Iran’s Captivating Oil Industry

 

Akbar Nematollahi

Director of Petroleum Ministry Public Relations

 

Achieving sustainable economic growth and development requires following appropriate models of economic development. The experience of developed countries indicates that these countries have effectively benefited from the model of exports development to reach high economic growth rate.

To that effect, oil shows are important tools for boosting exports and carrying out effective activities in marketing and promotion of products. They provide an opportunity for multipurpose dialogue that would facilitate realization of communications objectives for the development of activities.

Economists believe that improvement in exports will boost gross domestic product (GDP), generate revenues, create jobs and will help wean Iran’s economy off petrodollars.

 International exhibitions are instrumental in global marketing because they provide a venue for comparing products. Presence in exhibitions is the most effective way of improving communications, introducing products and finding new markets.

Iran’s 19^th Oil and Gas Show can be a golden opportunity for companies willing to show off their products.

This international event is seeking to set the stage for extensive interaction between Iranian and international companies.

Undoubtedly, attraction of investment, exchange of technical and engineering knowledge and marketing of products and enhancement of oil and gas production capacity are among the main objectives of the 19^th International Oil, Gas, Petrochemical and Refining Exhibition in Tehran.

Iran, sitting atop 11 percent of the world’s total oil and 18 percent of its gas reserves, is hosting an international oil and gas show every year. This exhibition is famous around the world in terms of the number of participants and visitors.

The presence of international companies as well as domestic manufacturers and industrialists provide a good chance for mutual cooperation as grounds are prepared for investment and signature of contracts.

As restrictions are eased for the presence of foreign companies in Iran following the signature of the Geneva nuclear deal, these companies are trying to return to Iran’s oil market. For their part, Iranian companies will also try to improve their performance in their rivalry with foreign companies.

This time, the main rivalry will be between international companies seeking to win a foothold in Iran’s market.

Iranian companies are eying lucrative markets inside the country; therefore, they will be able to win a share of world markets by putting their achievements on display. There are Iranian companies that have managed to win shares in important markets.

Iran’s petroleum industry is offering a 50-billion-dollar opportunity for investment, a figure which will definitely tempt every industrialist.

Negotiations between Iran’s Petroleum Ministry and international companies have painted a clearer image of Iran’s petroleum industry and represent a bargaining chip for accelerating the entry of international financiers and industrialists into Iran’s oil industry within the framework of win-win game.

Oil Terminal Envisaged in Jask Port

 

President Hassan Rouhani said an oil terminal export is being constructed in Jask Port in southern Iran.

“This port will become a major industrial and economic center in Hormuzgan province in the near future,” Rouhani said on his provincial tour to southern Iran.

He said that efforts are under way for the establishment of steel and aluminum industries in southern Iran.

“By benefiting from a gas pipeline crossing this region, we will create new sources ranging from petrochemicals to steel and aluminum. This region is planned to become an industrial zone,” said Rouhani.

The president said the southern Hormuzgan province has great potentials for growth and development, adding that the province is good for industrial, agricultural, transportation and marine sector development.

Pirouz Mousavi, managing director of Iran Oil Terminals Company, has already said that an oil export terminal in Jask would cost 2.5 million dollars.

Jask is a vital port for Iran’s petroleum industry as 20 million barrels of crude oil are stored there before being exported.

Rouhani also said that energy carriers’ prices will rise at a slow pace in the next calendar year which starts on March 21.

 

Oman Eyes 1 bcm/d Gas Purchase from Iran

 

Omani Oil and Gas Minister Mohammed al Rumhi has said his energy-thirsty country plans to buy one billion cubic feet (bcm) of gas per day from Iran in 2017 and 2018, under a long-term agreement.

As part of his plans to broaden interaction with the countries in the region, President Hassan Rouhani paid a state visit to the Persian Gulf Arab state of Oman on March 12 and 13.

Economic cooperation was high on the agenda during the Oman visit, on which Rouhani was accompanied by Petroleum Minister Bijan Namdar Zangeneh .The gas deal will mean Iran will be supplying 10 bcm of gas annually via a 350km pipeline linking southern Iran to the port of Sohar, in northern Oman.

Salim al Aufi, Omani Undersecretary of the Ministry of Oil and Gas, said recently: “All we have at the moment is the MOU with Iran. Lots of work still needs to be done to turn the MOU into a real project.

“We need to inspect the route, we need to do a feasibility analysis and to understand lots of things in terms of the size of the pipeline, tapping point and landing point, and so on,” he said.

Aufi added that talks with Iran are related to importing 1tn ft3 of gas per day. “If we take into account our current output, it is about one-third of what we produce.”

Iran and Oman share Hengam oil field located 45 kilometers from the Qeshm Island. The field was discovered in 1975.

Hengam is estimated to hold more than 700 million barrels of oil and some two trillion cubic feet of gas in place.

In the meantime, Iran and India agreed to start constructing a deepwater pipeline crossing Oman for gas delivery from Iran to India.

Oman is a GECF member in the Persian Gulf. Thirty percent of Oman’s total crude oil production is provided by international oil companies.

 

 

Tehran Seeks Energy Cooperation with Baku

 

Iran’s President Hassan Rouhani told his Azeri counterpart that the two countries can cooperate in the oil and gas sectors.

In a meeting with President Ilham Aliyev, Rouhani said the two countries enjoy great economic potentials.

“These capacities could be used as an important infrastructure for developing cooperation and ties between the two countries,” said Rouhani.

“The trip by Azerbaijan’s president to Tehran is an important step in the direction of expanding ties,” said Rouhani. “In the new administration, there is no obstacle to expanding ties between [our] friend and brother country of Azerbaijan.”

Rouhani announced the formation of a joint economic commission between the two countries and called for an expansion of ties in the private sector.

Iran and Azerbaijan have signed an agreement to build a hydroelectric plant. They also signed three memoranda of understandings: one between the Ministries of Youth and Sports of Iran and Azerbaijan, one between Iran’s Interior Ministry and Azerbaijan’s Ministry for Natural Disasters, and between Iran’s Ministry of Roads and Urban Development and Azerbaijan’s Ministry of Ecology and Natural Resources.

Rouhani also addressed the dispute over the Caspian Sea.

 “The Caspian Sea belongs to all of us and we should all be able to use it within the framework of reason, fairness and previous order,” he said.

Five nations border the Caspian shores: Iran, Azerbaijan, Kazakhstan, Turkmenistan and Russia.

Aliyev thanked Rouhani for the invitation and welcomed the expansion of ties between the two countries, saying, “The Republic of Azerbaijan places a great deal of respect and importance on its relationship with Iran.”

He added that the January meetings between Iran and Azerbaijan at the World Economic Forum in Davos were important in expanding cultural, economic, and political and energy cooperation between the two countries.

Aliyev also said that some countries do not look favorably upon the expansion of ties between Iran and Azerbaijan. “Many powers do not want a friendship between Iran and Azerbaijan, and are after disrupting this relationship,” he said. “The officials of the two countries must make efforts to counter these steps.”

 

Iran to Raise Oil Output to 4.7 mb/d in 2017

 

 

Iran’s Petroleum Minister Bijan Namdar Zangeneh said Iran will be able to raise its crude oil production to 4.7 mb/d in 2017.

“I’m convinced that in [the Iranian calendar year] 1396 (to start in March 2017), we will be able to increase our crude oil and gas condensate production capacity to 5.7 mb/d (4.7 mb/d of oil and 1 mb/d of condensate),” Zangeneh said.

The minister said four oil fields located in western Iran – North Azadegan, South Azadegan, Yadavaran and Yaran – will account for 700,000 b/d of the country’s oil production.

He said 480,000 b/d of gas condensate is also to be processed by mini-refineries that would be built by the private sector in South Pars.

Zangeneh said Iran is also able to bring its gas production up to 1 bcm/d by 2017.

He said Iran plans to export 90 bcm of gas to Turkey, Europe, Iraq, Pakistan and south of Persian Gulf by 2021, adding that the country’s refining capacity would reach three million barrels.

The minister welcomed relief sanctions following Iran’s nuclear deal with world powers. “Currently, important moves are under way in the foreign policy as sanctions imposed by Western governments are eased. Therefore, we have to get ready for important work,” he said.

Zangeneh said Iran has to increase its production capacity, enhance recovery from fields and conduct more exploration operations, particularly along its borders.

 

2014, a Key Year for South Pars

 

Petroleum Minister Bijan Namdar Zagneneh has said that most phases of the giant South Pars gas field are to become operational this year.

Zangeneh said the prioritized phases – 12, 15&16 and 17&18 – are to start production in 2014.

The minister also said that South Pars gas production is to increase by more than 100 mcm/d by the end of the current calendar year in March.

Zangeneh said phases 12, 15&16 and 17&18 are to add respectively 50, 50 and 25 mcm of gas by winter.

 

Iran Remains OPEC No. 2 Producer

 

US Energy Information Administration (EIA) announced that Iran produced 3.2 mb/d of oil in 2013 maintaining its 2nd rank in the Organization of Petroleum Exporting Countries (OPEC).

According to EIA's latest Monthly Energy Review, Iran's oil output shrank by 167,000 b/d in 2013, compared with that of last year.

Iran's crude oil production dropped by 687,000 b/d in 2012, which was the first year in which Western sanctions against Iran, was enforced.

This is while in its bimonthly report, EIA said Iran produced 2.8 mb/d of oil in 2013.

The 400,000-barrel difference between the two reports might be due to the inclusion of gas condensates in EIA's Monthly Energy Review.

According to this report, Iran remains OPEC's 2nd major oil producer in 2013.

Saudi Arabia, by producing 9.68 mb/d of oil, ranks the first among OPEC member countries in terms of crude production in 2013.

Also, Iraq produced 3.05 mb/d in this period and ranked third in terms of crude production.

The total output of OPEC in 2013 amounted to 32.34 mb/d, indicating a decline of 830,000 bpd compared with 2012.

OPEC is a permanent intergovernmental organization of 12 oil-exporting developing nations that coordinates and unifies the petroleum policies of its member countries.

The EIA is a principal agency of the US Federal Statistical System responsible for collecting, analyzing and disseminating energy information to promote sound policymaking, efficient markets and public understanding of energy and its interaction with the economy and the environment.

EIA programs cover data on coal, petroleum, natural gas, electric, renewable and nuclear energy. It is part of the US Department of Energy.

 

 NDF to spend $1b for Upstream Projects

 

Iran is to dip into National Development Fund (NDF) to earmark more than one billion dollars for upstream oil and gas projects, a senior official of National Iranian Oil Company (NIOC) said.

Moshtaqali Gohari said the sum is to be withdrawn from the NDF in the current calendar year to March 2015.

He said that Phase 14 of the offshore South Pars gas field as well as liquefied gas factories in southern Iran are to be financed by NDF. 

Gohari said nearly 10 billion dollars have so far been withdrawn from NDF for upstream projects, adding that five billion dollars have been spent in South Pars.

He said development of Azar and Darkhoein oil fields, and centralized and combined cycle power plants in South Pars are among other projects to be financed by NDF.

Meanwhile, National Iranian Oil Company is earmarking 14 billion dollars for the development of oil and gas fields Iran shares with neighboring countries.

The sum, which equals 77.7 percent of NIOC’s total budget, is to serve production enhancement, logistics, development of oil and gas reservoirs and hydrocarbon exploration in the current year to March 2015.

Moshtaqali Gohari, a senior official in NIOC, said the National Iranian South Oil Company (NISOC), Iranian Offshore Oil Company (IOOC) and Arvandan Oil and Gas Production Company will be allocated around 3.75 billion dollars, while Pars Oil and Gas Company (POGC) and Petroleum and Engineering Development Company (PEDEC) will be allocated 13.9 billion dollars.

 

More Oil Payments to Iran

 

India is scheduled to pay $1.65 billion to Iran for oil imports over the next three months as part of a nuclear agreement between Tehran and the six world powers for the release of over $ four billion of blocked Iranian funds overseas.

According to sources privy to the issue, four Indian refiners - Essay Oil, Bangalore Refinery and Petrochemicals Ltd, Hindustan Petroleum Corp and HPCL-Mittal Energy Ltd. - will settle the amount in three tranches.

The Indian government has reportedly asked the firms to make the first payment by mid-May.

Iran and the five permanent members of the UN Security Council - the US, France, Britain, Russia, China - plus Germany reached the deal on November 24, 2013, in the Swiss city of Geneva to set the stage for the full settlement of the dispute over Iran’s program. The deal took effect on January 20.

Under the Geneva deal, the six countries agreed to provide Iran with some sanctions relief in exchange for Iran agreeing to limit certain aspects of its nuclear activities during a six-month period. It was also agreed that no nuclear-related sanctions would be imposed on the Islamic Republic within the same time frame.

The sanctions relief for Iran includes access to $4.2 billion of its oil revenues frozen abroad by eight money-transfer schedules through July. Iran has already received five payments, four from Japan and one from South Korea, for oil imports.

The world’s third-largest economy, Japan, has made two more previously-frozen payments to Iran for crude imports that were unblocked under an interim deal between the Islamic Republic and the six major world powers.

The payments totaled $1 billion, with one installment of $550 million due on April 10 and the remainder on April 15.

The fourth and fifth payments mean Iran has received $2.55 billion in unfrozen oil funds, with all but one payment coming from Japan.

 In January, Japan became the first of Iran’s oil buyers to make a payment for crude imports following the deal between Iran and the six world powers over the Islamic Republic’s nuclear energy program. One source confirmed that the Japanese payment was $550 million.

 

South Pars to Be Developed Fully

 

Iranian Minister of Petroleum Bijan Zanganeh has said all phases of the supergiant South Pars gas field should and will come on-stream as planned with support from the government.

Addressing a meeting of the petroleum industry managers and the first vice president in the gas field south of Iran, Zanganeh said the government is set to remove obstacles, which are not few, to launch all South Pars phases. 

"Unfortunately, we have stayed behind our neighboring countries in recovering natural gas from the field, even though we began working on the field in 1997 with solely Iranian engineers," he added. 

He gave a positive assessment of the performance of Iranian contractors operating in the field.

Zanganeh also underscored the significance of environmental issues in operations in the giant gas field.

“More seriousness is needed with regards to respecting environmental issues in South Pars,” Zanganeh said.

He said solutions must be found for reducing pollution caused by petrochemical plants in South Pars, adding that the health of local residents is important.

Zanganeh called for more interaction between Petroleum Ministry and the Department of the Environment.

The South Pars gas field is estimated to contain 14 trillion cubic meters of gas and 18 billion barrels of gas condensate. It covers an area of 9,700 square kilometers, 3,700 square kilometers of which lie in Iran's territorial waters in the Persian Gulf.

 

Pakistan Needs Iran Gas

 

Prime Minister Nawaz Sharif is likely to visit Iran next month on a two-day visit for a reset in relationship with its western neighbor.

The trip scheduled to begin on May 11 has not been officially announced as yet.

According to Pakistani officials, Islamabad would have to face a penalty of $3 million per day if it dithers and fails to put the required project infrastructure in place on time, the Express Tribune reported on Tuesday.

They suggest that the dispute may also take the two sides to the international court of arbitration if the penalty is not waived.

In case of disagreement, the two countries may land in the international court of arbitration to settle the matter, sources say.

The US has been pushing Pakistan to shelve the IP project and opt for Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline and Central Asia-South Asia (CASA) 1,000MW power import project to meet its energy needs.

 

 

 

Exclusive Interview with NIOC Managing Director:

 Oil Output to hit 4mb/d by March 2015

 

 

By Hanieh Movahed

 

Roknoddin Javadi, managing director of National Iranian Oil Company (NIOC) has talked about a wide range of issues about Iran’s energy sector. Here is the abridged text of the interview:

 

 

Q: Mr Javadi! Would you please tell us about the current oil and gas production levels in Iran?

A: The current oil production capacity is 3.85 mb/d and the average production is around 2.85 mb/d. In the gas sector, production in this year’s winter reached 640 mcm/d. But given the daily consumption up to 750 mcm during peak days [of winter], we were short of 160 mcm/d of gas. We partly made up for this shortage by restricting gas supply to some industries.

 

Q: Will we be facing the same amount of gas shortage next year?

A: Not so gravely. We hope that gas production from the prioritized phases of South Pars gas field will supply 80 to 100 mcm/d of gas next winter. In that case, half of the country’s gas needs will be supplied domestically.

 

Q: But this can be true if the domestic consumption does not increase again.

A: Yes, that’s right. The consumption has to be optimized and controlled to enable us to meet the current demand.

 

Q: Do you think that gas imports from Turkmenistan would ever halt?

A: It’s possible. Moreover, the experience of importing with Turkmenistan has not been a desirable one.

 

Q: We were short of 160 mcm/d of gas in the winter. Did you ever consider importing gas from Qatar?

A: No. We don’t have the required pipeline; however, this idea could be an option which needs expert studies.

 

Q: What’s your plan for gas exports? What about gas exports to Pakistan?

A: Gas export is required for Iran’s economic development and it must be followed up on seriously. We have had agreements with Iraq and we think that gas exports to Iraq will start this year with the implementation of some of these agreements. Currently, except for Armenia and Turkey, other gas export options are inactive. Gas export to Pakistan has no clear future and it could not be assessed in the short-term.

 

Q: What about liquefied natural gas (LNG)? Are you still hopeful of the future of LNG in Iran?

A: LNG production and export, as a contributor to the country’s revenue mix, is of priority for us. But its realization depends on a chain of factors. We have decided to assign the task of assessment and feasibility of the project as well as estimation of costs to a professional international group so that we would take action accordingly.

 

Q: How long do you think would it take to bring oil production capacity back to the 2005 level?

A: For returning to the 2005 oil production capacity, it is necessary to make up for production fall-off of the reservoirs and renovation of decrepit facilities. We hope that our oil production would reach 4 mb/d by March 2015.

 

Q: How do you assess exports? Has NIOC revived any lost markets?

A: Now, our crude oil exports are up 40 percent compared with our exports in August and September [last year]. The main change we have made has been the purge of dealers from our country’s crude oil [trading], and selling oil to real consumers and secure markets.

 

Q: Following the Geneva accord, more foreign economic delegations have been visiting our country. Has the accord had any effects on Iran’s crude oil exports?

A: In case the restrictions on oil sales are relaxed, good markets will be awaiting Iran’s oil. Political overture and the agreements reached [between Iran and six world powers] have prepared the proper grounds for negotiations and interaction between Iran and other countries. Foreign countries are willing to invest in Iran’s petroleum industry and these delegates’ visits to Iran, soon after the Geneva accord, is proof of that. They want to start talks for contracts and in case sanctions are lifted most of these negotiations will turn into action. But for the moment, everything is at the stage of negotiation.

 

Q: What do you think of the revised oil contracts?

A: We have to accept that we can no longer afford the development of oil and gas reservoirs in the country. In today’s world, proprietors of money, technology and management have expectations and there must be a win-win framework. International conditions have changed and new markets have been defined. Saudi Arabia and the United Arab Emirates (UAE) have new plans to raise production. Libya is making efforts to renovate its industries and Mexico is striking big offshore deals. In the West, shale oil and gas reserves have opened a new window to hydrocarbon resources. All countries are determined to take greater steps towards development. Under such conditions, we have to revise and update the framework of our petroleum industry contracts in order to acquire standards and interact with the world. Iran’s petroleum industry enjoys many capacities for development, and improvement of contracts can make these capacities practical. At present, plans have been made for raising oil production capacity to 4 mb/d by using the existing model of contracts, and by benefiting from the revised contracts; the country’s oil production capacity could increase by one million barrels more.

 

Q: After the revised contracts become effective, will all development projects be pursued within the framework of the new model?

A: No, the new model will be used only for the development of fields which are to be awarded in an integrated manner from exploration to development or enhanced oil recovery (EOR) and improved oil recovery (IOR) projects.

 

 

Q: Is the development of independent fields off the agenda because of the priority of joint fields?

A: Nothing is off the agenda. It is just not prioritized. It means that investments should first be directed to joint fields. When we are assured about joint fields we can then focus on the development of independent fields. For example, no new investment will be made in Kish gas field and the development of this field will be followed up with the drillings made so far.

 

Q: You have set a deadline for China National Petroleum Corporation (CNPC) for delaying the development of South Azadegan field. Which specific plan does the NIOC have for dealing with this challenge?

A: Oil production from the shared fields located on the western bank of Karoun River is planned to be raised to 700,000 b/d by March 2018. With regards to South Azadegan field, the Chinese contractor has promised to go ahead with the project after the ultimatum. But the deadline remains in place and we will act according to the terms of the contract in case the contractor does not take any concrete steps. However, we are not intending to weaken or expel the contractors. We want to help the contractors to accelerate the work. But if the contractor has no determination to respect its obligations regarding joint fields, we will have to terminate the contract.

 

Q: Have we had any new explorations in recent months?

A: We have good news which will be officially announced by Petroleum Minister [HE Bijan Namdar Zanganeh].

 

Q: Do you have any plans for realizing the objectives of the NIOC in terms of enhanced recovery? The Recovery Enhancement Research Center was supposed to sign a deal with National Iranian South Oil Company (NISOC) to that effect.

A: Currently, the flow of oil from NISOC-run wells has fallen, on average, from 20,000 barrels to 2,000 barrels. Therefore, it is necessary to apply modern technologies for enhanced recovery from these wells. To that effect, the Recovery Enhancement Research Center is collaborating with six reputable universities in Iran and is close to signing the first contract with NISOC.

 

Q: How about heavy crude oil fields like Kuhmund, Zagheh and Ferdowsi?

A: These are independent fields and are of no priority for development.

 

Q: Do you think investment for recovery from unconventional oil and gas reserves in the country is a priority?

A: Not for the time being.

 

Q: In the world, huge investment is made in shale oil and gas reserves with some economists saying they are not cost-effective.

A: No! These projects are economical as the oil prices remain high. The Americans and some other countries are cashing in on them.

 

Q: Development of some oil fields requires high investment. What has been done for the development of Sardar-e-Jangal field off Caspian Sea? This field is said to be holding more than two billion barrels of oil.

A: Development of this field requires state-of-the-art technologies which we do not have completely. Compared with the technological developments in the world, we need to update ourselves.

 

Q: What about the Salman field? has Salman-Siri pipeline  been repaired?

A: Yes, the pipeline reparation is over.

 

Q: Is gas being recovered from Salman field?

A: Yes, but at a limited level.

 

Q: What happened to NIOC’s joint project with the British Petroleum (BP) in North Sea?

A: The project pertains to the development of Rhum oil and gas field. It is owned 50-50 by NIOC and BP. Gas production from Rhum had quitted due to sanctions, but production resumed two months ago following legal talks. Currently, around 200 mcf/d of gas is being produced from this field.

 

Q: So that’s not too much.

A: 200 mcm/d is not too much for us, but it is significant in Europe. We are also active in Azerbaijan’s Shah Deniz field and we are present in the second phase of development of this field. In the meantime, we have left Bolivia and our office in Bolivia is closed. Many other offices in Latin America are also being closed for not being economical.

 

Q: Do you mean that oil investment in Latin America was not justified?

A: It had no economic justification. NIOC must be run economically and not politically.

 

 

Q: The issuance of oil sukuk bonds in recent years achieved nothing. Will these bonds be printed in the future?

A: The issuance of sukuk bonds has been legalized and a working committee has been set up at the NIOC for that purpose. Therefore, these bonds are to be printed on a tentative basis.

 

Q: What about participation bonds? Will you print all the 50,000-billion-rial approved in the budget?

A: Yes, we are determined to print all participation bonds at 50,000 billion rials. They will be printed by Pars Oil and Gas Company (POGC), Iran’s Central Oil Fields Company (ICOFC), Iran’s Offshore Oil Company (IOOC) and the Petroleum and Engineering Development Company (PEDEC).

 

Q: What do you think will be the best interest rate for these bonds?

A: For the time being, the interest rate envisaged for the Central Bank of Iran (CBI) bonds, with 6-month lock-in period, is at 23 percent. The interest rate for these bonds depends on a number of economic factors. Foreign exchange rate, gold, housing and even stock market affect this interest rate. The bonds must be attractive enough; otherwise, people would not welcome them.

 

Q: Will crude oil be traded at the Energy Exchange?

A: Yes. Trading oil at Energy Exchange has more advantages than disadvantages. Oil trading in the Energy Exchange will require sometime to reach maturity. The instructions for crude oil trading in the Energy Exchange have been approved and we hope that oil would be traded in the Energy Exchange in the near future.

 

Q: How much is the minimum level of supply in the Energy Exchange??

A: We have considered a 10,000-barrel ceiling. It will start with 2,000 to 3,000 barrels of crude oil.              

 

Q: Are there any restrictions for physical delivery of oil to customers?

A: There are no specific restrictions, but it is clear that crude oil will be delivered to real consumers.

 

Q: What do you think of privatization? Do you have any plans to privatize National Iranian Drilling Company (NIDC)? Some interpret the non-privatization of the company as its monopolization.

A: Privatization of this company is a right decision, but it must be done properly. We propose the NIDC privatization to be postponed for three years. There is no longer any monopoly as private companies are now active. NIDC is our main win in drilling operations in the fields located in the west of Karoun River.

 

Q: Are oil production enhancement plans enough for supplying feedstock to refineries?

A: Currently, feedstock supply to Persian Gulf Star and Abadan refineries is our priority. We think that domestic market cannot do more now. But if other refineries are launched, the NIOC will provide feedstock to them.

 

 

Exclusive Interview with NIOC Managing Director:

 Oil Output to hit 4mb/d by March 2015

 

 

By Hanieh Movahed

 

Roknoddin Javadi, managing director of National Iranian Oil Company (NIOC) has talked about a wide range of issues about Iran’s energy sector. Here is the abridged text of the interview:

 

 

Q: Mr Javadi! Would you please tell us about the current oil and gas production levels in Iran?

A: The current oil production capacity is 3.85 mb/d and the average production is around 2.85 mb/d. In the gas sector, production in this year’s winter reached 640 mcm/d. But given the daily consumption up to 750 mcm during peak days [of winter], we were short of 160 mcm/d of gas. We partly made up for this shortage by restricting gas supply to some industries.

 

Q: Will we be facing the same amount of gas shortage next year?

A: Not so gravely. We hope that gas production from the prioritized phases of South Pars gas field will supply 80 to 100 mcm/d of gas next winter. In that case, half of the country’s gas needs will be supplied domestically.

 

Q: But this can be true if the domestic consumption does not increase again.

A: Yes, that’s right. The consumption has to be optimized and controlled to enable us to meet the current demand.

 

Q: Do you think that gas imports from Turkmenistan would ever halt?

A: It’s possible. Moreover, the experience of importing with Turkmenistan has not been a desirable one.

 

Q: We were short of 160 mcm/d of gas in the winter. Did you ever consider importing gas from Qatar?

A: No. We don’t have the required pipeline; however, this idea could be an option which needs expert studies.

 

Q: What’s your plan for gas exports? What about gas exports to Pakistan?

A: Gas export is required for Iran’s economic development and it must be followed up on seriously. We have had agreements with Iraq and we think that gas exports to Iraq will start this year with the implementation of some of these agreements. Currently, except for Armenia and Turkey, other gas export options are inactive. Gas export to Pakistan has no clear future and it could not be assessed in the short-term.

 

Q: What about liquefied natural gas (LNG)? Are you still hopeful of the future of LNG in Iran?

A: LNG production and export, as a contributor to the country’s revenue mix, is of priority for us. But its realization depends on a chain of factors. We have decided to assign the task of assessment and feasibility of the project as well as estimation of costs to a professional international group so that we would take action accordingly.

 

Q: How long do you think would it take to bring oil production capacity back to the 2005 level?

A: For returning to the 2005 oil production capacity, it is necessary to make up for production fall-off of the reservoirs and renovation of decrepit facilities. We hope that our oil production would reach 4 mb/d by March 2015.

 

Q: How do you assess exports? Has NIOC revived any lost markets?

A: Now, our crude oil exports are up 40 percent compared with our exports in August and September [last year]. The main change we have made has been the purge of dealers from our country’s crude oil [trading], and selling oil to real consumers and secure markets.

 

Q: Following the Geneva accord, more foreign economic delegations have been visiting our country. Has the accord had any effects on Iran’s crude oil exports?

A: In case the restrictions on oil sales are relaxed, good markets will be awaiting Iran’s oil. Political overture and the agreements reached [between Iran and six world powers] have prepared the proper grounds for negotiations and interaction between Iran and other countries. Foreign countries are willing to invest in Iran’s petroleum industry and these delegates’ visits to Iran, soon after the Geneva accord, is proof of that. They want to start talks for contracts and in case sanctions are lifted most of these negotiations will turn into action. But for the moment, everything is at the stage of negotiation.

 

Q: What do you think of the revised oil contracts?

A: We have to accept that we can no longer afford the development of oil and gas reservoirs in the country. In today’s world, proprietors of money, technology and management have expectations and there must be a win-win framework. International conditions have changed and new markets have been defined. Saudi Arabia and the United Arab Emirates (UAE) have new plans to raise production. Libya is making efforts to renovate its industries and Mexico is striking big offshore deals. In the West, shale oil and gas reserves have opened a new window to hydrocarbon resources. All countries are determined to take greater steps towards development. Under such conditions, we have to revise and update the framework of our petroleum industry contracts in order to acquire standards and interact with the world. Iran’s petroleum industry enjoys many capacities for development, and improvement of contracts can make these capacities practical. At present, plans have been made for raising oil production capacity to 4 mb/d by using the existing model of contracts, and by benefiting from the revised contracts; the country’s oil production capacity could increase by one million barrels more.

 

Q: After the revised contracts become effective, will all development projects be pursued within the framework of the new model?

A: No, the new model will be used only for the development of fields which are to be awarded in an integrated manner from exploration to development or enhanced oil recovery (EOR) and improved oil recovery (IOR) projects.

 

 

Q: Is the development of independent fields off the agenda because of the priority of joint fields?

A: Nothing is off the agenda. It is just not prioritized. It means that investments should first be directed to joint fields. When we are assured about joint fields we can then focus on the development of independent fields. For example, no new investment will be made in Kish gas field and the development of this field will be followed up with the drillings made so far.

 

Q: You have set a deadline for China National Petroleum Corporation (CNPC) for delaying the development of South Azadegan field. Which specific plan does the NIOC have for dealing with this challenge?

A: Oil production from the shared fields located on the western bank of Karoun River is planned to be raised to 700,000 b/d by March 2018. With regards to South Azadegan field, the Chinese contractor has promised to go ahead with the project after the ultimatum. But the deadline remains in place and we will act according to the terms of the contract in case the contractor does not take any concrete steps. However, we are not intending to weaken or expel the contractors. We want to help the contractors to accelerate the work. But if the contractor has no determination to respect its obligations regarding joint fields, we will have to terminate the contract.

 

Q: Have we had any new explorations in recent months?

A: We have good news which will be officially announced by Petroleum Minister [HE Bijan Namdar Zanganeh].

 

Q: Do you have any plans for realizing the objectives of the NIOC in terms of enhanced recovery? The Recovery Enhancement Research Center was supposed to sign a deal with National Iranian South Oil Company (NISOC) to that effect.

A: Currently, the flow of oil from NISOC-run wells has fallen, on average, from 20,000 barrels to 2,000 barrels. Therefore, it is necessary to apply modern technologies for enhanced recovery from these wells. To that effect, the Recovery Enhancement Research Center is collaborating with six reputable universities in Iran and is close to signing the first contract with NISOC.

 

Q: How about heavy crude oil fields like Kuhmund, Zagheh and Ferdowsi?

A: These are independent fields and are of no priority for development.

 

Q: Do you think investment for recovery from unconventional oil and gas reserves in the country is a priority?

A: Not for the time being.

 

Q: In the world, huge investment is made in shale oil and gas reserves with some economists saying they are not cost-effective.

A: No! These projects are economical as the oil prices remain high. The Americans and some other countries are cashing in on them.

 

Q: Development of some oil fields requires high investment. What has been done for the development of Sardar-e-Jangal field off Caspian Sea? This field is said to be holding more than two billion barrels of oil.

A: Development of this field requires state-of-the-art technologies which we do not have completely. Compared with the technological developments in the world, we need to update ourselves.

 

Q: What about the Salman field? has Salman-Siri pipeline  been repaired?

A: Yes, the pipeline reparation is over.

 

Q: Is gas being recovered from Salman field?

A: Yes, but at a limited level.

 

Q: What happened to NIOC’s joint project with the British Petroleum (BP) in North Sea?

A: The project pertains to the development of Rhum oil and gas field. It is owned 50-50 by NIOC and BP. Gas production from Rhum had quitted due to sanctions, but production resumed two months ago following legal talks. Currently, around 200 mcf/d of gas is being produced from this field.

 

Q: So that’s not too much.

A: 200 mcm/d is not too much for us, but it is significant in Europe. We are also active in Azerbaijan’s Shah Deniz field and we are present in the second phase of development of this field. In the meantime, we have left Bolivia and our office in Bolivia is closed. Many other offices in Latin America are also being closed for not being economical.

 

Q: Do you mean that oil investment in Latin America was not justified?

A: It had no economic justification. NIOC must be run economically and not politically.

 

 

Q: The issuance of oil sukuk bonds in recent years achieved nothing. Will these bonds be printed in the future?

A: The issuance of sukuk bonds has been legalized and a working committee has been set up at the NIOC for that purpose. Therefore, these bonds are to be printed on a tentative basis.

 

Q: What about participation bonds? Will you print all the 50,000-billion-rial approved in the budget?

A: Yes, we are determined to print all participation bonds at 50,000 billion rials. They will be printed by Pars Oil and Gas Company (POGC), Iran’s Central Oil Fields Company (ICOFC), Iran’s Offshore Oil Company (IOOC) and the Petroleum and Engineering Development Company (PEDEC).

 

Q: What do you think will be the best interest rate for these bonds?

A: For the time being, the interest rate envisaged for the Central Bank of Iran (CBI) bonds, with 6-month lock-in period, is at 23 percent. The interest rate for these bonds depends on a number of economic factors. Foreign exchange rate, gold, housing and even stock market affect this interest rate. The bonds must be attractive enough; otherwise, people would not welcome them.

 

Q: Will crude oil be traded at the Energy Exchange?

A: Yes. Trading oil at Energy Exchange has more advantages than disadvantages. Oil trading in the Energy Exchange will require sometime to reach maturity. The instructions for crude oil trading in the Energy Exchange have been approved and we hope that oil would be traded in the Energy Exchange in the near future.

 

Q: How much is the minimum level of supply in the Energy Exchange??

A: We have considered a 10,000-barrel ceiling. It will start with 2,000 to 3,000 barrels of crude oil.              

 

Q: Are there any restrictions for physical delivery of oil to customers?

A: There are no specific restrictions, but it is clear that crude oil will be delivered to real consumers.

 

Q: What do you think of privatization? Do you have any plans to privatize National Iranian Drilling Company (NIDC)? Some interpret the non-privatization of the company as its monopolization.

A: Privatization of this company is a right decision, but it must be done properly. We propose the NIDC privatization to be postponed for three years. There is no longer any monopoly as private companies are now active. NIDC is our main win in drilling operations in the fields located in the west of Karoun River.

 

Q: Are oil production enhancement plans enough for supplying feedstock to refineries?

A: Currently, feedstock supply to Persian Gulf Star and Abadan refineries is our priority. We think that domestic market cannot do more now. But if other refineries are launched, the NIOC will provide feedstock to them.

Potentials for Investment in Iran Petroleum Industry

 

Before 2007, major international companies were operating numerous oil and gas projects in Iran. They were so active in South Pars gas field. When big oil companies were operating in South Pars and major Iranian oil fields, Iranian companies were acting as contractor.

In 2007, the Western governments stepped up their illogical pressures against Iran by imposing sanctions on Iran’s energy sector. Western oil companies pulled out of projects in Iran. Iranian companies had no option but to master technology to be able to run projects. Today, some Iranian companies are even able to lead major oil consortiums. However, Iran’s Petroleum Ministry is negotiating to tempt back foreign companies to speed up the implementation of the projects.

Emad Hosseini, deputy petroleum minister for engineering affairs, told Iran Petroleum that oil giants like France’s Shell and Royal Dutch Shell would be allowed to work in Iran provided that they benefit from the services of Iranian manufacturers.

“While big foreign companies are obliged to use Iranian manufacturers, domestic industrialists should also upgrade their standards,” he said.

Iran’s petroleum industry has the potential to attract more than $ 200 billion in investment, and such a potential cannot be easily ignored by foreign companies.

In the meantime, Iran has revised its oil contract terms and conditions to make them more attractive for foreign investors.

Iran’s Petroleum Ministry plans to support Iranian manufacturers of oil industry equipment. But during the recent years, due to international sanctions and concomitant restrictions, domestic manufacturing of equipment for this industry has not improved significantly.

The important point is that domestic manufacturers of commodities and equipment for the petroleum industry are required to take into consideration standards and quality.

Hosseini, deputy petroleum minister for engineering affairs said the costs of development of equipment and implementation of petroleum industry projects have been multiplied during the recent years.

“The costs for implementation of oil and gas projects in the country have increased three to four times compared with previous years,” he said.

He has called on Iranian manufacturers to take into account standards and quality in a bid to reduce manufacturing costs.

Regarding Petroleum Ministry’s plans for revising oil contracts, Hosseini said the point which has been focused upon in the revision of contracts has been that foreign companies would be obligated to use  domestically manufactured equipment and commodities.

 

IOCs Readiness

 

Hosseini said many qualified European and Asian companies have so far voiced readiness to resume work in Iran’s oil industry after sanctions are lifted.

“Increased capabilities of domestic companies over recent years and the presence of foreign companies will make the business environment in Iran’s petroleum industry more and more competitive,” he said.

Hosseini added that Petroleum Ministry will still keep looking at domestic companies and manufacturers. “To that effect, we are seeking approaches to boost standards for commodities and services of Iranian companies involved in the petroleum industry,” he said.

Hosseini said Iran has had to use substandard commodities over recent years due to the sanctions.

“Given the key role of suppliers and manufacturers of commodities for the petroleum industry in the country’s economy, a portal of goods suppliers has been designed by experts at the Department for Engineering Affairs of Iran’s Petroleum Ministry,” he said.

Hosseini said the portal is an e-procurer of commodities for the petroleum industry through identifying manufacturers and their potentials, adding that the portal will be launched shortly.

E-procurement system in the petroleum industry will be of great help to transparent transaction of commodities in this industry because this system selects companies and manufacturers based on registered data.

With the registration of manufacturers and companies active in the oil and gas industry in this system, the petroleum industry’s relations with domestic and foreign manufacturers as well as with the private sector will get warmer.

The e-procurement system will also help promote domestic products in view of industrial self-sufficiency.

 

Oil Show

 

Hosseini said foreign companies have become more interested in Iran’s oil projects as negotiations between Iran and six world powers on Iran's’s nuclear programs make progress.

He predicted that the upcoming oil and gas show in Tehran would be largely welcomed by foreign companies.

As sanctions ease on Iran, the 19^th International Oil, Gas, Refining and Petrochemical Exhibition is expected to be a venue for rivalry between domestic and foreign companies. This time, Iranian companies are stronger than ever.

Hosseini said Iran’s petroleum industry plans will be implemented in the coming years.

Return of Oil Giants

 

Tehran’s 19^th Oil and Gas Show is due to be held in Tehran May 6-9. Iranian and foreign companies are actively present at the International Oil, Gas, Refining and Petrochemical Exhibition which is held annually in the capital. The number of foreign companies attending this year’s event is on a sharp rise compared with previous years, thanks to Iran’s international interaction.

Tehran Oil Show, in which hundreds of international companies as well as domestic manufacturers, contractors and consultants participate, can serve as a good opportunity for Iran’s petroleum industry to present its capacities and take a step towards interaction with the world.

This exhibition is held every year in order to put on display the latest achievements in the oil and gas industries and create closer and more tangible ties between petroleum industrialists. Iranian and foreign companies always welcome this event which would help them communicate further.

Attraction of investment, boosting the capacity of domestic manufacturers and upgrading technical and engineering know-how with a view to enhancing production are among the main objectives of Tehran Oil Show this year.

The exhibition is one of the most important economic and industrial events in the world and is forecasted to draw in more foreign companies than before due to Iran’s breakthrough nuclear deal with six world powers and the ensuing show of willingness by oil and gas companies to invest in Iran.

The previous rounds of Tehran Oil Show in recent years have always brought achievements for Iran’s petroleum industry. Although Iran has been subject to tough international sanctions, this exhibition, the largest petroleum industry event in the Middle East, was never influenced.

When Iran was not under sanctions, a large number of international contractors used to attend the exhibition for signing contracts with Iranian companies.

Given the attractiveness of Iran’s petroleum industry for international investors and contractors, the previous 18 exhibitions proved to be attractive to foreign companies.

Moreover, every round of this annual event provides chances to domestic companies to get more involved in the petroleum industry. In the 18^th exhibition held last year, 1,100 Iranian and foreign companies attended the exhibition. The motto of last year’s exhibition was self-sufficiency in Iran’s petroleum industry and Iranian companies showcased their achievements to that effect.

Last year, the main four subsidiaries of Petroleum Ministry unveiled some of their achievements and held talks with domestic manufacturing companies. National Iranian Oil Company (NIOC), National Iranian Gas Company (NIGC), National Iranian Oil Refining and Distribution Company (NIORDC) and National Petrochemical Company (NPC) are the main four offshoots of Iran’s Petroleum Ministry.

Like the 17^th exhibition, the 18^th exhibition allotted a pavilion to “self-sufficiency jihad”. It was first proposed two years ago by Petroleum Ministry. The pavilion was run by Tehran Kala Naft Company which is tasked with procurement of commodities for the petroleum industry.

During the 18^th exhibition, Kala Naft Company and the four subsidiaries of Iran’s Petroleum Ministry put on exhibit products manufactured by Iranian companies, like turbine components, downhole and wellhead equipment.

On the sidelines of the exhibition, talks were also held with Iranian and foreign manufacturing companies and contracts were signed.

The main activities conducted throughout the exhibition were as follows: Formation of product-oriented specialized consortiums, unveiling of Iranian-made turbine by National Iranian South Oil Company (NISOC) as the largest oil producer in Iran, signature of contracts between NISOC and Iranian companies for supplying chemicals and drilling bits, presentation of achievements by the Research Institute of Petroleum Industry (RIPI) in the gas sector, holding a seminar on investment opportunities with focus on the participation of private sectors from member states of the Economic Cooperation Organization (ECO), signature of 200-billion-rial agreement between RIPI and NIOC, signature of memorandum of understanding for the construction of the second semi-floating platform for the Caspian Sea, signature of three research agreements at NIOC for enhanced recovery  from oil and gas fields, the unveiling of the longest steel pipeline in the world and the first domestically-manufactured safety valve.

Moreover, the strong presence of some international oil companies once more showed Iran’s firm determination to defeat international sanctions. The foreign companies showed their interest in Iran’s oil and gas despite sanctions. Most foreign companies present in the exhibition said that investment in Iran’s petroleum industry would be one of the most secure ways of guaranteeing profits.

Two years ago, the 17^th exhibition was held with the participation of 940 Iranian and 315 foreign companies. The participation was 10 percent higher than that of the year before.

In the 17^th show, 44 countries attended. In addition to Iran, they were Austria, Spain, United Arab Emirates, England, Italy, Germany, Turkey, Switzerland, China, Russia, Singapore, Sweden, South Korea, Malaysia, Norway, the Netherlands, India, Uzbekistan, Australia, Ukraine, Indonesia, the United States, Brazil, Pakistan, Thailand, Turkmenistan, Romania, Zambia, Japan, Sudan, Iraq, Oman, Finland, Kazakhstan, Cameroon, Canada, Kuwait, Libya, Morocco, Mongolia, Mexico and Nigeria.

The first specialized seminar on the petroleum industry with focus on national production was held on the sidelines of the 17^th exhibition. Furthermore, contracts worth one trillion rials were signed with Iranian companies.

 Golden Opportunity

 

Since the victory of 1979 Islamic Revolution, Iran’s petroleum industry has been under Western sanctions, but experience has shown that the attractiveness of huge oil and gas resources, as well as geopolitical and strategic position of Iran have always encouraged world oil companies to undertake efforts not to lose their long-term presence in an energy-rich country despite politically motivated pressures against the Islamic Republic.

Businessmen active in the oil and gas sectors are well aware that losing a share in a market could not be compensated for in the short-term. To that effect, international companies have always tried not to easily lose their chance for presence in Iran’s energy market.

International shows are an important instrument for improving experts. International exhibitions are important because they put on exhibit manufactured products, technical and engineering services and state-of-the-art technology.

Nearly 95 percent of exhibitions held across the world are specialized exhibitions in different fields including oil sector.  In order to reach its objectives in the oil sector, preserve its current status in the Organization of the Petroleum Exporting Countries (OPEC), enhance its share in gas trading, indigenize technical knowledge and broaden international activities, Iran needs to attract 30 billion dollars in investment a year.

To that effect, Iran’s annual oil shows present a comprehensive picture of the country’s petroleum industry to foreign participants and provide a chance for attracting foreign investment.

Akbar Nematollahi, director for public relations of Iran’s Petroleum Ministry, is director of Tehran’s 19^th Oil and Gas Show.

He told Iran Petroleum that more than 2,000 Iranian and foreign companies are attending the International Oil, Gas, Refining and Petrochemical Exhibition.

Nematollahi said the space requested by 800 foreign companies participating in the exhibition is 120 meters more than a year ago.

He said there have been no restrictions in allotment to Iranian and foreign companies willing to attend the show.

Nematollahi said foreign companies attending the 19^th oil show are mainly involved in providing services, consulting, manufacturing, research, production of oil products and investment.

He said 32 countries owning technology in the energy sector have registered to attend the exhibition. Some of them are Australia, Algeria, Austria, Belgium, Canada, France, Germany, China, Iraq, Italy, Japan, South Korea, North Korea, Malaysia, Poland, Romania, Turkey, Spain, Switzerland, Thailand and Britain.

Nematollahi said Tehran’s oil show is among the top five oil exhibitions held across the world.

He added that this year’s exhibition was chosen to be held in May for participants to enjoy spring weather.

Nematollahi said seminars on research and technology and latest achievements in manufacturing are to be held on the sidelines of the exhibition in a bid to provide a good opportunity for exchange of views.

He said Iran’s Petroleum Ministry Public Relations Department, which runs the event, is tasked with clearing the way for further interaction between domestic and foreign companies.

“Efforts have been undertaken so that shortcomings in the welfare and public services would decline and visitors could enjoy their visits,” said Nematollahi.

He said journalists and photographers from more than 40 international media which have office in Tehran would cover the event.

Iran, which holds 11 percent of the world’s total crude oil and 18 percent of its natural gas reserves, holds oil and gas show every year. Given the number of participants, this exhibition is among the most important shows in the world.

The presence of famous international companies from different countries as well as Iranian manufactures and industrialists provides a good chance for upgrading mutual cooperation, attracting investment and signing contracts.

According to Nematollahi, the 19^th show will have subcommittees: general contractors, consulting engineers, research and education centers, fuel conservation, technology companies, manufacturers of petroleum industry equipment, producers and exports of oil and petrochemical products.

The main objectives pursued throughout this exhibition are showcasing latest technological achievements in the oil and gas sectors, broadening interaction with other countries, competing with oil companies across the world, boosting domestic manufacturing throughout exchange of technical data, attracting investment, transferring in state-of-the-art technology, interacting with advanced industries, familiarizing industrialists with the latest achievements, signing contracts on the exchange of commodities, services and technical data, creating jobs in the oil, gas and petrochemical sectors and winning shares in the international markets.

The exhibition is hoped to persuade decision-makers focus on the oil, gas, refining and petrochemical sectors with a view to achieving the objectives of the country’s five-year economic development plan (2010-2015), motivate domestic and foreign investment in the oil and gas industries, create self-confidence n Iranian human resources for conducting studies and research on exploration, extraction and recovery.

Nematollahi said the 19^th oil show is under way at a time Iran’s Petroleum Ministry is seeking to expand its international cooperation and set the wage for broader participation in economic and industrial fields.

Major industries are hoped to take advantage of this opportunity to increase their production and broaden their regional and international cooperation.

Nematollahi said Tehran’s oil show represents a good chance for industrialists as international conditions are in Iran’s favor, following nuclear deal between Iran and six world powers, which will lead to sanctions relief.

“The 19^th exhibition which promotes the motto of energy diplomacy and domestic manufacturing pays due attention to the private sector and domestic manufacturers,” he said.

Nematollahi said the exhibition has been distributed fairly so that more companies would attend.

“From the very beginning, the focus was on strong participation of big companies. To that effect, the organizers of the 19^th exhibition concentrated on this issue and they invited all companies active in the petroleum industry. These efforts were productive and we are witnessing an exhibition offering golden opportunities for interaction,” he said.

Exploration/Development Blocks Up for Grabs

 

Exploration, Instrumental in Upstream Sector

 

Petroleum industry is the most sophisticated industry, but exploration is instrumental in upstream operations.

Today, exploration activities are conducted in deep and complicated regions in Iran, particularly in Zagros sedimentary basin.

For instance, technical difficulties in touching Dehram Group in mountainous region of Fars province and environmental impediments such as marsh and explosives-infested Abadan plain area near Iraqi border due to the 1980s war make any operation   in these areas difficult.

Exploration Directorate of National Iranian Oil Company, due to its mission for exploring new hydrocarbon potentials and introducing replacement targets, focuses on extracting oil and gas and increasing Iran’s strategic hydrocarbon stocks. To that effect, it plans to introduce new exploration and development blocks in all sedimentary basins of the country.

Sedimentary basins cover 75 percent of the country’s area, mainly in Zagros, Persian Gulf, Central Iran, Kopet Dagh, Moghan, Tabas and Makran basins.

 

These sedimentary basins’ potentials run various geological and economic risks.

Iran’s Petroleum Ministry plans to expand exploration in regions with different grades of risks in terms of exploration, development and production under more attractive contracts with foreign companies.   

In the meantime, Iran’s Petroleum Ministry has defined a new model of oil contracts to attract foreign companies.

 

Rahim Nematollahi is deputy head for "exploration blocks and foreign participation" at the NIOC Exploration Directorate. He says Iran’s petroleum industry will see a jump in foreign investment attraction if sanctions are lifted.

Here is the full text of the interview he granted to Iran Petroleum.

 

Q: As the first question, would you please tell us about the presence of foreign companies in oil and gas exploration blocks in Iran?

A: Foreign companies have long been present in exploration blocks in Iran. Their presence dates back to before the 1979 Islamic Revolution in Iran. However, in 1997, the NIOC drew up a framework for exploration and development of oil and gas blocks in a bid to attract foreign investment, broaden offshore and onshore exploration operations and accelerate exploration from hydrocarbon reservoirs. The first group of blocks was put to tender in March 1999 in London. During that event, 17 exploration blocks in sedimentary basins were offered and 20 international companies like Eni, Petronas, Edison, Total and Repsol ran for the projects.

After the first round of tender for exploration blocks, the NIOC signed contracts with OMV in Mehr block, with Edison in Monir block and with Norsk Hydro in Anaran block. The contracts were only about exploration operations.

 

Q: Was any oil and gas discovered in these blocks?

A: Among the exploration blocks, the Band Karkheh oil field in Mehr and Azar field in Anaran were declared as commercial and the NIOC is now planning for their development.  

In 2000, a number of exploration blocks remaining from the first round were put to tender in Tehran. 15 foreign companies attended the event. Four of them offered proposals for 10 exploration blocks. Sinopec won the Zavareh-Kashan Block and explored non-commercial oil in Aran structure and India’s ONGC won a tender and started work in Farsi block. Farzad B gas field was explored in this block and is commercial.

 In 2002 second round of exploration blocks were put to tender in Tehran. Bushehr, Iran Mehr, Dayr, Hamoun, Alvand, Forouz, Towsan and Larak exploration blocks were put to tender and 22 foreign companies vied for the projects. Brazil’s Petrobras won Towsan block and Repsol won Iran Mehr and Forouz blocks.

 

Q: What was the difference between the terms and conditions of contracts in the second and third rounds and how was the third round held?

A: In the third round of tender bids for Iran exploration blocks, which was held in Hague in 2003, the model of contracts was different. In this round, development operations were added to exploration activities. Foreign companies welcomed Iran’s adoption of exploration and development contracts.    

In this round, 16 exploration blocks in high-risk sedimentary basins were put to tender for 33 Iranian and foreign companies. Proposals were finally received for six exploration blocks. Thailand’s PTTEP agreed to explore and develop petroleum resources in Saveh block, China’s Sinopec was awarded the Garmsar block, while HydroZagros-Stat Oil was awarded Khorramabad block.

 

Q: How was the fourth round held?

A: The fourth round of tenders for oil and gas exploration and development in Iran was held in 2006. In this round, the proposed contracts were obviously different because of high oil prices.

In the fourth round, 16 exploration blocks from different parts of Iran were put to tender. Thirty seven companies came to Iran to visit the proposed blocks. The NIOC Exploration Directorate held 268 meetings with the representatives of these companies.

In the end, three blocks were awarded; Dayer was awarded to Edison, Danan to PEVP and Moghan II to Croatia’s INA. But unfortunately due to international sanctions and the impossibility of fund transfer, the bulk of activities of these companies in the blocks were not finished.

 

Q: What was attractive in exploration and development contracts in the fourth round?

 

A: Foreign companies are willing to invest in oil and gas projects on the long-term (15 to 25 years) in the entire exploration, development and production chain. Based on exploration and development contracts, if the foreign company achieves success in exploration operations it will have the chance to go into the next stage of development without participating in any new tender.

The main differences lay in the following categories: The duration for exploration and development operations was lengthened to 30 years. Discount rate was cut from 30 to 20 percent. To develop oil and gas fields, these companies can serve as adviser to NIOC throughout production. In the third round of tenders, companies had to leave the field to NIOC after they reached the stage of production.

 

Q: What is Petroleum Ministry’s main policy about exploration projects in the new contracts?

A: Given Petroleum Ministry’s new policies on expanding upstream activities and accelerating identification and assessment of potential hydrocarbon resources across the country, the general policy is to award exploration blocks in all sedimentary basins.

Given the levels of risk in different regions, a variety of incentives will be envisaged for the presence of oil companies in high-risk zones in order to persuade companies. Of course in new contracts, the rate of return in exploration blocks for foreign companies depends on the exploration risk. In the past, low- and high-risk blocks were awarded to foreign companies under a single contract in which the rate of return was fixed.

But now it is proposed that companies operate gradually in high-risk exploration blocks. For example, they can first conduct geological and geophysical operations. If these operations prove successful they can enter the following stage. If not, they would stop the work.

Oil and gas is no longer sought in hydrocarbon traps and companies have to look for oil and gas in stratigraphic traps.  Therefore, exploration risk has increased since several decades ago.

Moreover, due to overture in other countries and the competitive nature of upstream activities ,as well as exploration of oil and gas shale in the US and Canada, our country is determined to make new exploration contracts more attractive to increase the impetus for the presence of these companies in Iran. Another advantage of these contracts is that private Iranian companies work shoulder-to-shoulder with foreign companies, so that Iranian companies would become international ones in the future.

 

Q: If sanctions are lifted, will it be possible for companies like Edison, PVEP and INAto resume work in Iran?

A: Our approach is based on the principle of interaction with foreign companies. For successful participation, the interests of the country and the trading partners have to be taken into account. We hope that we would see continuation of cooperation under the aegis of the new approach of Petroleum Minister [Bijan Namdar Zangeneh], NIOC, easier conditions and sanctions relief.

 

Q: How many oil and gas exploration blocks exist in Iran?

A: The entire country has been divided into 96 oil and gas exploration blocks. But after reviewing their data, the figure may change.

 

Q: How has presence of companies been defined in the new contracts?

A: By modifying its oil contracts, Iran has taken the first step for streamlining administrative bureaucracy and increasing the attractiveness of its petroleum industry. As an oil expert, I believe that due to exploration and development potentials in the country, the presence of foreign companies in Iran will see a jump if sanctions are lifted. We are currently making the preparations for the presence of qualified international companies in Iran.

 

Q: How many oil and gas exploration blocks have so far been awarded to foreign companies? Could you name them?

A: So far, 15 exploration oil and gas blocks have been awarded to foreign companies. Anaran, Mehr and Farsi blocks are known to be commercial. In some blocks (Zavareh-Kashan,Towsan and Kouhdasht), oil has been found and in some others (Saveh), gas has been discovered. But these fields have not proven to be commercial. Moreover, the volume of work done in exploration blocks through 2000 to 2010 has been significant. On 45,259 kilometers, seismic lines have undergone reprocessing, on 9,657 kilometers, 2D seismic acquisition were done on around 1,238 square kilometers, 3D seismic testing was conducted. Besides, 26 wells were drilled.

 

Q: Are any exploration blocks ready to be awarded to foreign companies for development? 

A: A number of exploration blocks have been defined in Fars, Kermanshah and Lorestan provinces, and the necessary permits have been obtained for tenders in the Persian Gulf. A website will be created for introducing these blocks so that companies would get the necessary information about them.

 

Q: Abadan Plain in Khuzestan province is one of the new hydrocarbon potentials in Iran. Will this region be in the list of exploration blocks proposed to foreign companies?

A: Now, Khuzestan, Bushehr and Kohgiluyeh and Boyer -Ahmad provinces have been excluded from the proposed blocks, but we hope we could get permission and present some new blocks in these provinces.

 

Q: How do you assess the competence of Iranian exploration experts?

A: Exploration is the beating heart of the petroleum industry. It is obvious that no development activities begin before hydrocarbon resources are discovered. After the [1979] Islamic Revolution in Iran, exploration activities have been handled by experts at NIOC Exploration Directorate. Fortunately, this Directorate has since discovered major gas structures like South Pars, Kish, Golshan, Forouz B and Tabnak fields, as well as Azadegan and Yadavaran oil fields.

Iranian experts may be facing shortcomings in terms of technology and hardware due to sanctions, but they are no different from foreign experts in terms of technical qualifications. In some cases, even the technical knowledge of Iranian experts is much higher than that of experts in international companies.

We plan to operate oil and gas projects outside Iran. Petroleum Ministry and NIOC will support this issue.

 

Q: Anything else that you would like to say to wrap up?

A: Iran’s petroleum industry has great potentials which could bring about great changes in the country. Undoubtedly, training specialized manpower and attracting devoted experts in the petroleum industry will definitely bring about great successes in exploration and development.

Exploration/Development Blocks Up for Grabs

 

Exploration, Instrumental in Upstream Sector

 

Petroleum industry is the most sophisticated industry, but exploration is instrumental in upstream operations.

Today, exploration activities are conducted in deep and complicated regions in Iran, particularly in Zagros sedimentary basin.

For instance, technical difficulties in touching Dehram Group in mountainous region of Fars province and environmental impediments such as marsh and explosives-infested Abadan plain area near Iraqi border due to the 1980s war make any operation   in these areas difficult.

Exploration Directorate of National Iranian Oil Company, due to its mission for exploring new hydrocarbon potentials and introducing replacement targets, focuses on extracting oil and gas and increasing Iran’s strategic hydrocarbon stocks. To that effect, it plans to introduce new exploration and development blocks in all sedimentary basins of the country.

Sedimentary basins cover 75 percent of the country’s area, mainly in Zagros, Persian Gulf, Central Iran, Kopet Dagh, Moghan, Tabas and Makran basins.

 

These sedimentary basins’ potentials run various geological and economic risks.

Iran’s Petroleum Ministry plans to expand exploration in regions with different grades of risks in terms of exploration, development and production under more attractive contracts with foreign companies.   

In the meantime, Iran’s Petroleum Ministry has defined a new model of oil contracts to attract foreign companies.

 

Rahim Nematollahi is deputy head for "exploration blocks and foreign participation" at the NIOC Exploration Directorate. He says Iran’s petroleum industry will see a jump in foreign investment attraction if sanctions are lifted.

Here is the full text of the interview he granted to Iran Petroleum.

 

Q: As the first question, would you please tell us about the presence of foreign companies in oil and gas exploration blocks in Iran?

A: Foreign companies have long been present in exploration blocks in Iran. Their presence dates back to before the 1979 Islamic Revolution in Iran. However, in 1997, the NIOC drew up a framework for exploration and development of oil and gas blocks in a bid to attract foreign investment, broaden offshore and onshore exploration operations and accelerate exploration from hydrocarbon reservoirs. The first group of blocks was put to tender in March 1999 in London. During that event, 17 exploration blocks in sedimentary basins were offered and 20 international companies like Eni, Petronas, Edison, Total and Repsol ran for the projects.

After the first round of tender for exploration blocks, the NIOC signed contracts with OMV in Mehr block, with Edison in Monir block and with Norsk Hydro in Anaran block. The contracts were only about exploration operations.

 

Q: Was any oil and gas discovered in these blocks?

A: Among the exploration blocks, the Band Karkheh oil field in Mehr and Azar field in Anaran were declared as commercial and the NIOC is now planning for their development.  

In 2000, a number of exploration blocks remaining from the first round were put to tender in Tehran. 15 foreign companies attended the event. Four of them offered proposals for 10 exploration blocks. Sinopec won the Zavareh-Kashan Block and explored non-commercial oil in Aran structure and India’s ONGC won a tender and started work in Farsi block. Farzad B gas field was explored in this block and is commercial.

 In 2002 second round of exploration blocks were put to tender in Tehran. Bushehr, Iran Mehr, Dayr, Hamoun, Alvand, Forouz, Towsan and Larak exploration blocks were put to tender and 22 foreign companies vied for the projects. Brazil’s Petrobras won Towsan block and Repsol won Iran Mehr and Forouz blocks.

 

Q: What was the difference between the terms and conditions of contracts in the second and third rounds and how was the third round held?

A: In the third round of tender bids for Iran exploration blocks, which was held in Hague in 2003, the model of contracts was different. In this round, development operations were added to exploration activities. Foreign companies welcomed Iran’s adoption of exploration and development contracts.    

In this round, 16 exploration blocks in high-risk sedimentary basins were put to tender for 33 Iranian and foreign companies. Proposals were finally received for six exploration blocks. Thailand’s PTTEP agreed to explore and develop petroleum resources in Saveh block, China’s Sinopec was awarded the Garmsar block, while HydroZagros-Stat Oil was awarded Khorramabad block.

 

Q: How was the fourth round held?

A: The fourth round of tenders for oil and gas exploration and development in Iran was held in 2006. In this round, the proposed contracts were obviously different because of high oil prices.

In the fourth round, 16 exploration blocks from different parts of Iran were put to tender. Thirty seven companies came to Iran to visit the proposed blocks. The NIOC Exploration Directorate held 268 meetings with the representatives of these companies.

In the end, three blocks were awarded; Dayer was awarded to Edison, Danan to PEVP and Moghan II to Croatia’s INA. But unfortunately due to international sanctions and the impossibility of fund transfer, the bulk of activities of these companies in the blocks were not finished.

 

Q: What was attractive in exploration and development contracts in the fourth round?

 

A: Foreign companies are willing to invest in oil and gas projects on the long-term (15 to 25 years) in the entire exploration, development and production chain. Based on exploration and development contracts, if the foreign company achieves success in exploration operations it will have the chance to go into the next stage of development without participating in any new tender.

The main differences lay in the following categories: The duration for exploration and development operations was lengthened to 30 years. Discount rate was cut from 30 to 20 percent. To develop oil and gas fields, these companies can serve as adviser to NIOC throughout production. In the third round of tenders, companies had to leave the field to NIOC after they reached the stage of production.

 

Q: What is Petroleum Ministry’s main policy about exploration projects in the new contracts?

A: Given Petroleum Ministry’s new policies on expanding upstream activities and accelerating identification and assessment of potential hydrocarbon resources across the country, the general policy is to award exploration blocks in all sedimentary basins.

Given the levels of risk in different regions, a variety of incentives will be envisaged for the presence of oil companies in high-risk zones in order to persuade companies. Of course in new contracts, the rate of return in exploration blocks for foreign companies depends on the exploration risk. In the past, low- and high-risk blocks were awarded to foreign companies under a single contract in which the rate of return was fixed.

But now it is proposed that companies operate gradually in high-risk exploration blocks. For example, they can first conduct geological and geophysical operations. If these operations prove successful they can enter the following stage. If not, they would stop the work.

Oil and gas is no longer sought in hydrocarbon traps and companies have to look for oil and gas in stratigraphic traps.  Therefore, exploration risk has increased since several decades ago.

Moreover, due to overture in other countries and the competitive nature of upstream activities ,as well as exploration of oil and gas shale in the US and Canada, our country is determined to make new exploration contracts more attractive to increase the impetus for the presence of these companies in Iran. Another advantage of these contracts is that private Iranian companies work shoulder-to-shoulder with foreign companies, so that Iranian companies would become international ones in the future.

 

Q: If sanctions are lifted, will it be possible for companies like Edison, PVEP and INAto resume work in Iran?

A: Our approach is based on the principle of interaction with foreign companies. For successful participation, the interests of the country and the trading partners have to be taken into account. We hope that we would see continuation of cooperation under the aegis of the new approach of Petroleum Minister [Bijan Namdar Zangeneh], NIOC, easier conditions and sanctions relief.

 

Q: How many oil and gas exploration blocks exist in Iran?

A: The entire country has been divided into 96 oil and gas exploration blocks. But after reviewing their data, the figure may change.

 

Q: How has presence of companies been defined in the new contracts?

A: By modifying its oil contracts, Iran has taken the first step for streamlining administrative bureaucracy and increasing the attractiveness of its petroleum industry. As an oil expert, I believe that due to exploration and development potentials in the country, the presence of foreign companies in Iran will see a jump if sanctions are lifted. We are currently making the preparations for the presence of qualified international companies in Iran.

 

Q: How many oil and gas exploration blocks have so far been awarded to foreign companies? Could you name them?

A: So far, 15 exploration oil and gas blocks have been awarded to foreign companies. Anaran, Mehr and Farsi blocks are known to be commercial. In some blocks (Zavareh-Kashan,Towsan and Kouhdasht), oil has been found and in some others (Saveh), gas has been discovered. But these fields have not proven to be commercial. Moreover, the volume of work done in exploration blocks through 2000 to 2010 has been significant. On 45,259 kilometers, seismic lines have undergone reprocessing, on 9,657 kilometers, 2D seismic acquisition were done on around 1,238 square kilometers, 3D seismic testing was conducted. Besides, 26 wells were drilled.

 

Q: Are any exploration blocks ready to be awarded to foreign companies for development? 

A: A number of exploration blocks have been defined in Fars, Kermanshah and Lorestan provinces, and the necessary permits have been obtained for tenders in the Persian Gulf. A website will be created for introducing these blocks so that companies would get the necessary information about them.

 

Q: Abadan Plain in Khuzestan province is one of the new hydrocarbon potentials in Iran. Will this region be in the list of exploration blocks proposed to foreign companies?

A: Now, Khuzestan, Bushehr and Kohgiluyeh and Boyer -Ahmad provinces have been excluded from the proposed blocks, but we hope we could get permission and present some new blocks in these provinces.

 

Q: How do you assess the competence of Iranian exploration experts?

A: Exploration is the beating heart of the petroleum industry. It is obvious that no development activities begin before hydrocarbon resources are discovered. After the [1979] Islamic Revolution in Iran, exploration activities have been handled by experts at NIOC Exploration Directorate. Fortunately, this Directorate has since discovered major gas structures like South Pars, Kish, Golshan, Forouz B and Tabnak fields, as well as Azadegan and Yadavaran oil fields.

Iranian experts may be facing shortcomings in terms of technology and hardware due to sanctions, but they are no different from foreign experts in terms of technical qualifications. In some cases, even the technical knowledge of Iranian experts is much higher than that of experts in international companies.

We plan to operate oil and gas projects outside Iran. Petroleum Ministry and NIOC will support this issue.

 

Q: Anything else that you would like to say to wrap up?

A: Iran’s petroleum industry has great potentials which could bring about great changes in the country. Undoubtedly, training specialized manpower and attracting devoted experts in the petroleum industry will definitely bring about great successes in exploration and development.

Iran Drilling Industry Racing Ahead

 

Before the 1979 Islamic Revolution, foreign companies were steering Iran’s petroleum industry, particularly in the upstream sector. Iran depended on foreign countries even for its most basic needs in the petroleum sector. But after the revolution, new disciplines were created at universities to train Iranian manpower for the petroleum industry. Now, the upstream sector’s activities like exploration, drilling, development and recovery from fields are done by domestic forces.

Drilling industry has been one of the sectors that have grown significantly during these years. National Iranian Drilling Company (NIDC) was established after the Islamic Revolution. It is now active in many oil fields in Iran and in neighboring countries where it is providing technical and engineering services. NIDC is also among leading companies in supporting domestic manufacturing of equipment.

Hamid-Reza Golpayegani, managing director of NIDC, says the company has plans to win shares in the markets of Caspian Sea littoral states. He said wells in 50 percent of Iranian oil fields are being drilled by NIDC. He said NIDC is ready to run for any tender bid.

He said NIDC’s agreement with Iraq for training Iraqi engineers is expected to increase the company’s presence in Iran’s western neighbor.

Golpayegani said there is even room for foreign companies to operate in Iran’s oil and gas sectors as international sanctions are eased due to Iran’s nuclear deal with six world powers.

“Even now, all Iran market is not in NIDC’s hands and private companies are also active,” said Golpayegani.

He referred to NIDC’s capabilities in human resources and equipment, saying: “We are not worried about the presence of foreign companies and we can even be present in other markets in the region.”

Drilling industry needs a great deal of key equipment. Having understood the significance of this issue, NIDC has in recent years supported domestic manufacturing in order to meet its needs for commodity and equipment through Iranian manufacturers. At present, more than 70 percent of the equipment used in drilling is domestically manufactured. NIDC purchases equipment from 120 Iranian companies.

Golpayegani said NIDC had to import the simplest equipment from abroad up to 1991, adding that the company is now even exporting equipment to other countries.

He said more than 8,000 key items used in the drilling industry have so far been indigenized by Iranian manufacturers, saying 4,000 more items are to be nationalized over the coming three years.

“So far, rigs and some of their components including top drive and drawworks have been manufactured domestically and some others like pumps are under construction,” said Golpayegani.

He said some drilling structures have already been manufactured in Iran and that more structures are to be manufactured.

Golpayegani said offshore drilling device is predicted to be fully manufactured in Iran in the near future.

He, however, said NIDC is ready to purchase drilling devices from abroad if necessary.

Golpayegani said Iran will be able to manufacture offshore drilling rig under a three-year program and with the support of companies like Iran Shipbuilding & Offshore Industries Complex Co (ISOICO).

 

Drilling Mud Logging

 

Golpayegani said 200 billion rials are to be earmarked for 14 research projects by this company, adding that mud logging device indigenization has just been completed.

He said 90 percent of the components of the mud logging device are manufactured in the country, saying the remaining 10 percent, which is in the software sector, is also being indigenized.

Golpayegani said the Iranian mud logging device would cost five billion rials, much lower than $ 500,000 to 800,000 paid for foreign ones.

He said the Iranian mud logging device is on equal footing with foreign ones in terms of quality.

Golpayegani said 10 mud logging devices have been ordered to a domestic manufacturer. He said two have already been delivered and the rest is to be delivered in four months.

Golpayegani said NIDC’s priority would be developing equipment needed for drilling.

He said that sanctions relief against Iran and the presence of foreign companies would not have any impact on NIDC’s policies. “We will continue to support domestic manufacturers.”

“Foreign companies always try to purchase their equipment from nearby markets in order to accelerate their development and production activities and save time and costs, and domestic manufacturers can benefit from this opportunity for selling their products,” he added.

Golpayegani said domestic manufacturers in the southwestern Khuzestan province have signed contracts for procurement of equipment with companies operating in regional countries.

Mud logging is the creation of a detailed record (well log) of a borehole by examining the cuttings of rock brought to the surface by the circulating drilling medium (most commonly mud). Mud logging is usually performed by a third-party mud logging company. This provides well owners and producers with information about the lithology and fluid content of the borehole while drilling.

Mud logging technicians in an oil field drilling operation determine positions of hydrocarbons with respect to depth identify down-hole lithology, monitor natural gas entering the drilling mud stream, and draw well logs for use by oil company geologist. Rock cuttings circulated to the surface in drilling mud are sampled and analyzed.

 

Activities

 

Golpayegani said drilling in Phase 18 of South Pars gas field ended in the last calendar year which ended on March 20.

“In Phase 17, two well repairs are left. After they are finished, Platform 17 will be delivered to Pars Oil and Gas Company for production and installation of facilities,” he said, adding that drilling in Phase 14 of South Pars has progressed 50 percent.

Golpayegani said five drilling devices are to be purchased this year.

Drilling Rig almost Indigenized

 

 

Drilling is undoubtedly the main operation in oil recovery from a reservoir. But the most important issue in drilling industry, for which new technologies are developed every day, is speed and accuracy in drilling in joint fields. Precision in drilling could not be envisaged unless advanced drilling devices are used.

As drilling industry grows in Iran, construction of drilling rigs and other equipment by Iranian manufacturers have been taken into account in recent years. So far, six drilling rigs have been constructed by Iranian companies like Fajr Shiraz, Tous Mashhad, Mashin Sazi Arak and Imen Taksa. Construction of more structures is on the agenda. One can claim that Iran’s petroleum industry has attained self-sufficiency in the construction of drilling rigs. But construction of systems and components of a drilling rig is important, as well. To that effect, under the aegis of National Iranian Drilling Company (NIDC)’s support, valuable measures have been undertaken for the manufacturing of these components inside the country. NIDC officials have said that Iranian manufacturers can build 70 percent of a drilling rig.

Mehran Makvandi, deputy head of NIDC for drilling operations, underlines the significance of drilling substructures rotary system, drawworks and drilling mud circulation system, saying: “Currently, we have no problem with the construction of onshore and offshore rigs. Fath-83 in Ahvaz is the first drilling mast constructed by Iranian companies. Six years after its construction, it is working without any technical problem.”

Makvandi said sophisticated components like drawworks and reels have already been constructed in Iran.

“Eighty percent of the equipment used in the mud circulation system including mud pump, mud tank, valve and mixer have already been indigenized. Only centrifuges have not been manufactured domestically. If Iranian manufacturers volunteer to manufacture this important component, NIDC will provide the necessary support to them,” he said.

Top drive is the most important component in the rotary system of a drilling rig. Iranian company Taiko has manufactured top drive for Rig 83.

Makvandi said the satisfactory performance of this component encouraged NIDC to order a second top drive to Taiko. The price charged by Taiko is lower than the price charged by foreign companies. Drilling mud treatment filters are also being produced by Iranian manufacturers.  

Makvandi said silicon-controlled rectifier (SCR) is the only section which has not been manufactured domestically.

“Engine and generator are the main equipment powering drilling rigs. Recently, a domestic company volunteered to manufacture them, but the power of this equipment needs to be high enough to work round the clock. If our standards are met, the equipment needed in SCR will be also manufactured domestically,” he said.

 

70% Self-Sufficiency in Drilling Rig

 

Although significant measures have been undertaken with regards to the domestic manufacturing of drilling rigs, it does not mean that all components will be made in the country.

Manufacturing some components and equipment is not economical and many leading foreign manufacturing companies commission the manufacturing of some components to other countries.

Habibollah Etemad, director of research and technology at NIDC, said Iranian companies can manufacture up to 70 percent of a drilling rig. “But we should not manufacture 100 percent of equipment and components, because the rig may need a generator whose purchase will cost less than its manufacturing,” he added.

He said Iranian manufacturers are able to build drilling rig, but that needs more cohesion. “Because a great deal of research activities must be done before a drilling rig is constructed and that may cause scheduling problems, specifically in joint fields for which we face limited time,” he said.

“Therefore, domestic manufacturers must coordinate with national drilling programs in terms of scheduling. On the other hand, the domestic manufacturers must be given guarantees that the drilling rigs they intend to produce would be sold provided that they are of acceptable quality,” said Makvandi.

 

Competition with Foreign Ones

 

At present, NIDC owns 67 onshore drilling rigs and has let 7 others. NIDC is expected to bring the number of its rigs to 90 by 2025. However, the rigs manufactured in Iran should always be assessed in terms of quality and compared with foreign ones.

An NIDC director said: “Domestically manufactured rigs are strong enough. I have worked with rigs 83, 86 and 87 constructed by domestic companies and we have accomplished drilling operations without any problems.”

Drilling in Iran is difficult because of deep waters, but domestically-manufactured rigs have accord this difficult job.

Mahmoud Shadmehr, currently operating Rig 83of Ahvaz, said this Iranian-manufactured rig is remarkable, adding that Iranian engineers can work with it more easily than with foreign rigs.

He said most of spare parts of this rig are manufactured and supplied by Iranian manufacturers, adding the quality of spare parts manufactured by Iranian companies have improved over years.

 

Domestic Manufacturing

 

Drilling industry in general needs many spare parts. NIDC is well aware of this fact and it has moved to support Iranian companies active in manufacturing drilling equipment.

At present, most of drilling needs in the country are met by domestic manufacturers.

Now, some Iranian manufacturers are worried that foreign companies may outdo them in Iran’s market as sanctions are being eased against Iran’s petroleum industry following the country’s nuclear deal with six world powers.

However, senior drilling managers have said that Iran’s Petroleum Ministry will continue to support domestic manufacturers who have gained experience during the past years.

Domestic manufacturers will be also able to win shares in regional markets and supply their needs.

But most Iranian manufacturers are facing shortage of machinery as they are still working with outdated machinery. They say the government has to purchase advanced machinery and equipment from foreign countries and provide them to Iranian companies.

Financial shortages and banking facilities are also another challenge faced by domestic manufacturers.

Drilling Rig almost Indigenized

 

 

Drilling is undoubtedly the main operation in oil recovery from a reservoir. But the most important issue in drilling industry, for which new technologies are developed every day, is speed and accuracy in drilling in joint fields. Precision in drilling could not be envisaged unless advanced drilling devices are used.

As drilling industry grows in Iran, construction of drilling rigs and other equipment by Iranian manufacturers have been taken into account in recent years. So far, six drilling rigs have been constructed by Iranian companies like Fajr Shiraz, Tous Mashhad, Mashin Sazi Arak and Imen Taksa. Construction of more structures is on the agenda. One can claim that Iran’s petroleum industry has attained self-sufficiency in the construction of drilling rigs. But construction of systems and components of a drilling rig is important, as well. To that effect, under the aegis of National Iranian Drilling Company (NIDC)’s support, valuable measures have been undertaken for the manufacturing of these components inside the country. NIDC officials have said that Iranian manufacturers can build 70 percent of a drilling rig.

Mehran Makvandi, deputy head of NIDC for drilling operations, underlines the significance of drilling substructures rotary system, drawworks and drilling mud circulation system, saying: “Currently, we have no problem with the construction of onshore and offshore rigs. Fath-83 in Ahvaz is the first drilling mast constructed by Iranian companies. Six years after its construction, it is working without any technical problem.”

Makvandi said sophisticated components like drawworks and reels have already been constructed in Iran.

“Eighty percent of the equipment used in the mud circulation system including mud pump, mud tank, valve and mixer have already been indigenized. Only centrifuges have not been manufactured domestically. If Iranian manufacturers volunteer to manufacture this important component, NIDC will provide the necessary support to them,” he said.

Top drive is the most important component in the rotary system of a drilling rig. Iranian company Taiko has manufactured top drive for Rig 83.

Makvandi said the satisfactory performance of this component encouraged NIDC to order a second top drive to Taiko. The price charged by Taiko is lower than the price charged by foreign companies. Drilling mud treatment filters are also being produced by Iranian manufacturers.  

Makvandi said silicon-controlled rectifier (SCR) is the only section which has not been manufactured domestically.

“Engine and generator are the main equipment powering drilling rigs. Recently, a domestic company volunteered to manufacture them, but the power of this equipment needs to be high enough to work round the clock. If our standards are met, the equipment needed in SCR will be also manufactured domestically,” he said.

 

70% Self-Sufficiency in Drilling Rig

 

Although significant measures have been undertaken with regards to the domestic manufacturing of drilling rigs, it does not mean that all components will be made in the country.

Manufacturing some components and equipment is not economical and many leading foreign manufacturing companies commission the manufacturing of some components to other countries.

Habibollah Etemad, director of research and technology at NIDC, said Iranian companies can manufacture up to 70 percent of a drilling rig. “But we should not manufacture 100 percent of equipment and components, because the rig may need a generator whose purchase will cost less than its manufacturing,” he added.

He said Iranian manufacturers are able to build drilling rig, but that needs more cohesion. “Because a great deal of research activities must be done before a drilling rig is constructed and that may cause scheduling problems, specifically in joint fields for which we face limited time,” he said.

“Therefore, domestic manufacturers must coordinate with national drilling programs in terms of scheduling. On the other hand, the domestic manufacturers must be given guarantees that the drilling rigs they intend to produce would be sold provided that they are of acceptable quality,” said Makvandi.

 

Competition with Foreign Ones

 

At present, NIDC owns 67 onshore drilling rigs and has let 7 others. NIDC is expected to bring the number of its rigs to 90 by 2025. However, the rigs manufactured in Iran should always be assessed in terms of quality and compared with foreign ones.

An NIDC director said: “Domestically manufactured rigs are strong enough. I have worked with rigs 83, 86 and 87 constructed by domestic companies and we have accomplished drilling operations without any problems.”

Drilling in Iran is difficult because of deep waters, but domestically-manufactured rigs have accord this difficult job.

Mahmoud Shadmehr, currently operating Rig 83of Ahvaz, said this Iranian-manufactured rig is remarkable, adding that Iranian engineers can work with it more easily than with foreign rigs.

He said most of spare parts of this rig are manufactured and supplied by Iranian manufacturers, adding the quality of spare parts manufactured by Iranian companies have improved over years.

 

Domestic Manufacturing

 

Drilling industry in general needs many spare parts. NIDC is well aware of this fact and it has moved to support Iranian companies active in manufacturing drilling equipment.

At present, most of drilling needs in the country are met by domestic manufacturers.

Now, some Iranian manufacturers are worried that foreign companies may outdo them in Iran’s market as sanctions are being eased against Iran’s petroleum industry following the country’s nuclear deal with six world powers.

However, senior drilling managers have said that Iran’s Petroleum Ministry will continue to support domestic manufacturers who have gained experience during the past years.

Domestic manufacturers will be also able to win shares in regional markets and supply their needs.

But most Iranian manufacturers are facing shortage of machinery as they are still working with outdated machinery. They say the government has to purchase advanced machinery and equipment from foreign countries and provide them to Iranian companies.

Financial shortages and banking facilities are also another challenge faced by domestic manufacturers.

World Firms Vie for Iran Oil

 

By Forough Gashtasbi

 

In order to experience economic growth and sustainable development, a country has to follow proper models of economic development which depends on commercial relations and markets. Any factor causing economic improvement in regional markets will also boost the economy at the international level.

Analysts believe that economic development in Iran would increase gross domestic product (GDP), bring in hard currency, create jobs and wean the economy off petrodollars. Such tools as international exhibitions should never be neglected in pursuing this objective.

International shows provide an appropriate venue for putting manufactured commodities on display and transfer in technology from other countries. Exhibitions also facilitate communications, marketing and promotion activities.

Iran’s annual Oil and Gas Show, which is regularly held in Tehran in spring, provides domestic and international companies with a good chance to cooperate or vie at the international level. Iran’s Oil and Gas Show is a member of the Paris-based Global Association of the Exhibition Industry (UFI).

As prospects are bright for a final nuclear accord between Iran and six world powers on Tehran’s nuclear issue and the widely expected more sanctions relief, this round of the oil and gas show is expected to be different from the past couple of years. A large number of Iranian and foreign companies are attending the event. For the first time since Iran has held annual oil shows, German, Italian, Chinese and Spanish companies are to attend in exclusive pavilions. Such a strong presence is expected to encourage cooperation between Iran’s petroleum industry and world companies.

 

Joint Fields Prioritized

 

Deputy head of National Iranian Oil Company (NIOC)’s Directorate for Incorporated  Planning, Abdorreza Assadi, told Iran Petroleum that negotiations are to be held with Iranian and foreign companies attending the 19^th International Oil, Gas, Refining and Petrochemical Exhibition within the framework of energy diplomacy.

“This Directorate is currently classifying priority projects, particularly in the development of shared oil and gas fields,” he said.

“Foreign companies must know that development of fields [located along] borders is Iran’s priority,” said Assadi.

A total of 3,028 projects have been suggested by NIOC subsidiaries and they are currently being classified in terms of priority.

Assadi said participants at the upcoming Iran Oil Show will be presented with prioritized and systematic investment opportunities, adding that Petroleum Ministry’s focus on these projects guarantees the security of these investments at both domestic and international levels.

 

Oil Contract Terms

 

Assadi said the new model of oil contacts, drafted by Iran’s Petroleum Ministry, is to be unveiled soon, but the main points may be presented during the exhibition.

He said Petroleum Ministry plans to attract investment for its prioritized projects, export technical and engineering services, broaden its international transactions and promote HSE standards.

 

Incomplete Projects

 

Assadi said incomplete oil and gas projects, some of which having progressed more than 90 percent, are among priority projects to be presented at the Oil Show.

He said these projects are to be offered for investment, adding that they are production, development, recovery, environmental and gas gathering projects.

He said that opportunities for investment will be introduced to foreign companies through brochures, visual media and CDs.

“In case foreign companies meet conditions for operating projects, they would be able to get the preliminary information about the projects throughout the exhibition,” he said.

Assadi added: “Details of projects, like investment, rate of return and recoupment which vary under different contracts will be announced to companies by Department for Investment and Financing Affairs of NIOC after the end of the exhibition.”

Asked if Iran’s Petroleum Ministry will seek to attract foreign manpower for deepwater drilling, Assadi said: “No specific plans have been adopted to that effect, but if foreign companies volunteer to operate offshore oil and gas projects, particularly in Caspian Sea deep waters, we will welcome them.”

Assadi said the priority in Iran’s independent hydrocarbon fields would be for unfinished projects.

“If any private entity volunteers to invest, it would be negotiable,” he said.

“Regarding fields shared [with neighboring countries], South Pars field is prioritized in the gas sector, and Azadegan as well as West Karoun fields are prioritized in the oil sector,” he said.

 

Energy Diplomacy

 

Director for Coordination and Supervision on Oil and Gas Production at NIOC, Amir-Masoud Jabbari, said this round of Tehran Oil and Gas Show will seek to attract foreign investment following the slogan of “energy diplomacy and domestic capabilities”.

He said broader interaction with other countries and competition with oil companies across the globe, signing contracts on exchange of commodities, services and technical data, helping create new markets abroad, motivating investment in the oil and gas sectors and the presence of international businessmen and industrialists are among the objectives of the international oil and gas exhibition.

“The 19^th exhibition will give foreign investors the chance to be able to acquire the necessary data about investment opportunities, including the amount of investment, rate of return, profitability, productivity and interaction,” Jabbari said.

 

New Oil Contracts  

 

The head of Institute for International Energy Studies (IIES), Hossein Iranmanesh, said conclusions achieved from studies conducted by this institute on the nature of contracts in other countries including Iraq will be presented during the exhibition.

“When new oil contracts take effect Iran and qualified foreign companies work alongside domestic companies, a modern development will take place in the country’s oil and gas production,” he said.

He said that the final version of Iran Petroleum Contract (IPC) would not be much different with its draft unveiled earlier this year.

This oil show will be a good chance for Iranian and foreign companies to show their qualifications and run for Iran’s 50-billion-dollar investment market.

 

Depoliticizing of Economy

 

Experience has shown that international sanctions imposed on Iran never posed any obstacle to the presence of international companies at Tehran Oil and Gas Show and every year the exhibition has seen growth in both quantity and quality. Oil sector is an economic venue in which politicization has no place.

Western economic sanctions against Iran’s petroleum industry have given rise to controversy in recent years, but they are losing momentum.

In the meantime, these irrational behaviors have further caught attention to international oil exhibitions in Iran because everyone wants to see how an oil show would go ahead in a country whose petroleum industry has been exposed to the toughest ever sanctions.

Tehran Kala Naft to Launch Oil Trading in Kish Island

 

Tehran Kala Naft Company has devised strategies in order to supply equipment to Iran’s petroleum industry and interact further with foreign manufacturers. Chief among these very important strategies are bartering Iran’s oil with strategic equipment and establishment of an international center for oil and gas trading in the Kish Island, known as Kish International Oil and Gas Business Center.

Ezzatollah Akbari, managing director of Kala Naft Company, told Iran Petroleum that the oil-for-goods contracts need to be drafted so as to help Iran get the technology for manufacturing.

He said the idea for establishment of an oil business center in Kish was first raised several years ago, adding that the business center is set to be established due to the insistence of Petroleum Minister HE Bijan Namdar Zangeneh.

Twenty-year tax exemption, facility of entry and exit of foreigners, lack of restrictions for transfer of hard currency, legal guarantee for investment, full foreign ownership of companies without having to pick any domestic partner, exemption of raw materials and machinery from customs duties and support for the manufacturing of required equipment are among advantages of investment in Kish free zone, said Akbari.

He added that the necessary grounds have been prepared for foreign companies manufacturing oil, gas and petrochemical equipment to operate in Kish.  He added that foreign banks have opened branch offices in the island.

Akbar, formerly head of the Industrial and Mining Committee of the parliament, said all legal measures have been undertaken for facilitating the presence of foreign investors in this international center.

 

Oil Barter

 

Another option proposed by Kala Naft is to exchange oil with strategic equipment and parts. Foreign companies willing to invest in Iran can provide Iranian companies with equipment and will be compensated by Iran’s oil.

Akbari said a number of foreign companies have voiced readiness for oil-for-goods trade with Iran, adding that preparations are currently under way to that effect.

 

Kala Naft at Oil Show

 

Akbari said Kala Naft Company is to introduce strategic equipment needed by operation companies to Iranian and foreign manufacturers, while introducing manufacturers to companies and consumers during Tehran’s Oil and Gas Show.

Other programs envisaged by Kala Naft include supporting domestic manufacturers of equipment and setting the stage for competition between domestic and foreign manufacturers of commodities, he said.

Akbari said Kala Naft targets indigenization of technology for the manufacturing of equipment through cooperation with foreign manufacturers.

 

Tax Exemption

 

Akbari said the following incentives are offered to domestic and foreign investors: Exemption from revenue taxes, exemption from taxes on machinery and production line equipment, reduced social security costs and privileges for job creation in impoverished regions.

“Facilitation of visa requirements and residence permit for foreign investors, managers and experts are other incentives envisaged for foreign companies. Moreover, cash and non-cash investment is done only based on investment permit and there is no need for any other permits,” he said.

“The volume of investment will face no restrictions and foreign capital is guaranteed,” he added.

Akbari said government bodies also guarantee the manufacturing of commodities within the framework of law, adding that the money gained from selling commodities could be transferred through the country’s banking system.

“If willing, foreign manufacturers can manufacture commodities either independently or under joint venture projects with domestic companies. Moreover, foreign investors can provide Iranian companies with technology for manufacturing,” he said.

Iran Offers $40-45b Petchem Projects  

 

Iran enjoys great potentials for the development of petrochemical industry. Experts say Iran is unique in the petrochemical sector mainly due to its advantage of abundance in feedstock. Another advantage is that Iran’s hydrocarbon reserves are offshore or onshore because access to high seas is very important for the petrochemical industry.

Iran is the pioneer of petrochemical industry in the region. The first petrochemical plant in the Middle East – Marvdasht Chemical Fertilizer Factory – was established in Iran in 1962. The first PVC was manufactured in the southwestern city of Abadan. Up to that time, there was no polymer production in the Middle East. The first petrochemical plant in the Middle East was Iran-Japan Petrochemical Plant, today known as Bandar Imam Petrochemical Plant.

Deputy Head of National Petrochemical Company (NPC), Mohammad-Hossein Peyvandi, says Iran’s nuclear accord with six world powers – reached late last year – allows Tehran to resume petrochemical exports to Europe in addition to facilitating Iran’s access to technology, technical and engineering services, and finance for petrochemical projects.

He said that Iran’s petrochemical industry slipped out of stagnation after President Hassan Rouhani took office last August.

“In recent years, the bulk of this industry has been privatized in line with Article 44 of the Constitution. That is why NPC is currently pursuing long-term planning as its basic strategy in upgrading this industry,” said Peyvandi.

He said that petrochemical projects with a total capacity of 55 million tons are currently under way in Iran, adding that National Development Fund (NDF)’s help is needed for the completion of the projects.

One of these projects is West Ethylene Pipeline, a legacy of the third and fourth five-year economic development plans (2000-2010).

“According to a survey conducted on the projects under way in Iran’s petrochemical industry, roughly 30 billion dollars are needed. So far, some five billion dollars have been spent,” said Peyvandi.

In spite of problems on its way, Iran’s Petroleum Ministry has made plans for implementing incomplete petrochemical projects in order to realize the objectives set for this industrial sector, he said.

Peyvandi said after Iran’s landmark nuclear deal with the world powers took effect on January 20, Chinese investors financing Iran’s petrochemical projects have become active.

“Nearly 10 million tons of these projects are in strategic locations because of their proximity to Assaluyeh, the main center of feedstock. These projects are mainly fed with methanol,” said Peyvandi.

 

Challenges

 

Peyvandi said Iran has to surmount challenges on the way of development of petrochemical industry.

He referred to financing, feedstock and competition among producers as main challenges to this industry.

“Hydrocarbons are on one hand like feedstock for the petrochemical industry, while on the other they serve as fuel for the energy sector,” said Peyvandi.

He said that hydrocarbon resources are mainly used as fuel, while they can be used more effectively in petrochemical projects.

Peyvandi said due to growing energy consumption, petrochemical plants are facing feedstock shortage.

“Currently, more than five percent of hydrocarbons produced in Iran are earmarked for the petrochemical industry. This small amount makes up 50 million tons of commodities and more than 40 percent of the country’s non-oil exports and has a significant share in the gross domestic product (GDP) and job creation,” he said.

The NPC has conducted studies on the amount of feedstock needed by new petrochemical plants.

Foreign investors active in Iran’s petrochemical industry mainly demand long-term feedstock supply.

“The ethane produced in South Pars along with 20 percent of gas condensates can easily supply feedstock to new petrochemical plants for ten years,” he said.

“Moreover, Iran has tried to produce the bulk of its future petrochemical products from natural gas by converting natural gas to methanol,” he added.

To that effect, Peyvandi said feasibility studies have already been conducted on petrochemical projects valued at 40 to 45 billion dollars.

“In case petrochemical feedstock is provided to [petrochemical] plants, the preliminary stages of new projects like signature of contracts and attraction of investors could be done from today,” he said.

Despite all restrictions, Iran has undertaken huge efforts for introducing potentials for foreign investment in the petrochemical industry. The NPC presents its attractive projects every year through Iran Petrochemical Forum (IPF) which has been held over the past ten years.

Peyvandi said this year the IPF is to be held on June 7-8, expressing hope that negotiations would be held on the sidelines of the gathering with a view to attracting foreign investment into the petrochemical sector.

“Foreign investment is not required to be direct, because Iran can attract the investor and technical knowledge through finance, too,” he said.

Peyvandi said another mission assigned to NPC is to “preserve the present conditions in terms of production and exports.”

 

Foreign Investment

 

Before the implementation of Article 44 of the Constitution, the petrochemical industry was totally controlled by the government and government’s supports were the main motivation for the presence of investors because the Iranian government guaranteed the profitability of projects.

Peyvandi said the high price of petrochemical feedstock is another reason for the lack of willingness for investment in the petrochemical sector.

“Under the present circumstances, we cannot pin much hope in direct investment, but we can hope for foreign finance,” he said.

Peyvandi said foreign investment will not be attracted unless the government holds a minimum 20-percent share in the projects.

“Development of downstream petrochemical industries is a strategy in the future plans for the development of petrochemical industry. In this regard, the cooperation of banks, as well as fresh investment can bring about a big change in the development of downstream along with upstream industries,” he said.

Peyvandi said propylene shortage is one reason behind non-development of downstream and petrochemical industries in Iran.

“Over the coming ten years, Iran’s petrochemical production will be propylene-oriented. Therefore, offering incentives in the liquid feedstock sector will be very vital so that the propylene production will increase and downstream industries will be developed.”

“Development of downstream petrochemical industries would clear the way not to sell crude oil, and it is of high value-added,” said Peyvandi.

 

Petchem Exports

 

Peyvandi said no country can replace Iran in the petrochemical sector. Buyers of Iran’s oil claim that one day they may find an alternative to Iran, but they would not be able to find a substitute to Iran’s 10-20 million tons of petrochemical products.

“Undoubtedly, there are attractions and potentials for investment in Iran’s oil, gas and petrochemical sectors with high rate of return. Such thing could not be found in any other country, and Iran is a unique option for investment in this industry,” he said.

NIOC Offers 37 Investment Opportunities

 

National Iranian Oil Company (NIOC) is to offer 37 opportunities for investment at the 19^th Oil and Gas Show of Tehran, an NIOC official said.

Abdolreza Assadi said 37 projects are to be introduced as investment opportunities at the 19^th International Oil, Gas, Refining and Petrochemical Exhibition.

“Of these 37 projects, 10 pertain to development of gas fields, 23 pertain to development of oil fields, one pertains to renovation of installations at Aghajari and NGL 1800, two environmental projects and one residential project,” said the official.

Assadi said development of the second phase of Salman gas field, first phase of Kish gas field, development of North Pars, Golshan, Ferdowsi, Lavan, Forouz B, Farzad A, Farzad B, Dey and Sefid Zakhour gas fields, development of gas reservoirs in southern Iran and renovation of Aghajari and NGL 1800 installations are among development projects to be put on exhibit in the gas section of the oil and gas show.

The oil projects include development of South Yaran oil field, Phase 2 of Dehloran oil field, Phase 3 of Darkhoein oil field, Jofair, Sumar and Band Karkheh oil fields, Phase 2 of Soroush oil field, Mahshahr oil field, Changouleh oil field, Phase 2 of Dannan oil field, completion of Dalpari oil field, development of Cheshmeh Khosh, Zagheh, Rig, Shouroum, Doudrou, East Assaluyeh, Kuhmund, Kuhkaki, Bushkan, Sepehr, Sousangerd, Arash and Sohrab oil fields and purchase of FPSO for the development of oil layers of South Pars.

Assadi said renovation of Aghajari and NGL 1800 installations include construction of a gas and gas condensate factory, CFU 100 separation unit, construction of processing facilities and a gas gathering project.

“Two environmental projects are also to be introduced at the 19^th show for investment. They include gas gathering and efficient energy use,” he said.

Assadi said the residential project is also aimed at housing petroleum industry staff.

$50b Offshore Projects Up for Investment  

 

Petroleum industry experts often say huge oil discovery in the world may no longer be possible. But the train of exploration in Iran is racing ahead. According to experts, more than 110 billion barrels of crude oil and 6 tcm of natural gas have been discovered since 2005. Persian Gulf, where more than 96 billion barrels of oil in place have so far been proven to exist, continues to remain potentially rich in oil and gas. According to forecasts, oil production in the Persian Gulf region will be reaching 30 mb/d by 2020. Persian Gulf region holds 715 billion barrels of oil (75% of the world total) and 2,462 tcf of gas (45% of the world total). Potentials are high for more oil and gas discovery in the Persian Gulf.

Oil and gas exploration in the Persian Gulf dates back to 50 years ago and new studies show that numerous crude oil and natural gas reserves still exist in the Persian Gulf and the Sea of Oman.

The volume of Iran’s crude oil reserves in the Persian Gulf has doubled in the past several years. Last year, huge non-conventional reserves were discovered in the Sea of Oman.

Mohammad-Hossein Daneshfar, director of planning at Iran’s Offshore Oil Company (IOOC), says exploration in the hydrocarbon fields run by this company are likely to rise due to promising findings from geological studies.

He said IOOC is currently operating 15 reservoir studies plans and a master development plan.

Iran has also conducted 3D seismic testing on around 2,400 square kilometers of its own sector of the Persian Gulf.

 

50 H/C Fields

 

IOOC manages 121 oil and gas reservoirs in 50 fields. The oil reserves in place of reservoirs run by IOOC were estimated at 96 billion barrels by 2012, 15.8 billion barrels of which are recoverable. Over the past 50 years, more than 7.4 billion barrels of oil have been recovered from Iran’s oil reservoirs in the Persian Gulf and the IOOC plans to recover 8.3 billion more in the coming years.

IOOC is one of the first companies established in the Middle East. With more than half a century of experience in management, the company runs 11 processing facilities, 16 processing platforms, 100 wellhead platforms, 700 oil and gas production and water and gas injection wells and 3,600 kilometers of subsea pipeline. The company has the potential to store 26 million barrels of oil, run 27 power plants, more than 1,600 pumps, compressors, turbo-generators and rotary machinery. IOOC can also process more than 1.2 mb/d of 18 to 48 degrees API oil.

Daneshfar said the outstanding feature of IOOC is its offshore operations. “Difficult conditions and high costs of offshore operation, letting rigs and diversity of geological layers in offshore reservoirs are few examples of the difference in operation in the Persian Gulf,” he said.

IOOC can conduct horizontal drilling, operate downhole pumps, inject water and gas simultaneously and also inject water and lift gas simultaneously.

In addition to the supergiant South Pars gas field, Iran has a significant share of offshore gas reserves in the Persian Gulf. Excluding South Pars, Iran owns 184 tcf of gas, 12 tcf of which is recoverable. IOOC has so far recovered 8 tcf of offshore gas.

Iran owns 50 oil and gas fields in the Persian Gulf, 17 of which are shared with the United Arab Emirates (UAE), Kuwait, Oman and Saudi Arabia. Five of these fields, operated by IOOC, have so far been developed and the rest are waiting for domestic and foreign investment.

Currently, IOOC is constructing six wellhead platforms for Doroud, Forouzan, Salman and Abouzar oil fields. After these platforms are installed and the necessary pipes are laid, Iran’s oil production from the Persian Gulf will increase.

 

Opportunities for Investment in Offshore Reservoirs

 

IOOC has currently 10 developed and undeveloped fields – Resalat, Esfandiar, Arash, Reshadat, Towsan, Mahshahr, Farzam, Alfa and Norouz – which are open to foreign investment. More than 10 billion dollars is expected to be needed for the development of these fields.

Moreover, in some of these fields, studies are under way. In case the findings of these studies are positive, more development plans could be implemented.

But another significant potential in IOOC in the gas sector is that the company currently owns 153 tcf of gas in place. The IOOC predicts to be producing more than 12 bcf/d of gas and 200,000 b/d of gas condensate from Forouz, Farzad, Lavan, Kish, Gourzin and Salkh gas fields as well as from the gas layers of Bahregansar, Balal, Arash, Reshadat, Resalat and Salman oil fields if 36 billion dollars is invested in them.

 

Qeshm, Persian Gulf Electricity Hub

 

The Persian Gulf island of Qeshm is expected to be a new oil and gas production hub in Iran in the coming ten years. National Iranian Oil Company (NIOC) has tasked the IOOC with the development of all hydrocarbon islands in the Qeshm Island. Except for Hengam field which is the sole light crude oil reservoir in Qeshm; Hormuz, Taftan and Towsan are fields up for development. Qeshm will become a major oil production zone if these fields undergo development.

If Iran decides to generate electricity from gas, it would be possible to produce more than 12,000 megawatts in Qeshm Island, where natural gas reservoirs abound. Assessments show that the gas reservoirs in this island will be supplying enough fuel to power plants there for 30 years.

Mohammad-Hossein Daneshfar, director of planning at IOOC, says: “By converting gas to electricity, it will be possible to export electricity instead of gas to neighboring countries.”

“Moreover, Qeshm Island enjoys a geo-energy situation in the Persian Gulf and the Strait of Hormuz,” he said.

Daneshfar added that an energy hub could take shape in the Persian Gulf’s largest island in 8 to 10 years.

The existence of more than 4 billion barrels of crude oil in place and 10 tcf of natural gas in Qeshm Island offer new potentials in this island. In order to boost Iran’s sovereignty role in the Persian Gulf waters and particularly in the strategic Strait of Hormuz as one of the main oil and gas transit routes, establishment of energy hub in Qeshm is on the agenda of NIOC.

Development of new oil and gas fields in Qeshm Island is a decision lying within the framework of the policy of creating an energy hub in Qeshm. To that effect, development of Hengam oil field started several years ago.

In the upstream sector, platforms have been installed and wells drilled. Enhanced recovery from Hengam depends on the completion of both upstream and downstream installations.

                             

Lavan, Petchem Hub in Persian Gulf

 

The gas-rich Lavan Island is one of the six regions managed by IOOC. Lavan has huge gas reservoirs in and around it. Iran’s Petroleum Ministry has envisaged development plans for this island. To that end, the island was privatized nearly three years ago for the construction of petrochemical plants. If petrochemical projects come on-stream in this island, Lavan would become a petrochemical hub in Iran.

In total, some 6 billion dollars would be invested in Lavan for the construction of a petrochemical plant and development of the upstream sector of Lavan gas field.

In the meantime, Siri Island has the potential to become an island for gas exports due to its proximity to Arab countries.

 

Reshadat Output to Rise

 

Development of Reshadat oil field is one of plans the IOOC has largely invested in.

Daneshfar said the field’s production will rise significantly after it undergoes development.

Most wells have been drilled in Reshadat and W0 and W4 wellhead platforms have been installed. Early production from some wells has even started. The processing and living quarters of platforms of this field are still under construction and the completion of the project depends on financing.

Reshadat oil field was discovered in 1965 before being awarded to Italy’s Iminico for development. The field has 33 wells in three platforms – R-3, R-4 and R-7. During the imposed war (1980-1988), R-7 platform was bombed by Iraqi fighters. US naval forces also attacked the platform in 1987 and set fire to its wells.

 

Hendijan Output at 22,000 b/d

 

Hendijan oil field is expected to see 22,000-barrel rise in its production this year. The necessary platforms have been installed and wells are being drilled.

IOOC is also following up a development project in the northern part of Hendijan field. Due to shallow waters, IOOC has started its development project in the onshore sector.

NIGEC Chief:

Iran, the Only Secure Gas Supplier

 

By Mahnaz Mohammadi

 

Iran, sitting atop 34 tcm of gas, is the largest holder of gas reserves in the world. However, the country has failed to win the market share it deserves. In recent years, political issues have largely affected the gas market ; therefore, Iran’s gas transactions have not been immune. But since President Hassan Rouhani took office, Iran’s petroleum industry opted for active energy diplomacy, and negotiations resumed on Iran’s gas exports.

To know further about Iran’s planned gas exports, Iran Petroleum has interviewed Ali-Reza Kameli, managing director of National Iranian Gas Exports Company (NIGEC).

 

Q: During Mr. Rouhani’s visit to Oman last March, Iran and Oman signed a gas contract. Would you please tell us more about the details of the contract?

A: The history of the contract signed with the Omani side dates back to several years ago when unfortunately the parties failed to reach agreement due to differences on the price. The issue was seriously put on the agenda when HE [Bijan Namdar] Zangeneh took office anew as petroleum minister and the two sides entered talks on gas interaction from a different aspect.

 

Q: Could you be more specific??

A: We agreed to work for the construction of a pipeline stretching from Mount Mubarak to Sohar region in Oman and then gas would be delivered to Oman through this pipeline. Gas delivery to Oman has two objectives; One is to supply Oman’s domestic need for gas and neighboring countries and the other is to feed LNG factories in Oman. It is noteworthy that Oman has two LNG factories inaugurated in 2000 and 2005. The capacities of these two factories total 10 million tons a year, but since Oman does not have sufficient gas to feed them, 20 percent of the capacity of these factories is idle.

The Omanis promised that they will let us use the 20-percent production capacity in exchange for gas supply to the factory. The factory’s LNG products will belong to us and we will be in charge of exports and marketing. In fact, we are giving them gas and we pay for processing and then we receive LNG which we will sell on world markets.

 

Q: How are we going to sell products while we are under sanctions?

A: A positive atmosphere is taking shape in the country as [nuclear] talks are under way [with six world powers]. Naturally, sanctions will not last forever. Another point is that we have started a 30-month period, i.e., after 30 months; it would be able to export gas to Oman and its LNG plants. We predict that due to efforts made by Foreign Affairs Ministry and superior organs, these sanctions slapped on our country unrightfully, would be lifted. Naturally, we cannot wait for sanctions to be lifted and then start our talks. We try to be able to enter the world markets after 2.5 or 3.5 years. In fact, we buy time to take advantage of opportunities. You must know that oil and gas projects and particularly gas projects need huge investment, they agreed upon between governments and they take time. For example, under appropriate conditions, a pipeline project or an LNG factory would take five years to be constructed.

The planned subsea 200-kilometer pipeline to Oman will need 30 to 35 months and we have to take this issue into account. We have also tolling agreements which often last six months. We have to sign a Gas Sales Purchase Agreement (GSPA) with the Omani side, as well and it will last between six months and a year. In-between, we have to conduct feasibility studies and surveys before laying the pipeline. These technical and economic assessments require too much time. As we are busy with these pre-project planning, we expect the sanctions to be eased or fully lifted.

 

Q: Do you mean that the project will enter the executive phase 30 months after the signature of accord?

A: We and the Omani side are both trying to accomplish the work.

 

Q: Where will the pipeline stretch from?

A: From national pipeline. Since the capacity of this pipeline is around 110 mcm/d, a portion of the capacity of this pipeline will be used for this contract. Besides supplying the needs of the region, this pipeline will be also used for exporting gas to Pakistan. The pipeline which has already been built has enough capacity. The zone we will branch out for [Oman] pipeline is Roudan which is 200 kilometers from Mount Mubarak. The distance between Mount Mubarak to Sohar in Oman is around 190 kilometers. The exact route for the pipeline will be decided after expert studies.

 

Q: Does this contract require each country to build its own section of the pipeline?

A: No, the Omani side has agreed to finance the project from Roudan to Sohar Port and that is a very important achievement made following relentless efforts. HE Zangeneh was instrumental to that effect. Given the constructive relations between the two governments, the Omani government is to finance the pipeline and we will act together on the offshore section of the pipeline.

 

Q: How much will the project cost? Where will the gas come from?

A: The final figure will be announced after expert studies, but nearly one billion dollars of finance is estimated to be needed. Gas will be fed from South Pars [gas field].

 

Q: Earlier, gas was supposed to be exported to Oman from Kish gas field. Was that plan annulled?

A: In the past, talks were partly on this issue, but since the Omani side agreed to finance the project, the issue [of Kish gas field] is not on the agenda at present, but the Omani side is likely to be ready to develop the Kish gas field in the future. Oman is forecasted to be running out of gas by 2024 if its gas consumption grows, and then it will have no gas to feed its LNG plants. It will then have to shut down the plants. That is why Oman is heavily counting on Iran’s gas and we count on that country’s market.

 

Q: So you mean that gas exports from Kish gas field to Oman is an option.

A: Yes, that’s still an option in energy relations between the two countries.

 

Q: What parameters are involved in gas pricing?

A:  There are hubs for natural gas transactions in the world. Henry Hub in the United States, NBP in Britain and Zeabrough in Germany are among them. Gas vendors and buyers can even do short-term transactions in these hubs where gas prices are set on a daily basis. The prices are set based on gas supply and demand in these markets.

Futures markets have been also established for gas, similar to crude oil. In the markets, we refer to as gas hub, the number of transactions help set the price. It is done in Europe and in the US. But no similar market has yet been established in the Middle East and Asia for gas buyers and clients to deal on a daily basis.

For crude oil, we have NYMEX and ICE which work on a daily basis, but they can also do transactions for the coming months and years. In Europe and in the US, it has already been done for gas, too. But in places where there are no gas hubs, like in Asia markets, the prices are not set on a daily basis and they are based on agreements reached between the buyer and the vendor.

 

Q: What are the criteria taken into consideration to reach an agreement?

A: Throughout talks, the buyers wonder which alternatives they have for gas and at what price. In this way, that country makes an assessment of costs it has to pay for a source of energy other than gas. Special formulae are defined based on these assessments to show the position of gas and alternative sources. We have currently formulas for gas and oil products. In Asia, these prices are based on Japan’s Crude Cocktail (JCC) which is the average price of customs-cleared crude oil imports into Japan.

 

Q: Has gas price been affected by oil prices?

A: Yes, it is. In some places it is affected by the price of oil products because gas contracts are often long-term and the correlation between these parameters and the gas prices may change during a period of time. In this case, the parties to a contract have to include price revision clause. If the conditions change in the market the price calculated based on alternative fuels will not be fair and the parties will have to reconsider the price. For instance, the coefficients in the formula may have to change from x to y. Experts from both sides sit together and discuss the issue. If they fail to reach agreement the case will be referred to arbitration.

 

Q: Is the gas price different in the US and in the Middle East?

A: In gas pricing, a number of important parameters are taken into consideration. We know these parameters as arbitrage (which is the simultaneous purchase and sale of an asset in order to profit from a difference in the price).

Crude oil is shipped easily from one spot to another and there is not much difference between two ports. But gas is different. It has to be transferred in pipeline which would need long-term investment or should be converted to LNG. But LNG factories and terminals are not available everywhere. Therefore, differences between market prices could not be covered easily.

 

Q: Is Qatar the main supplier to Asia LNG market?

A: Yes, Qatar and Oman have two LNG factories and meet the bulk of needs of Asian countries including South Korea.

 

Q: You’re director of Iran LNG project, too. What happened to it?

A: The sanctions heavily affected this project and the import of its equipment, but we, along with specialists at Iran LGN, will do our best to make the project go ahead. The project has made good progress. At present, the terminals and power plants of this project have been built. The LPG and LNG storage units are in their final stages. Some liquefaction equipment and compressors are needed. They have been manufactured overseas and they will be imported as soon as sanctions are lifted.

 

Q: How much has the project progressed?

A: The total progress in the project is estimated at more than 50 percent.

 

Q: Gas for this project was supposed to be supplied by Phase 11 of South Pars, while the fate of this phase has yet to be decided on.

A: Yes, even if sanctions are lifted, the rest of the project will last three years at best.

 

Q: The gas for this project was then decided to be provided by other phases like Phase 12.

A: After HE Zangeneh took office as petroleum minister, his priorities have been launching incomplete phases of South Pars. He said that the country’s gas production capacity will significantly rise in 2015. Naturally, gas production increase will be further again.

 

 

 

Q: Would you please tell us about gas exports to Iraq?

A: The contract with Iraq has been one of the most important projects realized with the help of our colleagues at NIGEC. That’s a big contract whose volume stands at 25 mcm/d. Iran’s gas is expected to go to Kouhdasht before being delivered to Charmaleh and Naftshahr for final supply to power plants in Baghdad.  We have had long and complicated talks with Iraqi parties before a contact was signed. If conditions are prepared, gas supply to Iraq is to start this summer.

 

Q: How are Iran’s interactions with the Gas Exporting Countries Forum (GECF) following Mohammad-Hosseini Adeli’s election as its secretary-general?

 

A: The election of Mr. Adeli was a positive development in the petroleum industry’s diplomacy. His election is a turning point for Iran’s presence in international organizations and it was not achieved easily. What we can pursue through GEFC is that the forum would make decisions matching Iran’s huge gas reserves. For example, Iraq is an oil-rich country with no significant independent gas reserves. It is in dire need of gas. We have also gas-thirsty Pakistan on the other side. A bit farther, the Indians heavily need gas. The ongoing talks about gas supply to them would definitely strengthen political and commercial relations if long-term contracts are signed. These policies could be reflected through GECF and Mr. Adeli. More work is needed to be done in making formulas for gas pricing.

 

 

Q: Why should more be done?

A: Due to the nature of gas contracts, pricing formulas are confidential. More studies are needed to see if it would be possible to make gas pricing formulas as transparent as the crude oil pricing system. We have to see if it would lead to more gas interaction. These are issues to work upon before reaching conclusions. GECF must be as influential in the gas market as OPEC in oil market decision-makings. GECF member states, particularly Iran, must exercise further control on gas supply in the world.

NIGEC Chief:

Iran, the Only Secure Gas Supplier

 

By Mahnaz Mohammadi

 

Iran, sitting atop 34 tcm of gas, is the largest holder of gas reserves in the world. However, the country has failed to win the market share it deserves. In recent years, political issues have largely affected the gas market ; therefore, Iran’s gas transactions have not been immune. But since President Hassan Rouhani took office, Iran’s petroleum industry opted for active energy diplomacy, and negotiations resumed on Iran’s gas exports.

To know further about Iran’s planned gas exports, Iran Petroleum has interviewed Ali-Reza Kameli, managing director of National Iranian Gas Exports Company (NIGEC).

 

Q: During Mr. Rouhani’s visit to Oman last March, Iran and Oman signed a gas contract. Would you please tell us more about the details of the contract?

A: The history of the contract signed with the Omani side dates back to several years ago when unfortunately the parties failed to reach agreement due to differences on the price. The issue was seriously put on the agenda when HE [Bijan Namdar] Zangeneh took office anew as petroleum minister and the two sides entered talks on gas interaction from a different aspect.

 

Q: Could you be more specific??

A: We agreed to work for the construction of a pipeline stretching from Mount Mubarak to Sohar region in Oman and then gas would be delivered to Oman through this pipeline. Gas delivery to Oman has two objectives; One is to supply Oman’s domestic need for gas and neighboring countries and the other is to feed LNG factories in Oman. It is noteworthy that Oman has two LNG factories inaugurated in 2000 and 2005. The capacities of these two factories total 10 million tons a year, but since Oman does not have sufficient gas to feed them, 20 percent of the capacity of these factories is idle.

The Omanis promised that they will let us use the 20-percent production capacity in exchange for gas supply to the factory. The factory’s LNG products will belong to us and we will be in charge of exports and marketing. In fact, we are giving them gas and we pay for processing and then we receive LNG which we will sell on world markets.

 

Q: How are we going to sell products while we are under sanctions?

A: A positive atmosphere is taking shape in the country as [nuclear] talks are under way [with six world powers]. Naturally, sanctions will not last forever. Another point is that we have started a 30-month period, i.e., after 30 months; it would be able to export gas to Oman and its LNG plants. We predict that due to efforts made by Foreign Affairs Ministry and superior organs, these sanctions slapped on our country unrightfully, would be lifted. Naturally, we cannot wait for sanctions to be lifted and then start our talks. We try to be able to enter the world markets after 2.5 or 3.5 years. In fact, we buy time to take advantage of opportunities. You must know that oil and gas projects and particularly gas projects need huge investment, they agreed upon between governments and they take time. For example, under appropriate conditions, a pipeline project or an LNG factory would take five years to be constructed.

The planned subsea 200-kilometer pipeline to Oman will need 30 to 35 months and we have to take this issue into account. We have also tolling agreements which often last six months. We have to sign a Gas Sales Purchase Agreement (GSPA) with the Omani side, as well and it will last between six months and a year. In-between, we have to conduct feasibility studies and surveys before laying the pipeline. These technical and economic assessments require too much time. As we are busy with these pre-project planning, we expect the sanctions to be eased or fully lifted.

 

Q: Do you mean that the project will enter the executive phase 30 months after the signature of accord?

A: We and the Omani side are both trying to accomplish the work.

 

Q: Where will the pipeline stretch from?

A: From national pipeline. Since the capacity of this pipeline is around 110 mcm/d, a portion of the capacity of this pipeline will be used for this contract. Besides supplying the needs of the region, this pipeline will be also used for exporting gas to Pakistan. The pipeline which has already been built has enough capacity. The zone we will branch out for [Oman] pipeline is Roudan which is 200 kilometers from Mount Mubarak. The distance between Mount Mubarak to Sohar in Oman is around 190 kilometers. The exact route for the pipeline will be decided after expert studies.

 

Q: Does this contract require each country to build its own section of the pipeline?

A: No, the Omani side has agreed to finance the project from Roudan to Sohar Port and that is a very important achievement made following relentless efforts. HE Zangeneh was instrumental to that effect. Given the constructive relations between the two governments, the Omani government is to finance the pipeline and we will act together on the offshore section of the pipeline.

 

Q: How much will the project cost? Where will the gas come from?

A: The final figure will be announced after expert studies, but nearly one billion dollars of finance is estimated to be needed. Gas will be fed from South Pars [gas field].

 

Q: Earlier, gas was supposed to be exported to Oman from Kish gas field. Was that plan annulled?

A: In the past, talks were partly on this issue, but since the Omani side agreed to finance the project, the issue [of Kish gas field] is not on the agenda at present, but the Omani side is likely to be ready to develop the Kish gas field in the future. Oman is forecasted to be running out of gas by 2024 if its gas consumption grows, and then it will have no gas to feed its LNG plants. It will then have to shut down the plants. That is why Oman is heavily counting on Iran’s gas and we count on that country’s market.

 

Q: So you mean that gas exports from Kish gas field to Oman is an option.

A: Yes, that’s still an option in energy relations between the two countries.

 

Q: What parameters are involved in gas pricing?

A:  There are hubs for natural gas transactions in the world. Henry Hub in the United States, NBP in Britain and Zeabrough in Germany are among them. Gas vendors and buyers can even do short-term transactions in these hubs where gas prices are set on a daily basis. The prices are set based on gas supply and demand in these markets.

Futures markets have been also established for gas, similar to crude oil. In the markets, we refer to as gas hub, the number of transactions help set the price. It is done in Europe and in the US. But no similar market has yet been established in the Middle East and Asia for gas buyers and clients to deal on a daily basis.

For crude oil, we have NYMEX and ICE which work on a daily basis, but they can also do transactions for the coming months and years. In Europe and in the US, it has already been done for gas, too. But in places where there are no gas hubs, like in Asia markets, the prices are not set on a daily basis and they are based on agreements reached between the buyer and the vendor.

 

Q: What are the criteria taken into consideration to reach an agreement?

A: Throughout talks, the buyers wonder which alternatives they have for gas and at what price. In this way, that country makes an assessment of costs it has to pay for a source of energy other than gas. Special formulae are defined based on these assessments to show the position of gas and alternative sources. We have currently formulas for gas and oil products. In Asia, these prices are based on Japan’s Crude Cocktail (JCC) which is the average price of customs-cleared crude oil imports into Japan.

 

Q: Has gas price been affected by oil prices?

A: Yes, it is. In some places it is affected by the price of oil products because gas contracts are often long-term and the correlation between these parameters and the gas prices may change during a period of time. In this case, the parties to a contract have to include price revision clause. If the conditions change in the market the price calculated based on alternative fuels will not be fair and the parties will have to reconsider the price. For instance, the coefficients in the formula may have to change from x to y. Experts from both sides sit together and discuss the issue. If they fail to reach agreement the case will be referred to arbitration.

 

Q: Is the gas price different in the US and in the Middle East?

A: In gas pricing, a number of important parameters are taken into consideration. We know these parameters as arbitrage (which is the simultaneous purchase and sale of an asset in order to profit from a difference in the price).

Crude oil is shipped easily from one spot to another and there is not much difference between two ports. But gas is different. It has to be transferred in pipeline which would need long-term investment or should be converted to LNG. But LNG factories and terminals are not available everywhere. Therefore, differences between market prices could not be covered easily.

 

Q: Is Qatar the main supplier to Asia LNG market?

A: Yes, Qatar and Oman have two LNG factories and meet the bulk of needs of Asian countries including South Korea.

 

Q: You’re director of Iran LNG project, too. What happened to it?

A: The sanctions heavily affected this project and the import of its equipment, but we, along with specialists at Iran LGN, will do our best to make the project go ahead. The project has made good progress. At present, the terminals and power plants of this project have been built. The LPG and LNG storage units are in their final stages. Some liquefaction equipment and compressors are needed. They have been manufactured overseas and they will be imported as soon as sanctions are lifted.

 

Q: How much has the project progressed?

A: The total progress in the project is estimated at more than 50 percent.

 

Q: Gas for this project was supposed to be supplied by Phase 11 of South Pars, while the fate of this phase has yet to be decided on.

A: Yes, even if sanctions are lifted, the rest of the project will last three years at best.

 

Q: The gas for this project was then decided to be provided by other phases like Phase 12.

A: After HE Zangeneh took office as petroleum minister, his priorities have been launching incomplete phases of South Pars. He said that the country’s gas production capacity will significantly rise in 2015. Naturally, gas production increase will be further again.

 

 

 

Q: Would you please tell us about gas exports to Iraq?

A: The contract with Iraq has been one of the most important projects realized with the help of our colleagues at NIGEC. That’s a big contract whose volume stands at 25 mcm/d. Iran’s gas is expected to go to Kouhdasht before being delivered to Charmaleh and Naftshahr for final supply to power plants in Baghdad.  We have had long and complicated talks with Iraqi parties before a contact was signed. If conditions are prepared, gas supply to Iraq is to start this summer.

 

Q: How are Iran’s interactions with the Gas Exporting Countries Forum (GECF) following Mohammad-Hosseini Adeli’s election as its secretary-general?

A: The election of Mr. Adeli was a positive development in the petroleum industry’s diplomacy. His election is a turning point for Iran’s presence in international organizations and it was not achieved easily. What we can pursue through GEFC is that the forum would make decisions matching Iran’s huge gas reserves. For example, Iraq is an oil-rich country with no significant independent gas reserves. It is in dire need of gas. We have also gas-thirsty Pakistan on the other side. A bit farther, the Indians heavily need gas. The ongoing talks about gas supply to them would definitely strengthen political and commercial relations if long-term contracts are signed. These policies could be reflected through GECF and Mr. Adeli. More work is needed to be done in making formulas for gas pricing.

 

 

Q: Why should more be done?

A: Due to the nature of gas contracts, pricing formulas are confidential. More studies are needed to see if it would be possible to make gas pricing formulas as transparent as the crude oil pricing system. We have to see if it would lead to more gas interaction. These are issues to work upon before reaching conclusions. GECF must be as influential in the gas market as OPEC in oil market decision-makings. GECF member states, particularly Iran, must exercise further control on gas supply in the world.

 

 

KCA Wins Hebron Project Contract

 

The Platform Services division of KCA Deutag has entered the offshore Canada drilling sector following the award of a multi-million-dollar contract with ExxonMobil Canada Properties.

KCA Deutag was awarded the Hebron platform’s drilling operations and maintenance services contract. The contract begins with an estimated three-year pre-operations phase, followed by a nine-year operations and maintenance program, with an option to extend. 

KCA Deutag’s expansion into Eastern Canada capitalizes on the work by RDS, the rig engineering and design division of KCA Deutag. RDS has been carrying out the front-end engineering and detailed design of the Hebron rig facilities since 2010.

 

Total Oil Discoveries in Ivory Coast

 

The Total-operated Saphir-1XB exploration well on block CI-514 has proved the presence of liquid hydrocarbons in the deep offshore, west of Ivory Coast.

Lying in 2,300 m (7,546 ft) of water, Saphir-1XB is the first well in block CI-514. It was drilled to TD of 4,655 m (15,272 ft), encountering 40 m (131 ft) of net pay containing light 34° API oil, in a series of 350 m (1,148 ft) of reservoirs.

“Drilled in an abrupt margin play, this first well is the first discovery in the San Pedro basin, a frontier exploration area in Ivory Coast,” commented Marc Blaizot, senior vice president of exploration at Total.

 

Gazpromneft Gets Environmental Clearance

 

Gazpromneft-Sakhalin has approval to drill an exploration well later this year on the Dolginskoye field in the Pechora Sea offshore northern Russia.

This follows public consultations held in December 2013 in Naryan-Mar (Nenets Autonomous District). The approval documents include a prevention and response plan for oil spills and an environmental impact assessment.

Additionally, an environmental sensitivity map has been drawn up based on monitoring operations over the license block last year.

The jackup GSP Saturn will drill the well. Technical audits have confirmed that the rig’s specifications make it suitable for use on the Russian Arctic shelf during the ice-free months.

It is equipped with a filter device to protect marine life during transport and operation of the rig. An automatic verticality control system (rotary steerable system) will be deployed to optimize drilling time and reduce environmental disturbance where possible.

Logging-while-drilling sensors should provide continuous, real-time control during the campaign.

India Eyes More Offshore Development

 

ONGC plans additional development of its Vasai East field in the Arabian Sea off western India at an estimated cost of Rs. 2476.82 Crore.

The project, due to be completed by December 2018, is expected to add 1.83 million metric tons (2.01 million tons) of incremental oil production of 1.971 bcm (70 bcf) of gas by 2030.

ONGC will drill infill wells in the field’s northern and southern flanks from two wellhead platforms, VSEB and VSEC, while also making use of facilities at the BPA/BCPA-2 process platform, following minor modifications.

Indonesia Subsea Pipeline Project Completed

 

T.D. Williamson Inc. (TDW) reports that as a result of a complex subsea pipeline pressure intervention carried out in record time offshore Indonesia it helped prevent a major gas supply interruption in Jakarta.

The operation was the largest subsea pipeline pressure intervention that TDW has ever executed. The hot tap and STOPPLE plugging operation was carried out for main contractor Timas Suplindo in cooperation with Offshore Construction Specialists on behalf of Pertamina EP, on sections of the pipeline network attached to the Lima Flow Station in the northwest Java Sea.

Dubai Crane Vessel Overhaul Completed

 

Drydocks World has completed at its Dubai-based shipyard the repair and refurbishment of National Drilling Co.’s self-elevating crane vessel Al Ghweifat.

The program on the 165 x 140 x 15-ft (50 x 42.6 x 4.6-m) vessel included extensive work on the three truss type 260-ft (79-m) long legs and spud cans, to allow the vessel to reach peak performance in 157 ft (48 m) of water.

Additionally, the yard did external inspection, blasting and painting of the legs, hull, deck, accommodation and tanks, and inspection, replacement, and painting of leg guides.

Lavan, Paradise of Investment in Persian Gulf

 

Lavan Island has become more significant than ever, mainly after it become a special economic zone, five years ago. Presently, at stake is making major decisions for investment in Lavan. Managing director of Lavan Special Economic Zone Abdol-Hamid Zarei describes the island as the paradise for investors in the energy sector in the future.

The proposal for the establishment of Lavan Special Economic Zone was forwarded to government by Iran’s Petroleum Ministry in 2009. One year later, the proposal took effect. Zarei says there are not sufficient water resources in the island for watershed management, while the island is an appropriate place for those who grow fish and aquatics. This option would be off the table, but the island is promising for the oil industry as it can become the center of manufacturers and importers of machinery used in the oil, gas, petrochemical, and refining and distribution industries.

The island is surrounded by Maqam Port in northeast, Shotour Island in the east and the Resalat, Reshadat and Salman oil fields in the south. Lavan’s offshore oil reservoirs are significant due to the proximity of the island to three oil fields.

In addition to oil companies, 1,500 to 2,000 inhabitants live in Lavan. The island and the isles around it are owned by the Iranian government. Iran is making the necessary preparations like allotment of land and other infrastructures for domestic and foreign companies willing to invest in the oil, gas and fishing sectors in Lavan. It would be important to keep in mind that there are no customs duties, as exist in the mainland.

 

Oil/Gas Potentials

 

Lavan Island is surrounded by big oil and gas fields, some of which Iran shares with Qatar and the United Arab Emirates. That is why a major long-term objective pursued by the Iranian government in this island has been recovery from oil and gas reservoirs.

Zarei says Iran’s top priority for investment in Lavan Island is to develop oil and gas fields shared with neighbors.

Given unlimited hydrocarbon reserves in Lavan, the island will turn into Iran’s second petrochemical hub in the near future. Now, it is possible to use associated petroleum gases produced around this island and extract gas in this vast island.

Zarei said the grounds are now prepared for economic activities in Lavan Island, adding that oil and gas activities will start soon as National Iranian Oil Company (NIOC) is making decisions to that effect.

A variety of proposals for investment in Lavan have been forwarded, but they are still under study.

“One of the oldest oil installations in Lavan Island is an oil refinery which was built in 1976 by INGRA Construction Company from former Yugoslavia, but under NIOC supervision. In the beginning, it was part of Shiraz refinery,” he said.

He said Lavan distillation plant started work with the processing capacity of 20,000 b/d of crude oil.

In July last year, 14 development projects were inaugurated by Lavan Oil Refining Company, raising the crude oil and gas condensate refining capacity to 60,000 b/d.

By implementing capacity optimization projects in Lavan Oil Refining Company, gasoline production in this treatment facility will rise from 1.08 ml/d to 2.8 ml/d, gasoil production will soar from 1.7 ml/d to 4 ml/d and liquid gas production will reach 100 tons a day from 30 tons now.

 

Lavan, Ideal for Tourism

 

Zarei said tourism is another important issue in Lavan Island. He said that tourism industry can be developed along with energy industries. Tourism is the third most profitable industry in the new millennium, after oil and auto making industries. Due to special attention paid to tourism, it is predicted to become the first source of revenue in the world. That is why economic theorists in the world are focusing their attention on tourism and different countries are making investments in this sector.     

Iran was the top tourism destination in the Middle East from 1967 to 1977. But today Iran is known to the world with its rich oil and gas reserves. The historic background of Iran is also an important aspect. More than 100 years ago, Iran’s petroleum industry was born when the Middle East’s first oil well was drilled in Iran’s southwestern province of Khuzestan.

Iran’s largest international lagoon is located near Lavan Island, offering a good tourism destination. The Lavan coasts are intact because mainly oil operations have been under way in recent years. Therefore, the coasts are a main tourist attraction. The necessary infrastructure has been provided for the development of tourism industry in this island and foreign investors can take this chance.

An attractive thing in this island is beehives near oil facilities. The honey produced here smells of oil, but tastes as sweet as other types of honey.

The islanders here gather pearl in certain periods of the year. Pearl is the only commodity the island exports. The island has also a good port for exporting oil products and a metal dock for marine transportation.

 

Advantages for Investment

 

Zarei said Lavan Island has the potential for more than 10 billion dollars in investment. Lavan has features which other Persian Gulf islands and special zones do not. For example, Lavan is the only special economic zone with energy, fishery and watershed management potentials. These industries have been established in Lavan as part of infrastructural policies for weaning the economy of oil. That would have other advantages including generation of national wealth and job creation. Lavan can also be the hub of pearl production in the country because pinctadas in Lavan Island are still reproducing naturally.

Meanwhile, Lavan has had other advantages like stabilization of the Islamic Republic’s sovereignty over the Iranian islands of the Persian Gulf. Terminal infrastructures are ready, there are roofed stores, customs affairs are handled easily and different banks have branch offices. Major oil and gas companies are present there. Oil and gas reserves in Lavan are advantages for petrochemical projects and other downstream industries. Moreover, oil and gas refineries can be built in this island.

Various sea species live in Lavan, which is known as the aquarium of the Persian Gulf. That provides the grounds for fishery industry. Lavan has also potentials for watershed management projects which could prove profitable.

The main economic advantages of Lavan Island are as follows: Easy and low-cost access to territorial waters and high seas facilitating transactions and boost trade, lack of administrative red tape on commodity entry and exit, legal exemptions on letters of credit, possibility of transit of goods from all customs posts in Iran to Lavan Special Economic Zone, high level of security, young manpower, inexpensive allotment of land for investment and tourist attractions.         

     

Ukraine Crisis; New Russia-EU Gas Dispute

 

 

 

By Soleyman Qasemian

 

After the 2006 gas crisis between Russia and Ukraine, Europe came to the conclusion that Russia is no longer a reliable gas supplier because of using natural gas as a strategic weapon. Europe had started its efforts to reduce its dependence on Russia’s gas, well before the revolution of unconventional gas resources. Through 2006 to 2014, Russia’s share of Europe gas supply fell from 39 to 23 percent.

In the meantime, the European Union (EU) has improved infrastructures and gas supply network. In 2013, Europe received around 70 percent of Russia’s gas exports with Russia’s Gazprom earning more than 17 billion Euros (24 billion dollars) in revenues. Therefore, Russia makes significant gains from exporting gas to European countries. Currently, 50 percent of Russia’s gas exports to the EU member states is done through a gas pipeline cutting through Ukraine. In 2009, the share of this pipeline was 80 percent, which fell after Nord Stream pipeline came on-stream.

 

The following graph indicates gas consumption in European countries and their gas imports from Russia. 

  

 

 

 

 

 

 

 

 

 

Some Russian nationalists believe that Russia must cut gas supply to Europe and instead export gas to China. In response to these nationalists, one should take into account the fact that China managed to produce 200 mcm of gas from its non-conventional resources in 2013 and that it will bring its gas production to 6.5 bcm in 2015 and to 60 or 100 bcm in 2020. China has also constructed a 6.5-billion-dollar pipeline for importing gas from Turkmenistan. China has spent one billion dollars on each kilometer of the pipeline. Gazprom has also built Bovanenkovo-Ukhta pipeline, costing 18 million dollars per kilometer.

Production from non-conventional gas resources in the United States would cost 100 to 130 dollars per 1,000 cubic meters. Although non-conventional gas reserves in China are much deeper than in US, extraction costs are unlikely to be higher in China than in US.

China is currently paying 100 to 140 dollars for each 1,000 cubic meters of gas imported from Turkmenistan.

China sits atop resources which are enough for the country to meet its needs.

In recent years, Gazprom has failed to reach agreement on selling gas to China. Meanwhile, China is unwilling to purchase gas from Gazprom at more than 100 to 120 dollars per 1,000 cubic meters.

The unreliability of the Russian parties comes further to the limelight when one takes into consideration Kremlin’s policy to use gas as a weapon against Europe. Even before the agreement was signed for the Nord Stream pipeline, Moscow was pursuing the same policy.

Some analysts believe that one reason behind Russia’s recent move in separating Crimea from Ukraine might be due to its fear for Ukraine’s non-conventional gas reservoirs which are expected to start production next year. Ukraine’s gas production would reduce Russia’s dominance on Ukraine and Europe. But this measure can persuade Ukraine to produce gas to meet its own demand and gradually blunt the impact of Russia’s gas weapon. This strategy tops the EU’s agenda and planned gas sanctions on Russia lie within this framework. Definitely, in the short and mid-term, slapping Russia with gas embargo will give rise to such negative consequences as gas price hikes that would impose costs on the European countries.

Following the escalation of crisis in Ukraine and the ensuing annexation of the Crimean peninsula to Russia, the EU has conducted numerous studies about imposing sanctions on Russia. One option envisaged by the EU has been to stop importing natural gas from Russia.

Based on this scenario, Nord Stream gas pipeline extending from Russia to Germany will be closed in middle of the current year. Simultaneously, Russia’s gas delivery to Europe through Yamal pipeline which passes through Belarus, Poland and Ukraine will be closed. Gas supply to Europe will go on through Blue Stream pipeline which cuts through Black Sea and connects Russia to Turkey.

If such a scenario is implemented, Europe will face sudden decline in gas consumption. In one year, its gas consumption will decline by 70 bcm or 12 percent of Europe’s total gas demand. The reasons for such a decline in consumption are as follows:

 

First, European countries cannot import gas easily or they would be able to import little amounts of gas. The countries facing such a problem are Finland, Hungary, Poland, Romania, Bulgaria, Serbia, Bosnia and the Baltic countries. Other European countries like the Czech Republic, Slovakia, Slovenia and Croatia will be less affected by such gas embargo because of their infrastructures and their network connected to West Europe.

Second, demand in all countries will fall due to significant growth in the gas price and alternative fuels will be used. In total, Europe’s gas imports will fall by around 50 percent (120 bcm).

 

It is also expected that liquefied natural gas (LNG) imports would increase by 50 bcm or 60 percent in order to compensate for reduced gas imports. Europe is unlikely to be able to find alternatives to its gas imports from Russia in the short-term through pipeline. North Africa’s natural gas production is facing restrictions due to challenges to production enhancement and limited capacity of gas transfer from south to north in Europe gas supply.

Due to delayed Trans-Caspian and Nabucco pipeline projects, natural gas delivery from Caspian Sea to Europe is unlikely ,while China is increasing gas transfer from the Caspian Sea to East.

Germany is the only country which would be least affected due to its diverse gas resources and therefore gas consumption in this country will not decline as much as in other European countries.

Russia’s natural gas imports are forecasted to be compensated partly by gas pumped by the Netherlands, Belgium and Norway. UK’s consumption will decline slightly while gas imports from Norway will also decline, but will be compensated by increased LNG imports.

Changes in the price of Russia’s gas will leave impacts on all European markets. Based on the price scenario, the spot price of natural gas in German and British markets will reach 9 and 10 dollars per million BTU in the coming years. But in the scenario of gas sanctions against Russia, the spot price of natural gas will double to reach 18 and 20 dollars per million BTU, respectively in the German and British markets. Natural gas retail prices for household consumption are also forecasted to rise by 40 percent.

The EU has not yet elucidated the impacts of probable gas sanctions on Russia while growing demand for LNG in Europe will affect the entire world. An increase in Europe’s LNG imports will shift LNG supply from other markets like Latin America, China, South Korea, India and China to Europe.

Spot prices have increased not only in Europe, but also in Asia-Pacific region. However, implementation of new exports projects, spot prices of LNG consignments in Japan will fall and subsequently demand for LNG will decline in Japan.

In the sanctions scenario, the spot price for LNG in Japan is expected to keep rising to soar from 16 dollars per million BTU to 18 or 19 dollars per million BTU, like in European markets.

Analysts believe that Russia would face serious challenges in case Europe slaps gas sanctions, because Russia would not be able to switch to East Asia in the short and mid-term and it is willing to grab a big share of EU’s gas market.

Ukraine and the EU will in the short term be able only to meet a limited portion of their gas demand from importing from Norway and LNG cargoes. But in the mid and long-term, LNG production will rise in the world and recovery from non-conventional gas reservoirs will increase particularly in the US; therefore, the European countries will be able to reduce their dependence on Russia and diversify their gas resources.

Policymakers at the EU Energy Committee have said that Iran would be a reliable source of gas supply to the 28-nation bloc in the mid and long-term.

Given Iran’s position in the world gas reserves, the country must envisage access to the European gas market in the long-term, while boosting its penetration of East Asia’s gas market. To that effect, Iran’s Petroleum Ministry should take the necessary measures within the framework of the country’s energy document to boost Iran’s position in gas trade with South Asia, East Asia, neighboring countries, Persian Gulf littoral states and the EU.    

 

Refining and Distribution in Tehran Oil Show

 

Ali Ziar, commercial director of National Iranian Oil Refining and Distribution Company (NIORDC), says the company is to put on display equipment and commodities required for refining crude oil and distributing oil products during Tehran Oil and Gas Show.

“This exhibition is an optimal opportunity for this company to inform domestic and foreign manufacturers of its investment opportunities in the commodity and equipment sector,” he told Iran Petroleum in an interview.

In previous years, NIORDC subsidiaries used to hold individual booths to display their products, but this year, NIORDC’s Commercial Directorate represents all its offshoots in the 19^th International Oil, Gas, Refining and Petrochemical Exhibition.

Ziari said the 19^th Oil Show would be different from previous ones because more Iranian manufacturing companies would be present.

“It shows that the capability of domestic manufacturers in the petroleum industry and oil products has improved every year,” he said.

He said that tough sanctions imposed on Iran in recent years have provided domestic manufacturing companies with good opportunities, adding that foreign companies have lost many chances due to restrictions imposed by their governments.

Ziari said more than 75 percent of commodities needed in the refining and distribution industries have been indigenized in Iran. He said more than 12,000 items of equipment required by this industry are supplied by domestic manufacturers.

Iran’s petroleum industry has undertaken fundamental measures with regards to production and consumption of oil derivatives in recent years. For instance, Iran has reached self-sufficiency in gasoline production.

Moreover, development projects are under way. For instance, the first phase of Persian Gulf Star Refinery can produce 11 ml/d of gasoline. This facility will be able to meet domestic demand while providing gasoline for exports.

In certain seasons of the year like summer, consumption of liquid fuels drops in the country and Iran can export liquid fuels.

“Iran is ready to benefit from the assistance of foreign investors for its development projects in the refining, transmission and distribution of oil products,” said Ziar.

He added that a large number of European and Asian companies have so far negotiated with Iranian officials.

“But we should keep in mind that investment in the petroleum industry is a bilateral affair that could lead to a win-win game,” he said.

Ziar added that demand for oil and energy will sharply rise in the coming years and Iran, the top holder of hydrocarbon reserves, will play an instrumental role.

He said domestic and foreign companies manufacturing equipment can manufacture refining equipment.

“Ideal conditions for the transit and swap of crude oil and oil products due to our country’s geographical position, weather and security conditions distinguish our country [from others] for investment,” said Ziar.

He said the NIORDC Commercial Directorate is tasked with supporting commodity manufacturing and procurement with the objective of promoting domestic manufacturing of equipment.

Comprehensive information about Iranian manufacturers is available on www.cd.niordc.com. This website was created so that qualified manufacturers would be picked for introduction to NIORDC subsidiaries. Domestic manufacturers can describe themselves to this website to undergo assessment for final cooperation with NIORDC.

Based on national policies of supporting domestic manufacturing, the fifth national economic development plan and the country’s 2025 perspective plan, NIORDC has made great achievements by drawing up a roadmap for promoting domestic manufacturing of equipment used in refining and distribution sectors. Moreover, billions of rials have been saved.

Ziari said the achievements in the domestic manufacturing of turbines, pumps, valves, etc are remarkable, but Iran is still long away from the ideal point.

He added that the objective set in the 2025 perspective and national development plans have to be followed up on more seriously.        

The main objectives of NIORDC’s Commercial are to propose projects to domestic manufacturing companies, interact with them, allocate budget for promoting domestic manufacturing, identify short-term and long-term needs of its subsidiaries and encouraging domestic manufacturing by avoiding imports.

 

NISOC, Leading Company in Indigenization Campaign

 

During the first years following the 1979 Islamic Revolution, National Iranian South Oil Company (NISOC) established a self-sufficiency section in order to acquire technology for manufacturing equipment needed in the petroleum industry. This section was then merged into the NISOC Directorate for Logistics and Commodities’ Affairs and Commodities Manufacturing Engineering Department was established. This department has made significant achievements by employing reverse engineering method.

NISOC has always supported national production as one of its strategic programs. Thanks to efforts undertaken by this company in recent years, a great deal of strategic equipment has been indigenized for the petroleum industry in recent years. Some of this equipment are downhole completion strings, gas turbine, rotors and blades for gas turbines, downhole safety valves, pipes and wellhead facilities. NISOC experts identify qualified manufacturers across the country in order to provide them with the necessary technology for the manufacturing of equipment. The domestic manufacturers produce equipment within the framework of regulations. The commodities manufactured by Iranian companies are put to technical tests for conformity with petroleum industry standards before being used.

In recent years, NISOC has mainly focused on manufacturing key equipment like gas turbines. NISOC has already indigenized the manufacturing of  turbines components, like blades and rotors. It is now trying to manufacture gas turbine.

NISOC has defined plans to meet domestic needs for commodities and equipment. To that effect, around 3,936 items of equipment have been manufactured domestically over the past five years by the company. In the last calendar year which ended on March 20, Iranian companies received orders for manufacturing 3,000 items of equipment like spare parts for turbines and processing machinery, chemicals and drilling equipment.

 

Manufacturing Order to Domestic Companies

 

NISOC is determined to support domestic manufacturing in the current calendar year. To that effect, it is to order the manufacturing of 3,000 widely used items, worth 5 trillion rials, to domestic manufacturers. Most of these items are used in turbines and processing machinery whose manufacturing technology has already been indigenized.

Given the significance of turbine equipment in continued oil and gas production, the manufacturing of this equipment is assigned to qualified manufacturers.

Last year, a research contract for the manufacturing of a gas turbine was for the first time commissioned to domestic manufacturers. The rotor for this turbine was manufactured three years ago. Now the entire turbine is under construction costing one-third lower than foreign ones. Indigenization of other turbines is also on the agenda of NISOC and it will be followed up on by National Iranian Oil Company (NIOC).

 

Quality of Domestic Manufacturing

 

Domestically manufactured equipment used in oil-rich regions in southern Iran are of the best quality and meet international standards. The standards used in Iran’s petroleum industry are even higher than European standards in some cases. For example, 15,000-grade downhole completion strings are exclusively produced by American companies, but this technology has been mastered in Iran, and NISOC has already ordered such strings to Iranian companies. These strings are mainly used in high-pressure wells in southwest of Iran like in Maroun field.

 

Achievements

 

Supporting domestic manufacturing will boost the industry, create jobs, spur economic development growth and accelerate the implementation of projects, thereby saving costs significantly.

Through 2008 to 2013, domestic manufacturing of commodities and equipment at NISOC saved more than 840 billion rials. However, all companies must embrace domestic manufacturing and domestic industrialists must be supported.

Global Crude Oil and Asian Product Markets, April

European crude markets were still affected by refinery turnarounds, while the Dubai market remained subdued. In the meantime, US crude markets enjoyed gains as it was expected that high seasonal refinery runs, lower imports and more exports can clear US stocks. As a result, WTI/Brent spread narrowed. However, such a strong WTI market will not be continuous as large volumes of shale barrels will be in the market during the coming period. It is mostly due to the restart of suspended projects which was called off in early 2014 because of cold weather.

Looking ahead in Asian crude oil market, lower levels of refinery maintenance and refining capacity additions in India and China during second half of 2014 will bring strong Asian market.

 

 

Asian Product Markets

In Singapore product market - leader product market in Asia - the mean of prices for most products rose in tandem with the rise in crude prices in April (see graph). In case of fuel oil, the market was feeble to the extent that outright prices fell. Some of the changes in product prices are because of crude price changes. Hence, in order to investigate product market fundamental, it is necessary to look at product price changes in comparison with crude price changes.

Products market fundamentals in brief

	Light Distillates Products		Middle Distillates Products		Heavy Products
	Gasoline	Naphtha	Gasoil	Jet Fuel	Fuel Oil 180	Fuel Oil 180
April 2014	↑	↑	↑	↑	↓	↓

(Upward arrow: strength, downward arrow: weakness)

Light Distillates (Gasoline, Naphtha & LPG)

Global gasoline performance was strong in April. Fall in US gasoline stock, limited European supply which was due to refinery maintenance, and Asian healthy demand with lack of its supply, pushed the gasoline market upward. In Asia, demand from China and India was considerable. However, Asian gasoline market is likely to some ground as demand growth is waning.

Over the reporting month, Asian naphtha market gained ground due to the tightness in supply and strong demand. Refinery maintenance in Europe led to Lower arbitrage volumes from Europe into Asia. This was coupled with firm LPG market due to increasing LPG freight in the region. Higher LPG prices directed some market participants to replace their feedstock with naphtha.

 

Middle Distillates (Gasoil, Jet fuel)

Asian Gasoil market enjoyed from demand side in April. Stronger import requirement in the region supported the market. Indonesia, Philippine, Australia and East Africa purchased more of the product. However, the export from Middle East increased and is expected to be at the same level until beginning of Ramadan. Moreover, an export from china is going to increase with two new refineries in the country and new export license.

Jet fuel market in Asia improved slightly. Market fundamentals were strong, as Indian export diminished on the back of more domestic consumption. Moreover, impendent start of travelling season will support the market more in the coming period.

Fuel Oil

Fuel oil market in both grades- 180 & 380 cst was weak in April. Fuel oil 380 cst is mostly used for bunker demand. Weak bunker demand in April was a sign of weakness in the market. It is expected to have elevated arbitrage volumes from Europe into Asia in the next period as refinery maintenance is going to end.

May, the Month Iran First Extracted Oil

 

If Iran is to name a month of the year after oil, it has to choose May because oil was first extracted in May; moreover, National Iranian Oil Company (NIOC) was established in the same month.

The story of oil flow from beneath the earth in Iran dates back to 117 years ago. French archeologist Jacques de Morgan, who had won permit from the Qajar rulers for drilling in Iran to explore oil, announced the existence of oil at that time. The head of Iran’s Customs Antoine Ketabchi looked for a foreign investor as soon as he heard about oil in Iran. He met with Australian businessman William D’Arcy in London. D’Arcy who had amassed huge wealth from gold discovery in Australia hired Alfred T. Marriot to secure the concession in Tehran. Marriot reached agreement with Nasser addin Shah Qajar, then ruler of Iran. Drilling operations started under the leadership of George Bernard Reynolds, a geologist who directly represented D’Arcy in Iran. The first drilling was done around Kermanshah and it ended inconclusively. The drilling equipment was then taken to Mamatin in Ramhormoz in southern Iran. Two wells, 561 and 661 meters deep, were spudded, but not result was achieved. Drilling was then done in Naftoun near Masjed Soleyman in southwestern Iran. Inconclusive drillings in rapid succession had disappointed D’Arcy and Reynolds felt exhausted.

D’Arcy sent a message to Reynolds, asking him to stop drilling and return home. But Reynolds did not stop because he was convinced that oil would be recovered in Masjed Soleyman. Just three days before the end of operations, the drilling bit hit oil rock 300 meters deep underground on May 26, 1908. At 360-meter depth, oil gushed to 15 meters high. Everyone there jubilated.

A new chapter started in Iran’s history and Iran joined oil-rich countries in the world.

 

First Oil Explorer in Iran

 

Historians say the stench of natural gas was the best one smelt by Reynolds after several years of relentless efforts in Iran. Reynolds was hired by D’Arcy on July 6, 1901 when he was 50. Reynolds was a graduate of petroleum engineering in India and he had experience of working in oil-rich Sumatra. He was also a skilful jockey who could easily cross treacherous mountains. He spoke Persian and he was in good shape. These factors were of great help to him in oil discovery in Iran. Reynolds was also a moderate, patient and reserved man. That was key to his success. However, some historians say he was very sensitive and touchy and he did not want others to meddle with his affairs. That is why he rejected D’Arcy’s request to stop drilling in Iran and return. He stayed until he proved his predictions of oil in Masjed Soleyman.

Reynolds, in high spirit, called for a camel courier and sent off a message to the telegraph office in Baghdad to inform his company: "I have the honor to report, that this morning at 4 a.m. oil was struck in the No.1 hole at a depth of 1180 feet." Wilson, who had been sleeping close to the rig, also broke this important news to the British government but in a coded message so that clerks could not notice: "See Psalm 104 Verse 15 Third Sentence and Psalm 114 verse 8 second sentence." Un-coded, the telegram read: "That he may bring out of the earth oil to make him a cheerful countenance ... the flint stone into a springing well." 

The following day, Well No. 1 was tested to flow about 297 barrels of oil a day. On 5 June, Well No. 2 at Masjed Soleyman also hit oil at 1,010 feet - another gusher.        

 

“Black Gold” Enshrined in Artworks   

 

We enter a gallery of art and see a human statue colored half black half golden. Near the statue stands a metal structure showing symbolic oil extraction. A group of artists set up an exhibition of oil from April 10 to April 22. Named “Black Gold”, the exhibition was co-sponsored by Homa and Shirin galleries. It was directed by Leila Varasteh and Vida Zaim, and a group of 387 artists contributed to it.

The exhibition was aimed at taking a positive look at oil as national wealth and its effects on human beings' life. A variety of works by Iranian and foreign artists were put on display in the event.

All artists contributing to this exhibition were holding a positive view of oil although each had his own view. Oil was viewed from the viewpoint of human identity, political aspects, and oil personalities, as well as widely used equipment in the petroleum industry.   

Shirin Partovi, director of Shirin Gallery, said a new subject was put on show in this exhibition.

“After the idea of this exhibition was raised, artists and galleries embarked on gathering artworks related to oil. Iranian artists living in Iran, in the United States, in Britain, in France and in Turkey sent numerous works,” she said.

She said that famous Belgian artist Wim Delvoye was also invited to send an oeuvre on the issue of art. He had sent a capsule on which symbols of life were drawn.

She said the works sent for the exhibition were much more than expected, adding: “Our criterion for selecting works was a positive view of oil and the existence of creativity and the necessary standards for creating an oeuvre.”

Partovi said the organizers of this exhibition plan to hold this event in other cities and even in some other countries.

“In the first step, we plan to put on exhibit the works of this exhibition in Museum of Contemporary Arts in Ahvaz. In case of opening of petroleum industry museums, we can hold exhibitions in these museums,” she said.

Partovi said her gallery was also planning to hold “black god exhibition” in the US and some European countries.

“Holding such an exhibition in other cities and countries would require high costs and we have so far failed to find a sponsor. We hope that Petroleum Ministry would support us in this regard,” she said.

Partovi said production of documentaries from this exhibition is planned.

Nadia Al-e Aqa, an artist, has designed a human statue whose vessels are filled with oil instead of blood. She shows the material and spiritual value of oil.

Regarding her work, Al-e Aqa said: “Due to my husband’s job, I was closely familiar with the problems of Iran’s petroleum industry. Therefore, I tried to focus on the significance of oil as a vital material for us, Iranians. In the meantime, I wanted to express my request for depoliticizing this valuable material.”

Qodratollah Aqeli participated in the exhibition with three statues about the Middle East.

“I’ve been working on the issue of Middle East for some time. I have so far created 8 statues. Oil has always been one of the disputed issues in the Middle East. Wherever in this world oil is discovered superpowers start meddling,” he said.

Aqeli said the issue of oil is attractive in artworks, adding that it has yet to be focused upon.

The exhibition organizers said more than 80 percent of works put on display have been sold. The exhibition can cover some of its costs when the artworks are sold.

The most expensive work belonged to Wim Delvoye. It was priced at 50,000 Euros. Other works varied between 10 million rials and 5.5 billion rials.

Delvoye is a Belgian neo-conceptual artist known for his inventive and often shocking projects. Much of his work is focused on the body. He repeatedly links the attractive elements with the repulsive ones, creating work that holds inherent contradictions within it - one does not know whether to stare, be seduced, or to look away.

Other artists who contributed to this exhibition were Kouroush Shishegaran, Azadeh Avijeh, Sepehr Bakhtiari, Jamshid Bayrami, Ladan Boroujerdi, Saeed Farahani, Hamzeh Farhadi, Firouz Farmanfarmayan, Parastou Forouhar, Nadia Qiaifar, Azadeh Qotbi, Kavian Hazeli, Amir-Hossein Heshmati, Amir-Nasr Kamgouyan, Behnam Kamrani, Babak Kazemi, Tara Khoshneshin, Farsad Labbaf, Aryan Lavasani, Ali-Reza Masoumi, Mehrdad Moheb Ali, Mehdi Nabavi, Siamak Nasr, Ahmad Nejad, Farnaz Rabiei Jah, Amin Roshan, Iman Safaei, Sara Sameri, Negar Varasteh and Neda Zarfsaz.

Akbar Nematollahi, director for Public Relations of Iran’s Petroleum Ministry, visited the exhibition and said Petroleum Ministry is ready to support Iranian artists in putting on display Iran’s 105-year-old petroleum industry.

He voiced the readiness of Public Relations Office of Iran’s Petroleum Ministry for holding joint exhibitions, saying: “Visual arts have rarely been supported. We are trying to win permission for purchasing artworks.”

Nematollahi said a policy pursued by the Public Relations Office of Iran’s Petroleum Ministry is to reconcile people with oil.

“Everyone must know that our country owes its growth and development to oil and if some people see oil as a scourge, it is due to mismanagement of oil,” he said.

Nematollahi said oil is a God-given blessing at the service of the country’s development.

“Oil is a national asset which we should use for the development of the country. We should not consume as much as we produce,” he said.

Nematollahi called on artists to highlight the cultural, political and social aspects of oil in the country.

Harireh City; 1,000 Years of Kish History

 

By Parisa Sadeqieh

 

I was surprised when my friend, an archeologist, suggested me to visit the Persian Gulf island of Kish in southern Iran. She was writing her dissertation on traditional bathrooms in Iran and I could not believe that she would decide to visit a tourism island. Anyway, I accepted to accompany her to Kish where I would take a rest and do shopping. I was dreaming of plunging deep into the Persian Gulf and enjoy sunshine on the Persian Gulf shores. I also prepared a long list of stuff which I could not find in Tehran. Kish is home to numerous shopping centers. But will an archeologist enjoy swimming as much as I do?

We finally got the ticket to travel to Kish. Our plane touched down at Kish airport at a hot noon. As I stepped out of the plane, I felt the heat which I would like. There are many five-star hotels in the island, but we chose to stay in a three-star one in order to save costs.

Kish is a 91.5-square-kilometre (35.3 sq mi) resort island in the Persian Gulf. It is part of the Hormuzgan Province of Iran. Due to its free trade zone status it is touted as a consumer's paradise, with numerous malls, shopping centers, tourist attractions, and resort hotels.

Kish is located in the Persian Gulf 19 km (12 mi) from mainland Iran and has an area of around 91 km2 (35 sq mi) with an outer boundary of 40 km (25 mi) and a nearly elliptical shape. Along Kish's coast are coral reefs and many other small islands. The Island is positioned along the 1,359 km (844 mi) long Iranian coastline north of the Persian Gulf, at the first quarter from the Hormuz entrance to the Persian Gulf.

 

A Different Experience in Kish

 

On the way from the airport to hotel, my friend was talking about the historic city of Harireh with the driver. That was exactly when I realized that my dreams would not come true. An archeologist should not be expected to spend time on recreational activities.

I no longer thought about drinking orange justice on the beach and shopping. How was I going to pass three days in Harireh?

In the hotel, when I asked my friend about Harireh, she smiled because she had understood that I was getting disappointed with this trip. “Don’t worry,” she said. “I promise that this would be your most memorable visit to Kish Island.”

But I was not hopeful and I decided to forget about my dreams. I was thinking of enjoying every moment of this trip, no matter how it would go ahead.

The following day, we took a car to the city of Harireh which my friend said is two-millennium-old.

In Kish Island, there is no traffic light or signs. The distance between the hotel and the historic city was a 15-minute drive. On the way to Harireh, sunshine was striking our faces. It gave me a sense of pleasure.

 

Two Culturally Different Worlds

 

After leaving behind the modern section of the island, where towering buildings, luxurious hotels and well-equipped shopping centers are erected, we arrived at the traditional section of the island. Contradiction between these two parts of the island was striking. They were two worlds with different cultures. But both belonged to Kish Island. Thatched buildings were surprising to me.

We finally arrived in the historic city. I looked around and I saw nothing but sands and thatched buildings. I was thinking that photographing this historic city would not last more than an hour, but I was wrong. My friend was asking about a water storage facility, traditional bathroom and ports. It was the second time during this trip that my dreams were being shattered.

 

Hidden Paradise in the Desert

 

We followed a sign planted at the beginning of a route. It was full desert. I sought in vain to dissuade my friend from continuing the visit, but my words fell on deaf ears. I was complaining about hot weather and unattractive scenes in a bid to make my friend think twice, but every time I expressed such words she increased the pace of walking. I was walking at distance from her. Out of the blue, I saw her taking images of a beautiful tree and green nature. I could not believe it. It was a mirage. What I was observing looked like the evergreen north of Iran. Such scenery in a hot island was unimaginable. I went closer and I saw an 800-year-old tree, the oldest sacred fig tree in the island and maybe in Iran. Ficus religiosa is grown by specialty tree plant nurseries for use as an ornamental tree, in gardens and parks in tropical and subtropical climates. It is used in traditional medicine for about 50 types of disorders including asthma, diabetes, diarrhea, epilepsy, gastric problems, inflammatory disorders, infectious and sexual disorders. Some people believe that this tree brings happiness and they tie a piece of cloth to it in the hope that their dreams would be realized. This tree was really attractive. It was like a covenant. The tree is surrounded with colorful flowers, mainly violet. I was so impressed by this nature that I named it the hidden paradise of the Kish Island. I sat for hours to watch the scenes. I asked my friend to take photos of me, but she didn’t because of my complaints. It was some sort of punishment for me. I stopped nagging at her because of hot weather. I kept going. The city of Harireh used to be a port, but it was so calm owing to the Persian Gulf waters.

 

Water Storage

 

At the entrance of the city, I saw wind-catchers at the top of a water storage facility. My friend, who had knowledge of the historic city, said the facility was used in the past for gathering water. Famous historian Zakaria Qazvini, who lived in the seventh century AH, describes the Kish Island as follows: “A pleasant city where Indian, Arab and non-Arab tradesmen come together, drink water and build water pools and storage facilities.”

The water storage facility was operational until 1993. The facilities have been built based on the architecture of the desert city of Yazd. But due to low precipitation and development activities, these water storage facilities are no longer usable. It was hard to believe that these old facilities were in use until 20 years ago. My friend was walking into the underground facility, deep two to three meters. First, I was afraid of accompanying her. But as my dreams about the island had already been shattered, I preferred not to miss this chance and accept to accompany her. It was one of the biggest water reservoirs in Iran.

 

Commercial City

 

The city of Harireh is still waiting for us. The beautiful sceneries I have already seen give me the impetus to visit the city.

Harireh is an ancient 8^th century city located in what is now Kish, Iran. It is situated in the center of the northern coast of the island. Its area is about 3 square kilometers.

 

Some say Harireh was first built sometime between the late Sassanid period and the early Islamic era. Harireh was quite popular during the Saljuks and Atavakan of Fars. An Iranian cultural heritage organization has verified that Harireh is at least 800 years old.

Harireh is most probably the town that the renowned Iranian poet, Saadi, has referred to in his book Golestan. There are references in the works of Iranian and Arab historians to the location of the town on the island. These say that the town was situated in the middle of the northern part, precisely where the ruins are standing today.   

Artifacts found during excavation of this settlement indicate that it was established around 1000 AD, occupied 120 hectares and was abandoned around 1600 AD. Its residents made their living mainly through fishing and pearl diving. The site – now referred to as Harireh Ancient City – comprises the remains of a large house with private qanat (underground water channel), a public hammam(bathroom) and a congregational mosque. It was originally positioned next to a busy commercial port; you can still see access stairs cut into the rocky cliff, as well as rock-cut wells and channels that were part of workshops producing date nectar, once one of the island’s major exports.

 

1,000 Years of History

 

My friend believes that the ancient city of Harireh tells the story of one thousand year history of the Kish Island. There are luxurious houses like those seen in the historic cities of Yazd, Isfahan and Kashan in this city. They have been unearthed in archeological excavations.

Kish Island has been mentioned in history variously as Kamtina, Arakia, Arakata, and Ghiss. In 325 BC, Alexander the Great commissioned Nearchus to set off an expedition voyage into the Sea of Oman and the Persian Gulf.

Kish Island's strategic position served as a way station and link for the ancient Assyrian and Elamite civilizations when their primitive sailboats navigated from Susa through the Karun River into the Persian Gulf and along the southern coastline passing Kish, Qeshm and Hormoz islands.

When these civilizations vanished, Kish Island's advantageous position was lost and for a period it was subjected to turmoil and the tyranny of local potentates and other vendors. With the establishment of the Achaemenid dynasty, the Persian Gulf was profoundly affected. Kish was, in particular, economically and politically linked with the civilization of the Medes, Persians and Aryan people, when they were at the height of their power.

 

Luxury Hammam

 

Ancient hammams (bathrooms) unearthed in excavations were interesting. Only remains of these hammams were seen there, but it was easy to imagine the entire building in the mind. I had the imagination that this luxurious hammam had been built on 500 square meters. The hammam was divided into different sections. Archeologists believe that this hammam is one of the oldest and the most equipped bathrooms in Iran. Its architecture belongs to two periods (Ilkhani and Teimouri).

The structure of the hammam indicated that this facility must have been privately owned by rich people.

 

Heart of Persian Gulf Trade

 

The ancient city of Harireh had also an industrial and commercial district. The structure of this business section looked strange and there were many known spaces there. Archeologists have not yet discovered the utility of underground horizontal canals and the numerous wells drilled around that district. But they estimate that they might have been related to fishing activities. They might have used these canals to reach sea more easily to gather pearls and corals and catch fish.

Watching these historic scenes did not match my imaginations of the island. Like many Iranians, I considered Kish as a newly-constructed island which might be 50 years old. It would be good to know that this island first knew trade a millennium ago.

I was reviewing what I had in mind before travelling to Kish.

The island has numerous attractions. The Greek ship is the wreck of a 1943 cargo steamship, the Koula F, on a beach on Kish's south-west coast. She was originally a British ship, Empire Trumpet, and was built in Scotland. She ran aground in 1966 and all attempts to salvage her failed. When Koula F's crew abandoned her they set her on fire, and all that remains is her steel hulk.

Other attractions are the beautiful beaches that captivate the eye with their bluish tint and the long shoreline that allures many tourists during the winter season. The water is so clear that fish can be seen swimming in the sea all year long.

Harireh City; 1,000 Years of Kish History

 

By Parisa Sadeqieh

 

I was surprised when my friend, an archeologist, suggested me to visit the Persian Gulf island of Kish in southern Iran. She was writing her dissertation on traditional bathrooms in Iran and I could not believe that she would decide to visit a tourism island. Anyway, I accepted to accompany her to Kish where I would take a rest and do shopping. I was dreaming of plunging deep into the Persian Gulf and enjoy sunshine on the Persian Gulf shores. I also prepared a long list of stuff which I could not find in Tehran. Kish is home to numerous shopping centers. But will an archeologist enjoy swimming as much as I do?

We finally got the ticket to travel to Kish. Our plane touched down at Kish airport at a hot noon. As I stepped out of the plane, I felt the heat which I would like. There are many five-star hotels in the island, but we chose to stay in a three-star one in order to save costs.

Kish is a 91.5-square-kilometre (35.3 sq mi) resort island in the Persian Gulf. It is part of the Hormuzgan Province of Iran. Due to its free trade zone status it is touted as a consumer's paradise, with numerous malls, shopping centers, tourist attractions, and resort hotels.

Kish is located in the Persian Gulf 19 km (12 mi) from mainland Iran and has an area of around 91 km2 (35 sq mi) with an outer boundary of 40 km (25 mi) and a nearly elliptical shape. Along Kish's coast are coral reefs and many other small islands. The Island is positioned along the 1,359 km (844 mi) long Iranian coastline north of the Persian Gulf, at the first quarter from the Hormuz entrance to the Persian Gulf.

 

A Different Experience in Kish

 

On the way from the airport to hotel, my friend was talking about the historic city of Harireh with the driver. That was exactly when I realized that my dreams would not come true. An archeologist should not be expected to spend time on recreational activities.

I no longer thought about drinking orange justice on the beach and shopping. How was I going to pass three days in Harireh?

In the hotel, when I asked my friend about Harireh, she smiled because she had understood that I was getting disappointed with this trip. “Don’t worry,” she said. “I promise that this would be your most memorable visit to Kish Island.”

But I was not hopeful and I decided to forget about my dreams. I was thinking of enjoying every moment of this trip, no matter how it would go ahead.

The following day, we took a car to the city of Harireh which my friend said is two-millennium-old.

In Kish Island, there is no traffic light or signs. The distance between the hotel and the historic city was a 15-minute drive. On the way to Harireh, sunshine was striking our faces. It gave me a sense of pleasure.

 

Two Culturally Different Worlds

 

After leaving behind the modern section of the island, where towering buildings, luxurious hotels and well-equipped shopping centers are erected, we arrived at the traditional section of the island. Contradiction between these two parts of the island was striking. They were two worlds with different cultures. But both belonged to Kish Island. Thatched buildings were surprising to me.

We finally arrived in the historic city. I looked around and I saw nothing but sands and thatched buildings. I was thinking that photographing this historic city would not last more than an hour, but I was wrong. My friend was asking about a water storage facility, traditional bathroom and ports. It was the second time during this trip that my dreams were being shattered.

 

Hidden Paradise in the Desert

 

We followed a sign planted at the beginning of a route. It was full desert. I sought in vain to dissuade my friend from continuing the visit, but my words fell on deaf ears. I was complaining about hot weather and unattractive scenes in a bid to make my friend think twice, but every time I expressed such words she increased the pace of walking. I was walking at distance from her. Out of the blue, I saw her taking images of a beautiful tree and green nature. I could not believe it. It was a mirage. What I was observing looked like the evergreen north of Iran. Such scenery in a hot island was unimaginable. I went closer and I saw an 800-year-old tree, the oldest sacred fig tree in the island and maybe in Iran. Ficus religiosa is grown by specialty tree plant nurseries for use as an ornamental tree, in gardens and parks in tropical and subtropical climates. It is used in traditional medicine for about 50 types of disorders including asthma, diabetes, diarrhea, epilepsy, gastric problems, inflammatory disorders, infectious and sexual disorders. Some people believe that this tree brings happiness and they tie a piece of cloth to it in the hope that their dreams would be realized. This tree was really attractive. It was like a covenant. The tree is surrounded with colorful flowers, mainly violet. I was so impressed by this nature that I named it the hidden paradise of the Kish Island. I sat for hours to watch the scenes. I asked my friend to take photos of me, but she didn’t because of my complaints. It was some sort of punishment for me. I stopped nagging at her because of hot weather. I kept going. The city of Harireh used to be a port, but it was so calm owing to the Persian Gulf waters.

 

Water Storage

 

At the entrance of the city, I saw wind-catchers at the top of a water storage facility. My friend, who had knowledge of the historic city, said the facility was used in the past for gathering water. Famous historian Zakaria Qazvini, who lived in the seventh century AH, describes the Kish Island as follows: “A pleasant city where Indian, Arab and non-Arab tradesmen come together, drink water and build water pools and storage facilities.”

The water storage facility was operational until 1993. The facilities have been built based on the architecture of the desert city of Yazd. But due to low precipitation and development activities, these water storage facilities are no longer usable. It was hard to believe that these old facilities were in use until 20 years ago. My friend was walking into the underground facility, deep two to three meters. First, I was afraid of accompanying her. But as my dreams about the island had already been shattered, I preferred not to miss this chance and accept to accompany her. It was one of the biggest water reservoirs in Iran.

 

Commercial City

 

The city of Harireh is still waiting for us. The beautiful sceneries I have already seen give me the impetus to visit the city.

Harireh is an ancient 8^th century city located in what is now Kish, Iran. It is situated in the center of the northern coast of the island. Its area is about 3 square kilometers.

 

Some say Harireh was first built sometime between the late Sassanid period and the early Islamic era. Harireh was quite popular during the Saljuks and Atavakan of Fars. An Iranian cultural heritage organization has verified that Harireh is at least 800 years old.

Harireh is most probably the town that the renowned Iranian poet, Saadi, has referred to in his book Golestan. There are references in the works of Iranian and Arab historians to the location of the town on the island. These say that the town was situated in the middle of the northern part, precisely where the ruins are standing today.   

Artifacts found during excavation of this settlement indicate that it was established around 1000 AD, occupied 120 hectares and was abandoned around 1600 AD. Its residents made their living mainly through fishing and pearl diving. The site – now referred to as Harireh Ancient City – comprises the remains of a large house with private qanat (underground water channel), a public hammam(bathroom) and a congregational mosque. It was originally positioned next to a busy commercial port; you can still see access stairs cut into the rocky cliff, as well as rock-cut wells and channels that were part of workshops producing date nectar, once one of the island’s major exports.

 

1,000 Years of History

 

My friend believes that the ancient city of Harireh tells the story of one thousand year history of the Kish Island. There are luxurious houses like those seen in the historic cities of Yazd, Isfahan and Kashan in this city. They have been unearthed in archeological excavations.

Kish Island has been mentioned in history variously as Kamtina, Arakia, Arakata, and Ghiss. In 325 BC, Alexander the Great commissioned Nearchus to set off an expedition voyage into the Sea of Oman and the Persian Gulf.

Kish Island's strategic position served as a way station and link for the ancient Assyrian and Elamite civilizations when their primitive sailboats navigated from Susa through the Karun River into the Persian Gulf and along the southern coastline passing Kish, Qeshm and Hormoz islands.

When these civilizations vanished, Kish Island's advantageous position was lost and for a period it was subjected to turmoil and the tyranny of local potentates and other vendors. With the establishment of the Achaemenid dynasty, the Persian Gulf was profoundly affected. Kish was, in particular, economically and politically linked with the civilization of the Medes, Persians and Aryan people, when they were at the height of their power.

 

Luxury Hammam

 

Ancient hammams (bathrooms) unearthed in excavations were interesting. Only remains of these hammams were seen there, but it was easy to imagine the entire building in the mind. I had the imagination that this luxurious hammam had been built on 500 square meters. The hammam was divided into different sections. Archeologists believe that this hammam is one of the oldest and the most equipped bathrooms in Iran. Its architecture belongs to two periods (Ilkhani and Teimouri).

The structure of the hammam indicated that this facility must have been privately owned by rich people.

 

Heart of Persian Gulf Trade

 

The ancient city of Harireh had also an industrial and commercial district. The structure of this business section looked strange and there were many known spaces there. Archeologists have not yet discovered the utility of underground horizontal canals and the numerous wells drilled around that district. But they estimate that they might have been related to fishing activities. They might have used these canals to reach sea more easily to gather pearls and corals and catch fish.

Watching these historic scenes did not match my imaginations of the island. Like many Iranians, I considered Kish as a newly-constructed island which might be 50 years old. It would be good to know that this island first knew trade a millennium ago.

I was reviewing what I had in mind before travelling to Kish.

The island has numerous attractions. The Greek ship is the wreck of a 1943 cargo steamship, the Koula F, on a beach on Kish's south-west coast. She was originally a British ship, Empire Trumpet, and was built in Scotland. She ran aground in 1966 and all attempts to salvage her failed. When Koula F's crew abandoned her they set her on fire, and all that remains is her steel hulk.

Other attractions are the beautiful beaches that captivate the eye with their bluish tint and the long shoreline that allures many tourists during the winter season. The water is so clear that fish can be seen swimming in the sea all year long.

 

Huge Oil/Gas Reservoirs

 

Besides tourism and commercial attractions, Kish Island holds also huge oil and gas reserves. The Exploration Directorate of National Iranian Oil Company (NIOC) conducted the first oil and gas exploration operations in this island in 2004 when the first well was drilled following geophysical operations. The drilling rig Fath 67 was installed so as not to cause problems for flights due to its proximity to the international airport there.

It was the first well in Iran to have been under environmental monitoring by experts from Shahid Beheshti University and Kish Free Zone Development Organization. Wastewaters flowing out of this well were treated with the help of bacteria which analyzed the molecules of super-heavy water. Drilling and well testing resulted in the discovery of huge oil, gas and condensate reserves in 2006. After the well was completed in that year, the development plan of this field was carried out by NIOC within the framework of HSE regulations.