NGL Mini-Refineries Attractive for Private Sector
Every country bases its economy on certain attitudes which may bring about economic growth and improve welfare for people.
In Iran, Supreme Leader Ayatollah Ali Khamenei instructed officials with the policy of “economy of resistance” in order to help the country become self-reliant. These policies could be of great help at a time the world countries are facing economic recession.
Crude oil sale has constantly been criticized by Iranian economic officials for more than 100 years. The issue has come further to the limelight in the past couple of years. Ayatollah Khamenei’s economy of resistance is not limited to crude oil sales. It is also about management of petrodollars. An option for preventing crude oil selling is to make investment in projects for converting crude oil to oil products. Iran’s Petroleum Ministry is currently focusing on this issue because oil products and petrochemicals are not blacklisted by Western governments. The Western sanctions target only light and heavy crude oil.
Iran’s Petroleum Minister Bijan Namdar Zangeneh has been a promoter of development of downstream facilities for generating value from hydrocarbon resources.
“Raising production and export of oil products is one of our objectives. In the first phase, we plan to convert all gas condensate produced in the country into products in gas condensate refineries and our objective is to bring our crude oil refining capacity to 2 mb/d and that of gas condensates to nearly 1 mb/d,” the minister said recently.
Experts say development of refineries is the best way for Iran’s economic self-reliance. In this way, Iran will get rid of crude oil exports restrictions and will be able to produce enough gasoline for domestic use.
By converting crude oil in domestic refineries, a number of objectives could be realized. The first important objective will be the privatization of large-sized industries in order to streamline government’s hold on enterprises and clear the way for economic growth in the country.
The second advantage will be creating jobs in the country so that thousands of young university graduates will find jobs. The unemployment rate will be significantly cut.
Iran sits atop the world’s largest gas reserves. Nearly 40 percent of Iran’s gas reserves are in South Pars gas field shared with Qatar. Each phase of South Pars produces around 40,000 b/d of gas condensate besides its gas production. Around 60 percent of this volume of gas condensate could be converted into gasoline at refineries. The difficulties of gas condensate exports as well as gasoline imports give enough impetus for converting condensate into gasoline in refineries.
By implementing new phases of South Pars, Iran’s gas condensate production will increase from the current 400,000 b/d to 1.2 mb/d. Along with the construction of Persian Gulf Star Refinery; new gas condensate refineries were also required to be built in Assaluyeh.
As part of its economy of resistance, Iran plans to build eight gas condensate refineries.
“God willing, we start the construction of eight 60,000-barrel gas condensate mini-refineries this year. All eight refineries are to be commissioned to the private sector. This 480,000-barrel refining capacity will bring us to the point that we will have no longer to export our gas condensates and we will be able to process all our gas condensates, which is more than one million barrels, inside the country,” Zangeneh said recently.
“That is a good opportunity for the private sector. We have planned small units so that the private sector would come forward. We have also won agreement for loans from the National Development Fund (NDF). The private sector would be required only to provide 30 percent of the costs because the remaining 70 percent will be provided by NDF. The infrastructures like water, electricity and access to ports are constructed by the petroleum industry in South Pars and some units could be built jointly,” he added.
Construction of gas condensate refineries will be economically viable and will attract investors. The use of naphtha in petrochemical plants in Assaluyeh and the possibility of gasoline and gasoil exports provide good opportunity for private organizations involved in the construction of such refineries.
Each gas condensate mini-refinery will cost around 300 million dollars. These planned eight refineries will have a centralized utility. National Iranian Oil Company (NIOC) will provide 20 percent of the investment needed for utility.
The conditions are ripe for the contribution of private companies to the construction of eight gas condensate refineries in Assaluyeh. The investors can expect high rate of return on their investment.
Studies have been conducted and preliminary plans have been made for the construction of eight 60,000-barrel mini-refineries in Assaluyeh. Of course, the 350,000-barrel Anahita oil refinery in the western province of Kermanshah and the 120,000-barrel Pars gas condensate refinery in the southern city of Shiraz are other projects currently under way with a view to preventing crude oil and gas condensate sales. In the meantime, projects are under way for boosting the capacity and quality of the existing refineries.
Eight Iranian financiers have so far voiced readiness for the construction of these refineries and five of them have already got permits to that effect.
Economic studies and the profitability of these projects indicate that the total investment will be returned after three to five years. These projects are estimated to produce more than 35-percent profit. The capacity of these refineries is put between 10,000 and 150,000 b/d. These eight refineries will also produce gasoil, gasoline, naphtha and bitumen of different grades.
Potential investors will enjoy a five-percent discount in the price of feedstock. That is why these projects are attractive. All stages including refinery construction, marketing, sales and export of products will be handled by the private sector. Gas condensate, consumed as feedstock in these refineries, will be sold based on daily market prices.
The low capacity of these refineries justifies the cost-effectiveness of the project. Moreover, the private sector can get involved in this sector and domestically manufactured equipment could be used in these refineries.
Over recent years, the Research Institute of Petroleum Industry (RIPI) has managed to master technological knowhow for designing oil and gas condensate refineries. The basic design of refineries is up to international standards and the products of these refineries enjoy such benefits as quality and conformity with environmental standards.
The first industrial unit of an oil and gas condensate refinery at Kharg Petrochemical Unit has been installed by RIPI. It is to produce 500 tons a day of propane, 500 tons a day of butane and 4,000 b/d of naphtha.
At Shahriar Refinery in the northwestern city of Tabriz, a 72,000-barrel gasoil purification unit has been designed by the RIPI. The demercaptanization unit in phases 2, 3, 4, 5, 9 and 10 of South Pars gas field has also been designed by RIPI.
Construction of mini-refineries will have such advantages as the proper quality of product, rapidity of transfer and distribution of products in remote regions, reducing harmful impacts on the environment and low costs. Therefore, they can be attractive for the private sector.