Iran for the first time.  

He said that the legacy of the Rouhani administration for future administrations would be the methanol, propylene, ethylene and benzene projects.

The ground would be broken for these projects, but their completion would fall upon future administrations.

It has also to be noted that for the completion of the propylene chain, an initiative is being designed for the production of about 1.5 million tonnes of propylene.

Mohammadi said: “Four giant mixed feedstock projects worth about $11 billion are envisaged, which would enhance the petrochemical industry capacity by 11 million tonnes.”

He added that the ground was broken for the Arghavan petrochemical plant, financed by the Pension Fund of the Islamic Republic of Iran Broadcasting. Two other projects are being financed by the Persian Gulf Petrochemical Industries Company in Assaluyeh and one by the Parsian Oil and Gas Company in Siraf.   

He said the newly envisaged projects would be instrumental in supplying feedstock to petrochemical plants. He added that half of the petrochemical feedstock needed in the country would be supplied by these new projects.

Mohammadi said propylene was a valuable petrochemical product, adding that a propylene park in Assaluyeh, three projects in northern Iran, one project in the Anzali free zone and one in Eslamabad Gharb had been defined to produce propylene from methanol. They would bring the propylene production capacity to 4 million tonnes a year from the current 1 million tonnes. The volume of investment and production is low in the downstream projects of the propylene chain, but the output is of higher quality. Increased propylene production would significantly enhance the downstream sector development of this chain. That may explain why Mohammadi is assured that all projects set for 2025 would come online on schedule.

Highlighting the growing number of Iran’s rivals in the petrochemical trading, he said: “That is why we would be reaching 100 million-tonne production capacity by 2021 in a bid to have a sustainable industry that would be resilient to harmful developments.”

Iran’s Position After 3rd Jump

In addition to the 2nd and 3rd jump projects, NPC eyes 34 new projects with a total investment of $17 billion for a production capacity of 19 million tonnes.

Mohammadi said that realization of the 3rd jump objectives in 2025 would give the top ranking in the petrochemical industry to Iran in the region.

“Given Iran’s top global position in terms of oil and gas reserves combined, developing the petrochemical industry with this amount of feedstock would be a must,” he said, adding that the new petrochemical projects would offer combined feedstock to plants.

He enumerated feedstock, technical knowhow, capital and market as the four pillars of development, saying: “Under the conditions of sanctions where eyes are moving from oil sales away to the petrochemical industry, we need to direct the market so as to bring about diversity to attract customers.”

Refinery Shares Disposal Strikes Shock on TSE

The Iranian government plans to list the shares of state-run and half state-run companies on the capital market within the framework of privatization. This plan is aimed at strengthening the foundations of social justice with a view to expanding ownership across the country. That would also streamline the government monopoly on the economic sector and therefore the government would be downsized, leading to lower costs and higher economic prosperity.

Note 2 of 2020 Budget Law allows the government to list the remaining shares of the government in the corporations through common methods or via the Exchange-Traded Fund (ETF). Such funds would be established by a relevant ministry and no other organ than a relevant specialized organ would be authorized to set up ETF. The authorization for setting up ETF could not be transferred from one organ to another. Therefore, based on this legal capacity, the Iranian Ministry of Economy and Finance has been authorized to privatize the Isfahan, Tehran, Bandar Abbas and Tabriz oil refineries within the framework of three ETFs. Bijan Zangeneh, minister of petroleum, had earlier said he agreed with selling refinery stocks on the stock market, saying the ministry would cooperate wherever needed.

Disposal of Refinery Shares

The amount of shares to be disposed at the four refineries plus the Lavan refinery to ETF would be determined after subscription by the relevant funds and collecting required sums from potential buyers.

The price of each disposal of share has to be announced in the subscription announcement for natural persons. It is determined based on the average final price of the shares of a refining company in the exchange market. A 20% discount is also applied.

Pursuant to a decision made by the Supreme Economic Coordination Council, natural persons willing to purchase shares of ordinary investment units will benefit from a 20% discount either directly or indirectly. That would include 15% direct discount in the price during subscription and 5% indirect discount when ETF purchases from the government. The Stock Exchange has also adopted a decision based on which up to 200 IRR 20 million worth of shares could be purchased by natural persons. That includes a 15% discount.

National Iranian Oil Refining and Distribution Company (NIORDC) is in charge of listing the refinery shares.

An advantage of ETF is that there is not restriction for subscription. That explains why the process of subscribing shares of refineries was warmly welcomed.

Attractive Shares

Parallel markets to the Tehran Stock Exchange may not attract investors as TSE has become the sole and high-yielding choice for absorbing liquidity. One major reason for people welcoming refinery share disposal was the significant growth of these shares. Even when oil prices had fallen into negative territory, this growth was continuing. On average, refineries have experienced 500% share in their stocks since the beginning of the current calendar year.

On behalf of the government, NIORDC owns part of refinery shares. NIORDC holds 13.75% of the Isfahan refinery (equivalent to 7 billion shares), 15.85% of the Tehran refinery (7 billion shares), 16.66% of the Bandar Abbas refinery (5 billion shares) and 16.14% of the Tabriz refinery (2 billion shares).

In terms of value, the shares of Tehran and Isfahan refineries are more valuable. That is why natural persons are more interested in the shares of these two companies than any other company.

A review of the market value and the government’s share of the market value of these companies shows that disposal of shares of these refineries would earn the government more than IRR 980,000 billion (20% discount excluded).

Therefore, the fall in global prices on the one hand, and disruption in the global stock market transactions on the other, slowed down the injection of liquidity and undermined the investors and shareholders’ interest in the shares of refineries and petrochemical markets listed on the stock market.

Some stock exchange experts believe that the flow of liquidity is a key factor in the capital market with the wave of liquidity currently going towards shares except for refining and petrochemical industries.

To dispose of its bank and refinery shares, the government had only two options; it had either to dispose of shares collectively or to sell shares via ETF.

In April, the government agreed with a proposal forwarded by the Ministry of Economy and Finance for the establishment of the first ETF mainly from the government shares of several banks and insurance agencies. A second ETF was agreed to be established from the government shares of the four oil refineries: Tehran, Tabriz, Bandar Abbas and Isfahan. The first one was handled by the Ministry of Economy and the second one is run by the Petroleum Ministry. The government eyes a third ETF. To that effect, the Ministry of Industry, Mine and Trade is to set up this fund via the government shares in Iran Khodro, Saipa, National Copper and National Steel companies.

As soon as the second ETF took shape to sell shares, refineries were promoted at the stock market and attracted the highest equity.

Thanks to a 20% reduction in the average monthly price of refinery shares, most analysts predicted the shares of these companies to increase in price in coming weeks so that the government would make more earnings. Legal entities were selling the shares of refining companies and natural persons showed high willingness for purchasing these shares.

Due to the market growth for these companies, the government is earning IRR 1,000 billion. However, this figure is subject to change due to possible changes in the price of shares in coming days.

Oil, Condensate Refining Capacity Growing

Due to existing restrictions on crude oil selling, Iran is planning to increase its crude oil and gas condensate refining capacity to 2.4 mb/d by the end of the current calendar year from the current 2.15 mb/d. About 850,000 b/d of crude oil and gas condensate, barred by US sanctions from being supplied on the oil markets, is refined in the country to be converted to products of higher value-added. These policies are being pursued in line with feedstock receipt for maximum supply of crude oil and gas condensate onto refineries. That would increase the gas condensate supply to the refineries from 450,000 b/d to 500,000 b/d and crude oil supply from 1.7 mb/d to 1.9 mb/d.

These policies are said to be one of tactics the Iranian Petroleum Ministry is exercising due to international sanctions for the purpose of debottlenecking in the refining sector.

Last calendar year, in addition to Phase 4 of the Bandar Abbas Gas Condensate Refinery, commonly known as the Persian Gulf Star refinery, added 120,000 b/d to the condensate refining capacity of the country. Furthermore, 300,000 to 350,000 b/d was added to the crude oil processing capacity of the Abadan, Isfahan, Tehran, Arak, Shiraz and Bandar Abbas oil refineries.

South Pars in Final Development Stage

CEO of Pars Oil and Gas Company (POGC) Mohammad Meshkinfam has said development phases of the giant offshore South Pars gas field, except for Phase 11, would have been completed by March 2022. Iran is currently recovering 700 mcm/d of gas from South Pars, outdoing Qatar with which it shares the giant reservoir.

Recently, with the commissioning of platforms in SP22-24, gas recovery has enhanced 200 mcf/d. The agreement for SP22-24 was initially signed in June 2010, but faced delays for various reasons. However, under the administration of President Hassan Rouhani, the Petroleum Ministry pushed ahead with the project, leading to its inauguration last winter.  The offshore section of SP22-24 is set to become operational this year. Four platforms (two main and two satellite) would be installed. The first stage involving the main platform of SP22 and the satellite platform 24A, each with a capacity of 14.2 mcm/d, came online in 2018. The second stage, involving the main platform of SP23 and the satellite platform 24B, would come online this year with the same capacity. Therefore, gas production capacity from SP22-24 would soon increase from the current 42 mcm/d to 56 mcm/d.

Throughout this development project, Iranian engineers handled the entire design of offshore and onshore refineries, installation of platforms and pipelines. It may be concluded that about 63% of the entire SP22-24 development project has been fully implemented by Iranian engineers and experts.

Output Up 2.5 Times

Until 2013, maximum recovery from South Pars stood at 280 mcm/d with 17 phases in semi-finished state. Now, the South Pars output is 2.5 times higher.

Over the past eight years, 17 phases (12 refineries) have become operational. Another key point is that of 37 active offshore platforms in South Pars, 26 have been installed over the past eight years, covering 70% of offshore platform development and installation. Moreover, 228 wells out of a total 336 wells sunk in South Pars have been completed in the past eight years. Regarding pipelines, of a total 3,200 km of offshore pipeline, 2,160 km has been installed in recent years while 30 of 50 trains of refineries have started operation over recent years.

Over recent years, increased international sanctions provided a chance for Iranian companies to work further in the interest of Iran’s petroleum industry. Trust in these companies was symbolized in the awarding of EPC contracts in south Pars to domestic firms within the framework of various consortia including Iran Marine Industrial Company (SADRA), Iranian Offshore Engineering and Construction Company (IOEC), Iran Shipbuilding and Offshore Industries Complex Company (ISCOICO) and Iranian Industrial Development and Renovation Organization (IDRO).

It may be interesting to note that Iran is now able to build offshore pipes, wellhead platforms and even oil and gas processing platforms and refining facilities.

When development work started in the 1990s in South Pars, Iranian companies used to build platforms and jackets for Samsung, Total, Eni and other foreign companies for SP1 to SP9. But now the same companies are leading the projects and handle all offshore and onshore activities although they may be slow.

No foreign engineer is now present in the South Pars. All activities, no matter how difficult they may be, are handled by Iranian engineers. Even in some cases, Iranian engineers set records in the South Pars projects.

SP Projects Accelerated

Under the Rouhani administrations, development of South Pars phases has picked up speed. One year into the mandate of the 11th administration, SP12 came online in March 2015. Then, SP15 and SP16 became operational in January 2016. SP17 & 18, SP19, SP20 and SP21 came online in April 2017 to help Iran outperform Qatar in gas recovery. Then, in March 2019, the refineries of SP13 and SP22-24 came online. In 2019, six platforms were installed and four became operational in SP14 and SP22-24.

Refineries Set to Be Completed

A number of remaining refineries in SP13 and SP22-24 are to be completed in the current calendar year. Despite all problems and restrictions including foreign constructors not honoring their pledges, owing to Iranian engineers; turbo expanders would start work in the refinery of SP13, SP19 and SP22-24.

Activating the contractor for the onshore sector of SP14 is another measure taken in the South Pars development. Except for SP11, all phases have become operational and only the SP14 refinery remains to become operational. Based on planning, the first train of SP14 refinery would be launched by the end of the current calendar year. The gas produced at SP14 is currently taken to the refinery of SP12 and SP19 for processing.

Completion of eight gas condensate storage tanks, each with capacity of 500,000 b/d, is another achievement of Iranian contractors in South Pars. These tanks would supply feedstock to the Persian Gulf Star refinery that runs on gas condensate.

According to Meshkinfam, the second stage of South Pars development would involve “maintaining and preserving production” because this field accounts for a big share of energy supply in the country.

South Pars supplies more than 75% of Iran’s gas needs, as well as 40% of gasoline production needs. That is why POGC plans to keep the 75% share unchanged by developing other fields and boosting pressure in the South Pars wells over 25 years.

Meshkinfam said POGC would proceed with its operations, hiring Iranian labor. “We have made plans to avert any disruption in gas production in the event of persistent sanctions and by relying on homegrown knowledge and capacity, we will pursue development and production.”

Total Drops Amazonas Basin Blocks

 Total plans to step down as operator of five offshore blocks in Brazil’s Foz do Amazonas basin.

FZA-M-57, FZA-M-86, FZA-M-88, FZA-M-125 and FZA-M-127 are 120 km (75 mi) from the shore.

Total has informed Brazil’s National Agency of Petroleum, Natural Gas and Biofuels (ANP) of its decision. A six-month period now falls during which a new operator will be appointed.

Until the changeover occurs, the company will continue to monitor all regulatory processes on behalf of its partners Petrobras and BP.

Woodside to Buy Cairn Senegal Interests

Woodside Energy (Senegal) B.V. has entered into a binding sale and purchase agreement to acquire Capricorn Senegal Ltd.’s entire participating interest in the Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore (RSSD) joint venture.

This follows Woodside’s exercise of its pre-emptive rights on Aug. 17, 2020.

Completion of the acquisition is subject to the government of Senegal approval, Cairn Energy PLC shareholder approval, and other customary conditions precedent

OMV Petrom Enters Deepwater Bulgaria Block

OMV Petrom has acquired 100% of the shares in OMV Offshore Bulgaria, thereby entering the Han-Asparuh exploration block in the Bulgarian sector of the Black Sea.

Following Repsol’s withdrawal from the concession, the Bulgarian regulator has reassigned its participating interest. Total is operator with 57.14%, with OMV Offshore Bulgaria holding 42.86%.

OMV is also a partner to ExxonMobil in the gas-proven Neptun Deep license to the north in the Romanian sector.

LNG Prices Slow India Gas Activity

Future deepwater gas production offshore India could be impacted by low spot LNG prices, according to Wood Mackenzie.

Although deepwater developments are expected to drive India’s gas production growth – adding more than 1 bcf/d of new supplies by 2023 – only 15%, or 200 MMcf/d, has been contracted currently, the consultant said.

With local market demand affected by COVID-19, and with low spot LNG prices likely to persist at least through 2022, full commercialization of deepwater discoveries may be at risk.

Australia Offers Exploration Acreage

The coalition government of Australia has issued the country’s 2020 Offshore Petroleum Exploration Acreage Release.

This covers 42 areas in waters offshore Western Australia, Victoria, Northern Territory and the territory of Ashmore and Cartier Islands off northwest Australia.

A total of 100,000 sq km (38,610 sq mi) of acreage is available for exploration across the Bonaparte, Browse, Northern Carnarvon, Otway, and Gippsland basins.

Trump Extends Drilling Ban Off Florida

U.S. President Donald Trump signed an order to extend a ban until 2032 on offshore oil drilling in the eastern Gulf of Mexico off Florida as he seeks to win support in the state ahead of the Nov. 3 election.

The executive order, which would also expand the ban to Florida's Atlantic coast and to the coasts of Georgia and South Carolina, was met with an unusual mix of disappointment from a drilling industry group and skepticism by environmentalists.

"This protects your beautiful Gulf and your beautiful ocean, and it will for a long time to come," the Republican president said in front of Florida's Jupiter Inlet Lighthouse and Museum after signing an executive order while officials from the three states watched.

While interest in offshore drilling has waned with lackluster oil demand during the novel coronavirus pandemic, the order could be reversed by a future president.

The Trump administration - which has worked to expand U.S. oil and gas drilling and roll back Obama-era rules on pollution from fossil fuels - originally wanted to expand offshore drilling off many of America's coasts, including Florida.

But proposals for drilling off Florida prompted fierce opposition from tourism, real estate, and environmental interests.

Trump, who narrowly beat Democrat Hillary Clinton in the state in 2016, faces a tough race this year against Democrat Joe Biden. An NBC/Marist poll showed Trump and Biden tied in Florida with each getting the support of 48 percent of likely voters. Florida is one of several states considered crucial in the election that Trump is slated to visit.

Baker Hughes Plots Low Carbon Future

Baker Hughes is pivoting to customers preparing for the transition to a low-carbon future, bolstering its footprint beyond oil and gas oilfield services, its chief executive said.

The company will continue to downsize its oilfield services and equipment portfolio, CEO Lorenzo Simonelli said at the Barclays CEO Energy-Power conference, putting more emphasis on the energy transition and technology needed for renewables. It has already been shedding some oilfield assets, such as its rod lift and specialty polymers businesses.

The strategic shift comes as more customers commit to lower carbon operations, and as growth in renewable energy such as wind and solar are accelerating. Baker Hughes has said it is targeting net-zero carbon emissions by 2050.

Baker Hughes is adjusting to a sharp drop in oil demand as the pandemic and a short-lived price war drove its biggest customers to idle equipment, slow new oil and liquefied natural gas (LNG) projects and cut employees. Global oil futures traded under $40 per barrel, below the breakeven price for many new projects.

"We believe that the changes facing the oil and gas markets and rapid growth in demand for lower carbon solutions warrant an acceleration of our strategy," Simonelli said in remarks to the virtual conference.

Baker Hughes sees opportunities as more companies move to lower their carbon footprints, including by upgrading gas turbines to reduce carbon emissions and buying methane monitoring products. Its also scaling up remote monitoring gear.

Equitrans to Finish Mountain Valley Natgas Pipe

U.S. pipeline company Equitrans Midstream Corp said it remains on track to complete the $5.4-$5.7 billion Mountain Valley natural gas pipeline from West Virginia to Virginia early next year.

That comment follows a decision by the U.S. Fish and Wildlife Service (FWS) to issue a new Biological Opinion on Sept. 4, which the project needs to resume construction.

Mountain Valley is one of several U.S. oil and gas pipelines delayed by regulatory and legal fights with environmental and local groups that found problems with federal permits issued by the Trump administration.

In February 2018 when Equitrans started construction of the 303-mile (488-km) pipeline designed to deliver 2 billion cubic feet per day of gas from the Marcellus and Utica shale, it estimated Mountain Valley would cost about $3.5 billion and be completed by the end of 2018.

Trump Urged to Halt Drilling Auctions

U.S. taxpayer and conservation groups urged the Trump administration to halt plans to sell oil and gas leases on more than 300,000 acres (120,000 hectares) of public lands this month after a sale in Nevada drew mostly minimum bids from a weakened drilling industry.

The small Nevada auction was the first of six sales the U.S. Bureau of Land Management will hold this month as it resumes its leasing program following a five-month pause due to the coronavirus pandemic.

Of the 11 parcels offered, seven sold for the minimum bid of $2 an acre. The remaining four sold for under $10 an acre. The sale of more than 15,000 acres raised about $63,000 in total bids, according to results posted on the online auction website EnergyNet.

Exxon Makes 18th Oil Discovery Offshore Guyana

ExxonMobil said it had made its 18th oil discovery offshore Guyana, which adds to its previous estimate .of more than 8 billion barrels of discovered recoverable resources in the area

In less than five years, Exxon and its partners in the Stabroek Block – Hess Corporation and a unit of China National Offshore Oil Corporation (CNOOC) –made more than a dozen quality discoveries on the block, making Guyana the newest oil-producing nation in December 2019. 

Earlier this year, Exxon revised upward its estimate of recoverable resources offshore Guyana by 2 billion barrels of oil equivalent to 8 billion oil-equivalent barrels, as it announced its 16th oil discovery on the Stabroek Block.

Merkel Dampens Talk of Halting Nord Stream 2

German Chancellor Angela Merkel and her economy minister has played down the possibility of halting the Nord Stream 2 gas pipeline from Russia to Germany as part of any sanctions imposed on Moscow due to the poisoning of Kremlin critic Alexei Navalny.

Germany is consulting European and NATO partners on how to respond if Russia fails to help clear up what happened to Navalny, being treated in a Berlin hospital for what Merkel has said was a murder attempt with a Novichok nerve agent.

One big area of discussion is the future of Nord Stream 2 which will double the capacity of the existing Nord Stream 1 pipeline from Russia to Germany and is due to start operation next year. It is more than 90% complete.

U.S. Shale Producers Race for Federal Permits

Oil producers in the top U.S. shale fields are stockpiling drilling permits on federal land ahead of the November U.S. presidential election, concerned that a win by Democratic candidate Joe Biden could lead to a clamp-down on oilfield activity.

Federal permitting in the largest U.S. oilfield in the Permian Basin, located in Texas and New Mexico, is up 80% in about the last three months, which analysts attribute to a hedge against a win by Biden, who currently leads U.S. President Donald Trump by several points in national polling.

Biden has stated that he does not want to ban fracking outright, putting him at odds with many environmentalists and Democratic party activists.

However, his climate plan includes banning new oil and gas permits on public lands, which industry groups say would hurt the economy and cut off an energy boom that has made the United States the world's largest crude oil producer.

The shale revolution of recent years boosted U.S. crude output to roughly 12 million barrels per day (bpd) last year through hydraulic fracturing, or fracking, which is environmentally controversial as it involves pumping water, sand and chemicals into rock at high pressure to release oil or natural gas.

As of Aug. 24, producers have received 974 permits so far this year for new wells on federal land in the Permian, compared with 1,068 for all of last year and 265 in 2018, according to data firm Enverus.

In the 90 days up till Aug. 24, producers received 404 permits in the Permian,

Australia Students Seek to Prevent Coal Mine

Eight young Australian students have brought a class action in the country's federal court seeking an injunction to prevent government approval of a coal project, lawyers representing the claimants said.

The lawsuit against Environment Minister Susan Ley comes ahead of a decision this month on whether to approve the Whitehaven Coal-owned Vickery coal mine extension project in New South Wales.

"The case is an Australian first, as it seeks to invoke the Minister's common law duty of care to protect younger people against climate change," Equity Generation Lawyers said in a statement.

All the claimants are under the age of 18 years and Equity Generation is urging other youngsters from across the world to register for the class action.

"It is the only class action on climate change that includes every single person under the age of 18 around the world as a result of the likely harm each one will experience from climate change."

Ley's office did not immediately respond to a request for comment while a spokeswoman for Whitehaven Coal declined to comment.

Climate change has been a divisive topic in Australia, which counts coal and iron ore as its two top exports.

The country's reliance on coal-fired power also makes it one of the world's largest per capita carbon emitters and just last year it approved a huge new coal mine by India’s Adani Enterprises.

"As a young person, I cannot vote to have my voice heard by politicians," said 16-year-old Laura Kirwan from Sydney, one of the litigants.

Equinor to Replace Deficient Wells

Norway’s Equinor must drill several new wells at its much-delayed Martin Linge oil and gas field in the North Sea in order to ensure safe operations when production starts, the company said.

Originally scheduled for completion in 2016 under its then-operator Total, the project was taken over by Equinor in 2018 and is yet to be finished.

“Four gas wells that were drilled at Martin Linge before 2018 have well barrier deficiencies that are considered to make them inappropriate for safe production,” Equinor said.

“The wells are considered safe as they are now, but we will keep them plugged and under continuous monitoring until we have reduced the pressure in the formation by producing from other wells,” the company added.

Up to three new wells will be drilled at a cost of around 2 billion Norwegian crowns ($222 million), Equinor said.

“Total has recently been made aware of Equinor’s view that certain of the wells drilled on Martin Linge do not have the necessary barriers,” a spokesman for the French company told Reuters.

“This information is new to us and we are reviewing the matter. We have no further information to provide at this stage.”

Equinor has described the field’s main reservoir as structurally complex, characterised by high pressure and high temperatures compared to many other fields.

The company said in May it had postponed the planned startup to 2021 from 2020 previously. A new update on costs and the planned startup is due next month when the Norwegian government presents its fiscal budget for 2021.

India Eyes Solar-Powered Fuel Stations

India aims for 50% of fuel stations owned by public sector oil companies to be operated by solar power within five years under the government’s green energy drive, its oil minister said.

Dharmendra Pradhan said India’s three state-backed fuel retailers Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum, which operate about 63,150 fuel station across India, are moving to deploy solar panels across their operations.

They have currently installed a combined 270 megawatts (MW) of solar power capacity and will add 60 MW more capacity in the coming year, Pradhan said.

With government encouragement, Indian oil and gas companies are turning to investing in green energy such as renewables, biofuels and hydrogen to reduce the country’s carbon footprint.

“The oil and gas public sector undertakings are increasingly evaluating new opportunities in the solar and renewable energy space for diversification,” Pradhan said at the World Solar Technology Summit of the International Solar Alliance.

He did not give any investment figures.

India imports over 80% of its solar cell and module requirements from China, as domestic manufacturers have struggled to compete with cheap Chinese modules. However, Pradhan said companies have expressed interest in setting up new manufacturing capacity in India amounting to 10 GW of solar power equipment.

Prime Minister Narendra Modi wants companies to procure most of their equipment from local industry to boost the Indian economy, which has now been hit by COVID-19.

OPEC Turns 60; Track Record, Challenges and Outlook

Shuaib Bahman

OPEC is leaving behind its 60th anniversary after going through myriad ups and downs. The Organization of the Petroleum Exporting Countries is one of the largest oil organizations in the world. It has always played a key role in energy markets. At the 60th anniversary of its establishment, OPEC is faced more than ever with external challenges. The coronavirus pandemic postponed the festivities planned for the anniversary of OPEC in the Iraqi capital Baghdad. Furthermore, it has affected the performance of OPEC. Given the high significance of OPEC in global energy markets, the present article is aimed at briefly reviewing the performance, perspective and future challenges of OPEC.

OPEC Performance

Article 102 of the UN Charter recognizes OPEC as an international intergovernmental organization. It was initially founded by the five states of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela on September 14, 1960 in Iraq. OPEC soon grew into the most important organization of developing nations had been established until that time. Protecting interests against the Seven Sisters, controlling prices as well as management of output and supply were among the most important reasons for the OPEC establishment.

Some of the most important achievements of OPEC throughout its existence are as follows:

Arranging coordination among oil producing nations;
Striking a balance between supply and demand in world markets; and
Relatively successful influence on pricing.

Nonetheless, OPEC has faced some frequent problems throughout its life, which have affected the performance of the Organization. The most important problems within OPEC that have remained unresolved are as follows:

Lack of coordination among some OPEC member states that has damaged the performance and solidarity of the Organization.
Some states favoring political considerations over collective economic interests that have left OPEC inefficient on some occasions.

OPEC Challenges

Over recent years, OPEC has faced modern challenges in addition to its longtime traditional problems. They have all negatively influenced the performance of OPEC in a way or other. Some of the most important challenges are as follows:

US Sanctions against Iran: These sanctions have affected Iran’s oil sales, thereby forcing buyers of Iranian oil to seek new sources of energy supply.
Sino-US Trade War: It is not directed directly against OPEC member states, but as it has reduced economic growth in the world, oil production and sales have been affected.
Political and Security Instability in Venezuela, Libya and Iraq: These parameters have forced OPEC member states to produce less oil. The oil installations of these countries have been decrepit as no investment has been made due to insecurity and instability.
US Oil Exports: The United States has been looking for new markets to export its oil, thereby pushing some OPEC members aside.
Emergence of New Energy Sources: Most developed nations have turned to renewable energies and therefore oil has been almost set aside as the main influential source in the energy markets.
Covid Pandemic: As a new factor, the coronavirus outbreak significantly affected oil consumption and caused a decline in oil price.

The aforesaid challenges have all contributed to weakening OPEC. The US sanctions on Iran and instability in Iraq, Libya and Venezuela have put a strain on OPEC output and undermined its influence on consumers. The US policy of oil export has created a powerful player in the energy sector. The US is resorting to every tool to find new markets and substitute OPEC’s oil. The US-China trade war, adoption of renewable energy in some countries and the covid-19 outbreak slashed oil consumption in the world and subsequently OPEC’s influence on world markets was weakened. Decline in oil production has also inflicted heavy damage on OPEC member states.

OPEC Outlook

OPEC member states are currently supplying 40% of the world’s oil. They sit atop more than 80% of world oil. Therefore, OPEC has turned into a significant organization in the energy sector.

Over recent years, Qatar has left OPEC while some new countries have joined. Furthermore, OPEC has closed ranks with some partners, collectively known as OPEC+. Non-OPEC producers have chosen to cooperate with OPEC with a view to managing the market and striking a balance in the prices. The formation of OPEC+ in recent years has been effective in the management of energy markets and helped restore balance to prices. Furthermore, OPEC’s potential and efficiency have been upgraded. Therefore, continuation of cooperation between OPEC and its allies would definitely be influential on global energy markets.

Of course, it has to be noted that major challenges continue to remain in the way of OPEC. At least in the near future, OPEC may not be able to counter them severely. For instance, the issue of economic contraction in the world and violent conflicts in some oil producing nations are among some of challenges OPEC has to grapple with.

OPEC has over the past six decades been instrumental in the oil market stability. Changes in the OPEC policy have significantly affected global energy prices.

Over recent years, OPEC has learnt a lot from various price cycles. One difficult cycle was between 2014 and 2016, and the current cycle has been caused by the covid-19 outbreak.

Past experience enables OPEC to show faster and more effective reaction in the future with a view to managing global energy markets. Therefore, the oil price slump is not currently the biggest challenge faced by OPEC; rather, the real problem is the possibility of decline in supply due to insufficient investment in OPEC member states.

Oil Market Recovery; Challenges and Scenarios

Shuaib Bahman

The oil market has, over recent years, faced with the biggest crisis ever. The negative aspects of the coronavirus pandemic and a price war between Saudi Arabia and Russia have significantly influenced global markets. The shocks caused by these events were so important that global energy markets even experienced unprecedentedly low figures on oil sales. The covid-19 outbreak did not merely reduce consumption and drove prices down; rather, big oil companies were forced to stop or reduce their capital spending, mainly in the exploration and development of new fields. Given the tense period, global energy markets have seen over the past months, everyone is still wondering when these challenges would be removed and when the market would restore balance to the market.

Existing Challenges

The level of impacts on the global energy market from ongoing crisis may be seen in the following domains:

Reduced Investment: Many major oil companies have had to significantly reduce their capital expenditures. For instance, Italian company Eni, in addition to cutting investment in Iraqi oil fields, plans to reduce its investment in exploration, production and development projects in Egypt, the United Arab Emirates and Indonesia by 30%. That is even worse when it comes to shale oil. Costs and investments are to fall by about 40% by late 2020. Exploration and production companies are expected to reduce their investment in 2020 by about 32%, which is the lowest in 13 years.
Reduced Output: Given the sharp decline in oil prices, some companies are willing to reduce their output. For instance, ConocoPhillips has announced a 225,000 b/d decline in its oil output, which is seen as the biggest shale oil production cut in the face of historically low demand. Brazil’s state-run oil giant Petrobras is also planning to cut 100,000 b/d from its output by the end of the year. That is why reactivating suspended wells would take time and require huge spending.
Project Delay and Shutdown: Many major oil companies have had to postpone or even shut down their projects. For instance, Continental Resources suddenly announced the shutdown of some of its fields in Oklahoma and North Dakota, saying it would not deliver crude oil to its buyers due to economic weakness. Sound Energy, the British company licensed to operate the Tindara gas field in Morocco, has postponed the finalization of a deal for exploration and production.
Sharp Decline in Margins: In recent months, many big companies working in the energy sector have experienced a sharp decline in their profits and economic interests. BP has announced a two-thirds decline in its profits in the first quarter of 2020 due to the consequences of Saudi-Russian price war and the impact of the covid-19 outbreak. Norway’s oil giant Equinor has also noted a two-thirds quarterly loss of dividends.
Layoff: Most exploration and production companies, as well as oil service companies operating oil fields have had to lay off their workforce in a bid to save costs. BP axed 15% of its staff in response to the covid-19 outbreak. A US oil company announced the dismissal of 85 persons from its Maryland office.
Lower Activity: Some energy companies have had to prevent their staff and service workers from foreign trips in a bid to save costs. For instance, Royal Dutch Shell was among the first ones to suspend foreign travels by its managers and staff. The US company Chevron has also called on its staff to postpone their trips. It asked its staff based in London to return to the US. Oil services company Halliburton has also put 3,500 of its staff on leave due to the oil price slump.

Future Scenarios

The petroleum industry is currently suffering from uncertainty about future prices. Following the sharp price fall in April 2020 and uncertainty about the future of oil market, two scenarios may be envisaged:

Scenario 1 – Price Recovery: The fall in investment in the oil sector, reduced production by OPEC+, and voluntary production cut by some oil producers would reduce supply and possibly increase demand in the mid-term as post-covid conditions would improve, in which case, oil prices would improve. However, this trend will not happen quickly and oil prices will vary between $30 and $40 a barrel up to mid-2021.

Scenario 2 – Oil Price Crash: If oil storage operations continue by consumers, some producers are forced to keep supplying, and demand for oil remains low for a long period of time due to the negative economic impact of the coronavirus crisis, one may expect the paralysis of energy markets, and subsequently oil price fall.

Although there is no evidence about the occurrence of either of these two scenarios, the first one sounds more likely in light of the intention of many nations for overture in their economy. Launching small-sized businesses will automatically drive global demand up for oil and it would help improve prices given the existing agreements for reducing production among OPEC+, as well as the halt in investment in the energy sector.

Oil Soccer Teams Hit New Records

Iranian football clubs finally ended a tough season, designating champions at various ranks. In the previous season, six teams affiliated with the Petroleum Ministry were competing in various matches hosted by football clubs. Three were in the pro league and three in the second league.

The Petroleum Ministry teams experienced ups and downs in the previous season. The Sanat Naft Abadan football club fared well in the pro league, but the Pars Jonoubi team fell from the pro league into the first league. In the second league, the Petroleum Ministry teams had sinus-shaped performance.

A key factor in these developments was definitely the outbreak of the coronavirus. Many results achieved post-covid were detrimental to these teams and therefore their success was short-lived. For instance, Sanat Naft Abadan failed to get the quota to play in the Asian championship matches.

However, despite all ups and downs, it is noteworthy that the Petroleum Ministry-affiliated football teams also registered records and showed untainted performance.

The following is a review of the performance of three such teams in the Iranian pro league football.

Record Setting

To explain the performance of Petroleum Ministry football teams last season, we start with Sanat Naft Abadan. Their performance was much better than expected. Week after week, they achieved brilliant success. Finally, at the tail end of the first half-season they were among the top four in the table and had the chance to secure an Asian berth. Nonetheless, everything changed in the last minute. The head coach, Dragan Skočić, did not continue his cooperation for the second half-season, citing his disease. The club managers failed to reach agreement with him and he finally left. But the fact is that Dragan Skočić was not sick. To the surprise of everyone, he was named the head coach of Iran’s national football. Behnam Seraj succeeded Dragan Skočić at Sanat Naft Abadan, but he could never coach like the Croat. In the meantime, the covid-19 outbreak made conditions more difficult and therefore a team which everyone expected to get the quota to go into Asian matches finished seventh. One point has to be highlighted here. The team had scored 41 points throughout a single season for Sanat Naft Abadan in the pro league. That was unique. Now they have managed to register this record for themselves. In addition, Sanat Naft Abadan no longer fought for fighting downgrade. Rather it was struggling to win an Asian berth.

Draw Champion

The Naft Masjed Soleyman FC experienced a good season with head coach Mehdi Tartar. This team used to fight only to avoid a fall in ranking or it was playing the role of elevator in the pro league. Despite numerous financial problems it was faced with, Naft Masjed Soleyman achieved good results. In the first half season, it was the only team without loss in the pro league.

Naft Masjed Soleyman players were mainly sharing their scores with rivals rather than being winner. Naft Masjed Soleyman finished the 19th league after 17 draws in a total of 30 matches in the pro league.

The turning point of Naft Masjed Soleyman in the 19th league occurred in the final week. By showing an untainted football, it spared the spirit of football any harm.

On the final day of the league matches and when the match score had no impact on their fate, they showed strong performance in their match with Pars Jonoubi in order to survive longer in the pro league. They played remarkably and managed to stay. This win defeated all rumors that were swirling of the Naft Masjed Soleyman football club and its head coach. That is why Tartar arranged the best team and did a golden substitution to secure his team’s win and silence rumormongers.

On the final night of the 19th league, Tartar witnessed the defeat of a team which he had upgraded into the pro league.

Gone Is Good Time for Pars Jonoubi

The Pars Jonoubi football team had made good performance into the pro league under the coaching of Tartar and it was close to securing a berth in Asia; however, in the 18th league, it had a very bad season. The team could not offset its bad performance even after changing its head coach three times.

Pars Jonoubi began the season with the coaching of Faraz Kamalvand and went ahead up to half season; however, management changes and Bahram Rezaeian’s departure caused Kamalvand to depart. Houman Afazeli succeeded him. With Kamalvand, Pars Jonoubi did not have good performance, but it was always in the middle of the table. But with Afazeli, the team saw its conditions get worse than before. It fell to the bottom of the table until Afazeli quit. In the last seven matches, Pour Mousavi was heading the team.

When Pour Mousavi took over, Pars Jonoubi was in the 14th place and despite promises and pledges; the team did not show any good performance. In the end, the team fell to the first league following three years of consecutive presence in the pro league.

That was how the fate of Petroleum Ministry teams was sealed: Sanat Naft Abadan finished the seventh, Naft Masjed Soleiman finished the eighth and Pars Jonoubi fell into the first league.

British Expropriation

Ali Bahrami

Less than 10 years after Britain had emerged winner in the World War, Iranians nationalized their petroleum industry. That cost Britain dearly because they had recorded a strong victory in World War II and were gradually imposing their culture and language upon the world through media and economic policies. They were used to moving from country to country and change governments as they wished. They even installed British rulers in some nations. British colonies were rising in number. Relying on its strength, Britain claimed sovereignty over the entire globe. Under such circumstances, the oil nationalization movement called into question Britain’s political authority. The conditions worsened when Britain suffered a legal defeat at the international court of arbitration in the face of Iran. In the meantime, the influence of Iran’s oil nationalization on the Middle East and North Africa led to the formation of scattered small and large movements across the region. All these movements were hostile to British colonialism. Gholam-Reza Nejati, author of The Petroleum Industry Nationalization Movement, writes: “Britain was a world superpower. It was present everywhere. But it had suffered a deadly blow from a third world nation, i.e. Iran. The nationalization movement in Iran served as a model for other nations. Iran’s oil nationalization was the first well-organized anti-colonial movement in the Middle East. That is how Iran became a role model for other countries. Following the oil nationalization in Iran, General Najeeb and General Nasser rose up against the Farouk rule in Egypt and the Suez Canal was nationalized on 26 July 1956.”

No to British Firms

Britain was so deep-rooted in Iran’s petroleum industry that their expropriation in 1951 could not be underestimated. It would be enough to briefly review Iran’s petroleum industry. D’Arcy and his allies had won the Oil Concession after intense negotiations. Britain had saved the 1919 deal with endeavor and maintained their presence in Iran until the Pahlavi II dynasty. British troops were using Iran’s oil during WWI and WWII. Britain owed its war triumph to Iran’s oil.

Aside from that, following the death of Nader Shah, Britain went on a carnage spree in a bid to strengthen their physical presence in Iran. All through the Zand and Qajar dynasties, Britain designed plots for the Iranian territory. It was unbelievable for them to be defeated by Prime Minister Mohammad Mossadeq in court.

Nejati writes: “After the nationalization of oil, Britons were still present in Iran. Therefore, the primary action was to expel them. To that end, the Oil Committee of National Assembly adopted a 9-point law on oil nationalization in 1951, later known as expropriation law. The law also passed by the Senate. This important law entered into force under Mossadeq. The National Assembly named a committee to supervise the implementation of the law. The committee comprised Ali Shayegan, Abdollah Moazzami, Allahyar Saleh, Hossein Makki and Naser Qoli Ardalan. The Senate in turn appointed MortezaQoli Bayat, Ahmad Matin Daftari, Mohammad Sarvari, Abol-Qassem Najm and Sadeq Rezazadeh Shafaq to its own ad hoc supervisory committee. The expropriation delegates included Mehdi Bazargan, Mohammad Ali Varasteh, Kazem Hassibi, Abdolhossein Ali-Abadi and Mohammad Bayat. In reaction to the Iranian government’s decision to implement the 9-point nationalization law, the British government took legal action. It filed a lawsuit with the International Court of Justice against Iran, which failed. The provisional Board of Directors of National Iranian Oil Company (NIOC) started work in Khorramshahr. The Board warned all former directors against taking any action without its prior approval. Eric Drake, the general director of Anglo-Iranian Oil Company (AIOC), was asked to submit the ledgers of transactions. In the meantime, the provisional Board suggested that Drake stay and work with AIOC under the new Board, but he left. His departure was followed by his team. They finally boarded a ship for Basra. Mehdi Bazargan succeeded Drake as the first CEO of NIOC. Later that year, the Abadan oil refinery, the largest oil treatment facility in the world, was handed over to NIOC. Iranians achieved a brilliant victory by cutting British hands off oil wells. After a long period of time, Iran’s tricolor flag started flying over the Abadan refinery.”

Britain Out

The message carried through by Iran’s petroleum industry nationalization was clear: Get out of here. Iranian people were practically telling Britons to find a new source of income outside Iran. The oil nationalization movement meant Iranians would no longer let Iran’s oil run Britain’s economy. Britain owed its power to its economic power thanks to two centuries of colonialism. Owing to these policies, Britain gained raw materials for its economic growth and development without having to pay any price. India, Africa, the Middle East and many other regions across the globe were suffering from Britain’s economic policies. Iran was no exception, given the incapability of Qajar and Pahlavi dynasties. Oil was not the only substance looted by Britons, but it was the main product.

In the wake of the Second World War, the AIOC rapidly expanded production and investment to meet an increased global demand for oil. Originally, the firm was called the Anglo-Persian Oil Company, changing its name to the Anglo-Iranian Oil Company in 1935 at the request of the Shah. In 1954, it became the British Petroleum. Throughout this paper, the firm is referred to as AIOC.

Iran, via the AIOC’s activities, had become hugely important to the global oil industry. It was the second largest exporter of crude petroleum and contained the third largest oil reserves, and in Abadan, the AIOC had the world’s largest refinery.

Between 1930 and 1950, the company’s pretax profits grew from approximately £6.5 million to nearly £85 million, bringing in large amounts of income, but disproportionately shared, to the British Treasury, company shareholders, and the Iranian government. By the late 1940s, the AIOC was the largest foreign investor in Iran and its employees and contractors numbered some 80,000. The refinery at Abadan was also Britain’s largest single overseas investment, and represented a source of enormous national pride.

For the period 1930-39, the AIOC’s royalty payments to the Iranians significantly exceeded the company’s payments to His Majesty’s (HM) Treasury. During this nine-year period, the AIOC paid over £22,000,000 in tax and royalties to Iran, compared with UK income tax of £8,749,000 and a net profit of £35,754,000.

However, the Iranian government became concerned when these proportions were reversed as production and profits dramatically increased after the Second World War. In 1947, the company’s Iranian operations gave the British Government £14.8 million in tax revenues and the Iranian Government £7.1 million in royalty payments, while the company’s net profit was £18.56 million. By 1950, the difference between HMG and Iranian earnings had risen to almost £35 million, with HM’s Treasury receiving £50.71 million and the Iranians £16.03, while the net profit had grown to £33.10 million.

The decline in the Iranian share of profits is further illustrated when Iranian royalties as percentage of pretax profits are considered. In 1932, Iranian royalties represented around 37 percent of pretax profits, whereas in 1950, only 19.18 percent of the profits from the AIOC’s operations in Iran went to the Iranians.

The other 80.82 percent that went to British interests, in 1950, represented almost a 10 percent increase y-o-y.