Depoliticization and Energy Security

 

The world experienced the first-ever oil shock four decades ago. In the wake of the 1973 oil shock and the concomitant exit of significant volumes of oil from the market, oil prices increased four-fold and “energy security” became an important issue in the world petroleum industry.

The oil shock showed that oil consumers – including industrialized and developing countries – had economies highly vulnerable to price fluctuations. In order to tackle this challenge, industrialized countries took actions either individually or collectively to safeguard their national security.

Their collective action resulted in the establishment of the International Energy Agency (IEA) in 1974. The IEA worked out mechanisms to make up for oil undersupply and energy security entered the jargon of petroleum industry in the world.

The mechanisms defined by the IEA member states were effective in countering threats emanating from energy supply disruption; however, energy security challenges continue to grip the world.

Rarely may we review world energy news without seeing “energy security” between the lines.

Today, not only does the energy security challenge continue to haunt the world, but also such terms as supply and demand security have found their merited position in the literature of world petroleum industry.  As much as supply security is important for consumers, demand security is important for producers.

Under the present circumstances, the challenges related to energy security mainly result from the politicization of the issue of energy. Western sanctions against Iran’s oil sector are a case in point. The ongoing situation in Iraq and Libya and Russia-Ukraine tug-of-war are all indicative of concerns about energy supply security.

Iraq is expected to be a major supplier of oil in the future as demand for oil keeps growing. Iran sits atop the world’s largest hydrocarbon reserves and Russia is the largest oil producer and the largest gas exporter in the world.

The European Union (EU), which represents the largest bloc of IEA member states, is still anxious about its energy security.

Reducing dependence on oil and gas imported from Russia or buying Russian gas; while bypassing Ukraine like through Nord Stream and South Stream pipelines, importing liquefied natural gas (LNG) and diversifying sources of energy like buying gas from Algeria or Norway, are among EU’s options for ensuring its energy security.

In the meantime, Iran’s talks with six world powers in Vienna are still away from a permanent accord.

The continuation of unrest in Iraq, escalation of tensions between Russia and Ukraine and international sanctions against Iran’s oil sector are overshadowing sustainable energy supply in the world.

Interruption in the development of oil fields in Iraq, Iran-West impasse and gas dispute in Europe undermine efforts for guaranteeing energy supply.

The West is expected to depoliticize the issue of energy in an attempt to counter threats to world energy supply.

 

Monopoly to Stop Haunting Research

Petroleum Minister Bijan Namdar Zangeneh said industrial monopoly blocks progress in research activities.

“Some companies and industries like car manufacturing do not make any efforts for innovation and research because of monopolies. Therefore, removing monopoly on the industries is key to a major change in industry-university interaction,” Zangeneh said.

He said the country’s economy should become competitive, adding that the government’s more-than-enough support for industries would harm the industrial sector.

Zangeneh said competition should be the main driving force behind development of technology.

“Currently, more than 90 percent of industries and companies are run by the government or by the private sector. Therefore, privatizations have not been effective,” he said.

Zangeneh said a significant plan devised by Petroleum Ministry is to commission the administration of a number of oil reservoirs to universities.

“Petroleum Ministry is also seeking to manufacture equipment. It has the manufacturing of 10 items of commodities on the agenda now,” he said.

 

APO Wants More Iran Role

 

The secretary general of Asian Productivity Organization (APO) has stressed the need for more prominent role of Iran’s petroleum industry in the APO projects.

Mari Amano, who was addressing a meeting with Iran’s senior oil managers, said the APO needs more cooperation of its member states as it faces limited budget.

He called on Iran’s Petroleum Ministry to volunteer to host the next meeting of APO.

Roya Tabatabaei, head of Iran’s National Productivity Organization, said this organization is interested in boosting Iran’s contribution to APO projects.

Kambiz Baghban, director for productivity affairs, administrative development and entrepreneurship of National Iranian Oil Company, said NIOC wants to enjoy APO electronic services in the petroleum industry.

APO is a union of 20 Asian countries formed in 1961 to promote socioeconomic development among its members.

The members of the Asian Productivity Organization are Bangladesh, Cambodia, China, Fiji, Hong Kong, India, Indonesia, Iran, Japan, Korea, Laos, Malaysia, Mongolia, Nepal, Pakistan, the Philippines, Singapore, Sri Lanka, Thailand and Vietnam.

The APO's roles include researching the needs of member countries, promoting economic alliances among members, building relations among member countries and non-member countries, developing methods for member countries to increase their productivity and competitiveness, strengthening national productivity organizations in member countries, and facilitating information exchange among member countries.

It is also concerned with helping member countries to become knowledge-based economies, promoting sustainable (green) development and helping small and medium-sized business to become more competitive.

 

Iran, Qatar Can Work for World Peace

 

 

Iranian President Hassan Rouhani reiterated Iran and Qatar can work closely to establish peace and security in the world.

"Iran and Qatar can cooperate positively in the region for the establishment of peace and security," said Rouhani in a phone call with Qatari Emir Sheikh Hamad bin Khalifa al-Thani.

He also said Iran is ready to work with its friendly and neighboring countries to battle insecurity and instability to return peace and calm to the sensitive Middle East.

Rouhani reaffirmed the importance of strengthening cooperation among countries in the region to combat terrorists, stressing that the era of violence and terrorism has passed.

“I hope that terrorists would realize the firm determination of Muslim governments in the region in fighting terrorism and know that our era is not one of killing and terrorism,” he said.

The Iranian president expressed regret over the ongoing insecurity in the region, particularly in Iraq and said, “The issue of extremism and terrorism is a big problem for all countries in the region.”

Rouhani called on all Muslim nations in the region to unite and cooperate with each other with the purpose of resolving this problem.

He also urged countries in the region to help establish stability and peace through dialogue and cordial relationships.

The Iranian president emphasized that the expansion of terrorism in the region would only serve the interests of the Zionists and enemies of the Muslim world.

“We are ready to join hands with all our friend and brother countries in the region to combat the problems of instability and insecurity and restore peace and calm to our sensitive region,” the Iranian president pointed out.

 

The Qatari emir, for his part, said he shares the views of the Iranian president on the ongoing regional crises, adding that Qatar condemns terrorism and calls for unity to eliminate it.

Al Thani warned that the spread of terrorism would be detrimental to all countries in the region.

 

Tender Bid Integration System

 

A deputy petroleum minister said a system has been launched for harmonizing tender bids in the oil sector.

“With the implementation of this system, all tender bids for contractors will be put in an integrated manner,” Emad Hosseini, deputy petroleum minister for engineering affairs, said.

He said the system, known as Petroleum Industry Contractors System, is being launched by Petroleum Ministry’s Division for Engineering Affairs.

The launch of this new system follows the successful functioning of petroleum commodities e-procurement system.

Hosseini underscored the need for defining laws to further protect domestic manufacturing.

Ahmad Tavallaei, director of information technology and communications at National Iranian Oil Company, said the petroleum commodities e-procurement system would avoid parallel purchase or manufacturing.

He said that more than 60 percent of the petroleum industry’s costs are spent for the purchase of commodities and services, adding that precise planning would manage the costs.

 

Oil, Gas, Coal Technology Developers Identified

 

The Committee for Development of Oil, Gas and Coal Technology of the Office of Vice-President for Science and Technology has identified knowledge-based companies active in the related fields and introduced them to industries, the secretary of the committee has said.

Jafar Towfiqi said the graduates of petroleum industry need to get familiar with the fields they can work in.

He said the committee is a newly-established offshoot of the Office of Vice-President for Science and Technology.

“This committee should be equipped with technology potentials so that maximum profits could be reaped from this God-given benediction,” said Towfiqi.

He said that Iran has yet to reach its desired status in the development of oil, gas and coal technology despite great strides taken for that purpose.

Towfiqi said the committee has been set up to remove obstacles on the way of technology development, adding that it supports Petroleum Ministry’s plans for the development of technology.

He said the committee will mainly support knowledge-based companies active in the oil, gas and coal sectors, adding that the committee is identifying knowledge-based companies in order to provide facilities to them.

“The tasks we are determined to accomplish in the committee pertain to the development of technology for the oil, gas and coal industries as well as monitoring technology programs,” said Towfiqi.

He said that the committee is ready to intervene anywhere technological infrastructure is needed for the petroleum industry.

“This committee supports and contributes to designing and implementation of technology development plans drawn up by Petroleum Ministry,” he said.

Towfiqi said the committee will identify and remove hurdles in cooperation with universities, research institutes, knowledge-based companies, science and technology parks and other relevant bodies.

He noted that the committee has no intention of operating in parallel with Petroleum Ministry.

 

Russian Firm to Build Iran Pipeline

 

A Russian company has agreed to build a pipeline extending from Iranshahr to Chabahar in southwestern Iran, an official with the National Iranian Gas Company (NIGC) said.

Asghar Soheilipour said the Russian company, whose name was not revealed, has signed a 700-million-dollar deal with NIGC for the construction of 300-kilometer pipeline.

He said the pipeline is expected to be constructed in two years' time.

Iran has already built a pipeline from Assaluyeh, where the giant offshore South Pars gas field is located, to Iranshahr.

In June, National Iranian Oil Company (NIOC) and Russia’s OAO Tatneft revived a memorandum stalled due to Western sanctions against the Islamic Republic’s energy sector.

Tatneft had agreed to develop heavy crude oil reservoirs in Iran, introduce new recovery enhancement methods and carry out seismic testing.

In 2011, Tatneft signed an accord valued at $1 billion with Iran to develop the Zagheh oil field in Iran.

A preliminary deal was signed in Tehran earlier between Tatneft, which is based in Russia’s Tatarstan region, and Iran’s Petroleum and Engineering Development Company.

Zagheh field, located in southwestern Iran, will start production within 24 months with a volume of about 7,000 barrels a day of heavy crude and output will eventually rise to 55,000 barrels a day.

 

Turkmenistan, Iran Mull Energy Partnership

 

The results of the working visit by the Turkmen government delegation to Iran were discussed at a meeting of the Cabinet of Ministers of Turkmenistan, the Turkmen government said.

Traditional issues of bilateral cooperation in the sphere of thermal energy complex, as well as measures taken with the purpose of modernization of the industrial oil and gas field were the topics of discussion during the visit, Azernews reported.

The information report said that Turkmen President Gurbangulu Berdimuhamedov stressed at the meeting that one of the key aspects of Turkmenistan's energy strategy is the development of mutually beneficial international partnerships in this important area.

In this context, the president stressed the need to continue to take comprehensive measures to raise the export potential of the industry, raise the volumes of production and processing of raw hydrocarbons.

Gas supplies from Turkmenistan to Iran started in the mid-90s after the launch of the Korpeje-Kordkuy gas pipeline. Another pipeline - the Dovletabat-Sarakhs-Khangiran pipeline has also been commissioned recently. There was a demand for this pipeline, given the increasing exports of Turkmen gas to Iran.

As reported earlier, Tehran and Ashgabat held talks to enhance the Turkmen gas supplies to Iran.

A number of large deposits, such as Korpeje, Keimir, South Kamyshlydja, Akpatlavuk, Shatut, Nebitlije and Altyguyy deposits were discovered earlier in Turkmenistan's Balkan province. They serve as raw materials sources for exports to Iran.

The annual bilateral trade level between these two neighboring countries stands at about $5 billion and this figure can double in the coming years, according to the Iranian side.

 

Iran Set to Produce High-Quality Petrol

 

A deputy petroleum minister has said that Iran will achieve self-sufficiency in high-quality gasoline production by March 2016.

“Based on plans, with the implementation of the first phase of Persian Gulf Star Refinery, the quality of gasoline production in Iran’s refineries will improve and we will be able to become exporter of standard and high-quality gasoline,” Abbas Kazemi said.

He said the products of Persian Gulf Star Refinery will be consumed domestically, while Abadan and Bandar Abbas refineries’ products including gasoline will be exported.

“We’re already self-sufficient in gas oil, fuel oil, liquefied gas and kerosene production,” said Kazemi, who is also managing director of National Iranian Oil Refining and Distribution Company (NIORDC).

He said the oil-rich city of Ahvaz in southwestern Iran will start distributing euro-4 gasoline in September.

Kazemi said Petroleum Ministry plans to build a second refinery in Abadan to produce euro-5 grade gasoline.

Prospects Bright for Iran Petchem Sector

 

The first achievement of the Islamic Republic of Iran’s Petroleum Ministry is expected to be seen in South Pars gas field in the near future. Since taking office last August, Petroleum Minister Bijan Namdar Zangeneh has concentrated his efforts on the development of South Pars which Iran shares with Qatar.

In the current calendar year to March 2015, Iran hopes to start producing 100 mcm/d from the field’s priority phases (12, 15&16 and 17&18). Many petroleum industry experts believe that such a breakthrough achievement in Iran would bring about a major development in all sectors including supply of feedstock to petrochemical plants which are currently out of service due to shortage of feedstock.

Abbas Sheri-Moqaddam, deputy petroleum minister for petrochemical affairs, has said that Iran’s petrochemical production capacity stands at 60 million tons a year now. He said that Iran is using only 68 percent of this capacity due to feedstock restrictions.

Ilam and Kermanshah petrochemical plants in western Iran came on-stream last calendar year. Lorestan Petrochemical plant will come online this year, while Mahabad and Sanandaj petrochemical plants are expected to become operational in the coming years. Therefore, one can hope that development of South Pars main phases would boost Iran’s petrochemical production.

Iran, which owns 33.8 tcm of gas, needs to develop modern technologies, provide financial resources and win foothold in world markets for its petrochemical industry. The latest estimates indicate that Iran needs to attract 70 billion dollars in investment for its upstream and downstream industries. Of this estimated sum, 30 percent would go to downstream industries particularly polymers like polypropylene supply chain.

The most important competitive condition for investment in Iran’s petrochemical industry is to have access to feedstock – natural gas, ethane, and naphtha and gas condensate – in big volumes.

The present capacity of gas refining and transmission in the country is around 600 mcm/d, expected to reach 1,000 mcm/d soon. Furthermore, access to ethane to feed petrochemical plants will solidify Iran’s position as a producer of petrochemicals.

With the completion of South Pars phases (12-27), 650,000 b/d of gas condensate, 6.7 million tons a year of liquefied petroleum gas (LPG) and four million tons a year of ethane will be recovered. The ethane will be fully used by petrochemical plants and other products will feed the plants based on their requirements.

 

Presence in Iran Petchem Market

 

Besides access to low-cost petrochemical feedstock, Iran enjoys other competitive advantages that could not be easily ignored. The growing domestic petrochemical market, access to skilled manpower, extensive communications infrastructure, Iran’s geographical position in sharing borders with 15 other countries mainly from Central Asia and South Caucasus, special economic petrochemical zones, attractive investment law, tax exemption facilities and active petrochemical chains are among advantages of investment in Iran’s petrochemical sector. Iran’s National Development Fund (NDF) is also ready to provide the necessary facilities for petrochemical projects.

 

End to Crude Oil Selling

 

Iran’s Supreme Leader Ayatollah Ali Khamenei has instructed the petroleum industry to reduce crude oil sales and instead consider selling oil products. What can wean Iran’s economy off petrodollars is sustainable development. To that effect, the petrochemical industry would serve Iran’s economy the most. This industry is capable of boosting the position of Iran’s economy, creating jobs and generating revenues by supplying valuable products.

Economists say that each job position in the petrochemical industry can create at least 14 jobs.

Iran’s Petroleum Ministry has drawn up a 75-billion-dollar development plan for the petrochemical industry over the coming eight years. In the meantime, South Pars gas field is expected to become fully operational in five years. These two factors can promise quick development of Iran’s petrochemical industry.

Winning permanent markets for petrochemical products, supplying products to suit the taste of clients and gaining more profits, aiding national development plans and sustainable job creation in the country, replacing upstream petrochemical industries with downstream petrochemical industries, making the necessary preparations for further activity of the private sector in national development plans, further privatization in line with Article 44 of the Constitution and reduction of risks due to international sanctions are among advantages of development of downstream petrochemical industries in Iran.

By completing some 60 half-finished petrochemical projects inherited from the previous administrations, the current annual capacity of petrochemical production can be raised to 120 million tons a year.

Moreover, with the implementation of 36 new projects requiring 41 billion dollars in investment, Iran’s annual petrochemical production capacity will exceed 180 million tons.

In the current calendar year to March 2015, Iran’s petrochemical production capacity will increase by two million tons.

The future development of petrochemical industry will not be restricted to Bandar Imam and Assaluyeh as four petrochemical hubs are to be established in the coasts of Persian Gulf or Sea of Oman. Parsian Special Economic Zone in the east of Assaluyeh, Jask free zone in the Sea of Oman and just next to the Strait of Hormuz, Chabahar free zone and Iranshahr special zone are to house the four petrochemical hubs.

In addition to these hubs, construction of four ethanol and urea/ammoniac plants is envisaged in Lavan. In the meantime, due to the future abundance of natural gas in Iran, National Petrochemical Company (NPC) intends to develop gas-to-oil (GTO) and gas-to-power (GTP) technologies to produce olefins domestically. Olefins make great contribution to the development of downstream industries.

 

Investment in Persian Gulf and Sea of Oman Coasts

 

Mohammad-Hassan Peyvandi, deputy head of NPC, said investments in the coasts of the Persian Gulf and the Sea of Oman are expected to continue.

The private sector is preparing the necessary infrastructure for petrochemical projects in Chabahar. Jask and Iranshahr are also expected to attract private investment for petrochemical projects in the near future.

Petrochemical industry is the core of development of the country. Over the past two decades, job creation in the country has been dependent on the petrochemical industries. Tourism industry, which apparently has nothing to do with the petrochemical industry, depends on aerospace and most equipment used in airplanes is polymer compounds.

Defining a strategy for the development of petrochemical industry and introducing projects to the private sector for investment are among the main missions assigned to NPC.

In the past, Iran mainly invested in the upstream sector to secure national interests. Big volumes of investment flew into urea and methanol production. Today, since downstream industries complete the supply chain and create more jobs and value-added; the private sector will have a specific position in the investment programs. Methanol has a production chain and conversion of methanol to valuable products like propylene is among future plans of the petroleum industry.

Given the growing crude oil prices and subsequently the growing price of liquefied petrochemical products, the private sector has made little investment in propylene production.

But today, new sectors of petrochemical industry need lower investment; therefore more investments could flow into propylene production. Completing the propylene production chain will develop downstream industries like acrylonitriles, acetones, phenols, Maleic anhydride and polyols.

 

Petchem Development

 

Iran’s petrochemical industry, which has access to abundant feedstock, enjoys educated and young manpower and unique geographical position due to access to high seas and is in the proximity of target markets, is currently playing a trans-national and trans-regional role. Despite a variety of political and trade restrictions, it has maintained its unique position in international markets.

The value of Iran’s petrochemical sales has been multiplied by 36 over the past 25 years. This sale is largely due to scientific progress achieved inside the country. The important point is that this achievement has been made at a time Iran and its petrochemical industry have been under sanctions imposed by the West.

By the end of 2013, Iran managed to export 12.8 million tons of petrochemicals to world markets for 9.9 billion dollars and sell 14.5 million tons on domestic markets.

The main petrochemical products in Iran are polyethylene, PET, PS, PP and paraxylene. More than 50 percent of these products has been supplied on domestic market with the rest being sold in world markets.

Over the past years, Iran’s upstream and downstream petrochemical industries have managed to broaden their markets and Iran’s petrochemical products are currently exported to Asia, Africa, Europe, America and Oceania.

Iran’s petrochemical industry is committed to developing its capacities. In the coming one or two years, new petrochemical products will hit markets. In early 2015, PVC units in Hamedan, linear polyethylene plant in Lorestan and Mahabad as well as the second phase of West Ethylene Pipeline will have been finished and they will supply their products on the market. A comparison between important indicators of the petrochemical sector from 1978 to 2012 endorses the achievements of Iran’s oil and gas industries in the years following the 1979 Islamic Revolution. Iran has since raised its petrochemical production from 1.604 million tons a year to 41 million tons a year. Iran’s rated petrochemical capacity was announced at 57.1 million tons by March 2013.

At present, 45 production units with a capacity of around 60 million tons are making a 36-percent share of the country’s total non-oil exports and 45-percent share of the country’s industrial exports.

Iran’s petrochemical exports amounted to 12 billion dollars in the calendar year to March 2013. According to international figures, 24 percent of the Middle East’s petrochemical production capacity and 4.2 percent of the world’s petrochemical production capacity belong to Iran.

Iran’s petrochemical production capacity is forecasted to reach 100 million tons by 2016 to give Iran more than 20 billion dollars – equaling Iran’s annual oil revenues in the 1990s. It shows the significance of petrochemical industry and its contribution to national economic boom as well as Iran’s international position. A review of Iran’s petrochemical exports in recent years show the country’s specific position in exporting methanol, urea, polyethylene and aromatics.

For the products which Iran can offer in big volumes, it would be possible to bargain and facilitate logistics for exports. Realization of these objectives depends on coordination between the main players of the market and the centralized sales management. For example, under the aegis of centralized sale management, Iran’s petrochemical industry managed in 2009 to sell products at highest prices in China’s main market and it has been acknowledged in international media. But due to divergence among Iranian producers, the same media are exploiting the situation to promote low prices.

Bandar Imam Petrochemical Plant which was established in 1973 in order to produce petrochemicals and export olefin, polyolefin, aromatics and other petrochemical products, is a major petrochemical producer in Iran. It is an infrastructure facility in the country and its products are used to feed downstream industries. Bandar Imam Petrochemical Plant is feeding 5,000 downstream units now.

The plant’s production exceeded 1.323 million tons during the first quarter of the current calendar year, up 14 percent from a year ago.

Bandar Imam Processing Company supplied such products as butane, ethane, propane, pentane plus, hexane, ethylene, pyrolysis benzene, fuel oil, gasoline, xylene composites, high-density aromatics and paraxylene during the first three months of the Iranian year. These products fed high-density polyethylene (HDPE) and low-density polyethylene (LDPE) units of Bandar Imam Polymers Company as well as the vinyl chloride monomer (VCM) and ethylene dichloride (EDC) units of Bandar Imam Kimia Company.

Polymers Company is another subsidiary of Bandar Imam Petrochemical Plant. It is a major supplier of polymer products to Iran. During the first quarter of the current calendar year, it produced more than 146,953 tons of polymers, up 31 percent from the year before. This company’s products are used in plastic containers of liquids, gas supply pipes, chemical and foodstuff containers, shoemaking, toy making and electrical insulation.

Kimia Company, another offshoot of Bandar Imam Petrochemical Plant, supplied more than 263,947 tons of products during the same period, up 11 percent from last year. The products included sodium hydroxide, hydrochloric acid, white king, ethylene dichloride and MTBE. Sodium hydroxide is used in making soaps, detergents, purification of vegetable oil and paints. MTBE is used for enhancing the octane of gasoline. One of the most important applications of hydrochloric acid is in the pickling of steel, to remove rust or iron oxide scale from iron or steel before subsequent processing, such as extrusion, rolling, galvanizing, and other techniques. White King is a brand of bleach used in a variety of cleaning applications including washing of clothing and cleaning of mould from bathroom tiles.

With approximately 80% of the world's consumption of 1,2-dichloroethane, the major use of 1,2-dichloroethane is in the production of vinyl chloride monomer (VCM, chloroethane) with hydrogen chloride as a byproduct. VCM is the precursor to polyvinyl chloride.

As a good polar aprotic solvent, 1,2-dichloroethane could be used as degreaser and paint remover but is now banned from use due to its toxicity and carcinogenity. As a useful 'building block' reagent, it is used as an intermediate in the production of various organic compounds such as ethylenediamine. In the laboratory, it is occasionally used as a source of chlorine, with elimination of ethane and chloride.

Via several steps, 1,2-dichloroethane is a precursor to 1,1,1-trichloroethane, which is used in dry cleaning. Historically, 1,2-dichloroethane was used as an anti-knock additive in leaded fuels.

Currently, 33 billion dollars of investment is needed for financing petrochemical plants with an output of 55 million tons. Such investment would help Iran gain 26 billion dollars in revenues, annually. There are also 14 to 15 priority projects which are expected to come on-stream in four years and increase Iran’s petrochemical production capacity by 10 million tons. 

If seven methanol projects are financed in Assaluyeh, Iran would be able to supply some 10 million tons of methanol on the world markets.

Earlier, Iran’s petrochemical industry depended on ethylene due to the abundance of ethane. Downstream industries also grew to some extent, but for more growth in these industries, the grounds needed to be prepared for propylene production. Iran plans propylene production from methanol so that methanol prices are not slashed while propylene would be produced for downstream industries.

Propylene is produced from fossil fuels—petroleum, natural gas, and, to a much lesser extent, coal. Propylene is a byproduct of oil refining and natural gas processing. During oil refining, ethylene, propylene, and other compounds are produced as a result of cracking larger hydrocarbon molecules to produce hydrocarbons more in demand. A major source of propylene is cracking intended to produce ethylene, but it also results from refinery cracking producing other products. Propylene can be separated by fractional distillation from hydrocarbon mixtures obtained from cracking and other refining processes; refinery-grade propylene is about 50 to 70%.

Propylene is the second most important starting product in the petrochemical industry after ethylene. It is the raw material for a wide variety of products. Manufacturers of the plastic polypropylene account for nearly two thirds of all demand. Polypropylene is, for example, needed for the production of films, packaging, caps and closures as well as for other applications. In the year 2008 the worldwide sales of propylene reached a value of over 90 billion US dollars.

Propylene and benzene are converted to acetone and phenol via the cymene process. Propylene is also used to produce isopropanol (propan-2-ol), acrylonitrile, propylene oxide (epoxypropane) and epichlorohydrin.

Prospects Bright for Iran Petchem Sector

 

The first achievement of the Islamic Republic of Iran’s Petroleum Ministry is expected to be seen in South Pars gas field in the near future. Since taking office last August, Petroleum Minister Bijan Namdar Zangeneh has concentrated his efforts on the development of South Pars which Iran shares with Qatar.

In the current calendar year to March 2015, Iran hopes to start producing 100 mcm/d from the field’s priority phases (12, 15&16 and 17&18). Many petroleum industry experts believe that such a breakthrough achievement in Iran would bring about a major development in all sectors including supply of feedstock to petrochemical plants which are currently out of service due to shortage of feedstock.

Abbas Sheri-Moqaddam, deputy petroleum minister for petrochemical affairs, has said that Iran’s petrochemical production capacity stands at 60 million tons a year now. He said that Iran is using only 68 percent of this capacity due to feedstock restrictions.

Ilam and Kermanshah petrochemical plants in western Iran came on-stream last calendar year. Lorestan Petrochemical plant will come online this year, while Mahabad and Sanandaj petrochemical plants are expected to become operational in the coming years. Therefore, one can hope that development of South Pars main phases would boost Iran’s petrochemical production.

Iran, which owns 33.8 tcm of gas, needs to develop modern technologies, provide financial resources and win foothold in world markets for its petrochemical industry. The latest estimates indicate that Iran needs to attract 70 billion dollars in investment for its upstream and downstream industries. Of this estimated sum, 30 percent would go to downstream industries particularly polymers like polypropylene supply chain.

The most important competitive condition for investment in Iran’s petrochemical industry is to have access to feedstock – natural gas, ethane, and naphtha and gas condensate – in big volumes.

The present capacity of gas refining and transmission in the country is around 600 mcm/d, expected to reach 1,000 mcm/d soon. Furthermore, access to ethane to feed petrochemical plants will solidify Iran’s position as a producer of petrochemicals.

With the completion of South Pars phases (12-27), 650,000 b/d of gas condensate, 6.7 million tons a year of liquefied petroleum gas (LPG) and four million tons a year of ethane will be recovered. The ethane will be fully used by petrochemical plants and other products will feed the plants based on their requirements.

 

Presence in Iran Petchem Market

 

Besides access to low-cost petrochemical feedstock, Iran enjoys other competitive advantages that could not be easily ignored. The growing domestic petrochemical market, access to skilled manpower, extensive communications infrastructure, Iran’s geographical position in sharing borders with 15 other countries mainly from Central Asia and South Caucasus, special economic petrochemical zones, attractive investment law, tax exemption facilities and active petrochemical chains are among advantages of investment in Iran’s petrochemical sector. Iran’s National Development Fund (NDF) is also ready to provide the necessary facilities for petrochemical projects.

 

End to Crude Oil Selling

 

Iran’s Supreme Leader Ayatollah Ali Khamenei has instructed the petroleum industry to reduce crude oil sales and instead consider selling oil products. What can wean Iran’s economy off petrodollars is sustainable development. To that effect, the petrochemical industry would serve Iran’s economy the most. This industry is capable of boosting the position of Iran’s economy, creating jobs and generating revenues by supplying valuable products.

Economists say that each job position in the petrochemical industry can create at least 14 jobs.

Iran’s Petroleum Ministry has drawn up a 75-billion-dollar development plan for the petrochemical industry over the coming eight years. In the meantime, South Pars gas field is expected to become fully operational in five years. These two factors can promise quick development of Iran’s petrochemical industry.

Winning permanent markets for petrochemical products, supplying products to suit the taste of clients and gaining more profits, aiding national development plans and sustainable job creation in the country, replacing upstream petrochemical industries with downstream petrochemical industries, making the necessary preparations for further activity of the private sector in national development plans, further privatization in line with Article 44 of the Constitution and reduction of risks due to international sanctions are among advantages of development of downstream petrochemical industries in Iran.

By completing some 60 half-finished petrochemical projects inherited from the previous administrations, the current annual capacity of petrochemical production can be raised to 120 million tons a year.

Moreover, with the implementation of 36 new projects requiring 41 billion dollars in investment, Iran’s annual petrochemical production capacity will exceed 180 million tons.

In the current calendar year to March 2015, Iran’s petrochemical production capacity will increase by two million tons.

The future development of petrochemical industry will not be restricted to Bandar Imam and Assaluyeh as four petrochemical hubs are to be established in the coasts of Persian Gulf or Sea of Oman. Parsian Special Economic Zone in the east of Assaluyeh, Jask free zone in the Sea of Oman and just next to the Strait of Hormuz, Chabahar free zone and Iranshahr special zone are to house the four petrochemical hubs.

In addition to these hubs, construction of four ethanol and urea/ammoniac plants is envisaged in Lavan. In the meantime, due to the future abundance of natural gas in Iran, National Petrochemical Company (NPC) intends to develop gas-to-oil (GTO) and gas-to-power (GTP) technologies to produce olefins domestically. Olefins make great contribution to the development of downstream industries.

 

Investment in Persian Gulf and Sea of Oman Coasts

 

Mohammad-Hassan Peyvandi, deputy head of NPC, said investments in the coasts of the Persian Gulf and the Sea of Oman are expected to continue.

The private sector is preparing the necessary infrastructure for petrochemical projects in Chabahar. Jask and Iranshahr are also expected to attract private investment for petrochemical projects in the near future.

Petrochemical industry is the core of development of the country. Over the past two decades, job creation in the country has been dependent on the petrochemical industries. Tourism industry, which apparently has nothing to do with the petrochemical industry, depends on aerospace and most equipment used in airplanes is polymer compounds.

Defining a strategy for the development of petrochemical industry and introducing projects to the private sector for investment are among the main missions assigned to NPC.

In the past, Iran mainly invested in the upstream sector to secure national interests. Big volumes of investment flew into urea and methanol production. Today, since downstream industries complete the supply chain and create more jobs and value-added; the private sector will have a specific position in the investment programs. Methanol has a production chain and conversion of methanol to valuable products like propylene is among future plans of the petroleum industry.

Given the growing crude oil prices and subsequently the growing price of liquefied petrochemical products, the private sector has made little investment in propylene production.

But today, new sectors of petrochemical industry need lower investment; therefore more investments could flow into propylene production. Completing the propylene production chain will develop downstream industries like acrylonitriles, acetones, phenols, Maleic anhydride and polyols.

 

Petchem Development

 

Iran’s petrochemical industry, which has access to abundant feedstock, enjoys educated and young manpower and unique geographical position due to access to high seas and is in the proximity of target markets, is currently playing a trans-national and trans-regional role. Despite a variety of political and trade restrictions, it has maintained its unique position in international markets.

The value of Iran’s petrochemical sales has been multiplied by 36 over the past 25 years. This sale is largely due to scientific progress achieved inside the country. The important point is that this achievement has been made at a time Iran and its petrochemical industry have been under sanctions imposed by the West.

By the end of 2013, Iran managed to export 12.8 million tons of petrochemicals to world markets for 9.9 billion dollars and sell 14.5 million tons on domestic markets.

The main petrochemical products in Iran are polyethylene, PET, PS, PP and paraxylene. More than 50 percent of these products has been supplied on domestic market with the rest being sold in world markets.

Over the past years, Iran’s upstream and downstream petrochemical industries have managed to broaden their markets and Iran’s petrochemical products are currently exported to Asia, Africa, Europe, America and Oceania.

Iran’s petrochemical industry is committed to developing its capacities. In the coming one or two years, new petrochemical products will hit markets. In early 2015, PVC units in Hamedan, linear polyethylene plant in Lorestan and Mahabad as well as the second phase of West Ethylene Pipeline will have been finished and they will supply their products on the market. A comparison between important indicators of the petrochemical sector from 1978 to 2012 endorses the achievements of Iran’s oil and gas industries in the years following the 1979 Islamic Revolution. Iran has since raised its petrochemical production from 1.604 million tons a year to 41 million tons a year. Iran’s rated petrochemical capacity was announced at 57.1 million tons by March 2013.

At present, 45 production units with a capacity of around 60 million tons are making a 36-percent share of the country’s total non-oil exports and 45-percent share of the country’s industrial exports.

Iran’s petrochemical exports amounted to 12 billion dollars in the calendar year to March 2013. According to international figures, 24 percent of the Middle East’s petrochemical production capacity and 4.2 percent of the world’s petrochemical production capacity belong to Iran.

Iran’s petrochemical production capacity is forecasted to reach 100 million tons by 2016 to give Iran more than 20 billion dollars – equaling Iran’s annual oil revenues in the 1990s. It shows the significance of petrochemical industry and its contribution to national economic boom as well as Iran’s international position. A review of Iran’s petrochemical exports in recent years show the country’s specific position in exporting methanol, urea, polyethylene and aromatics.

For the products which Iran can offer in big volumes, it would be possible to bargain and facilitate logistics for exports. Realization of these objectives depends on coordination between the main players of the market and the centralized sales management. For example, under the aegis of centralized sale management, Iran’s petrochemical industry managed in 2009 to sell products at highest prices in China’s main market and it has been acknowledged in international media. But due to divergence among Iranian producers, the same media are exploiting the situation to promote low prices.

Bandar Imam Petrochemical Plant which was established in 1973 in order to produce petrochemicals and export olefin, polyolefin, aromatics and other petrochemical products, is a major petrochemical producer in Iran. It is an infrastructure facility in the country and its products are used to feed downstream industries. Bandar Imam Petrochemical Plant is feeding 5,000 downstream units now.

The plant’s production exceeded 1.323 million tons during the first quarter of the current calendar year, up 14 percent from a year ago.

Bandar Imam Processing Company supplied such products as butane, ethane, propane, pentane plus, hexane, ethylene, pyrolysis benzene, fuel oil, gasoline, xylene composites, high-density aromatics and paraxylene during the first three months of the Iranian year. These products fed high-density polyethylene (HDPE) and low-density polyethylene (LDPE) units of Bandar Imam Polymers Company as well as the vinyl chloride monomer (VCM) and ethylene dichloride (EDC) units of Bandar Imam Kimia Company.

Polymers Company is another subsidiary of Bandar Imam Petrochemical Plant. It is a major supplier of polymer products to Iran. During the first quarter of the current calendar year, it produced more than 146,953 tons of polymers, up 31 percent from the year before. This company’s products are used in plastic containers of liquids, gas supply pipes, chemical and foodstuff containers, shoemaking, toy making and electrical insulation.

Kimia Company, another offshoot of Bandar Imam Petrochemical Plant, supplied more than 263,947 tons of products during the same period, up 11 percent from last year. The products included sodium hydroxide, hydrochloric acid, white king, ethylene dichloride and MTBE. Sodium hydroxide is used in making soaps, detergents, purification of vegetable oil and paints. MTBE is used for enhancing the octane of gasoline. One of the most important applications of hydrochloric acid is in the pickling of steel, to remove rust or iron oxide scale from iron or steel before subsequent processing, such as extrusion, rolling, galvanizing, and other techniques. White King is a brand of bleach used in a variety of cleaning applications including washing of clothing and cleaning of mould from bathroom tiles.

With approximately 80% of the world's consumption of 1,2-dichloroethane, the major use of 1,2-dichloroethane is in the production of vinyl chloride monomer (VCM, chloroethane) with hydrogen chloride as a byproduct. VCM is the precursor to polyvinyl chloride.

As a good polar aprotic solvent, 1,2-dichloroethane could be used as degreaser and paint remover but is now banned from use due to its toxicity and carcinogenity. As a useful 'building block' reagent, it is used as an intermediate in the production of various organic compounds such as ethylenediamine. In the laboratory, it is occasionally used as a source of chlorine, with elimination of ethane and chloride.

Via several steps, 1,2-dichloroethane is a precursor to 1,1,1-trichloroethane, which is used in dry cleaning. Historically, 1,2-dichloroethane was used as an anti-knock additive in leaded fuels.

Currently, 33 billion dollars of investment is needed for financing petrochemical plants with an output of 55 million tons. Such investment would help Iran gain 26 billion dollars in revenues, annually. There are also 14 to 15 priority projects which are expected to come on-stream in four years and increase Iran’s petrochemical production capacity by 10 million tons. 

If seven methanol projects are financed in Assaluyeh, Iran would be able to supply some 10 million tons of methanol on the world markets.

Earlier, Iran’s petrochemical industry depended on ethylene due to the abundance of ethane. Downstream industries also grew to some extent, but for more growth in these industries, the grounds needed to be prepared for propylene production. Iran plans propylene production from methanol so that methanol prices are not slashed while propylene would be produced for downstream industries.

Propylene is produced from fossil fuels—petroleum, natural gas, and, to a much lesser extent, coal. Propylene is a byproduct of oil refining and natural gas processing. During oil refining, ethylene, propylene, and other compounds are produced as a result of cracking larger hydrocarbon molecules to produce hydrocarbons more in demand. A major source of propylene is cracking intended to produce ethylene, but it also results from refinery cracking producing other products. Propylene can be separated by fractional distillation from hydrocarbon mixtures obtained from cracking and other refining processes; refinery-grade propylene is about 50 to 70%.

Propylene is the second most important starting product in the petrochemical industry after ethylene. It is the raw material for a wide variety of products. Manufacturers of the plastic polypropylene account for nearly two thirds of all demand. Polypropylene is, for example, needed for the production of films, packaging, caps and closures as well as for other applications. In the year 2008 the worldwide sales of propylene reached a value of over 90 billion US dollars.

Propylene and benzene are converted to acetone and phenol via the cymene process. Propylene is also used to produce isopropanol (propan-2-ol), acrylonitrile, propylene oxide (epoxypropane) and epichlorohydrin.

 

NIGC, Gazprom to Team Up

 

Iran and Russia, as top possessors of global natural gas reserves, plan to enhance cooperation level in the industry, an Iranian energy official has said.

“Establishment of a joint committee comprising National Iranian Gas Company (NIGC) and Russia’s Gazprom has been put on the agenda with the aim of expanding ties and cooperation,” managing director of the NIGC Hamidreza Araqi said.

Provision of equipment, transfer of technology, participation in oil and gas projects in the form of finance and preparation of working plans for foreign investment are among the new NIGC-Gazprom cooperation strategies, Araqi added.

He said NIGC and Gazprom agreed to broaden their ties throughout meetings held on the sidelines of the World Petroleum Congress recently held in Moscow.

Araqi said NIGC and Gazprom discussed ways of entering international markets.

He said that NIGC and Gazprom are both members of Gas Exporting Countries Forum (GECF) and the International Gas Union (IGU).

Iran and Russia share common interests as the world’s gas giants and plan to increase their share of the international market, and as such, the two sides have agreed on the new cooperation plan, he said.

In June 2013, the UK-based energy giant, BP, classed Iran as the world’s top gas reserves holder with 33.8 trillion cubic meters.

Iran has been trying to enhance its gas production by attracting foreign and domestic investment, especially in its South Pars gas field.

In November 2013, Iran's nominee was elected as the new Secretary General of the 12-nation Gas Exporting Countries Forum (GECF) for a two-year term.

The forum is an intergovernmental organization of the world’s top natural gas producers comprising Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates and Venezuela. Kazakhstan, Iraq, the Netherlands, Norway and Oman have the status of Observer Members.

The objectives of the Forum are to support the sovereign rights of member countries over their natural gas resources and their abilities to independently plan and manage the sustainable, efficient and environmentally conscious development, use and conservation of natural gas resources for the benefit of their peoples. These objectives will be promoted through the exchange of experience, views, information, and coordination.

 

China's Crude Imports from Iran Up 36%

 

China, Iran's largest oil client, has since late 2013 been stepping up purchases from the OPEC member country after a landmark November nuclear deal eased some sanctions on Iran, making up the main portion of Asia's higher imports since then.

Asian buyers are expected to import about 1.25 million-1.3 million b/d of Iranian oil in the six months through June, mostly owing to China's increases, industry and government sources have said.

China's May imports at 3.22 million tons, or 757,900 bpd, eased from a record high of nearly 800,000 bpd in the previous month.

Top refiner Sinopec Corp has since last November been lifting full contract volumes or more of Iranian oil deemed cheaper versus similar grades from Saudi Arabia, industry officials have told Reuters.

The increases were both a result of the state refiner's new push to cut crude procurement costs and the easing sanctions environment, they said.

Also contributing to strong import figures , imports started around last August by an independently-run petrochemicals company in southeast China of condensate, a very light crude oil from Iran's South Pars gas project. China counts condensate as crude oil.

The supplies have until now been on spot or semi-term basis. But from around August, they would be under a one-year term deal that was reached between state-run trader Zhuhai Zhenrong Corp and National Iranian Oil Company (NIOC).

Iran now ranks the third among the top suppliers, according to customs, with growth in the January-May period the fastest among China's top suppliers, outpacing that of Iraq, Oman, Angola and Russia.

 

South Pars Output to Hit 60 mcm/d

 

The main phase of the massive offshore South Pars gas field will be producing more than 60 mcm/d of gas before the start of winter, an official with Petropars said.

Hadi Mir-Baqeri said as the third and fourth terrains of the Phase 12 refinery are to become operational, the output is expected to reach 60-mcm.

He said that Phase 12 refinery is expected to process 1 bcf of gas.

Mir-Baqeri said the first cargo of NGL has also been loaded from Phase 12 of South Pars which Iran shares with Qatar.

Phase 12 of South Pars gas field is developed to produce 75 mcm/d of rich gas for feeding national pipeline (50 mcm/d) and liquefied natural gas (LNG) production units. This phase is also forecasted to supply 120,000 b/d of gas condensate and 750 tons a day of sulfur.

Petropars is the main contractor for this phase development.

 

Chabahar, New Petrochemical Hub

 

Iran plans to turn Chabahar Port, located in the southeastern province of Sistan-Baluchestan on the coast of the Gulf of Oman, to the third petrochemical hub of the country.

 In line with this plan, 21 petrochemical complexes are projected to be established in the Chabahar Free Trade Zone, National Petrochemical Company managing director Abbas She’ri Moqaddam said.

Since Chabahar is close to the major Indian and the Chinese markets it has an advantage over the two existing petrochemical hubs, namely Assalouyeh and Mahshahr, which are located in the southwestern province of Bushehr on the Persian Gulf coasts, he said.

This issue will considerably reduce transportation costs to major markets like those in India and China, he added.

Chabahar is a natural gateway for India to Afghanistan and Central Asia.

Over the last 10 years, Iran has invested considerable sums of money in the development of Chabahar. A 600km-long highway links Chabahar to the city of Zahedan, which is only about 240 kilometers from Milak on the Iran-Afghanistan border. Across Milak is Zaranj in Afghanistan where India has built the Zaranj-Delaram highway. Thus, there is already excellent road connectivity between Chabahar and Afghanistan via Zahedan.

Iran has also started the construction of a railway line from Chabahar to Zahedan where it will connect Iran to Central Asian states and other CIS countries through rail networks.

 

Iraq Crisis May Lift Iran Oil Prospects

 

Since the onset of the crisis(militants attacked Iraq’s largest oil refinery), oil prices have risen  and at the same time, Iran is in the final leg of negotiations that could finally result in the end of punitive sanctions that have crippled Iran's economy for the past several years and made day-to-day life very difficult for many Iranians, writes Thinkadvisor.

Of course, Iran’s nuclear program is the key issue that is still on the bargaining table, but even as Iran has stated that it may undertake military action to protect Shiite shrines from attack by Islamic State (IS) insurgents in Iraq, it also seems as though the US and Iran, after decades of strained relations, appear to be on the same side of the current conflict, thereby improving prospects for Iranian oil.

It is well known that Iran holds the world’s fourth largest oil reserves and the first largest natural gas reserves and even before the current conflict occurred, the country had already planned to increase its daily oil production by one million barrels – a decision that caused some concern about excess capacity to OPEC countries,  said Henry J. Leir Professor of the Economics of the Middle East, in Brandeis University’s Crown Center, but that risk has now dissipated since the onset of the insurgency in Iraq.

“That means there are good prospects for Iranian output to increase, particularly if sanctions against Iran are reduced or removed,” Nader Habibi said.

When he came to power a year ago, Iranian president Hassan Rouhani pledged to reform and revitalize Iran’s oil and gas sector in a big way, and definitely, the quality of management of Iranian oil –which had deteriorated significantly during the tenure of former president Mahmoud Ahmadinejad—has improved dramatically, Habibi said.

Rouhani has entrusted the Petroleum Ministry to Bijan Namdar Zangeneh, a seasoned and well respected professional who has succeeded, Habibi said, in bringing back on board a team of top-notch experts “who know what they’re doing.”

International firms are already showing some interest in providing Iran with the know-how and technology it needs. However, nothing is written in stone yet, Habibi said, as most are waiting for the July 20 deadline, when the future of sanctions against Iran which were eased six months ago, will be decided upon.

 

India’s Oil Imports from Iran

 

India’s crude imports from Iran rose considerably in May over the month before, tanker data obtained from trade sources indicates.

Citing trade sources, Reuters reported that India’s oil purchases from Iran stood at well over 255,000 b/d in April, which swelled by 13.5 percent in May.

Tehran was the sixth largest crude supplier to India in May, the data showed. India is among Asia’s major importers of energy, and relies on Iran to meet a part of its energy requirements.

The Asian country’s oil purchases from Iran fell down in April-July period last year due to insurance problems as a result of US-engineered sanctions against the Islamic Republic.

At the beginning of 2012, the United States and the European Union imposed new sanctions on Iran’s oil and financial sectors over Tehran’s nuclear energy program. As part of the bans, the EU member states were prevented from extending insurance coverage for tankers carrying Iranian crude.

IP-26-30

 

Energy Service Market

 

Managing director of Iran’s Fuel Conservation Organization (IFCO) Nosratollah Seifi has said preparations have been made for the establishment of energy service market in Iran.

He said these markets would set price on energy carries, define the type of contracts and determine conditions for contribution to Iran’s oil sector.

Seifi said Petroleum Ministry’s Engineering Affairs Department has defined a single type of contract for energy services companies.

He said that energy services companies are required to meet certain conditions before starting their activity.

Seifi said a pricing model is being finalized by Iran’s Petroleum Industry Efficient Energies Council, adding that the final version of this model would be set as precondition.

An energy service company or energy saving company (ESCO or ESCo) is a commercial or non-profit business providing a broad range of energy solutions including designs and implementation of energy savings projects, retrofitting, energy conservation, energy infrastructure outsourcing, power generation and energy supply, and risk management.

After installing energy conservation measures (ECMs), ESCOs often determine the energy savings resulting from the project and present the savings results to their customers. A common way to calculate energy savings is to measure the flows of energy associated with the ECM, and then to apply spreadsheet calculations to determine savings.

 

Iran Petchem Needs $33b

 

Iran needs to attract 33 billion dollars in investment for financing 55 million tons of petrochemical projects, a senior petrochemical official said.

Mohammad-Hassan Peyvandi, deputy head of National Petrochemical Company, said the envisaged projects would bring Iran 26 billion dollars in revenues.

He said that 71 petrochemical projects are currently under way with average progress at 27 percent.

Peyvandi said privatization of petrochemical industry has demoted NPC’s rank among world’s petrochemical companies.

He said petrochemicals account for 40 percent of Iran’s non-oil exports.

Peyvandi said 12 to 15 petrochemical projects under construction are expected to come on-stream in four years to enhance Iran’s petrochemical output by 10 million tons.

Peyvandi said seven methanol projects are to be financed in Assaluyeh in southern Iran, adding that they would deliver 10 million tons of ethanol to world markets.

 

Insurance Coverage, Main Challenge to LPG Exports

 

The head of National Petrochemical Company (NPC) has said that Iran’s nuclear negotiators should discuss the issue of insurance for vessels carrying liquefied petroleum gas.

“It is necessary that the issue of P&I of LPG carriers be raised in the Foreign Ministry’s talks with the P5+1 group and be announced to the P&I Club through the European Union,” Abbas Sheri-Moqaddam said.

He said that LPG is the chokepoint of Iran’s petrochemical industry, adding that owners of LPG carriers are barred by international sanctions from loading cargos at Iranian ports.

Sheri-Moqaddam, who is also deputy petroleum minister for petrochemical affairs, said nothing has so far happened in practice regarding sanctions relief despite a six-month interim accord between Iran and the six-power group.

“International P&I companies have covered the six-month period and they have noted in their official correspondence with the owners of vessels carrying petrochemicals that they are still barred from striking long-term contracts,” he said.

Sheri-Moqaddam said the P&I companies have told the ship-owners that they will not be responsible for any damages beyond the July 20 deadline.

“For this reason, international companies refuse to send ships or they carry their products one by one,” he said.

Sheri-Moqaddam said ship-owners refuse to receive payments related to Iran, adding that the banking system has set no framework for these transactions.

 

Foreign Vessels Waiting

 

He said European, Japanese, South Korean and even companies co-owned by the US have voiced their full readiness to cooperate with Iran in case sanctions are eased. The main problem pertains to P&I insurance coverage.

“With regards to the sale of petrochemical products, famous European, Japanese and Korean companies have shown interest in renewed presence in Iran’s market. Numerous meetings have been held with different companies in Tehran to that effect,” said Sheri-Moqaddam.

“Undoubtedly, long-term cooperation in sales is like the shipment issue tied to the permanent accord between Iran and the P5+1 countries,” he said.

Protection and indemnity insurance, more commonly known as P&I insurance, is a form of international maritime insurance provided by a P&I Club, a mutual insurance association that provides risk pooling, information and representation for its members, typically ship-owners, ship-operators or demise charterers. Unlike other marine insurance companies, which report to its shareholders, a P&I club only reports to its members.

 

OEOC to Conduct Seismic Testing in West Karoun

 

The seismic testing is to be done in order to have more precise data about oil reserves in West Karoun region.

 

 

 

The National Iranian Oil Company (NIOC) Exploration Directorate and Oil Exploration Operations Company (OEOC) have signed an agreement for conducting 2D and 3D seismic testing in oil-rich West Karoun.

The seismic operations are financed by NIOC. Five companies bid for the project and finally the OEOC was picked, Hormuz Qalavand, director for exploration of NIOC said.

Under the contract, valued at 11 million euros, 3D seismic operations are to be conducted on 1,460 square kilometers of land in the southwestern province of Khuzestan.

Moreover, 2D seismic testing is to be done on 470 kilometers of land in the same province. The total operation will last 21 months.

The seismic testing is to be done in order to have more precise data about oil reserves in West Karoun region.

Combining new data with previously acquired data will largely contribute to the development of Yadavaran oil field.

New reservoirs are likely to be explored in West Karoun while new traps could be also identified, said Qalavand.

West Karoun is located where there are many hydrocarbon fields shared with neighboring countries. This region is of high significance for Iran’s Petroleum Ministry and NIOC. Therefore, seismic testing in this region requires precision, management and compliance with regulations.

Iran counts on West Karoun region for its planned enhanced oil recovery and the OEOC is focusing all its efforts on removing hurdles to oil recovery.

Data gathering is planned to start in October and then they will undergo processing. After that, geophysicists from NIOC’s Exploration Directorate will interpret the data for oil extraction.

Seismic surveys have become the primary tool of exploration companies across the world, both onshore and offshore.  3-D seismic surveys have lowered finding costs and allowed exploration of reserves not locatable by other means, revolutionizing the industry. 

A seismic survey is conducted by creating a shock wave - a seismic wave - on the surface of the ground along a predetermined line, using an energy source. The seismic wave travels into the earth, is reflected by subsurface formations, and returns to the surface where it is recorded by receivers called geophones - similar to microphones.

 

Sustainable Development Guarantees Production

 

The managing director of National Iranian South Oil Company (NISOC) has said that sustainable development would facilitate oil production and other activities in southern oil-rich regions.

“Given the development of surrounding regions, big companies face social responsibilities,” Hamid Bovard said.

“In any region where industrial activities including oil production are done, certain measures have to be undertaken for compensating for natural costs of production,” he said.

Bovard said development of oil-rich regions in southern Iran need clear planning, adding that negotiations are under way with Iranian lawmakers for deregulation and adopting facilitating laws.

 

Public Benefit Projects

 

Bovard said public benefit projects worth IRR 15 trillion have been implemented in the NISOC-run area for urban development.

He said the public benefit projects pertain to road construction, environment protection, establishment of education, cultural and sports centers, expansion of green space and healthcare centers.

“Most public benefit projects are about road construction. Some of them have already been completed and some others are still under way,” he said.

 

More Desalting 

 

Bovard also referred to enhanced recovery projects, saying three desalting and production units have been established at NISOC last year. He said three to four new desalting factories are envisaged for the current year.

“With the operation of the new units, 250,000 to 400,000 b/d will be added to the desalting capacity of this company. That would compensate for natural decline in the wells production rate and would enhance recovery,” he said.

He said they are to be built in Lab Sefid, Gachsaran-3 and Bibi Hakimieh-1 fields.

 

Oil Output Hike

 

Bovard said NISOC is running 60 hydrocarbon fields accounting for the country’s 80 percent of oil production. He said NISOC is the major driver of the country’s economy.

He said NISOC’s main objective for the current year is to enhance oil production capacity as required by Iran’s Petroleum Ministry.

“In case the grounds are prepared for more oil exports, this company is fully ready to enhance its current production,” he said.

 

Contract with Domestic Companies

 

Bovard said NISOC, which is the largest oil producing company in Iran, provides huge support for domestic manufacturers.

He said contacts worth more than IRR 9 trillion have been signed with Ahvaz Pipe Mill and Khuzestan Oxin Steel Company.

Bovard said Khuzestan Oxin Steel Company is committed to producing sheets and Ahvaz Pipe Mill has undertaken to supply the required pipes to NISOC.

 

1bcf/d Output Hoped for Kish Field

 

Operations for completing the drilling of 12 development and one repair wells on Clusters A and B of Kish gas field are to start in August, managing director of Petroleum Development and Engineering Company (PEDEC) said.

“National Iranian Drilling Company (NIDC) starts completing the drilling of 13 wells in the first development phase of Kish gas field” in August, Abdorreza Haji-Hosseinnejad said.

“The gas produced from these wells will first go to Bandar Aftab before being fed into the Iran Gas Trunkline (IGAT)-VII following preliminary processing,” he said.

“More than 600 million dollars has so far been invested in Kish gas field and plans are under way for recovering 25 mcm/d of gas from this field,” he added.

Haji-Hosseinnejad said the field is expected to produce 1 bcf/d of gas next year to feed a connection pipeline to IGAT-VII.

Drilling of a repair and six development wells started in Cluster B of Kish gas field in February 2009, while six development wells’ drilling began in Cluster A, a year later. The drilling operations came to a halt in 2013 before their resumption following National Iranian Oil Company (NIOC)’s decision to develop the field.

Investment in the downstream sector of the Kish gas field development project is to be done by a consortium of Iranian banks and domestic financiers over two years and compensation through sale of products.

NIOC will be providing the necessary finance for the development of the upstream sector of this field – including reparation, drilling completion and gas gathering pipelines.

NIOC has so far invested more than 600 million dollars in the upstream, mid-stream and downstream sectors of this field whose development is estimated to cost 2.2 billion dollars.

Development of Kish gas field, as the largest independent gas field in Iran, is planned under three phases with the objective of transferring gas through subsea and underground pipelines and transfer of sour gas to refinery for processing and production of light gas for exports or domestic consumption.

The field is operated by PEDEC.

 

South Pars under Development

 

Iran is currently recovering more than 320 mcm/d of gas from the supergiant offshore South Pars gas field it shares with Qatar in the Persian Gulf waters.  Iran’s Petroleum Ministry plans to raise its natural gas production from this field to 800 mcm/d in two years. South Pars is to be developed in 24 phases. Ten phases are already operational and the rest is developing quickly.

Petroleum Minister Bijan Namdar Zangeneh has underlined the urgency of development of South Pars in order to meet growing domestic demand for gas and honor obligations for gas purchase to Pakistan and Iraq this year. Phases 12 to 18 are known as priority phases due to nearly 95-percent progress in their development.

Pars Oil and Gas Company (POGC) is running South Pars development projects.

Ali-Akbar Shabanpour, managing director of POGC, says Iran’s petroleum industry senior managers are spending their time mainly on the development of the remaining phases of South Pars.

 

Phase 12

 

In an interview with Iran Petroleum, Shabanpour said one platform is currently producing 28 mcm/d of gas in Phase 12 of South Pars. “This platform has a production capacity of more than 700 mcf and it will soon reach its maximum capacity.”

He said Platform A of Phase 12 of South Pars is the first one to be brought to Persian Gulf after an eight-year hiatus, adding that B12 and C12 topsides have been loaded out on FLB 124 vessel for this phase.

Platforms A, B and C of Phase 12 of South Pars would contribute around 65 mcm to Iran’s gas production. The two topsides are expected to have been installed in Phase 12 by December.

The three topsides, along with their equipment, weigh 27,480 tons.  Nearly 40 percent of the costs for the construction of the three platforms have been provided by Iranian manufacturers and contractors. More than seven million man/hours have worked on the offshore section of Phase 12.

Shabanpour said the first unit of Phase 12 refinery is currently working at maximum capacity, adding that gas sweetening operations have already been tested and that gas production from this phase is to reach 25 mcm soon.

“We are only waiting for increased sour gas delivery from sea to land in order to produce sweet gas in the second unit of this phase. Sour gas production in Platform A of this phase will soon soar to 1 bcf/d,” he said. “Moreover, operations for the start-up of the third and the fourth units of Phase 12 of South Pars are under way and it will start production on schedule.”

Shabanpour said 800 mcf of gas has been produced in the first and second terrains of Phase 12 refinery, adding that 400 to 500 mcf/d of sweet gas is produced in Phase 12.

 

Phase 13

 

Shabanpour said Phase 13 development of South Pars has progressed around 66 percent.

“Pars Oil and Gas Company is making efforts to accelerate drilling operations in this phase,” he said. “Currently, three drilling rigs are operating in Phase 13 of South Pars round the clock. Operations for the installation of two subsea pipelines, of 32-inch diameter, will start in this phase soon.”

Shabanpour said construction of Phase 13 refinery is under way acceptably despite certain restrictions. He added that this phase will fully come on-stream in 2015 and 2016.

“The offshore section of this phase has had a 78.2-percent progress and according to contractor, the first phase of this refinery will come on-stream in eight months to process sour and dry gas supplied from phases 6, 7 and 8 of South Pars,” he said.

Drilling of wells in Phase 13 of South Pars has progressed 45.9 percent. Drilling is under way in Platform A (78 percent), Platform B (8 percent) and Platform D (30 percent).

Phase 13 development of South Pars envisages drilling 38 gas wells in the Persian Gulf.

In the offshore sector of Phase 13, designing and construction of four platforms, each producing 500 mcf/d of gas, have been envisaged.

Phase 13 development of South Pars eyes production of 50 mcm/d of gas, 80,000 b/d of gas condensate, 400 tons a day of sulfur, 1 mt/year of ethane and 1.1 mt/year of liquefied gas.

 

Phase 14

 

Shabanpour said Phase 14 development of South Pars is 57 percent completed. “We make efforts to increase activities in this phase. That is why the drilling of 22 wells in this phase is under way with more than 40 percent progress,” he said.

National Iranian Drilling Company (NIDC) recently moved an offshore drilling rig from Phase 17 to this phase in order to accelerate drilling operations, Shabanpour said.

“So far, two compressors have been installed in Phase 14 of South Pars gas field and all turbocompressors of this phase will have been installed by the end of the first half of the current [calendar] year [which started on March 21]. Operations for the installation of boiler in the refinery of Phase 14 of this joint field are in their final stages,” he said.

Phase 14 development of South Pars is aimed at producing 56.5 mcm/d of sour gas and 75,000 b/d of gas condensate. This phase requires 44 appraisal and development wells, 22 of which will be handled by NIDC. Two drilling rigs have been installed in this phase and two appraisal wells are to be drilled. Drilling of one well is almost over.

The offshore sector of Phase 14 is 41 percent complete and its pipeline is under construction with 55 percent progress, so far.

Two subsea pipelines, 260 meters long, will be constructed in this phase. A consortium comprised of eight Iranian contractors and constructors is developing the field at an estimated cost of 6.134 billion dollars.

 

Phases 15&16 

 

Phases 15&16 of the massive offshore South Pars gas field are expected to be producing 40 mcm/ of gas before the start of winter, Shabanpour said.

He said drilling operations in the two phases have already been completed.

The official said hookup operations in Phase 16 are to be finished soon so that its platform would become operational by October.

Phases 15&16 of South Pars are currently producing 2 mcm/d of gas, Shabanpour said.

He added that cooling compressors are required in these two phases which are expected to finally produce 56.6 mcm/d of natural gas, 75,000 b/d of gas condensate, 400 tons a day of sulfur, 1.05 mt/year of liquefied petroleum gas, propane and butane as well as one million tons a year of ethane for feeding petrochemical plants.

South Pars currently supplies 300 mcm/d of natural gas to Iran gas trunklines, which equals 72 percent of the country’s total consumption.

 

Phases 17&18

 

Shabanpour said the utility units of refineries in Phases 17 and 18 of South Pars gas field have been launched.

He said the utility units were launched during a recent visit to the giant offshore field by Petroleum Minister Bijan Namdar Zangeneh.

He added that the first terrain of this refinery is to come on-stream by September.

The platform of Phase 18 of the massive offshore South Pars gas field is expected become operational before the start of winter.

The platform will then be ready to deliver sour gas to the onshore section of Phase 18 of South Pars.

Pre-commissioning operations on the platform of Phase 18 are nearly completed and the necessary tests have been carried out.

A 300-member engineering team from Iran’s Offshore Engineering and Construction Company (IOEC) has been working for installing the platform of Phase 17. But, due to bad weather conditions, the operation has been slowed down.

The Abozar vessel and its 300 crew members are managing a hookup operation to connect export pipelines to the platforms of the phases.

Phases 17 and 18 development of South Pars are expected to produce 50 mcm/d of natural gas, 80,000 b/d of gas condensate, 400 tons/d of sulfur, 1mt/year of ethane and 1.05 mt/y of liquefied gas.

Industrial Development and Renovation Organization (IDRO), Iranian Offshore Engineering and Construction (IOEC), OIEC and Iran Marine Industrial Company are developing phases 17 and 18 of South Pars.

 

Phase 19

 

Shabanpour said Phase 19 development of South Pars has progressed 78 percent. Drilling in this phase is 72 percent completed. Drilling for Platform C is already over and Platform B drilling is to finish by the end of the current calendar year in March 2015.

The contract for Phase 19 development was signed in 2009. The onshore section of this phase has progressed almost 78 percent. The necessary equipment supply has been done for this phase and the equipment is being transferred there.

The offshore section of Phase 19, which is being operated by IOEC, is 76.6 percent complete. Subsea pipe-laying in this phase is over and the start-up operations are to be done.

“The onshore installations in this phase are located in Tonbak region (some 210 kilometers southeast of Bushehr Port) on some 218.5 ha of land between refineries in Phases 11 and 12 of South Pars in Pars Special Economic Energy Zone (PSEEZ),” Shabanpour said.

In the gas refinery of Phase 19 of South Pars, some 57 mcm/d of sour gas mixed with gas condensate, water and other impurities gathered from offshore facilities is processed for conversion into desired products.

Phase 19 development of South Pars was awarded in 2010 by POGC to a Petropars-led consortium of Petropars Limited and Petropars Iran (for onshore facilities and drilling operations) and IOEC (for the construction of offshore platforms and laying subsea pipelines) under an EPC contract.

 

Phases 20&21

 

Shabanpour said the refinery in Phases 20&21 of South Pars have progressed 60 percent.

He added that these two phases have progressed on average 1.5 percent per month in the onshore section.

The required commodities for the platforms of these phases have already been ordered and a significant portion of these items have already been supplied to the site. With the preparations made by National Iranian Oil Company (NIOC), financial restrictions for contractors will be soon resolved.

Shabanpour said drilling in these two phases has progressed 48 percent, adding that the platforms in these phases are 38 percent completed.

He said the platforms are expected to have been installed in 16 months.

Shabanpour said half of subsea pipelines in Phases 20&21 of South Pars have cement coating. He said that the subsea pipelines in these phases are planned to have been laid in 17 months.

Phases 20&21 development of South Pars are aimed at supplying 50 mcm/d of refined gas for domestic consumption, recovering one million tons a year of ethane for petrochemical plants, 1.05 million tons of liquefied gas a year for exports, 75,000 b/d of desulfurized gas condensate for exports and 400 tons a day of sulfur.

Construction and installation of two wellhead platforms equipped with water separation facilities, bridges and flare platforms, installation of four subsea pipelines, construction of independent gas treatment refinery and power supply are among activities that should be done in phases 20&21.

South Pars under Development

 

Iran is currently recovering more than 320 mcm/d of gas from the supergiant offshore South Pars gas field it shares with Qatar in the Persian Gulf waters.  Iran’s Petroleum Ministry plans to raise its natural gas production from this field to 800 mcm/d in two years. South Pars is to be developed in 24 phases. Ten phases are already operational and the rest is developing quickly.

Petroleum Minister Bijan Namdar Zangeneh has underlined the urgency of development of South Pars in order to meet growing domestic demand for gas and honor obligations for gas purchase to Pakistan and Iraq this year. Phases 12 to 18 are known as priority phases due to nearly 95-percent progress in their development.

Pars Oil and Gas Company (POGC) is running South Pars development projects.

Ali-Akbar Shabanpour, managing director of POGC, says Iran’s petroleum industry senior managers are spending their time mainly on the development of the remaining phases of South Pars.

 

Phase 12

 

In an interview with Iran Petroleum, Shabanpour said one platform is currently producing 28 mcm/d of gas in Phase 12 of South Pars. “This platform has a production capacity of more than 700 mcf and it will soon reach its maximum capacity.”

He said Platform A of Phase 12 of South Pars is the first one to be brought to Persian Gulf after an eight-year hiatus, adding that B12 and C12 topsides have been loaded out on FLB 124 vessel for this phase.

Platforms A, B and C of Phase 12 of South Pars would contribute around 65 mcm to Iran’s gas production. The two topsides are expected to have been installed in Phase 12 by December.

The three topsides, along with their equipment, weigh 27,480 tons.  Nearly 40 percent of the costs for the construction of the three platforms have been provided by Iranian manufacturers and contractors. More than seven million man/hours have worked on the offshore section of Phase 12.

Shabanpour said the first unit of Phase 12 refinery is currently working at maximum capacity, adding that gas sweetening operations have already been tested and that gas production from this phase is to reach 25 mcm soon.

“We are only waiting for increased sour gas delivery from sea to land in order to produce sweet gas in the second unit of this phase. Sour gas production in Platform A of this phase will soon soar to 1 bcf/d,” he said. “Moreover, operations for the start-up of the third and the fourth units of Phase 12 of South Pars are under way and it will start production on schedule.”

Shabanpour said 800 mcf of gas has been produced in the first and second terrains of Phase 12 refinery, adding that 400 to 500 mcf/d of sweet gas is produced in Phase 12.

 

Phase 13

 

Shabanpour said Phase 13 development of South Pars has progressed around 66 percent.

“Pars Oil and Gas Company is making efforts to accelerate drilling operations in this phase,” he said. “Currently, three drilling rigs are operating in Phase 13 of South Pars round the clock. Operations for the installation of two subsea pipelines, of 32-inch diameter, will start in this phase soon.”

Shabanpour said construction of Phase 13 refinery is under way acceptably despite certain restrictions. He added that this phase will fully come on-stream in 2015 and 2016.

“The offshore section of this phase has had a 78.2-percent progress and according to contractor, the first phase of this refinery will come on-stream in eight months to process sour and dry gas supplied from phases 6, 7 and 8 of South Pars,” he said.

Drilling of wells in Phase 13 of South Pars has progressed 45.9 percent. Drilling is under way in Platform A (78 percent), Platform B (8 percent) and Platform D (30 percent).

Phase 13 development of South Pars envisages drilling 38 gas wells in the Persian Gulf.

In the offshore sector of Phase 13, designing and construction of four platforms, each producing 500 mcf/d of gas, have been envisaged.

Phase 13 development of South Pars eyes production of 50 mcm/d of gas, 80,000 b/d of gas condensate, 400 tons a day of sulfur, 1 mt/year of ethane and 1.1 mt/year of liquefied gas.

 

Phase 14

 

Shabanpour said Phase 14 development of South Pars is 57 percent completed. “We make efforts to increase activities in this phase. That is why the drilling of 22 wells in this phase is under way with more than 40 percent progress,” he said.

National Iranian Drilling Company (NIDC) recently moved an offshore drilling rig from Phase 17 to this phase in order to accelerate drilling operations, Shabanpour said.

“So far, two compressors have been installed in Phase 14 of South Pars gas field and all turbocompressors of this phase will have been installed by the end of the first half of the current [calendar] year [which started on March 21]. Operations for the installation of boiler in the refinery of Phase 14 of this joint field are in their final stages,” he said.

Phase 14 development of South Pars is aimed at producing 56.5 mcm/d of sour gas and 75,000 b/d of gas condensate. This phase requires 44 appraisal and development wells, 22 of which will be handled by NIDC. Two drilling rigs have been installed in this phase and two appraisal wells are to be drilled. Drilling of one well is almost over.

The offshore sector of Phase 14 is 41 percent complete and its pipeline is under construction with 55 percent progress, so far.

Two subsea pipelines, 260 meters long, will be constructed in this phase. A consortium comprised of eight Iranian contractors and constructors is developing the field at an estimated cost of 6.134 billion dollars.

 

Phases 15&16 

 

Phases 15&16 of the massive offshore South Pars gas field are expected to be producing 40 mcm/ of gas before the start of winter, Shabanpour said.

He said drilling operations in the two phases have already been completed.

The official said hookup operations in Phase 16 are to be finished soon so that its platform would become operational by October.

Phases 15&16 of South Pars are currently producing 2 mcm/d of gas, Shabanpour said.

He added that cooling compressors are required in these two phases which are expected to finally produce 56.6 mcm/d of natural gas, 75,000 b/d of gas condensate, 400 tons a day of sulfur, 1.05 mt/year of liquefied petroleum gas, propane and butane as well as one million tons a year of ethane for feeding petrochemical plants.

South Pars currently supplies 300 mcm/d of natural gas to Iran gas trunklines, which equals 72 percent of the country’s total consumption.

 

Phases 17&18

 

Shabanpour said the utility units of refineries in Phases 17 and 18 of South Pars gas field have been launched.

He said the utility units were launched during a recent visit to the giant offshore field by Petroleum Minister Bijan Namdar Zangeneh.

He added that the first terrain of this refinery is to come on-stream by September.

The platform of Phase 18 of the massive offshore South Pars gas field is expected become operational before the start of winter.

The platform will then be ready to deliver sour gas to the onshore section of Phase 18 of South Pars.

Pre-commissioning operations on the platform of Phase 18 are nearly completed and the necessary tests have been carried out.

A 300-member engineering team from Iran’s Offshore Engineering and Construction Company (IOEC) has been working for installing the platform of Phase 17. But, due to bad weather conditions, the operation has been slowed down.

The Abozar vessel and its 300 crew members are managing a hookup operation to connect export pipelines to the platforms of the phases.

Phases 17 and 18 development of South Pars are expected to produce 50 mcm/d of natural gas, 80,000 b/d of gas condensate, 400 tons/d of sulfur, 1mt/year of ethane and 1.05 mt/y of liquefied gas.

Industrial Development and Renovation Organization (IDRO), Iranian Offshore Engineering and Construction (IOEC), OIEC and Iran Marine Industrial Company are developing phases 17 and 18 of South Pars.

 

Phase 19

 

Shabanpour said Phase 19 development of South Pars has progressed 78 percent. Drilling in this phase is 72 percent completed. Drilling for Platform C is already over and Platform B drilling is to finish by the end of the current calendar year in March 2015.

The contract for Phase 19 development was signed in 2009. The onshore section of this phase has progressed almost 78 percent. The necessary equipment supply has been done for this phase and the equipment is being transferred there.

The offshore section of Phase 19, which is being operated by IOEC, is 76.6 percent complete. Subsea pipe-laying in this phase is over and the start-up operations are to be done.

“The onshore installations in this phase are located in Tonbak region (some 210 kilometers southeast of Bushehr Port) on some 218.5 ha of land between refineries in Phases 11 and 12 of South Pars in Pars Special Economic Energy Zone (PSEEZ),” Shabanpour said.

In the gas refinery of Phase 19 of South Pars, some 57 mcm/d of sour gas mixed with gas condensate, water and other impurities gathered from offshore facilities is processed for conversion into desired products.

Phase 19 development of South Pars was awarded in 2010 by POGC to a Petropars-led consortium of Petropars Limited and Petropars Iran (for onshore facilities and drilling operations) and IOEC (for the construction of offshore platforms and laying subsea pipelines) under an EPC contract.

 

Phases 20&21

 

Shabanpour said the refinery in Phases 20&21 of South Pars have progressed 60 percent.

He added that these two phases have progressed on average 1.5 percent per month in the onshore section.

The required commodities for the platforms of these phases have already been ordered and a significant portion of these items have already been supplied to the site. With the preparations made by National Iranian Oil Company (NIOC), financial restrictions for contractors will be soon resolved.

Shabanpour said drilling in these two phases has progressed 48 percent, adding that the platforms in these phases are 38 percent completed.

He said the platforms are expected to have been installed in 16 months.

Shabanpour said half of subsea pipelines in Phases 20&21 of South Pars have cement coating. He said that the subsea pipelines in these phases are planned to have been laid in 17 months.

Phases 20&21 development of South Pars are aimed at supplying 50 mcm/d of refined gas for domestic consumption, recovering one million tons a year of ethane for petrochemical plants, 1.05 million tons of liquefied gas a year for exports, 75,000 b/d of desulfurized gas condensate for exports and 400 tons a day of sulfur.

Construction and installation of two wellhead platforms equipped with water separation facilities, bridges and flare platforms, installation of four subsea pipelines, construction of independent gas treatment refinery and power supply are among activities that should be done in phases 20&21.

Banks Needed to contribute to oil projects

 

 

Economic expert Hassan Sobhani says production sharing agreements (PSA) are a good option for high-risk fields and also fields shared with neighbors. He, however, says all aspects of a project must be studied meticulously before any decision-making.

Sobhani, a former MP, shares his views about investment in Iran’s petroleum industry with Iran Petroleum.

 

Q: What do you think of the necessity of investment in the petroleum industry?

A: Petroleum industry, which is an important sector in the economy, needs major investment. The volume of investment made in this sector needs to be in proportion with other sectors of the economy.

 

Q: What do you mean by “proportion”?

A: I mean that if any investment is to be made it must be clear how well it conforms to national and international economies. In fact, all aspects of investment need to be analyzed. The next stage will be the necessity, volume and method of investment. We have to see if we need money or technology. As long as these issues are not made clear we would not be able to attract enough investment. We need to know such things to decide whether we need domestic or foreign investment.

 

Q: To what extent do you think sanctions and pressures are effective?

A: Definitely, sanctions can cause challenge to attraction of investment and technology; however, we can work out mechanisms to resolve the finance problem. The structure of banking system is such that banks are one of the best sources of investment in all sectors including petroleum industry. The reason is that unlike foreign banks, Iranian banks participate in the project instead of granting loans and paying sums.

Our banking system has made it clear that the banks should not grant loans in order to boost their profits and that they have to make contribution to the projects in order to boost production.

A potential investor has to take into consideration the target market, costs and benefits, profits, expertise, etc. He has also to make an accurate and reasonable assessment of where he is to invest. Iranian banks seem to have not made precise assessment of oil projects.

The banking system is neither respecting the obligations for granting loans, nor is it honoring the requirements for investment. It tries to move in-between and that is why it is not making progress. If the banks accomplish their legal tasks they can be the best source of money injection into the petroleum industry.

 

Q: What happens that the banks do not succeed in investment in the oil sector?

A: The banks should take into account the fact that they may win profits or suffer losses like their partners. But is such a rule accepted? No! The banks only want to grant money and receive it after a specific period of time. They always demand collateral to avoid possible losses.

How do we expect investors to finance oil projects at a time when we have to focus on supporting Iranian capital on the one hand, and put the banking interest rate at 20 percent due to fluctuations in the foreign currency and gold market?

Banks are awash with money instead of being a capital market. The law requires money to finance production and not produce profits.

The banks can participate in the projects if they are ready to make acceptable contribution. However, experiences of the past years show that nobody can count on the banks for investment in the petroleum industry.

 

Q: Do you mean that the banks should not be “silent partners”?

A: Yes, that’s it. In some countries, banks are silent partners, but in Iran, the law requires the banks to make contribution.

 

Q: Oil companies followed this rule in recent years and they finally suffered defeat. Why?

A: These days, owners of money choose a bank that would be most profitable. Does such an attitude benefit the economy? The banks are willing to make maximum revenues without suffering losses.

 

Q: What should be done for the successful presence of banks in the petroleum industry?

A: Article 43 of the Constitution stipulates that the Islamic Republic’s economy should be regulated so as to provide facilities to those capable of working but they don’t have the necessary tools.

The profitability is high in economic activities, particularly in the banking system. As long as these high rates are not eliminated the petroleum industry would not be able to benefit from its manpower and financial and physical facilities for growth.

 

Q: Different economic centers have said that Iran’s liquidity stands at around 5,000 trillion rials. Is it possible to direct this liquidity towards the petroleum industry?

A: In a certain period of time, money supply growth overtook economic growth and this phenomenon pushed demand beyond supply. As a result, the consumer prices index, which we know as inflation, grew. But in the past one year, we have witnessed that the government is making efforts to improve conditions.

I believe that the liquidity is not so high, but it is not in its right place, i.e. in production activities. The reason for this misplacement is that the current place is more profitable for the liquidity.

Liquidity will definitely go to any sector which could be more profitable. If oil proves to be profitable, most petroleum industry needs would be met. But we cannot have any hope as long as the banking interest rates are not eliminated.

 

Q: Why?

A: The bank has set 20-percent interest rates and part of the money goes to the banks. The Bank gives individuals' funds to people while charging interest without running any risk. You can see how non-generative interest harms the economy and paralyzes it. For some players, it may not be important which conditions the real market is experiencing. For them, speculation and playing with liquidity for windfall profits is the main objective. They go from the gold market to Forex market and then to housing market before going to stock market. They always try to take maximum advantage of fluctuations in the markets.

 

Q: Isn't it possible to direct liquidity into oil industry projects by raising oil participation bonds’ interest rates?

A: Legally, it is possible, but it would drive money from all other economic sectors into oil and the economy would lose its equilibrium. That would be another problem. The petroleum industry is important for the economy, but it should not undermine other sectors like industry, agriculture, trade, etc.  

As I said we have first to see if investments are to serve national economy or international economy. Definitely, we don’t want to destroy our own economy just for assuring the world about our production hike. Although production hike boosts our global position, that does not cost so much.

This issue is not defendable in the sector of macro-economy because it leaves bad impacts.

 

Q: Do you mean that Iran had better seek foreign investment to develop its upstream oil sector and develop its hydrocarbon fields? What should be done then?

A: First we should see how important investment attraction is. It may be not so important for National Iranian Oil Company (NIOC) to see if the Iranian or foreign party would gain profits.

 

Q: NIOC is always pursuing enhanced production.

A: We should always choose the one who can do the job better. If there is no Iranian, we have to look for a foreign partner. Of course, we have to see what our law and legal system say in this regard. We have to take into account restrictions and concerns.

 

Q: Should our contracts be based on our own legal system or international law?

A: We have to act within the framework of our own legal system. Oil contracts are signed between experts and therefore we have to train experts and negotiators in the best possible manner.

 

Q: You’ve been in the parliament for several times and you are familiar with economic regulations. Aren’t production sharing agreements in conflict with the law?

A: There is no problem as long as they do not transfer ownership to the foreign party. Formation of companies by foreigners is absolutely forbidden unless the Iranian party has a 51-percent share.

 

 

 

Q: What should be done with regards to new oil contracts?

A: Production sharing agreements are logical for joint and high-risk fields. But they should be used for some fields and not for all of them.

For awarding a project to an Iranian side, important indicators have to be taken into account. The high quality of the job needs to be taken into consideration in the development of joint fields. The objectives should be defined first so that the best method for the development of fields could be prescribed. Nothing is more important than the country’s interests. Therefore, decisions must be taken seriously and clearly. Costs and benefits must be examined from all aspects.

Banks Needed to contribute to oil projects

 

 

Economic expert Hassan Sobhani says production sharing agreements (PSA) are a good option for high-risk fields and also fields shared with neighbors. He, however, says all aspects of a project must be studied meticulously before any decision-making.

Sobhani, a former MP, shares his views about investment in Iran’s petroleum industry with Iran Petroleum.

 

Q: What do you think of the necessity of investment in the petroleum industry?

A: Petroleum industry, which is an important sector in the economy, needs major investment. The volume of investment made in this sector needs to be in proportion with other sectors of the economy.

 

Q: What do you mean by “proportion”?

A: I mean that if any investment is to be made it must be clear how well it conforms to national and international economies. In fact, all aspects of investment need to be analyzed. The next stage will be the necessity, volume and method of investment. We have to see if we need money or technology. As long as these issues are not made clear we would not be able to attract enough investment. We need to know such things to decide whether we need domestic or foreign investment.

 

Q: To what extent do you think sanctions and pressures are effective?

A: Definitely, sanctions can cause challenge to attraction of investment and technology; however, we can work out mechanisms to resolve the finance problem. The structure of banking system is such that banks are one of the best sources of investment in all sectors including petroleum industry. The reason is that unlike foreign banks, Iranian banks participate in the project instead of granting loans and paying sums.

Our banking system has made it clear that the banks should not grant loans in order to boost their profits and that they have to make contribution to the projects in order to boost production.

A potential investor has to take into consideration the target market, costs and benefits, profits, expertise, etc. He has also to make an accurate and reasonable assessment of where he is to invest. Iranian banks seem to have not made precise assessment of oil projects.

The banking system is neither respecting the obligations for granting loans, nor is it honoring the requirements for investment. It tries to move in-between and that is why it is not making progress. If the banks accomplish their legal tasks they can be the best source of money injection into the petroleum industry.

 

Q: What happens that the banks do not succeed in investment in the oil sector?

A: The banks should take into account the fact that they may win profits or suffer losses like their partners. But is such a rule accepted? No! The banks only want to grant money and receive it after a specific period of time. They always demand collateral to avoid possible losses.

How do we expect investors to finance oil projects at a time when we have to focus on supporting Iranian capital on the one hand, and put the banking interest rate at 20 percent due to fluctuations in the foreign currency and gold market?

Banks are awash with money instead of being a capital market. The law requires money to finance production and not produce profits.

The banks can participate in the projects if they are ready to make acceptable contribution. However, experiences of the past years show that nobody can count on the banks for investment in the petroleum industry.

 

Q: Do you mean that the banks should not be “silent partners”?

A: Yes, that’s it. In some countries, banks are silent partners, but in Iran, the law requires the banks to make contribution.

 

Q: Oil companies followed this rule in recent years and they finally suffered defeat. Why?

A: These days, owners of money choose a bank that would be most profitable. Does such an attitude benefit the economy? The banks are willing to make maximum revenues without suffering losses.

 

Q: What should be done for the successful presence of banks in the petroleum industry?

A: Article 43 of the Constitution stipulates that the Islamic Republic’s economy should be regulated so as to provide facilities to those capable of working but they don’t have the necessary tools.

The profitability is high in economic activities, particularly in the banking system. As long as these high rates are not eliminated the petroleum industry would not be able to benefit from its manpower and financial and physical facilities for growth.

 

Q: Different economic centers have said that Iran’s liquidity stands at around 5,000 trillion rials. Is it possible to direct this liquidity towards the petroleum industry?

A: In a certain period of time, money supply growth overtook economic growth and this phenomenon pushed demand beyond supply. As a result, the consumer prices index, which we know as inflation, grew. But in the past one year, we have witnessed that the government is making efforts to improve conditions.

I believe that the liquidity is not so high, but it is not in its right place, i.e. in production activities. The reason for this misplacement is that the current place is more profitable for the liquidity.

Liquidity will definitely go to any sector which could be more profitable. If oil proves to be profitable, most petroleum industry needs would be met. But we cannot have any hope as long as the banking interest rates are not eliminated.

 

Q: Why?

A: The bank has set 20-percent interest rates and part of the money goes to the banks. The Bank gives individuals' funds to people while charging interest without running any risk. You can see how non-generative interest harms the economy and paralyzes it. For some players, it may not be important which conditions the real market is experiencing. For them, speculation and playing with liquidity for windfall profits is the main objective. They go from the gold market to Forex market and then to housing market before going to stock market. They always try to take maximum advantage of fluctuations in the markets.

 

Q: Isn't it possible to direct liquidity into oil industry projects by raising oil participation bonds’ interest rates?

A: Legally, it is possible, but it would drive money from all other economic sectors into oil and the economy would lose its equilibrium. That would be another problem. The petroleum industry is important for the economy, but it should not undermine other sectors like industry, agriculture, trade, etc.  

As I said we have first to see if investments are to serve national economy or international economy. Definitely, we don’t want to destroy our own economy just for assuring the world about our production hike. Although production hike boosts our global position, that does not cost so much.

This issue is not defendable in the sector of macro-economy because it leaves bad impacts.

 

Q: Do you mean that Iran had better seek foreign investment to develop its upstream oil sector and develop its hydrocarbon fields? What should be done then?

A: First we should see how important investment attraction is. It may be not so important for National Iranian Oil Company (NIOC) to see if the Iranian or foreign party would gain profits.

 

Q: NIOC is always pursuing enhanced production.

A: We should always choose the one who can do the job better. If there is no Iranian, we have to look for a foreign partner. Of course, we have to see what our law and legal system say in this regard. We have to take into account restrictions and concerns.

 

Q: Should our contracts be based on our own legal system or international law?

A: We have to act within the framework of our own legal system. Oil contracts are signed between experts and therefore we have to train experts and negotiators in the best possible manner.

 

Q: You’ve been in the parliament for several times and you are familiar with economic regulations. Aren’t production sharing agreements in conflict with the law?

A: There is no problem as long as they do not transfer ownership to the foreign party. Formation of companies by foreigners is absolutely forbidden unless the Iranian party has a 51-percent share.

 

 

 

Q: What should be done with regards to new oil contracts?

A: Production sharing agreements are logical for joint and high-risk fields. But they should be used for some fields and not for all of them.

For awarding a project to an Iranian side, important indicators have to be taken into account. The high quality of the job needs to be taken into consideration in the development of joint fields. The objectives should be defined first so that the best method for the development of fields could be prescribed. Nothing is more important than the country’s interests. Therefore, decisions must be taken seriously and clearly. Costs and benefits must be examined from all aspects.

Iran’s Lucrative Gas Transmission Network

 

Everyone knows that Iran sits atop the world’s largest gas reserves. But repetition of this slogan would be useless because the country would get nothing if this God-given blessing is not used appropriately.

Extracting gas to meet domestic demand and exporting it to other countries are important factors that a gas-rich country like Iran should take into consideration.

Over recent years, tough international sanctions caused problems for Iran’s oil and gas production; however, gas transmission has been under way both nationally and internationally without any glitch. The incessant flow of gas through Iran’s trunklines is due to relentless efforts by veteran Iranian manpower. Iran is currently the fourth country in the world in terms of extent of gas transmission network.

Reza Almasi, managing director of National Iranian Gas Transmission Company (NIGTC), says Iran has to further expand its gas transmission network in the future as new phases of the gigantic South Pars gas field are coming on-stream.

Almasi said there is a gap between gas production and transmission in Iran, adding: “Once new phases [of South Pars] join Phase 12 in production, a pipeline will be needed for every four phases. To that effect, completion of Iran Gas Trunkline-10 (IGAT-10), construction and completion of gas pressure booster stations for IGAT-4 and extension of IGAT-6 are the three factors envisaged for new production from Assaluyeh.”

Almasi said establishment of gas pressure booster stations are among the major points in safe gas transmission.

“When there is no pressure booster station, only 50 percent of the pipeline’s capacity could be used,” he said.

Almasi said two pressure booster stations are to be installed on IGAT-4, one station on IGAT-10, four stations on IGAT-8 and two stations on Azarbaijan Trunkline-3.

He said Petroleum Minister Bijan Namdar Zangeneh has ordered maximum gas delivery to power plants instead of liquid fuel during the second four months of Iran’s calendar year so that the country’s gas production capacity would be stable during the first four months of the year.

 

Electronic Pressure Booster Station

 

Iran’s preparations for gas exports to neighboring Iraq, continued gas swap operations and launch of gas pressure booster station in the northwestern city of Tabriz are among programs of NIGTC in the current year.

Almasi said the necessary preparations have been made for Iran to start pumping gas to Iraq this year.

He added that gas swap with Azerbaijan is also under way. Almasi said there have been demands for increased gas swap, but they have not been finalized yet.

The official noted that the necessary infrastructure is already ready for further gas swap operations.

Almasi said Iran is installing an electronic gas pressure booster station in Tabriz.

“This station has fully been constructed by Iranian engineers and a 9-MW electrocompressor has been installed in it,” he said.

He said 600 maintenance activities, including 85 related to turbocompressors, have been done this year.

He said an 8,000-kilometer intelligent pigging operation is also envisaged to be done, adding that 2,000 to 3,000 kilometers of pigging is expected to be done this year.

 

182 bcm Gas Transmission

 

NIGTC transmitted a total of 182 bcm of gas (sweet gas, sour gas and imported gas) in the last Iranian calendar year to March 20.               

Almasi said sweet and imported gas transmission amounted to 550 mcm/d, adding that Iran imported 9.28 bcm of gas last year.

A year before, Iran exported 9.3 bcm of gas and imported 5.3 bcm.

NIGTC’s activities also included 11,000 kilometers of pigging, 39,000 kilometers of leak detection and connection of facilities to IGAT-6.

 

Self-Reliance in Reparations

 

Until four years ago, 70 percent of NIGTC’s reparations were fully or partially done by foreign engineers. But now, Iranian engineers handle 90 percent of work.

Almasi said plans got under way following the imposition of sanctions against Iran’s oil and gas industry for self-reliance in reparation work.

“Although gas pressure booster stations are equipped with the most sophisticated turbines, their reparation is done by Iranian manpower. We still buy some items from abroad, but we have no problem with reparation,” he said.

Almasi said Siemens turbines were repaired in Iran last year without any foreign expert from this company attending. More than 95 percent of turbine reparations are already done in the country and only a single brand has to be sent abroad for reparation.

Iran also managed to repair Rolls-Royce turbine which was earlier commissioned to Canadian and British companies.

 

Domestic Manufacturing

 

More than 85 percent of the equipment required for gas transmission in Iran is supplied by domestic manufacturers. Plans have also been made for domestic manufacturing of the remaining 15 percent which mainly involves turbine components.

Almasi said domestic manufacturing of all equipment may not be economical, saying some equipment had better be purchased from foreign companies.

He said that Iranian manufacturers have been recommended not to content themselves with Iran’s market and seek to win footholds in regional markets.

 

Investment Opportunities

 

Iran is a proper place for foreign investors as it contains huge gas reserves, has skilled manpower and enjoys a strategic geographical position.

Almasi said Iran lies at the intersection of energy exchanges in the region, adding that foreign investors would have a good chance to benefit from Iran’s gas trunklines.

He said foreign investors can buy gas from Iran’s neighbor Turkmenistan, which holds the world’s fourth largest gas reserves, to sell it in the Persian Gulf in the form of LNG or sell gas through Iran trunklines to India and Pakistan.

He said investors can also buy gas from South Pars and sell it to Turkey and Europe through Iran gas trunklines.

Gas is needed to be fed into the Nabucco gas pipeline. Turkmenistan has to cut through Caspian Sea deep waters, Azerbaijan and Georgia to reach Turkey, but it can deliver gas to Turkey through Iran easily. Turkmenistan can also export gas to Iraq via Iran.

Construction of power plants near Afghanistan and Pakistan and supplying gas to them via Iran, laying out pipeline in Iran, presence in free zones and offering services to the oil and gas sectors are among other opportunities for investment in Iran, according to Almasi.

He said that foreign investors would be able to cooperate with NIGTC in reparation, construction and supply of equipment, adding that their presence in Iran would give them easy access to markets in Iran’s neighboring countries.

Safe gas transmission network, skilled and low-cost manpower, extended gas trunklines across Iran, abundant gas for feeding petrochemical plants, as well as political stability are among advantages of investment in Iran.

Nigeria Loses $2.7b in Oil Exports

Nigeria’s crude oil export to the US experienced a shortfall of 25.1 million barrels in the first quarter of this year, a significant drop from last year’s figures of 30.7 million barrels.

Export to the US – arguably the largest importer of Nigerian crude, accounting for 40 percent of the country’s total export – dropped dramatically to 5.6 million barrels in Q1 this year, costing the country $2.7 billion with crude price lingering at $110 per barrel, BusinessDay reported.

Oil revenue has been on a decreasing trend in recent times, largely owing to security and domestic economic challenges including oil theft, illegal sales, vandalism and other illegal activities.

 

Kuwait to Spend $3.9-5.3b on Oil Projects

KOC is drafting a project budget to be presented for approval in early August.

The Persian Gulf state of Kuwait is expected to approve hydrocarbon projects worth between KD 1.1-1.5 billion ($3.9-5.3 billion) for its 2015-2016 fiscal year, a newspaper reported on Monday.

The state-owned Kuwait oil company (KOC) is drafting a budget for projects during that period and will soon present it to its parent company, the Kuwait national petroleum company (KNPC), the Arabic language daily Al Rai said.

The paper quoted what it described as informed sources as saying that KOC has been locked in “marathon” meetings to finalize the 2015-2016 oil projects budget.

 

Russia Oil Exports Fall to 6-Year Low

Russian crude oil exports declined to the lowest level in at least six years as the nation’s refiners carried out less maintenance, boosting fuels output.

Crude shipments dropped 5.3% to 4.95 million barrels a day in the six months to June from a year earlier, according to CDU-TEK, part of the Energy Ministry. Production rose 1 percent in the same period.

Russian refiners including OAO Rosneft reduced maintenance programs in the first half of the year, halting 15 percent less capacity than a year ago. That enabled them to process more crude as lower export duties on fuel oil and diesel incentivize the output of those products, according to KBC Energy Economics and UralSib Financial Corp., an investment bank.

“Russian refinery crude intake was growing strongly in the first half of the year as the Spring refining maintenance was very mild,” David Wech, managing director at JBC Energy GmbH, said July 3 in an e-mail. “This explains the decline in crude oil exports.”

Fuel oil production gained 5.8 percent in the year to May, reaching a five-year high despite billions of dollars in investment for government-mandated upgrades intended to boost yields of premium products such as diesel and gasoline

 

Phoenix South-1 Begins Drilling Side Track

Carnarvon Petroleum Ltd the Phoenix South-1 well has begun drilling a side track wellbore. On July 7, the well was drilling ahead at 1,960 m (6,430 ft) on the way to the 9-5/8-in. casing point of 3,700 m (12,139 ft).

As reported on June 23, a new side-track wellbore section of the Phoenix South-1 well was required to be drilled below the 13-3/8-in. casing depth, due to a stuck 9-5/8-in. casing hangar seal assembly running tool (casing tool). To retrieve the stuck casing tool, the upper portion of the previously set 9-5/8-in. casing was cut and retrieved along with the casing tool.

The original wellbore was plugged with cement, and the new side-track begun on July 5.

 

Oil Leaks Raise Environmental Concerns in Brazil

Brazil's most promising offshore oil province, the Santos Basin, has 400 times the number of oil leaks as its older and more prolific neighbor, the Campos Basin, a Brazilian university study says, raising concern about the environmental sustainability of the country's new oil wealth.

The Santos Basin, south of Rio de Janeiro likely contains more than 30 billion barrels of recoverable oil, enough to supply all U.S. oil needs for more than four years.

Most of the oil comes from the basin's so-called "subsalt" reservoirs, which hold oil trapped beneath up to 7 km (4.3 miles) of ocean and seabed by an ancient layer of salt.

Those fields, announced in 2007, are the focus of state-led oil company Petroleo Brasileiro SA, or Petrobras' $221 billion five-year investment plan and are seen as a key to financing the health and education policies of Brazilian President Dilma Rousseff.

 

 

IOEC Accelerating South Pars Development

 

Iranian Offshore Engineering and Construction Company (IOEC) is busier than any time since its establishment 21 years ago.

Handling operations for the installation of five topsides (phases 12B, 12C, 15, 16 and 18A) in South Pars gas field, pre-commissioning and commissioning of topsides in phases 17A, 18A, 12B and 12C as well as operation of Platform 12A are all brilliant points in the track record of Iran’s offshore operations.

The launch of Single-Point Mooring (SPM) in Phase 12 of South Pars facilitates export of gas condensate from this phase in Tonbak region.

IOEC has also completed stretching pipeline from the offshore to onshore section of phases 22 and 23 of South Pars gas field which Iran shares with Qatar.

All these activities are aimed at accelerating development of South Pars gas field. Nearly 90 percent of IOEC’s projects pertain to South Pars.

With the development of phases 12, 15&16 and 18 of South Pars, Iran will be producing 100 mcm/d of gas by March next year.

 

Topside 12B

 

The biggest topside in Phase 12 of South Pars, known as 12C, has been mounted on its jacket. It weighs 3,400 tons. Countdown has also started for the installation of Topside 12B which weighs 3,250 tons. These topsides were both constructed in Khorramshahr Yard.

Once installed, 12B and 12C along with 12A will raise the country’s gas production by more than 65 mcm/d.

 

Topsides for Phases 15&16, 18

 

IOEC has handled the installation of five topsides on South Pars during the first four months of the current calendar year which started on March 21. So far, the topsides for phases 12C, 15&16 and 18 have been mounted and 12B is to be installed. Moreover, the topside for phase 18A has been installed. The later weighs 2,320 tons and was constructed in 24 months.

Eighteen percent of the equipment used in Phase 18 has been supplied by Iranian manufacturers.

IOEC managed to install the 2,730-ton topside of Phase 16 of South Pars in four days. Constructed by Iran Shipbuilding & Offshore Industries Complex Co (ISOICO), the topside would add more than 25 mcm/d of gas to the country’s production.

IOEC staff also installed the 2,800-ton topside of Phase 15 of South Pars. That would also bring about a 25-mcm/d gas production hike.

This topside was constructed in Bandar Abbas Yard by Saff Rosemond Engineering & Management Company.

Hookup, pre-startup and start-up operations are the main activities currently handled by IOEC. These operations are currently under way in phases 17&18 of South Pars.

Platforms 17A, 18A, 12B and 12C are in the phase of pre-commissioning and commissioning.

 

SPM for Phase 12

 

The installation of SPM in Tonbak region has facilitated gas condensate exports from Phase 12 of South Pars. The first cargo was loaded by 300,000-ton Dena vessel.

In the first stage of installation of SPM in Phase 12, 2,500 cubic meters per hour of condensate could be delivered.

IOEC has been monitoring construction, engineering, transfer, installation and launch of the SPM in South Pars. The final stage of SPM operation is to take place in the near future to bring the condensate delivery capacity to 5,000 cubic meters per hour.

For the first time, Iran is constructing a spare SPM for Phase 12. 

The single point mooring buoy consists of a buoy that is permanently moored to the seabed by means of multiple mooring lines. The buoy contains a bearing system that allows a part of it to rotate around the moored geostatic part. When moored to this rotating part of the buoy with a mooring connection, the vessel is able to freely weathervane around the geostatic part of the buoy.

As the moored vessel rotates itself into the dominant environment, the system will minimize the loads on the mooring system of the buoy. This capability of the SPM system is also used during the approach of a vessel that needs to moor. The vessel will approach the buoy with its bow into the dominant environment, maximizing control while minimizing the need for tug assistance.

The mooring system can also be combined with a fluid transfer system that enables connection of (subsea) pipelines to the tanker. The fluid transfer system includes submarine hoses between the pipeline end manifold (PLEM) at the seabed and the buoy, and hoses between the buoy and the tanker. In the buoy a swivel provides the fluid transfer path between the geostatic part and the rotating part of the buoy.

 

Shore Pull in Phases 22&23

 

IOEC recently finished laying gas pipelines to connect offshore to onshore facilities.

Trench Dredging Industries Company (TDIC) as a civil engineering and maritime construction company and a subsidiary to IOEC completed an 860 meters pipe laying project in South Pars gas field phase 22 and will start similar operations in phase 23 soon.

After completion of these operations, executive works will start laying 113 kilometers of pipeline in phase 22.

Shore-pull pipeline projects of South Pars gas field phases 22, 23 and 24 include two 4 and 32 inch gas pipeline carried out by domestic contractors.

 

       

 

Gas, Flag-Bearer of World Economy

 

By Peyman Jonoubi

 

Fossil energy crisis has prompted researchers to look for an alternative to oil to serve as fuel and also as raw material for petrochemical production. Abundant natural gas reserves offer a good option because they can meet the world’s growing demand for hundreds of years.

Natural gas consists of big volumes of methane. Between 83 and 97 percent of natural gas is methane. Converting methane to high-value hydrocarbons like ethylene, which is a key petrochemical substance, is economically and scientifically important.

Transformation of methane to methanol is the first step in the process of producing gasoline from natural gas. The second step is converting methanol to gasoline, propylene and olefin. Researchers have concentrated on this process in recent years. The methanol produced from synthetic gas is converted into low-density olefin (ethylene and propylene) and gasoline aromatics.

Since the world is headed for a gas-relying economy, bright prospects are predicted for the development of gas-to-liquids (GTL) technology to serve transportation fleets.

Gas to liquids (GTL) is a refinery process to convert natural gas or other gaseous hydrocarbons into longer-chain hydrocarbons such as gasoline or diesel fuel. Methane-rich gases are converted into liquid synthetic fuels either via direct conversion—using non-catalytic processes that convert methane to methanol in one step—or via synthesis gas (syngas) as an intermediate, such as in the Fischer Tropsch, Mobil and syngas to gasoline plus processes.

The Fischer–Tropsch process starts with partial oxidation of methane (natural gas) to carbon dioxide, carbon monoxide, hydrogen gas and water. The ratio of carbon monoxide to hydrogen is adjusted using the water gas shift reaction, while the excess carbon dioxide is removed with aqueous solutions of alkanolamines (or physical solvents). Removing the water yields syngas which is chemically reacted over an iron or cobalt catalyst to produce liquid hydrocarbons and other byproducts. Oxygen is provided from a cryogenic air separation unit.

Iran’s refineries are currently using oil products for gasoline production. Converting gasoline to crude oil is of limited value, but in case gasoline is produced from natural gas, the value-added would be significantly high.

Given Iran’s rich gas reserves and the high gas prices, establishment of factories for producing gasoline from natural gas would be economical and the projects fed by natural gas are advantageous.

The first unit of GTL facility was launched in December 2011 in Abbas-Abad Industrial Park. Iran was then said to be the third country to have acquired the GTL technology. Earlier, the technology was owned only by South Africa’s Sasol and Shell.

Iran eyes production of 1 mb/d of gasoline through GTL technology. That would require 100 refineries, but it would bring Iran 24 billion dollars in revenues annually. The GTL technology can create considerable value added.

The sulfur content of gasoline and gasoil currently produced in Iran is 10 ppm, but in the fuel produced from GTL, the sulfur content is less than 1 ppm.

GTL technology enables Iran to gain revenues in the liquefied natural gas (LNG) market without facing such challenges as political tensions and market restrictions.

According to some technical estimates, GTL technology can convert 10,000 cubic feet of natural gas to a barrel of high-quality oil product. Iran’s 33.8-tcm gas reserves could be potentially converted to 118.6 billion barrels of oil products.

In Iran’s refineries, only some 60 percent of a crude oil barrel could be converted to such products as gasoil, kerosene and gasoline. In the most advanced refineries in the world, this percentage is 70 to 80 percent.

Construction of small-sized GTL units with the capacity of 5,000 to 15,000 b/d and fed by between 5.1 to 5.4 mcm/d of gas is another option to avoid associated gas being flared off in the oil fields.

Another advantage with the GTL technology is that along with the production of each barrel of oil product, a barrel of oil is also produced as by-product. This water can be consumed by GTL unit or be used for irrigation and even drinking water. This by-product is of high value in South Pars gas field because desalination is widely required.

Analysts say methanol production is increasing due to its growing consumption. They estimate that 10 million tons a year of methanol would have been consumed over the coming four years.

Mohammad-Hassan Peyvandi, deputy managing director of National Petrochemical Company, recently said that Iran is to raise its methanol production over the coming five years.

He said a new plant starts methanol production every six months, adding that Iran is expected to produce 10 million tons of methanol in five years.

AMAK, an Environment-Friendly Project

 

 

Crude oil recovery is always accompanied with associated petroleum gas whose flaring emits greenhouse gases causing pollution in the environment. Therefore, gathering associated gases and converting them into valuable products will help safeguard the environment in addition to bringing remarkable profits for oil-rich countries. Today, many gas producing countries gather flare gases in order to honor their international obligations for reducing pollution on Earth and save energy.

Iran, which has the largest gas reserves in the world, is obligated to prevent flaring sour gases extracted from hydrocarbon fields and treat them to feed industrial, commercial and housing sectors.

In Bangestan’s oil layer, associated gases contain 2.5 percent of hydrogen sulfide. Therefore, flaring these gases will emit toxic materials which will damage the environment. Gathering these gases is inevitable.

National Iranian Oil Company (NIOC) started implementing a gas gathering project, known as Gathering Associated Gases from Southern Oil Fields (AMAK), in order to stop flaring associated gases which would pollute the environment and instead use them as feedstock for petrochemical plants. AMAK stands for the Ab Teimour, Mansouri/Maroun, Ahvaz and Koupal oil fields in southern Iran.

AMAK is the largest environmental project in Iran’s oil and gas sectors. The project, which has so far cost 500 million dollars, started in 2000. The first station for associated gas gathering under this project was launched in February 2005.

Iran can gather 241 mcf/d of associated gas from southern fields for desalting.

 

AMAK Process

 

Since associated gases extracted from the Bangestan oil layer are not usable due to their sulfurized hydrogen content they are flared. Under AMAK project, a pressure booster station is established next to production stations so that associated gases are gathered and dehydrated before being transferred to a desalting refinery for the production of sweet gas.

In other words, preventing the emission of environment pollutants through gathering, dehydrating and desalting sour gases and their conversion into rich sweet gas for industrial and commercial purposes constitute the objective of the implementation of this project.

 

10 bcm Annual Gathering

 

Mohsen Dahanzadeh, managing director of Karoun Oil and Gas Production Company, said of 241 mcf per day of sour gas gathered from hydrocarbon fields, 210 mcf is converted into sweet gas and more than 30,000 cubic feet to gas condensate.

“AMAK project has two phases. In the first phase, associated gas is gathered and delivered to refinery for sweet gas production. In the second phase, a pressure booster station and a dehydration unit should be established so that acid gases are fed into Razi Petrochemical Plant through a 96-kilometer pipeline,” he said.

“With the implementation of the first phase of AMAK which comprises gas sweetening unit and seven gas pressure booster stations, more than 90 percent of associated gases which used to be flared is gathered. That would safeguard national wealth and will largely reduce harmful impacts on the environment,” Dahanzadeh said.

He said the first phase of AMAK will result in the gathering of more than 10 bcm of gas a year. That volume of gas gathering will generate value-added and safeguard the environment.

“The second phase of AMAK, which has already progressed more than 95 percent, is in the stage of removing problems with pressure booster stations,” he said.

 

Light Gas Production

 

A major element of AMAK project is protecting the environment and following no-flaring strategy. Besides environmental benefits for Iran, the project will help Iran gain revenues from selling liquefied gas produced from associated gas.

AMAK will lead to the production of 28,000 b/d of gas condensate to feed Bandar Imam Petrochemical Plant and the production of 182 mcf/d of light gas for industrial, commercial and housing consumption.

Crude oil production enhancement through the return of gas condensate to oil production units is another fruitful result of AMAK.

 

Domestic Potentials

 

AMAK is the first fully mechanized project under way in oil-rich regions in southern Iran. It is also one of the most sophisticated petroleum industry projects designed and implemented by Iranian engineers in the oil-rich city of Ahvaz in southwestern Iran.

The project was ordered by National Iranian Oil Company (NIOC). It is operated by Petroleum Engineering and Development Company (PEDEC) with a consortium of Iranian International Energy Company (IRITEC) and Italy’s IRASCO as the contractor of the project.

More than 140 companies (consulting engineers, contractors and manufacturers) have handled the project.

AMAK project has so far required eight pressure booster and dehydration stations, a sour gas sweetening refinery, 280 kilometers of pipeline for transferring acid gas, 95 kilometers of high-voltage power transmission line, as well as power supply posts.

Environment Standards, Key to Sustainable Development

 

The process of industrialization and enhanced production bring about economic benefits and social welfare, but they are likely to harm the environment. The detrimental effects of industrial activities on the environment have become an inseparable element of industry and production. The health of manpower and the environment are exposed to threats.

In order to minimize the effects of harmful elements, the principle of sustainable development has been prioritized by developed countries.

Experts say sustainable development is summarized in a state of balance between the three following concepts: economic growth, social progress and environment protection. To that effect, health, safety, environment (HSE) system has been an effective step for reaching sustainable development.

HSE management system also offers a new management perspective for the activities of the organization applying it. This system seeks to identify potential threats in order to curb their impacts.

The main element in the productivity of organizations is manpower; therefore any conditions safeguarding manpower will improve HSE function and the productivity of the organization. It shows that productivity and HSE are directly related.

Major organizations and companies in the world pay special attention to improving their quality management system and sustainable development in order to become stronger on the world stage.

HSE first started in Iran in 1946, when Ministry of Labor and Social Affairs and Labor Law Drafting was established.

HSE plays a major role in the petroleum industry, nuclear power plants and agriculture which make great contribution to economic and industrial development in Iran.

 

HSE in Petroleum Industry

 

In order to realize its sustainable development objectives, Iran’s petroleum industry established HSE management system and important policies like preventing accidents, capping emission of pollutants, saving energy, optimizing energy use, improving the health of staff and boosting the quality of products were defined as top policies of Petroleum Ministry.

Iran’s Petroleum Ministry regularly monitors exploration, drilling and production in an attempt to curb their undesired impacts on human being and the environment.

National Iranian Oil Company (NIOC) has made significant efforts for professional health. Extension of working hours without accidents exemplifies the effective implementation of safety and health standards in this sector.

Oil and its products are known as contaminants of the environment, but oil recovery and processing boost national economy, contribute to job creation and improve the gross national product (GNP). HSE is a key factor in the petroleum industry.

 

HSE Guarantees Economic Stability

 

From economic point of view, HSE is a safe investment and sustainable revenue. This issue has not been ignored by administrators of Iran’s petroleum industry.

A significant measure by Iran’s petroleum industry in recent years has been the construction of green belt around oil facilities as well as taking effective steps for boosting the quality of fuel in refineries to euro-4 level.

Iran’s petroleum industry has gathered associated gases, implemented clean development mechanism and curbed greenhouse gas emissions as part of its efforts to protect the environment.

Other achievements of the Petroleum Ministry in HSE management include planning for no-flaring project, allocation of budget for stabilization of quick sands, combating desertification, planting trees near oil facilities, boosting the capacity of wastewater treatment and preventing the penetration of oil contaminants into water tables.

Economic analysis of HSE preventive measures has proven that the HSE management system is effective in preventing job-related diseases and accidents. That would also boost the quality of life and job satisfaction and result in sustainable economic benefits in the long term.

 

PSEEZ Offers 20-Year Tax Exemption to Foreigners

 

Pars Special Economic Energy Zone (PSEEZ), administered by Iran’s Petroleum Ministry, can offer good potentials for domestic and foreign investment. The most significant advantage of this zone is its proximity to the giant South Pars gas field. This positive point can make great contribution to the development of upstream, downstream, heavy and semi-heavy industries. Furthermore, incentives for foreign companies are among attractive points envisaged for the development of this strategically important zone.

The zone was established in 1998 for oil and gas recovery from huge hydrocarbon reservoirs in South Pars, as well as carrying out economic activities in the oil, gas and petrochemical sectors.

Mehdi Yousefi, managing director of PSEEZ, says the main objective followed for the zone is to prepare the necessary hardware and software infrastructure for the development of upstream mid-stream and downstream industries with a view to economic development.

In an interview with Iran Petroleum, he said that PSEEZ is concentrating its efforts on the creation of 29 nominal phases in South Pars within the framework of 24 phases.

Regarding the development of infrastructure, Yousefi said, ports are planned to be mechanized while foreign flights are expected to resume travels to the zone.

“In the ports sector and in Pars-I zone, there are two operational ports. One of them is Pars Services Port which imports strategic commodities and the other one is a petrochemical port. Pars-II Port is under construction in the sector held by Pars Oil and Gas Company. It is expected to become operational in 18 months. Moreover, studies are being conducted for the construction of a port in North Pars,” he said.

“Currently, the development of PSEEZ airport is on the agenda. It is a priority project and will be most probably done by domestic investment,” he added.

Yousefi said there are also plans in the welfare sector for the construction of hotels which will be open to domestic and foreign investors.

“Moreover, a 2,000-strong township, an advanced welfare complex and a 10,000-unit township for housing foreigners have been envisaged,” he said, adding that these projects are up for investment.

Yousefi said air emergency service and an emergency healthcare center are also among other plans for allaying concerns of Iranians and foreigners supposed to invest in the energy zone.

 

Investment in Semi-Heavy and Heavy Industries

 

He said that the main plans envisaged for the Pars energy zone are based on economic development with attraction of investment.

“The PSEEZ’s investment attraction plans are concentrated on downstream industries. However, for attracting investment, we will not content ourselves with downstream industries ;in addition we have also plans for attracting investment into the semi-heavy and heavy industries,” said Yousefi.

He highlighted huge gas reserves in the PSEEZ as the advantages of investment in this zone, saying: “This zone is located in a good geographical spot and is close to domestic and global markets. It would be possible to transfer products from this zone to Central Asian markets.”

 

Tax Exemption

 

Yousefi said investment in PSEEZ is rewarded by 20-year tax exemption.

“The commodities supposed to be used in this zone will be exempted from customs duties. Therefore, foreign companies will pay low costs for brining in equipment and parts,” he said.

Yousefi said Iran’s Foreign Affairs Ministry is to open a representative office in the PSEEZ in the near future. “Special preparations have been made for granting visa to foreigners and facilitating laws so that working visa would be granted to foreigners quickly.”

He said a seminar is expected to be held in Iran in November or December to introduce opportunities for investment to foreigners.

He said that foreigners face no commitment for hiring Iranian companies, adding that cooperation would face no obstacles either.

Yousefi said delegates from Izmir Chamber of Commerce recently visited PSEEZ and evaluated opportunities for investment. He said that delegates from Germany and Qatar have expressed willingness to invest in this zone.  

 

Streamlined Bureaucracy

 

Yousefi said the number of customs checkpoints is to be reduced from 67 to 34 in PSEEZ.

He referred to customs-related problems, saying: “Currently, transfer of commodities from one phase to another has to go through four customs control steps. By reducing the number of checkpoints, we intend to resolve this problem.”

Yousefi said imports and exports through PSEEZ are significant for Iran’s economy.

 

Refineries

 

Yousefi underscored the need for efforts aimed at attracting more investment into PSEEZ, saying attraction of domestic and foreign investment is a top priority.

“Among long-term objectives envisaged for this zone are the construction of gas condensate refineries and downstream petrochemical plants,” he said.

Yousefi said gas condensate refineries and petrochemical plants, for which foreign investment is to be attracted, are aimed at preventing crude oil sales.

 

Environment Protection

 

Yousefi said PSEEZ is also working out mechanisms for safeguarding the environment. “Since the petroleum industry is a contaminating industry, the issue of integration in the environment sector is among PSEEZ plans,” he said.

Yousefi said the most important environmental activity in the energy zone would be to gather associated gases in order to clear the region in six years. He said eight online pollution control stations are also to be constructed.

He said that barge traffic system (BTS) is also planned for PSEEZ in order to avoid collision between vessels.

(BTS) is a web application that came into use in 2007, primarily to simplify the handling of container barges in the port. The BTS acts as a unique platform for barge operators who load or discharge containers to make planning requests with terminals and for the Terminals to give feedback regarding the terminal planning to the barge operators.

In addition, all barge operators and Terminal operators are able to consult the lock planning in the port and the positional data of barges in Belgium and the Netherlands via the BTS. Barge operators are also able to consult nautical messages about the port and pre-announce their trip.

Yousefi said construction of infrastructure in Pars-II zone along with customs checkpoints compliant with industrial and refining facilities are among the priorities.           

PSEEZ Offers 20-Year Tax Exemption to Foreigners

 

Pars Special Economic Energy Zone (PSEEZ), administered by Iran’s Petroleum Ministry, can offer good potentials for domestic and foreign investment. The most significant advantage of this zone is its proximity to the giant South Pars gas field. This positive point can make great contribution to the development of upstream, downstream, heavy and semi-heavy industries. Furthermore, incentives for foreign companies are among attractive points envisaged for the development of this strategically important zone.

The zone was established in 1998 for oil and gas recovery from huge hydrocarbon reservoirs in South Pars, as well as carrying out economic activities in the oil, gas and petrochemical sectors.

Mehdi Yousefi, managing director of PSEEZ, says the main objective followed for the zone is to prepare the necessary hardware and software infrastructure for the development of upstream mid-stream and downstream industries with a view to economic development.

In an interview with Iran Petroleum, he said that PSEEZ is concentrating its efforts on the creation of 29 nominal phases in South Pars within the framework of 24 phases.

Regarding the development of infrastructure, Yousefi said, ports are planned to be mechanized while foreign flights are expected to resume travels to the zone.

“In the ports sector and in Pars-I zone, there are two operational ports. One of them is Pars Services Port which imports strategic commodities and the other one is a petrochemical port. Pars-II Port is under construction in the sector held by Pars Oil and Gas Company. It is expected to become operational in 18 months. Moreover, studies are being conducted for the construction of a port in North Pars,” he said.

“Currently, the development of PSEEZ airport is on the agenda. It is a priority project and will be most probably done by domestic investment,” he added.

Yousefi said there are also plans in the welfare sector for the construction of hotels which will be open to domestic and foreign investors.

“Moreover, a 2,000-strong township, an advanced welfare complex and a 10,000-unit township for housing foreigners have been envisaged,” he said, adding that these projects are up for investment.

Yousefi said air emergency service and an emergency healthcare center are also among other plans for allaying concerns of Iranians and foreigners supposed to invest in the energy zone.

 

Investment in Semi-Heavy and Heavy Industries

 

He said that the main plans envisaged for the Pars energy zone are based on economic development with attraction of investment.

“The PSEEZ’s investment attraction plans are concentrated on downstream industries. However, for attracting investment, we will not content ourselves with downstream industries ;in addition we have also plans for attracting investment into the semi-heavy and heavy industries,” said Yousefi.

He highlighted huge gas reserves in the PSEEZ as the advantages of investment in this zone, saying: “This zone is located in a good geographical spot and is close to domestic and global markets. It would be possible to transfer products from this zone to Central Asian markets.”

 

Tax Exemption

 

Yousefi said investment in PSEEZ is rewarded by 20-year tax exemption.

“The commodities supposed to be used in this zone will be exempted from customs duties. Therefore, foreign companies will pay low costs for brining in equipment and parts,” he said.

Yousefi said Iran’s Foreign Affairs Ministry is to open a representative office in the PSEEZ in the near future. “Special preparations have been made for granting visa to foreigners and facilitating laws so that working visa would be granted to foreigners quickly.”

He said a seminar is expected to be held in Iran in November or December to introduce opportunities for investment to foreigners.

He said that foreigners face no commitment for hiring Iranian companies, adding that cooperation would face no obstacles either.

Yousefi said delegates from Izmir Chamber of Commerce recently visited PSEEZ and evaluated opportunities for investment. He said that delegates from Germany and Qatar have expressed willingness to invest in this zone.  

 

Streamlined Bureaucracy

 

Yousefi said the number of customs checkpoints is to be reduced from 67 to 34 in PSEEZ.

He referred to customs-related problems, saying: “Currently, transfer of commodities from one phase to another has to go through four customs control steps. By reducing the number of checkpoints, we intend to resolve this problem.”

Yousefi said imports and exports through PSEEZ are significant for Iran’s economy.

 

Refineries

 

Yousefi underscored the need for efforts aimed at attracting more investment into PSEEZ, saying attraction of domestic and foreign investment is a top priority.

“Among long-term objectives envisaged for this zone are the construction of gas condensate refineries and downstream petrochemical plants,” he said.

Yousefi said gas condensate refineries and petrochemical plants, for which foreign investment is to be attracted, are aimed at preventing crude oil sales.

 

Environment Protection

 

Yousefi said PSEEZ is also working out mechanisms for safeguarding the environment. “Since the petroleum industry is a contaminating industry, the issue of integration in the environment sector is among PSEEZ plans,” he said.

Yousefi said the most important environmental activity in the energy zone would be to gather associated gases in order to clear the region in six years. He said eight online pollution control stations are also to be constructed.

He said that barge traffic system (BTS) is also planned for PSEEZ in order to avoid collision between vessels.

(BTS) is a web application that came into use in 2007, primarily to simplify the handling of container barges in the port. The BTS acts as a unique platform for barge operators who load or discharge containers to make planning requests with terminals and for the Terminals to give feedback regarding the terminal planning to the barge operators.

In addition, all barge operators and Terminal operators are able to consult the lock planning in the port and the positional data of barges in Belgium and the Netherlands via the BTS. Barge operators are also able to consult nautical messages about the port and pre-announce their trip.

Yousefi said construction of infrastructure in Pars-II zone along with customs checkpoints compliant with industrial and refining facilities are among the priorities.           

Global oil and Asian product market, July

Marker crude prices fell over the month of July

By Zakiye Bahrami, Leila Sadr

Crude prices declined during July. Uncertainty of Iraqi crude production made the market strong during June and prices rose on Iraq's crisis.  However, during July Crude oil prices dipped. In 2014 year-to-date, crude market was stable with little ups and downs (see graph 1). During June the market had a sharp upward movement. However, the market adjusted soon, in July.  Some of the crude prices driving factors during July are explained as follows:

• In Asia, worries about Iraqi crude production waned. In Middle East, crude loadings during coming period were expected to rise according to the planning. As a result, Asian crude market is expected to go downward more in near future.
• In Europe, expectation of rising Libyan exports limited the market. Some of the protests affecting oil terminals and field came to an end. On the other hand, low demand in Europe and Asia Pacific due to the low refinery throughputs pressured the market. Looking ahead, it is expected to see some supports in the next month as August loading program is tight.

Boom days of condensate

Recently it was announced that two US companies got the approval from US government to export condensate into the out of the US. The first US condensate cargo is planned to be in Asia Pacific region in Early August. It is around 400,000 bbls of lease condensate. Condensate is a major feedstock for petrochemical industry and this US cargo will be absorbed by Asian countries like Japan or South Korea or China which have developing petrochemical industry and need to import feedstock. Petrochemical industry in Asia is growing and demand for condensate is increasing. Therefore, the impact of such a small cargo from US on Asian condensate market will be limited. Condensate export from US is unlikely to increase sharply as the country will need its condensate in its upcoming splitters. 

At the beginning of July, Saudi Arabia released its official selling price of crude for August-loading. The price formula was lower than July. Saudi Arabia cut its crude price in order to keep the market buoyant as higher outright prices in Asia has affected refiners economic.

 

 

Asian Product Markets

In Singapore products market- leader product market in Asia- the mean of middle distillate and fuel oil prices decreased in line with the fall of crude prices (see graph 2). However, gasoline and naphtha market was highly strong to the extent that outright prices of these two products rose. 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. Market fundamentals at the top of barrel improved over the reporting month. Asian gasoline and naphtha market strengthened considerably while middle and bottom of the barrel had a weak performance during July. Gasoil, jet fuel and fuel oil market have been going downward since the beginning of 2014 (see graph 3).

 

 

 

 

Products market fundamentals in brief

	Light Distillates		Middle Distillates
	Products		Products		Heavy Products
	gasoline	Naphtha	Gasoil	Jet Fuel	Fuel Oil 180	Fuel Oil 180
July 2014	↑	↑	↓	↓	↓	↓

(Upward arrow: strength, downward arrow: weakness)

 

Light Distillates (gasoline, naphtha)

In general, growth of West to East movements of LPG cargoes during July as a result of wide West/East spread increased the shipping rate for Very Large Gas Carriers. Therefore freight costs which is around 130 $/t from Ras Tanura to Chiba - one of the main route for LPG export- continued to push down the buying interest for this product. On the other hand, lower seasonal demand caused the spot deals to be transacted at lower differentials. As LPG is widely used as a fuel for heating purposes, in general its demand is lower during summer.   

On the top of the barrel, the sharp jump in Asian naphtha cracks was due to the tight supply and increase of demand in the market. Naphtha market strengthened by less supplies from India ahead of closure of HMEL's 180,000 b/d Bhatinda refinery which is a joint venture between Hindustan Petroleum and Mittal Energy caused by a fire there. Furthermore, it was not economic to use LPG as an alternative feedstock on the back of increase in freight of VLGCs and also narrow LPG/naphtha spread. As a result, demands for naphtha improved more. Furthermore, recent tightness in gasoline market boosted the naphtha market as naphtha is used primarily as feedstock for producing high octane gasoline via the catalytic reforming process. Looking ahead, upcoming scheduled steam cracker maintenances over September-October in Taiwan, South Korea, Japan and Singapore will likely reduce naphtha demand for petrochemicals and will have a negative effect on the market. 

The gasoline's margin over crude price rose during the reporting period. The main reason for strong and bullish market is the Islamic fasting month of Ramadan and recent refinery maintenances in Vietnam, Taiwan, Malaysia and also Europe. In general, consumption increases during fasting month of Ramadan as a result of increase in traveling during this month in Islamic countries like Saudi Arabia and Indinesia. Besides, demand usually peaks during summer season and supports the market. Also closure of HMEL's 180,000 b/d Bhatinda refinery made Indian private sector refiners Reliance and Essar trying to import gasoline for domestic use. This has increased the crack spread and spot differentials in the market because India is not a usual gasoline importer. Refinery maintenances in Europe and also increase of arbitrage to West Africa from Amsterdam-Rotterdam-Antwerp hub, reduced stocks there and it have supported gasoline value too. Meanwhile, recent crisis in Iraq and closure of Baiji refinery increased tightness in the market. Baiji has been the largest refinery in Iraq, with a capacity of 310 kb/d, and used to provide one third of domestic products. It is expected for this refinery to stay offline for at least 3 month. On the other hand, market has a backwarded structure over the past few weeks and it has made market participants to sell their cargoes and keep their inventories at low levels.

 

Middle Distillates (gasoil, jet fuel)

Asian gasoil and jet fuel market were weak during July. Graph (3) shows that in 2014 year-to-date gasoil and jet fuel market weakened continuously. Gasoil's value relative to Dubai benchmark fell due to ample supplies in the region as refiners returned from maintenance. Exports from Japan and South Korea increased. Meanwhile, Australian demand increased but it did not improve the market and inventories remained well above year ago levels.

With such a full gasoil market in Asia and a slight improvement in European gasoil margins, it is expected to have economical gasoil arbitrage from Asia into Europe in the coming period. Therefore, it is possible to have an improved Asian gasoil market in next month. In this regards, a gasoil cargo shipped from South Korea to the Netherlands but poor demand was still the key driving factor in the market.

Abundant jet fuel supplies in Asia weighed on the market. Plenty of cargoes from Qatar and Taiwan were offered in the region. Despite the rise in crude prices, Asian jet fuel prices fell to the lowest level since June 2013 (see graph 2).

Fuel Oil

Fuel oil market in both grades- 180 & 380 cst- weakened for second consecutive month. Since the start of 2014, fuel oil market moved downward step by step (see graph 2). More downward pressure was seen from a reduction in crude and fuel oil use by some major Japanese power fuel oil utilities. The consumption declined to 243,212 b/d. fuel oil stocks at Singapore rose, reaching above 23 million barrels. The market was strongly feeling the effect of poor demand in the region and Singapore fuel oil market structure was seen in contango. Apart from this weak Asian fuel oil market, European fuel oil margins rose and the arbitrage to export fuel oil to Asia narrowed slightly.

Iran is exporting two type of fuel oil- 280 cst and 380 cst-. The fuel oil 380 cst is mostly used for bunkering.

Total CEO Warns against New Berlin Wall with Russia

 Europe should stop thinking about cutting its dependence on Russian gas and focus instead on making those deliveries safer, including options to bypass Ukraine, the head of French oil major Total told Reuters.

In his strongest backing for Russia and its energy policies so far amid the conflict in Ukraine, Christophe de Margerie said Europe could see a repeat of a big gas supply crisis this winter.

"We will have a problem this winter if there is a cut in supplies and if it is cold - that is obvious," De Margerie told Reuters in an interview.

"There are plenty of solutions that are being suggested to avoid the Ukrainian problem, including by Russia," he said, citing as an example the Nord Stream pipeline built in 2011 under the Baltic Sea to Germany, which bypassed Ukraine.

"(Nord Stream) was built to avoid passing through Ukraine, not to avoid Russian gas," he said.

"Can we live without Russian gas in Europe? The answer is no. Are there any reasons to live without it? I think - and I'm not defending the interests of Total in Russia - it is a no."

De Margerie dismissed a European Commission proposal for EU member states to pool their bargaining power to negotiate gas contracts with Russia and prevent Moscow playing countries off against each other with different prices.

"Should there be a central purchasing body? I don't think so," he said. "Today Russian gas prices are in line with international market prices. They've even cut their prices to keep customers."

De Margerie said tensions between the West and Russia were pushing Moscow closer to China as illustrated by a $400 billion (233.5 billion pounds) deal to supply Beijing with gas clinched in May. 

"You hear people say we have got to protect ourselves from Ukraine and then they talk about Russia. This is not the same thing... Are we going to build a new Berlin Wall?"

"Russia is a partner and we shouldn't waste time protecting ourselves from a neighbor ... What we are looking to do is not to be too dependent on any country, no matter which. Not from Russia, which has saved us on numerous occasions?"

Any deliberate reduction in imports from Russia would result in more expensive supplies from other producers which end users would not like, he added.

 

Nigeria Oil Output Rebounds

Nigeria’s crude oil production rose by 200,000 barrels a day to 2.15 million in June, a Bloomberg survey of Organization of Petroleum Exporting Countries (OPEC) producers indicated.

The gain in Nigeria was the second-biggest in the survey and the highest output since September.  Figures for Africa’s biggest producer are volatile because of unrest and theft in the Niger River delta, the main oil-producing region.

Production by the 12-member OPEC rose by 278,000 barrels a day to 30.223 million, according to the survey of oil companies, producers and analysts.

OPEC ministers kept their output target unchanged at 30 million barrels a day on June 11 in Vienna. The next OPEC Conference is due to be held on Nov. 27.

Oil prices have remained elevated as output dipped by over 400,000 barrels a day in Iraq, due to turmoil in the country.

Brent, the benchmark for more than half of the world’s oil, reached $115.71 on June 19, the highest level since Sept. 9.

The oil and gas industry accounts for 75 percent of the Nigerian government’s revenue and up to 95 percent of dollar earnings.

 

Venezuela Sees US Shale Boom

Venezuela wants to increase oil supplies to the United States to regain some of the market share it lost over the past decade as Caracas sees the U.S. boom in light oil from shale as a chance to raise heavy-crude exports, the country's oil minister said.

Rafael Ramirez, economy vice president and oil minister, also said Venezuela was working on borrowing $4 billion from China guaranteed by oil sales.

But Venezuela's total debt to Beijing stood at below $20 billion, he said, much lower than market estimates of over $40 billion.

Venezuela has gone from being the top U.S. supplier at the end of the 1990s to No.4 behind Canada, Saudi Arabia and Mexico as its own output stagnated, U.S. production rose thanks to shale and relations between Washington and Caracas hit new lows.

But Ramirez said his country, the world's largest holder of oil reserves on the back of heavy-oil discoveries in the past decade, would remain a major supplier to the United States in decades to come. 

 

Cold Winter Feared in Europe

Central and south-eastern Europe rely largely on Russian gas imports via Ukraine and would be hit hard by another winter gas cut-off.

Central and south-eastern Europe could face higher gas prices and potential shortages this winter, as a prolonged price row between Russia and Ukraine heightens regional supply fears.

The FSU countries, many of which receive most or all of their gas from Russia via Ukraine, have been diversifying to fill their underground gas storages and arrange alternate supply sources to prepare for the winter heating season.

In June, Russian natural gas exporter Gazprom cut off gas deliveries for use by Ukraine in a dispute over unpaid bills, raising concerns of a disruption of supplies to the rest of Europe.

So far, Ukraine has continued to send gas to the European Union under transit obligations it has with Russia and EU member states.

Western Europe is well prepared to deal with Russian gas flow disruptions, with access to alternative supplies such as Norway and Algeria or imports of liquefied natural gas (LNG).

But for countries in central and south-eastern Europe the dispute has rekindled memories of 2006 and 2009 when a pricing disagreement prompted Russia to cut off deliveries along the Ukraine pipeline, leaving hundreds of thousands of homes and businesses without heat in freezing temperatures.

 

OPEC Oil Output Slips in June on Iraq

OPEC's oil output has fallen in June from May's three-month high, a Reuters survey found, as fighting in Iraq closed its largest oil refinery and technical problems slowed its southern exports.

The slight decline underlines how unrest and outages in the Middle East and Africa are taking their toll on OPEC supply, just as the International Energy Agency is highlighting a greater need for OPEC oil in the rest of the year.

Supply from the Organization of the Petroleum Exporting Countries has averaged 29.93 million barrels per day (bpd), down from 30.00 million bpd in May, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants.

The decline puts OPEC output back below its nominal target of 30 million bpd, which oil ministers decided at a June 11 meeting in Vienna to maintain for the rest of 2014.

OPEC pumps a third of the world's oil. In June, output has declined in Iraq and Iran, offsetting a modest increase in top exporter Saudi Arabia and smaller rises elsewhere in the group.

The largest decline came from Iraq, where production declined by 170,000 bpd according to the survey. Domestic crude use fell because of the closure of the Baiji refinery, which was attacked by militants.

Also, Iraq's southern exports fell. Shipments in the first three weeks of June were steady, but slowed to 2.43 million bpd over the whole month due to technical issues, from May's 2.58 million bpd.

Iraq Shocks Oil Optimists

 

By Heshmatollah Razavi

 

 

OPEC oil ministers gathered in Vienna on June 11 and agreed to keep oil production ceiling unchanged at 30 mb/d. This decision was predictable as the 12-member Organization of the Petroleum Exporting Countries has regularly held ministerial meetings since 2012 and renewed output rollover.

Moreover, OPEC ministers decided to renew Secretary General Abdalla Salem al-Badri for the first half of 2015.

These decisions, adopted in the 165^th meeting of the OPEC Conference, meant that OPEC is happy with the current level of oil prices and that it is looking at the future of world oil market with certainty.

But no later had the OPEC ministers left Vienna than the oil market plunged into instability. One day after the meeting of the OPEC Conference, the so-called Islamic State – an al-Qaeda offshoot – claimed to have seized vast swathes of land in north and west of Iraq.

The IS’s quick advance and the seizure of Mosul, oil-rich Kirkuk and the strategic Baiji refinery in north of Iraq immediately influenced the oil market. It was imagined that oil exports from Kirkuk will be disrupted and the Baiji refinery would stop producing 300,000 b/d of oil.

There were worries that the wave of instability would strike the Iraqi capital Baghdad and that oil production and exports from southern Iraq will be halted at a time Iraq is busy picking a new prime minister.

Exactly one day after meeting of the OPEC Conference, oil prices hit their nine-month high at 115 dollars.

Amid simmering tensions in Iraq, foreign oil giants like ExxonMobil, British Petroleum (BP) and a Turkish oil company said they were paring down their staff on the ground. These events were worrying from the standpoint of international oil market and could negatively affect Iraq’s plans for developing its oil fields.

The IS’s advance has been slowed down and Iraq’s oil exports are expected to continue, at least in the short term. But the future of Iraq’s petroleum industry and its repercussions on the world oil market would continue to be debated by oil consumers.

Over recent months, Iraq has been producing 3.2 mb/d of oil and exported more than 2.5 mb/d.

The world petroleum industry and oil consumers have been counting on Iraq’s oil and view this country as a major source for meeting growing demands in the future.

The International Energy Agency (IEA) has predicted that Iraq would be supplying 45 percent of the world oil demand by 2035.

Before the start of IS offensive in Iraq, the agency had forecasted Iraq’s oil production to increase from 3.3 mb/d to 6 mb/d in five years. In that case, Iraq would become the fourth largest oil producer – behind Russia, Saudi Arabia and the United States.

But if the convergence pursued in Iraq in recent years turns into divergence, the IEA’s forecasts are unlikely to come true.

The Iraqi parliament has failed to reach consensus on the formation of government and it has put off its meeting to August. That means that a stable government in Iraq is not being formed any time soon.

The absence of a central government legitimized by the parliament will not be empowered enough to control the entire country. Meantime, different groups and parties will have the chance to exercise power de facto.

The persistence of the present circumstances will undermine the Iraqi Central Government’s control of oil-rich regions and could escalate future disputes for controlling oil wealth.

Iraq’s Central Government and Kurdistan region have so far failed to reach agreement about the distribution of Kirkuk oil revenues. In the absence of a broad-based agreement, Iraq’s autonomous Kurdistan region has independently exported oil to Turkey. The Kurdistan region has sent about 2.5 million barrels of oil to Turkey, sitting in storage tanks at Ceyhan port.

Meanwhile, Kurdistan Regional Government (KRG) has threatened to hold a referendum for detachment from Iraq and bringing oil-rich Kirkuk under control.

As instability rages on in Iraq, the Oil Ministry has announced that Kurdish "peshmergas" have seized two key oil fields and expelled Iraqi staff. These events could further destabilize the conditions in Iraq.

The mayor of Tuz Khurmatu, Shallal Abdul Baban, said the IS had started selling crude oil extracted from the Ajeel oil field and exporting it through the Kurdish region to local refineries or across the Iranian border.

He said the IS began shipping 100 tanks loaded with crude oil extracted from the Ajeel oil field, adding that the IS sells the crude oil at a price ranging between $12-14,000 per tank to finance its operations.

The challenges faced by Iraq’s Central Government could influence development of oil fields in southern Iraq. These fields account for 80 percent of Iraq’s total production.

The repercussions from what happens to these oil fields will go beyond Iraq and affect the global oil market.

The future of oil demand and prices heavily depends on political developments in Iraq. The world petroleum industry cannot ignore the ongoing upheavals in Iraq.

 

Unconventional Gas: an Alternative for Russian Gas in Europe?

 

The political crisis in Ukraine, including its dispute with Moscow over the flow of Russian natural gas, has urged many European nations to reconsider their reliance on imported gas from Russia.

 Although Europe highly depends on Russian gas imports, the continent is believed to be sitting atop 13 trillion cubic meters of shale gas reserves, according to ISNA.

Some nations are looking for new options for extracting natural gas at home; however, it is noteworthy that shale gas exploration is pretty difficult.

France, Poland and Ukraine have extracted a lot of shale gas, but the existing reserves in Romania, Bulgaria and the United Kingdom are still untapped.

The presence of large shale gas reserves and the current crisis in Ukraine have sharpened the focus on Europe’s potential shale gas. Still, Europe is believed to be years away from commercially exploiting shale gas. Poland, the United Kingdom and Romania are the farthest along, and expect to start exploration by 2020.

However, extracting shale gas requires hydraulic fracturing technique, which is a pretty challenging issue.

Most drilling sites in the above-mentioned countries are adjacent to densely populated areas and environmental groups have raised concerns about water and air pollution and their relevant impacts.

There also are political issues. European taxes levied on the oil industry on one hand and strict regulations on the other, create serious challenges for extraction companies, and limit their activities.

“It is much more complex extracting the gas in places like Poland and Central Europe than it is in the US. So we really need to better understand how much is there and how easily we can actually get it out of the ground,” said Eric Stewart, president of the Romanian-American and Polish-American Business Council.

Energy companies also must battle a strong environmental movement and public opposition. The process can help meet Europe’s energy needs if it complements conventional and renewable sources of energy like solar and wind. Hydraulic fracturing is a time-taking process; however, along with other factors it can contribute to energy security in Europe.

Much of Europe’s gas flows through a pipeline which runs from Russia across Ukraine. But Ukraine has had trouble paying its gas bill to Russia’s Gazprom. And earlier this year, Ukrainian protesters ousted the country’s pro-Russia president. The new Ukrainian government has signed economic agreements with the European Union, over Moscow’s objections. In the meantime, Moscow has signaled it may cut off gas export to Kyiv, and thus to much of Europe.

With winter approaching, the current dispute reminds the crisis in 2009, when Russia halted the natural gas export to Europe.

Although there are a lot of shale gas reserves in Europe, shale gas exploration will not lead to complete energy independence from Russian imports, but will diminish the dependence level in long-term.

This event would be beneficial for both Europe and Russia, because Russia needs a more diversified economy and less dependence on energy exports revenues.

 

 

Kharg NGL and $2.2b Annual Revenues

 

Flaring associated petroleum gas (APG) releases significant volumes of CO2, H2S and NO2 which would certainly damage the environment, not to mention huge energy waste. This issue is of great importance in Iran. Petroleum Ministry is focusing on plans to prevent associated gases being flared off in oil and gas fields.

In order to gather and use associated gases, National Iranian Oil Company (NIOC) plans to build 10 gas and condensate processing facilities in order to gather associated gases to feed petrochemical plants. One of these facilities currently under construction is Kharg NGL in the Kharg Island. Natural Gas Liquids (NGL) are components of natural gas that are separated from the gas state in the form of liquids. This separation occurs in a field facility or in a gas processing plant through absorption, condensation or other methods.

Iran decided to build Kharg NGL facility in 2006 to gather flare gases and convert them into useful products. Associated gases are transferred from oil production platforms through pipeline to this factory.

Ali Azimi, director of Kharg NGL project in the Iranian Offshore Oil Company (IOOC), said this engineering, production, construction (EPC) project is 43 percent completed physically.

“After engineering activities were carried out and relevant information was provided, the necessary equipment and components were purchased for the Kharg NGL project,” he said, adding that gas gathering installations have been installed and that installation of piping is under way.

Azimi said the Shell’s gas sweetening license has been used in Kharg NGL project for compliance with global standards.

“In order to minimize sulfur production, we needed this technology to do sweetening operations first, then dehydration and finally demercuration,” he said.

Azimi said construction of a sulfur recovery unit (SRU) in Kharg NGL facility is a must. “The SRU is the inseparable part of this project and without which, Kharg NGL factory could not become operational. At the moment, the required measures are under way to develop technology for the construction of this unit,” he said.

Azimi said the main objective of this project is to avoid environment pollution, adding that the project would also bring Iran more than two billion dollars in revenues from the sale of such products as liquefied petroleum gas (LPG), methane, and ethane and gas condensate.

He said that flaring associated gases releases 15 million tons of CO2, 478,000 tons of H2S and 136,000 tons of NO2 in the environment every year.

“By gathering and processing them in the Kharg NGL factory, 400 mcf/d of methane, 62 mcf/d of ethane, 40,000 b/d of LPG and 10,000 b/d of gas condensate are produced,” said Azimi.

“Of 400 mcm/d of methane [to be] produced, 123 mcf/d would be fed into the methanl-2 unit of Kharg Petrochemical Plant, 120 mcf/d would be injected into Doroud field for enhanced recovery and the rest would be consumed in the Kharg NGL factory and the power plants in the region,” he said.

Azimi said the Kharg NGL project is required by Petroleum Ministry to come on-stream by March 2016, adding that 45 million Euros per month has to be paid to the contractor over the coming 15 months.

Iranian manufacturers have supplied 40 percent of the equipment needed for this project and the rest has been purchased from foreign companies.

Azimi said the facility is under construction under a 1.206-billion Euro contract.           

 

Gas Sweetening Membrane Developed in Iran

 

For the first time, in Iran, researchers at Petrochemical Research and Technology Company (NPC-RT) have managed to design and fabricate natural gas sweetening membranes on the semi-industrial scale.

Fabrication of these membranes was until recently monopolized by the US company MTR. But from now on, Iran can present itself as a producer of this membrane in the world.

Yousef Mohammadi, head of hi-tech group of NPC-RT, says membrane methods are the best option for sweetening natural gas.

“Gas separation membranes, which are required to separate gas molecules on the angstrom scale, are among the most complicated ones used in industries. The substances used for their fabrication need to have specific properties,” he said.

“The structure of this category of membranes should be free of any angstrom-scale porosity. Moreover, the industrial-scale design and fabrication of this package of membranes should be highly delicate. That requires application of very accurate equipment and precise methods,” he added.

Mohammadi said membrane methods are widely used for industrial purposes, adding: “Given huge gas reserves in Iran, conducting research on the fabrication of natural gas sweetening membranes is one of the most significant fields of activity of the country’s researchers.”

“To that effect, a project has been defined under the title of designing and development of membrane system for separating acid gases from natural gas stream. By acquiring the technical knowhow for designing and fabricating natural gas sweetening composite membranes, these membranes were produced on the semi-industrial scale,” said Mohammadi.   

He said the natural gas sweetening membrane project took 30 months. “In the beginning, the composite membranes including nonwoven layer, support layer, selective layer, and protective layer were designed and fabricated on the lab scale. Then, they underwent performance tests and the potential of the developed membranes was assessed in sweetening operations (separation of H2S and CO2 from methane). Then, the proper infrastructure was provided for the project and the membrane was designed and fabricated on the semi-industrial and industrial scales,” he said.

Mohammadi said foreign companies refused to supply natural gas sweetening membrane, a strategic material, to Iran due to restrictions imposed on Iran’s energy sector. He added that purchase of this membrane cost Iran too much.

Mohammadi said nearly 4 billion rials has been invested in this project, adding that natural gas sweetening membrane made in Iran costs 1/50 of foreign ones.

“In the next step, designing and fabrication of industrial modules for natural gas sweetening are planned by this research group. In the near future, natural gas sweetening module will be produced in this company,” he said.

Gas sweetening, also known as mine gas treating and acid gas removal, refers to a group of processes that use aqueous solutions of various alkylamines (commonly referred to simply as amines) to remove hydrogen sulfide (H2S) and carbon dioxide (CO2) from gases. It is a common unit process used in refineries, and is also used in petrochemical plants, natural gas processing plants and other industries.

Processes within oil refineries or chemical processing plants that remove hydrogen sulfide are referred to as "sweetening" processes because the odor of the processed products is improved by the absence of hydrogen sulfide. An alternative to the use of amines involves membrane technology. Membranes are attractive since no reagents are consumed.

 

Nanotechnology and Drilling

 

By Mohammad Soleymani,

Head of Drilling Technology Research Department

Faculty of Research &Development in Petroleum Upstream Industry

Research Institute of Petroleum Industry(RIPI),

 

Nanotechnology can be seen as the most advanced human technologies so that its different applications can revolutionize(change)  the world  future . Nanotechnology history dates back to 45 years ago , when Professor Richard Feynman , Expert in theoretical quantum, when getting the Nobel Prize  in his famous speech titled " It 's a lot less space at down "pointes to the Underdeveloped dimension of  material science . Research on nanotechnology  were seriously followed since early eight century , and  for  incredible effects of this technology , It  has been become  one of the important research priorities if countries of world  during the first decade of the twenty first century. It has been successfully applied to a variety of products including electronic circuitry, composite  materials, medical and even consumer goods. Over recent years, researchers from across the world have taken significant steps towards the application of nanotechnology  in the Petroleum  upstream industries and particularly  in oil wells drilling operation that has been also affected by nanotechnology and so that can be used to improve drilling conditions. The application of nano science in improving drilling fluid properties due to high efficiency , high stability And applying various methods on the well operation is one of the most important aspects fo researchers . The use of nanoparticles in drilling fluid , enabling researchers  by changing  the composition and size distribution of the nanoparticles ,rapidly correct  the  drilling fluid properties.

With regard  to the most important actions of the Iranian oil industry and major oil producing countries in the world for  Studies and investment in different upstream sectors of oil and gas industry  ,Drilling Technology Research Department of Faculty of Research and development  in petroleum industry of RIPI has taken  steps  for prepare the nanotechnology  tree to achieve penetration  of technology , particularly in drillingsectorin 2007. Due to importance of petroleum upstream section , investment on novel Nano technology Research projects  is necessary . Some Application of nano technology are: Nano role in overcoming the challenges associated with drilling and production, Application of Nanotechnology in drilling fluids optimizing  and modification rheological properties of  drilling fluid, Control wellbore instability ,Lost circulation prevention, Reducing BHA drag and friction, Solving stuck pipe problems, Improvement drilling fluid heat transfer and also Using in high-temperature, high-pressure (HTHP)  environments .

The rapid development of technology , last few years Fundamental violation in the technology of drilling fluids, Additives variation and increase  access depth to hydrocarbon reserves , Cases need to  use novel technology in drilling fluid section . In this regard, in order to utilization benefit from the technologies by application of nano -scale additive to compare and  solning  problems , Research projects in various fields of technology needed for the drilling industry was defined and  were sent to the different  National Iranian Oil Company directorates such as ICOFCO,NISOC that fortunately accepted by technical committees .

National Iranian South Oil Company (NISOC), which runs oil reservoirs in southern Iran,  approved and accepted implementation of the two Nano oriented projects  and  assigned  RIPI:

1. New-Generation nano Drilling Fluid for shale formations:

In this project development of Technical knowledge, construction and performance study of nano- additive to reduce interactions of clays  with drilling fluid and reduce swelling and water absorption have been objected.

Shales are fine-grained sedimentary rocks that can be rich resources of petroleum and natural gas.. Common sedimentary rocks include sandstone, limestone, and shale. Shale formations consist of some problems and is facing great challenges in drilling industry. The main problem are  well instability ,  stuck drill pipe , bit balling ,  cleaning  bore hole during expose of shale  in  drilling fluids (Over the past decade, the combination of horizontal drilling and hydraulic fracturing has allowed access to large volumes of shale gas that were previously uneconomical to produce. especially water-based ) that increase in drilling time and ultimately costs will be much. Some complex factors that distinguishes the Shales  from other rocks  is  their sensitivity to compounds of water- based drilling mud .the main purpose of the study is Effects of drilling fluid ( with nano- scale additive ) on the Clays and shales formation being drilled.

Shale wellbore instability is a complex difficulty encountered during drilling all over the world. And the most important factor to determine shale wellbore stability is the distribution and expansion of micro-cracks in hard brittle shale. The common ways to avoid collapse of shale wellbore mainly include increasing the inhibition of drilling fluid filtrate, improving the quality of drilling fluid cake and sealing the pores and micro-cracks near the wellbore surface. However, the shale wellbore collapsing difficulty was not solved effectively in field, because effective sealing is difficult to achieve if crack width is unknown. Furthermore, the drilling fluid cake is more difficult to be formed on shale sections because of the very low filtration rate, compared to sand sections under the same differential pressure.

When the sand formation is drilled, the drilling fluid will filtrate into formation pores under overbalanced differential pressure. Then after a while formation pores will be plugged by solid particles gradually and drilling fluid cake will be formed so the filtration will be stopped. The mud cake forming with ultra-low filtration requires the match between the pore throat size and the shielding/ plugging particle size.

In the past decades there has been an increased interest for new products in the area of drilling fluids; and extensive researches and developments have been carried out to improve those systems. Water-based drilling fluids have been prepared with certain additives that help to adjust one or more properties; these additives are mainly polymers.

In the most recent years, nanotechnology has had remarkable advancement in many scientific fields; the drilling fluids technology, a big profitable domain with a great potential, could not fall apart. Therefore, a particular effort is dedicated to the application of nanotechnology to the design of drilling fluids, taking into consideration the increased flexibility of those systems.

Solid nanoparticles dispersed may offer unique properties to a drilling fluid or can simply influence its properties in certain ways. From a practical point of view, the presence of nano-sized solid particles in a drilling fluid is worth to be studied, evaluated and, eventually, controlled. Introducing nano-sized additives in the drilling fluids technology is extremely new; therefore, promising.

Iran needs to be self-sufficient in nano-additives production itself, because those produced in other countries cost too much.

The technological advantages of using water- based polymer containing drilling fluids are good slurry suspension and transport properties, as the gel process occurs rapidly, and the shear stress at low shear rates are high.

These qualities also prevent slurry layer formation in the horizontal sections of the slanting hole. In addition, the hydration and dispersion inhibition of the clay that comes from the productive strata is the result of encapsulating action of the macromolecular chains towards the clay colloids.

Nanotechnology used as an additive in drilling fluids has been investigated for several years with mixed success. The desire to either solve problems that have been outstanding for years or just develop products that perform more effectively and efficiently has motivated fluids researchers to look towards nanotechnology and see what benefits it may bring in the area of rheology, fluid loss or shale stability of drilling fluids. 

Some Advantages of these methods :Studies towards achieving nano- additive manufacturing knowledge ,  Introducing usability nanomaterial in controlling rock drilling fluidsinteractions and Research infrastructure in order to prepare nanoparticles in industrial production in the country.

 

1. Manufacturing Nano-Additives to Reduce Friction

Lubrication and cooling the drill bit is the function  of the mud .Generated lubrication  level by drilling fluids  depends on  the type, quality and weight of the solids and chemical composition on the  mud system.Oil-basedmuds  are more lubricant but  for the environmental issues are more likely to use a water-based .

Thelubricant propertyof water-based drilling mud must beachieved with anti-wear additives and lubricant in various temperature and pressure conditions within the lubricant oil base mud .The following objectives ofproject are : Identify and assess the various mechanisms  of reduce friction and wear of different processes in drilling operations,Identification andTechnical - Economic evaluation of nano- additive in drilling ,Development and Evaluation of Nanoparticlesperformance in field operating conditions ,Applying and testing of nano technology in water-based drilling fluid compositions for the first time in the country,Providing procedures and the introduction of nano additive neededmixing equipment and  Determination of tensile forces and torques applied in reduction of yield nano- additive.

Some economic benefits of the project included:25% reduction in friction coefficient ,Increased heat transfer , Increasing cutting up warding velocity speed,cleaning  wellbore and  penetrating  rate , Minimize damage to the reservoir rocks and tools

Project achievements:stuck pipedecrease due to the differentialpressure ,improve the drilling rate due to the reduced torque, To avoid additional costs imposed by the friction and wear parts for drilling, Prepare beds and other infrastructure required in the manufacture of nano- additive usedin drilling fluids

 

Nanotechnology and Drilling

 

By Mohammad Soleymani,

Head of Drilling Technology Research Department

Faculty of Research &Development in Petroleum Upstream Industry

Research Institute of Petroleum Industry(RIPI),

 

Nanotechnology can be seen as the most advanced human technologies so that its different applications can revolutionize(change)  the world  future . Nanotechnology history dates back to 45 years ago , when Professor Richard Feynman , Expert in theoretical quantum, when getting the Nobel Prize  in his famous speech titled " It 's a lot less space at down "pointes to the Underdeveloped dimension of  material science . Research on nanotechnology  were seriously followed since early eight century , and  for  incredible effects of this technology , It  has been become  one of the important research priorities if countries of world  during the first decade of the twenty first century. It has been successfully applied to a variety of products including electronic circuitry, composite  materials, medical and even consumer goods. Over recent years, researchers from across the world have taken significant steps towards the application of nanotechnology  in the Petroleum  upstream industries and particularly  in oil wells drilling operation that has been also affected by nanotechnology and so that can be used to improve drilling conditions. The application of nano science in improving drilling fluid properties due to high efficiency , high stability And applying various methods on the well operation is one of the most important aspects fo researchers . The use of nanoparticles in drilling fluid , enabling researchers  by changing  the composition and size distribution of the nanoparticles ,rapidly correct  the  drilling fluid properties.

With regard  to the most important actions of the Iranian oil industry and major oil producing countries in the world for  Studies and investment in different upstream sectors of oil and gas industry  ,Drilling Technology Research Department of Faculty of Research and development  in petroleum industry of RIPI has taken  steps  for prepare the nanotechnology  tree to achieve penetration  of technology , particularly in drillingsectorin 2007. Due to importance of petroleum upstream section , investment on novel Nano technology Research projects  is necessary . Some Application of nano technology are: Nano role in overcoming the challenges associated with drilling and production, Application of Nanotechnology in drilling fluids optimizing  and modification rheological properties of  drilling fluid, Control wellbore instability ,Lost circulation prevention, Reducing BHA drag and friction, Solving stuck pipe problems, Improvement drilling fluid heat transfer and also Using in high-temperature, high-pressure (HTHP)  environments .

The rapid development of technology , last few years Fundamental violation in the technology of drilling fluids, Additives variation and increase  access depth to hydrocarbon reserves , Cases need to  use novel technology in drilling fluid section . In this regard, in order to utilization benefit from the technologies by application of nano -scale additive to compare and  solning  problems , Research projects in various fields of technology needed for the drilling industry was defined and  were sent to the different  National Iranian Oil Company directorates such as ICOFCO,NISOC that fortunately accepted by technical committees .

National Iranian South Oil Company (NISOC), which runs oil reservoirs in southern Iran,  approved and accepted implementation of the two Nano oriented projects  and  assigned  RIPI:

1. New-Generation nano Drilling Fluid for shale formations:

In this project development of Technical knowledge, construction and performance study of nano- additive to reduce interactions of clays  with drilling fluid and reduce swelling and water absorption have been objected.

Shales are fine-grained sedimentary rocks that can be rich resources of petroleum and natural gas.. Common sedimentary rocks include sandstone, limestone, and shale. Shale formations consist of some problems and is facing great challenges in drilling industry. The main problem are  well instability ,  stuck drill pipe , bit balling ,  cleaning  bore hole during expose of shale  in  drilling fluids (Over the past decade, the combination of horizontal drilling and hydraulic fracturing has allowed access to large volumes of shale gas that were previously uneconomical to produce. especially water-based ) that increase in drilling time and ultimately costs will be much. Some complex factors that distinguishes the Shales  from other rocks  is  their sensitivity to compounds of water- based drilling mud .the main purpose of the study is Effects of drilling fluid ( with nano- scale additive ) on the Clays and shales formation being drilled.

Shale wellbore instability is a complex difficulty encountered during drilling all over the world. And the most important factor to determine shale wellbore stability is the distribution and expansion of micro-cracks in hard brittle shale. The common ways to avoid collapse of shale wellbore mainly include increasing the inhibition of drilling fluid filtrate, improving the quality of drilling fluid cake and sealing the pores and micro-cracks near the wellbore surface. However, the shale wellbore collapsing difficulty was not solved effectively in field, because effective sealing is difficult to achieve if crack width is unknown. Furthermore, the drilling fluid cake is more difficult to be formed on shale sections because of the very low filtration rate, compared to sand sections under the same differential pressure.

When the sand formation is drilled, the drilling fluid will filtrate into formation pores under overbalanced differential pressure. Then after a while formation pores will be plugged by solid particles gradually and drilling fluid cake will be formed so the filtration will be stopped. The mud cake forming with ultra-low filtration requires the match between the pore throat size and the shielding/ plugging particle size.

In the past decades there has been an increased interest for new products in the area of drilling fluids; and extensive researches and developments have been carried out to improve those systems. Water-based drilling fluids have been prepared with certain additives that help to adjust one or more properties; these additives are mainly polymers.

In the most recent years, nanotechnology has had remarkable advancement in many scientific fields; the drilling fluids technology, a big profitable domain with a great potential, could not fall apart. Therefore, a particular effort is dedicated to the application of nanotechnology to the design of drilling fluids, taking into consideration the increased flexibility of those systems.

Solid nanoparticles dispersed may offer unique properties to a drilling fluid or can simply influence its properties in certain ways. From a practical point of view, the presence of nano-sized solid particles in a drilling fluid is worth to be studied, evaluated and, eventually, controlled. Introducing nano-sized additives in the drilling fluids technology is extremely new; therefore, promising.

Iran needs to be self-sufficient in nano-additives production itself, because those produced in other countries cost too much.

The technological advantages of using water- based polymer containing drilling fluids are good slurry suspension and transport properties, as the gel process occurs rapidly, and the shear stress at low shear rates are high.

These qualities also prevent slurry layer formation in the horizontal sections of the slanting hole. In addition, the hydration and dispersion inhibition of the clay that comes from the productive strata is the result of encapsulating action of the macromolecular chains towards the clay colloids.

Nanotechnology used as an additive in drilling fluids has been investigated for several years with mixed success. The desire to either solve problems that have been outstanding for years or just develop products that perform more effectively and efficiently has motivated fluids researchers to look towards nanotechnology and see what benefits it may bring in the area of rheology, fluid loss or shale stability of drilling fluids. 

Some Advantages of these methods :Studies towards achieving nano- additive manufacturing knowledge ,  Introducing usability nanomaterial in controlling rock drilling fluidsinteractions and Research infrastructure in order to prepare nanoparticles in industrial production in the country.

 

1. Manufacturing Nano-Additives to Reduce Friction

Lubrication and cooling the drill bit is the function  of the mud .Generated lubrication  level by drilling fluids  depends on  the type, quality and weight of the solids and chemical composition on the  mud system.Oil-basedmuds  are more lubricant but  for the environmental issues are more likely to use a water-based .

Thelubricant propertyof water-based drilling mud must beachieved with anti-wear additives and lubricant in various temperature and pressure conditions within the lubricant oil base mud .The following objectives ofproject are : Identify and assess the various mechanisms  of reduce friction and wear of different processes in drilling operations,Identification andTechnical - Economic evaluation of nano- additive in drilling ,Development and Evaluation of Nanoparticlesperformance in field operating conditions ,Applying and testing of nano technology in water-based drilling fluid compositions for the first time in the country,Providing procedures and the introduction of nano additive neededmixing equipment and  Determination of tensile forces and torques applied in reduction of yield nano- additive.

Some economic benefits of the project included:25% reduction in friction coefficient ,Increased heat transfer , Increasing cutting up warding velocity speed,cleaning  wellbore and  penetrating  rate , Minimize damage to the reservoir rocks and tools

Project achievements:stuck pipedecrease due to the differentialpressure ,improve the drilling rate due to the reduced torque, To avoid additional costs imposed by the friction and wear parts for drilling, Prepare beds and other infrastructure required in the manufacture of nano- additive usedin drilling fluids

 

Nitrogen Generator in NISOC Fields

 

National Iranian South Oil Company (NISOC) has installed, for the first time, a nitrogen generation pump in Well No. 190 of Ahvaz.

The system was launched in the presence of NISOC managing director Hamid Bovard.

Mohammad-Mehdi Zarei, deputy head of NISOC for drilling, said the system is installed in the well in order to pump the required air for the revival of wells.

“In the traditional method, liquefied nitrogen was carried in a tanker from the factory to be pumped into the well,” he said.

“Due to the limited number of tankers carrying nitrogen, long distances and the wells’ need, that could have taken several days, but the advantage of this system is that, the duration is cut from five days to 24 hours,” he added.

Zarei said the system is equipped with an air compressor which pumps 40-bar air and separates nitrogen from the air through reverse osmosis procedure. Then the nitrogen is pumped into the well at the volume of six gallons per minute.

“This operation will revive the wells and is often used in the wells experiencing pressure fall-off due to water production or use of drilling fluid weighing heavier than the well pressure,” he said.

Oil Service Contracts in Iran

 

In August 1966, National Iranian Oil Company (NIOC) concluded a 25-year service contract with the French state oil company Entreprise de recherches et d'activités pétrolières (ERAP), which created a new Iranian-registered subsidiary, Société française de pétroles d'Iran (Sofiran), to explore oil. NIOC made all policy decisions in respect to Sofiran’s operations within Iran, while Sofiran had functional management responsibility.

This service contract was the first to that date to recognize Iran’s sovereignty on its oil resources.

 

Exploration Costs

 

Iran’s economy was heavily dependent on oil revenues in the 1960s. Iran had defined development projects based on its petrodollars. Therefore, the country had to adopt a policy to be able to take maximum benefit from its oil resources and had to make a precise assessment of its huge hydrocarbon reservoirs. Acquiring such valuable data required heavy costs and time for a developing country like Iran. A great deal of exploration and prospecting were necessary for getting the required data.

 

Foreign Investment Attraction

 

The most reasonable and economical way for Iran to achieve its oil objectives was to attract foreign investment. In the meantime, all operations needed to be controlled by NIOC.

These double objectives were achieved after NIOC signed a contract with France’s ERAP which had promised to conduct exploration, geological and geophysical studies in one year and provide them to NIOC.

The joint venture strategy was developed in the 1960s. In 1965 six new joint venture agreements were signed, followed by three more, including one with a Japanese group, in 1971. As a result of the joint venture arrangements and the December 1966 agreement, NIOC began to have its own supply of crude oil.

 

 

Iran, Leader in Service Contracts

 

During the second half of the 1960s, NIOC heightened its exploration efforts within Iran through the use of service contracts. Service contracts differed from joint ventures in that the foreign operator had no ownership rights in Iran at all, but was only a contractor working for NIOC and was remunerated for its services with crude oil.

The signature of the agreement with France’s ERAP led to a revolution in the terms and conditions of oil contracts.

Sofiran was commissioned to explore oil within certain designated areas of Iran, and to supply the technical services to exploit the oil fields discovered. ERAP committed to contribute the initial funds for financing the extraction operations and, if oil fields were discovered, carry out extraction, until the cash flow, accruing to NIOC as a result of the operations, would enable NIOC to provide the financing.

NIOC was liable for the repayment of the funds advanced by ERAP, but only if oil fields were discovered and commercial production of oil (regular export of at least 100,000 cubic meters of oil) had commenced. NIOC also undertook to sell to ERAP a certain percentage of the crude oil extracted from the discovered fields, at a preferential price.

 

Iran, Key Player

 

The Iranian government was a prominent player in the events in the early 1970s that led to the end of the consortium system in the Middle East, and the huge price rises of 1973 and 1974. Because the 1951 nationalization of the Iranian oil industry had never been canceled, however, there was no formal transfer of assets of the kind seen almost everywhere in the Arab world. In July 1973, negotiations between the eight-member consortium Iranian Oil Participants (IOP), formed in September 1954, and the Iranian government led to a new agreement, which replaced the one signed in 1954.

NIOC assumed sole responsibility over the former consortium area. The IOP member companies agreed to provide part of the future capital investment in production operations by NIOC in the form of annual prepayments against their future crude oil purchases. The IOP companies also were given preferential oil-purchase rights in Iran for a period of 20 years.

Ardabil, the city of mystical simplicity and glory

Tourist attractions and historic monuments in the city of Ardabil were so numerous that we could not find enough time to take a rest during our two-day trip there. What were associating my ideas with the city of Ardabil, were beautiful sceneries and clean and cool weather in this hot summer. However, these beautiful sceneries along with unique historic monuments such as Friday mosque and Sheikh Safi Shrine, make the city of Ardabil immanent in my mind forever.

Before the journey, I have heard from my family and friends many times about this shrine but these hearsays were completely different from what I saw in reality. A monument to the extremely beautiful and yet comprehensive where was the domicile and the tomb of the major ancestor of Safavid ancestry. An ancestry which during their 300-year reign on Iran could establish a united and unique empire and by formalization of Shia, could create golden period for Islam and Islamic civilization. 

Sheikh Safi Complex

The precious Sheikh Safi complex, the ancestor of Safavid kings, was built in 735/1334 by his son, Sadr al-Dīn Mūsā. In addition to beautiful tiles, what was so magnificent since our entrance to this historic monument, was a high dome in the name of Allah Allah dome; a brick-made dome which was decorated with turquoise-colored tiles in different shapes of Allah word.

 Unparalleled harmony

An unparalleled harmony between brown and blue color on this dome bestows a special sight to the entrance of this shrine. We took our shoes off before entrance to the shrine and by crossing a corridor, we entered the major apron of the Kānaqāh which was the place for the gathering and worshiping of the sufis' and enlightened in the past. Unlike the other Islamic constructions, turquoise-colored tilework was replaced by a beautiful synthesis of a blue and gold color on the Muqarnas and Stucco decoration in this Portico. I dashed toward a woman who wanted to explain about this historic monument.       

 

A Shrine with the Novel Artistic Contents

A leader whilst greeting us, pointed to the end of the entrance. This shrine which was situated in the same Allah Allah dome had 600-year old antiquity. Sheikh Safi's casket (wooden box), one of the world biggest and most beautiful caskets, from the outside of the Allah Allah dome was completely conspicuous. Other caskets which belong to the Sheikh Safi's son and grandson were located next to this big casket. The leader warned that, all present caskets in this complex are symbolic and the corps have been buried under the earth. I moved toward the Allah Allah dome and I tried to experience its embodied novel artistic contents from close distance.

The Oldest World Wallpaper

While I was wondered if I could ask the leader a question about most beautiful and novel wall decoration of Sheikh Safi's Shrine, the leader started to explain. She reminded that, today this decoration is known as the oldest world wallpaper. She believed that, all the wall decorations of this complex were done on the canvas. These canvases were painted in the Safavid style by gold powder and some minerals. This style was one of the exclusive styles of decoration and today is known as the oldest world wallpaper.

Except to Allah Allah dome, the other paintings of the complex which were similar to wallpaper designs were done on the plaster. Sheikh Safi's casket, one of the most precious caskets of the world, was one of the other valuable things of the complex decorated with turquoise, other rondelle, Khatam and wood carving.  

The Most Precious World Casket

Shāh Ismāil I's tomb was located next to the tomb of Sheikh Safi. Shāh Ismāil, the sixth descendant of Safi-ad-din Ardabili, marched toward the Uzbeks and The Ottomans when he was 13 years old. He ascended the throne when he was 15 years old and unified all of Iran. He died at the relatively early age of thirty eight after reaction to typhoid fever.  Before death, he had the will to be buried near the tomb of Sheikh Safi. An etched figure of a giant hand, in front of the Shah Ismail's casket and among the colorful tiles, was the sign of Panj-tan-e Āl-e Abā. The leader stated that, the figure also symbolizes the Shah Ismail's unified government. Shah Ismail's Casket, the most precious casket in the world, was decorated with Jade, tusk and turquoise. This casket was built 500 years ago and many times throughout history it was exposed for sale or swap, but fortunately the short gates of the tomb prevented.    

 

 

The Oldest Building of the Complex

After visiting these beautiful tombs, the leader led us to the Haram Khane (Ladies Quarters) which was the oldest building of the Sheikh Safi's complex. Haram Khane was a place in which Sheikh Safi worshiped however when his oldest son, Mohi Al-din Mohammad died, was buried in this place and Haram Khane converted into Sheikh Safi's family tomb. In my opinion, Haram Khane was the simplest building of the complex. The truth of my opinion was verified by the entrance to the Chini Khane Forum.   

 Glorious Decorative art

Chini Khane was one of the most wonderful and magnificent forums in Iran. From rags to riches of this forum was the representation of Iranian art glory and greatness. The 60-square meter carpet strewn around the forum was woven with gold and mineral colors over 8 years. At the top of the carpet, a bit of Hafiz poetry was woven: "save Thy threshold, my shelter in the world is none.
Save this door, my fortress-place is none." I thought that these beautiful words of Hafiz refered to the sacred and pretty tomb of Sheikh Safi. The carpet design was similar to the wall design of the major apron of the Kānaqāh. The leader expressed that 400 years ago, during the rule of Shah Abbas Safavi, china emperor offered 1200 Chinese porcelains to Shah Abbas due to the establishment of security in the Silk Road. Shah Abbas, 2^nd descendent of Sheikh Safi, dedicated donated porcelains to Sheikh Safi's complex and Sheikh Bahai, famous Safavi scientist and enlightened, designed carving and chambers on the wall for decorative purposes and put the porcelains into the chambers. Today many of these beautiful porcelains, some of them were still found in the tomb, are kept in Hermitage Museum.           

Greatness in Simplicity

At the end of the Chini Khane forum, which its glory from the echo of leader's voice was quite tangible, was a showcase, in which the cloak of Sheikh Safi was kept. The cloak, 700 years ago was donated by Sheikh Zahed Gilani to Sheikh Safi. The cloak was a sign by which Sheikh Zahed introduced Sheikh Safi as a pole Alarfyn and his successor. One of the main features of this cloak is its bigness which refers to moral authority of the Sufi traveler.

The pleasure of enjoying these beauties was endless. With a camera in my hands, I turned around and tried to record all these moments. I wasn't sure what time once again I will come back to this beautiful monument. while I was filming from anywhere of the Sheikh Safi's complex, the head of public relations of Ardabil province Gas company, I was their guest in two days, encouraged me to leave the tomb to visit one of the other Iran architectural wonders namely Ardabil Friday Mosque. 

Iranian Religious Background

We moved toward the Friday mosque. Most Ardabil historic monuments belong to Safavid era but Friday Mosque, one of the oldest Iranian mosques, was founded in Seljuqi era. It was near the sunset and the orange sun went down off.  Curator told us, "Visiting the historic part of the mosque is forbidden." But we have begged him to let us visit the historic part. He accepted our request and opened the door of historic part of Friday Mosque. Since I entered the mosque, I told myself, "if I couldn't visit this part, my life went with the wind," because this mosque was like a birth certificate which had registered all Iranian religious background in every age and state. The primary building of the mosque was a Parthian fire temple. Excavations conducted on one of the sides of this foursquare mosque, revealed the existence of a hearth. In Seljuqi period this fire temple converted into a mosque. The brick body of this mosque is the main feature of Seljuqi and Ilkhani architecture. Friday Mosque kept on its body the characteristics of different ages architectures. For example, turquoise tilework represented the Safavi architecture. Generally excavations conducted on this mosque revealed the signs that any of them represents Iranian beliefs and regulations in each period.

 The First Iranian pool

On the way back from the mosque, we visited Ardabil traditional bath which belonged to the Ilkhani period. From architectural point of view, the bathroom was completely similar to other Iranian bathrooms, but unlike the other bathrooms, there were no sign of splendid tileworks. The walls were decorated with simple plaster and from the entry door, the simplicity was immediately conceivable. The first Iranian swimming pool was in this bathroom and now turned to a museum of Ardabil old photographs and Safavi tools and implements of war. The bath visit time was running out and we were forced to leave this historic monument.

Ardabil, the City of Mystical simplicity

On the way back from the bathroom, we passed through historical texture which includes Ardabil traditional bazaar. I have tried all the time to find a reason to justify the simplicity and yet the glory of Ardabil historic monuments. Glory and greatness along with simplicity was a paradoxical situation that can only be reconciled in Sufi. Sufis live simply but enjoy moral glory.  Disposition of Sufism can be found in Ardabil historic monuments where is the birthplace of Sufism and provided the ground for connection of two contrasting features like simplicity and glory.    

Ardabil, the city of mystical simplicity and glory

Tourist attractions and historic monuments in the city of Ardabil were so numerous that we could not find enough time to take a rest during our two-day trip there. What were associating my ideas with the city of Ardabil, were beautiful sceneries and clean and cool weather in this hot summer. However, these beautiful sceneries along with unique historic monuments such as Friday mosque and Sheikh Safi Shrine, make the city of Ardabil immanent in my mind forever.

Before the journey, I have heard from my family and friends many times about this shrine but these hearsays were completely different from what I saw in reality. A monument to the extremely beautiful and yet comprehensive where was the domicile and the tomb of the major ancestor of Safavid ancestry. An ancestry which during their 300-year reign on Iran could establish a united and unique empire and by formalization of Shia, could create golden period for Islam and Islamic civilization. 

Sheikh Safi Complex

The precious Sheikh Safi complex, the ancestor of Safavid kings, was built in 735/1334 by his son, Sadr al-Dīn Mūsā. In addition to beautiful tiles, what was so magnificent since our entrance to this historic monument, was a high dome in the name of Allah Allah dome; a brick-made dome which was decorated with turquoise-colored tiles in different shapes of Allah word.

 Unparalleled harmony

An unparalleled harmony between brown and blue color on this dome bestows a special sight to the entrance of this shrine. We took our shoes off before entrance to the shrine and by crossing a corridor, we entered the major apron of the Kānaqāh which was the place for the gathering and worshiping of the sufis' and enlightened in the past. Unlike the other Islamic constructions, turquoise-colored tilework was replaced by a beautiful synthesis of a blue and gold color on the Muqarnas and Stucco decoration in this Portico. I dashed toward a woman who wanted to explain about this historic monument.       

 

A Shrine with the Novel Artistic Contents

A leader whilst greeting us, pointed to the end of the entrance. This shrine which was situated in the same Allah Allah dome had 600-year old antiquity. Sheikh Safi's casket (wooden box), one of the world biggest and most beautiful caskets, from the outside of the Allah Allah dome was completely conspicuous. Other caskets which belong to the Sheikh Safi's son and grandson were located next to this big casket. The leader warned that, all present caskets in this complex are symbolic and the corps have been buried under the earth. I moved toward the Allah Allah dome and I tried to experience its embodied novel artistic contents from close distance.

The Oldest World Wallpaper

While I was wondered if I could ask the leader a question about most beautiful and novel wall decoration of Sheikh Safi's Shrine, the leader started to explain. She reminded that, today this decoration is known as the oldest world wallpaper. She believed that, all the wall decorations of this complex were done on the canvas. These canvases were painted in the Safavid style by gold powder and some minerals. This style was one of the exclusive styles of decoration and today is known as the oldest world wallpaper.

Except to Allah Allah dome, the other paintings of the complex which were similar to wallpaper designs were done on the plaster. Sheikh Safi's casket, one of the most precious caskets of the world, was one of the other valuable things of the complex decorated with turquoise, other rondelle, Khatam and wood carving.  

The Most Precious World Casket

Shāh Ismāil I's tomb was located next to the tomb of Sheikh Safi. Shāh Ismāil, the sixth descendant of Safi-ad-din Ardabili, marched toward the Uzbeks and The Ottomans when he was 13 years old. He ascended the throne when he was 15 years old and unified all of Iran. He died at the relatively early age of thirty eight after reaction to typhoid fever.  Before death, he had the will to be buried near the tomb of Sheikh Safi. An etched figure of a giant hand, in front of the Shah Ismail's casket and among the colorful tiles, was the sign of Panj-tan-e Āl-e Abā. The leader stated that, the figure also symbolizes the Shah Ismail's unified government. Shah Ismail's Casket, the most precious casket in the world, was decorated with Jade, tusk and turquoise. This casket was built 500 years ago and many times throughout history it was exposed for sale or swap, but fortunately the short gates of the tomb prevented.    

 

 

The Oldest Building of the Complex

After visiting these beautiful tombs, the leader led us to the Haram Khane (Ladies Quarters) which was the oldest building of the Sheikh Safi's complex. Haram Khane was a place in which Sheikh Safi worshiped however when his oldest son, Mohi Al-din Mohammad died, was buried in this place and Haram Khane converted into Sheikh Safi's family tomb. In my opinion, Haram Khane was the simplest building of the complex. The truth of my opinion was verified by the entrance to the Chini Khane Forum.   

 Glorious Decorative art

Chini Khane was one of the most wonderful and magnificent forums in Iran. From rags to riches of this forum was the representation of Iranian art glory and greatness. The 60-square meter carpet strewn around the forum was woven with gold and mineral colors over 8 years. At the top of the carpet, a bit of Hafiz poetry was woven: "save Thy threshold, my shelter in the world is none.
Save this door, my fortress-place is none." I thought that these beautiful words of Hafiz refered to the sacred and pretty tomb of Sheikh Safi. The carpet design was similar to the wall design of the major apron of the Kānaqāh. The leader expressed that 400 years ago, during the rule of Shah Abbas Safavi, china emperor offered 1200 Chinese porcelains to Shah Abbas due to the establishment of security in the Silk Road. Shah Abbas, 2^nd descendent of Sheikh Safi, dedicated donated porcelains to Sheikh Safi's complex and Sheikh Bahai, famous Safavi scientist and enlightened, designed carving and chambers on the wall for decorative purposes and put the porcelains into the chambers. Today many of these beautiful porcelains, some of them were still found in the tomb, are kept in Hermitage Museum.           

Greatness in Simplicity

At the end of the Chini Khane forum, which its glory from the echo of leader's voice was quite tangible, was a showcase, in which the cloak of Sheikh Safi was kept. The cloak, 700 years ago was donated by Sheikh Zahed Gilani to Sheikh Safi. The cloak was a sign by which Sheikh Zahed introduced Sheikh Safi as a pole Alarfyn and his successor. One of the main features of this cloak is its bigness which refers to moral authority of the Sufi traveler.

The pleasure of enjoying these beauties was endless. With a camera in my hands, I turned around and tried to record all these moments. I wasn't sure what time once again I will come back to this beautiful monument. while I was filming from anywhere of the Sheikh Safi's complex, the head of public relations of Ardabil province Gas company, I was their guest in two days, encouraged me to leave the tomb to visit one of the other Iran architectural wonders namely Ardabil Friday Mosque. 

Iranian Religious Background

We moved toward the Friday mosque. Most Ardabil historic monuments belong to Safavid era but Friday Mosque, one of the oldest Iranian mosques, was founded in Seljuqi era. It was near the sunset and the orange sun went down off.  Curator told us, "Visiting the historic part of the mosque is forbidden." But we have begged him to let us visit the historic part. He accepted our request and opened the door of historic part of Friday Mosque. Since I entered the mosque, I told myself, "if I couldn't visit this part, my life went with the wind," because this mosque was like a birth certificate which had registered all Iranian religious background in every age and state. The primary building of the mosque was a Parthian fire temple. Excavations conducted on one of the sides of this foursquare mosque, revealed the existence of a hearth. In Seljuqi period this fire temple converted into a mosque. The brick body of this mosque is the main feature of Seljuqi and Ilkhani architecture. Friday Mosque kept on its body the characteristics of different ages architectures. For example, turquoise tilework represented the Safavi architecture. Generally excavations conducted on this mosque revealed the signs that any of them represents Iranian beliefs and regulations in each period.

 The First Iranian pool

On the way back from the mosque, we visited Ardabil traditional bath which belonged to the Ilkhani period. From architectural point of view, the bathroom was completely similar to other Iranian bathrooms, but unlike the other bathrooms, there were no sign of splendid tileworks. The walls were decorated with simple plaster and from the entry door, the simplicity was immediately conceivable. The first Iranian swimming pool was in this bathroom and now turned to a museum of Ardabil old photographs and Safavi tools and implements of war. The bath visit time was running out and we were forced to leave this historic monument.

Ardabil, the City of Mystical simplicity

On the way back from the bathroom, we passed through historical texture which includes Ardabil traditional bazaar. I have tried all the time to find a reason to justify the simplicity and yet the glory of Ardabil historic monuments. Glory and greatness along with simplicity was a paradoxical situation that can only be reconciled in Sufi. Sufis live simply but enjoy moral glory.  Disposition of Sufism can be found in Ardabil historic monuments where is the birthplace of Sufism and provided the ground for connection of two contrasting features like simplicity and glory.    

Ardabil, the city of mystical simplicity and glory

Tourist attractions and historic monuments in the city of Ardabil were so numerous that we could not find enough time to take a rest during our two-day trip there. What were associating my ideas with the city of Ardabil, were beautiful sceneries and clean and cool weather in this hot summer. However, these beautiful sceneries along with unique historic monuments such as Friday mosque and Sheikh Safi Shrine, make the city of Ardabil immanent in my mind forever.

Before the journey, I have heard from my family and friends many times about this shrine but these hearsays were completely different from what I saw in reality. A monument to the extremely beautiful and yet comprehensive where was the domicile and the tomb of the major ancestor of Safavid ancestry. An ancestry which during their 300-year reign on Iran could establish a united and unique empire and by formalization of Shia, could create golden period for Islam and Islamic civilization. 

Sheikh Safi Complex

The precious Sheikh Safi complex, the ancestor of Safavid kings, was built in 735/1334 by his son, Sadr al-Dīn Mūsā. In addition to beautiful tiles, what was so magnificent since our entrance to this historic monument, was a high dome in the name of Allah Allah dome; a brick-made dome which was decorated with turquoise-colored tiles in different shapes of Allah word.

 Unparalleled harmony

An unparalleled harmony between brown and blue color on this dome bestows a special sight to the entrance of this shrine. We took our shoes off before entrance to the shrine and by crossing a corridor, we entered the major apron of the Kānaqāh which was the place for the gathering and worshiping of the sufis' and enlightened in the past. Unlike the other Islamic constructions, turquoise-colored tilework was replaced by a beautiful synthesis of a blue and gold color on the Muqarnas and Stucco decoration in this Portico. I dashed toward a woman who wanted to explain about this historic monument.       

 

A Shrine with the Novel Artistic Contents

A leader whilst greeting us, pointed to the end of the entrance. This shrine which was situated in the same Allah Allah dome had 600-year old antiquity. Sheikh Safi's casket (wooden box), one of the world biggest and most beautiful caskets, from the outside of the Allah Allah dome was completely conspicuous. Other caskets which belong to the Sheikh Safi's son and grandson were located next to this big casket. The leader warned that, all present caskets in this complex are symbolic and the corps have been buried under the earth. I moved toward the Allah Allah dome and I tried to experience its embodied novel artistic contents from close distance.

The Oldest World Wallpaper

While I was wondered if I could ask the leader a question about most beautiful and novel wall decoration of Sheikh Safi's Shrine, the leader started to explain. She reminded that, today this decoration is known as the oldest world wallpaper. She believed that, all the wall decorations of this complex were done on the canvas. These canvases were painted in the Safavid style by gold powder and some minerals. This style was one of the exclusive styles of decoration and today is known as the oldest world wallpaper.

Except to Allah Allah dome, the other paintings of the complex which were similar to wallpaper designs were done on the plaster. Sheikh Safi's casket, one of the most precious caskets of the world, was one of the other valuable things of the complex decorated with turquoise, other rondelle, Khatam and wood carving.  

The Most Precious World Casket

Shāh Ismāil I's tomb was located next to the tomb of Sheikh Safi. Shāh Ismāil, the sixth descendant of Safi-ad-din Ardabili, marched toward the Uzbeks and The Ottomans when he was 13 years old. He ascended the throne when he was 15 years old and unified all of Iran. He died at the relatively early age of thirty eight after reaction to typhoid fever.  Before death, he had the will to be buried near the tomb of Sheikh Safi. An etched figure of a giant hand, in front of the Shah Ismail's casket and among the colorful tiles, was the sign of Panj-tan-e Āl-e Abā. The leader stated that, the figure also symbolizes the Shah Ismail's unified government. Shah Ismail's Casket, the most precious casket in the world, was decorated with Jade, tusk and turquoise. This casket was built 500 years ago and many times throughout history it was exposed for sale or swap, but fortunately the short gates of the tomb prevented.    

 

 

The Oldest Building of the Complex

After visiting these beautiful tombs, the leader led us to the Haram Khane (Ladies Quarters) which was the oldest building of the Sheikh Safi's complex. Haram Khane was a place in which Sheikh Safi worshiped however when his oldest son, Mohi Al-din Mohammad died, was buried in this place and Haram Khane converted into Sheikh Safi's family tomb. In my opinion, Haram Khane was the simplest building of the complex. The truth of my opinion was verified by the entrance to the Chini Khane Forum.   

 Glorious Decorative art

Chini Khane was one of the most wonderful and magnificent forums in Iran. From rags to riches of this forum was the representation of Iranian art glory and greatness. The 60-square meter carpet strewn around the forum was woven with gold and mineral colors over 8 years. At the top of the carpet, a bit of Hafiz poetry was woven: "save Thy threshold, my shelter in the world is none.
Save this door, my fortress-place is none." I thought that these beautiful words of Hafiz refered to the sacred and pretty tomb of Sheikh Safi. The carpet design was similar to the wall design of the major apron of the Kānaqāh. The leader expressed that 400 years ago, during the rule of Shah Abbas Safavi, china emperor offered 1200 Chinese porcelains to Shah Abbas due to the establishment of security in the Silk Road. Shah Abbas, 2^nd descendent of Sheikh Safi, dedicated donated porcelains to Sheikh Safi's complex and Sheikh Bahai, famous Safavi scientist and enlightened, designed carving and chambers on the wall for decorative purposes and put the porcelains into the chambers. Today many of these beautiful porcelains, some of them were still found in the tomb, are kept in Hermitage Museum.           

Greatness in Simplicity

At the end of the Chini Khane forum, which its glory from the echo of leader's voice was quite tangible, was a showcase, in which the cloak of Sheikh Safi was kept. The cloak, 700 years ago was donated by Sheikh Zahed Gilani to Sheikh Safi. The cloak was a sign by which Sheikh Zahed introduced Sheikh Safi as a pole Alarfyn and his successor. One of the main features of this cloak is its bigness which refers to moral authority of the Sufi traveler.

The pleasure of enjoying these beauties was endless. With a camera in my hands, I turned around and tried to record all these moments. I wasn't sure what time once again I will come back to this beautiful monument. while I was filming from anywhere of the Sheikh Safi's complex, the head of public relations of Ardabil province Gas company, I was their guest in two days, encouraged me to leave the tomb to visit one of the other Iran architectural wonders namely Ardabil Friday Mosque. 

Iranian Religious Background

We moved toward the Friday mosque. Most Ardabil historic monuments belong to Safavid era but Friday Mosque, one of the oldest Iranian mosques, was founded in Seljuqi era. It was near the sunset and the orange sun went down off.  Curator told us, "Visiting the historic part of the mosque is forbidden." But we have begged him to let us visit the historic part. He accepted our request and opened the door of historic part of Friday Mosque. Since I entered the mosque, I told myself, "if I couldn't visit this part, my life went with the wind," because this mosque was like a birth certificate which had registered all Iranian religious background in every age and state. The primary building of the mosque was a Parthian fire temple. Excavations conducted on one of the sides of this foursquare mosque, revealed the existence of a hearth. In Seljuqi period this fire temple converted into a mosque. The brick body of this mosque is the main feature of Seljuqi and Ilkhani architecture. Friday Mosque kept on its body the characteristics of different ages architectures. For example, turquoise tilework represented the Safavi architecture. Generally excavations conducted on this mosque revealed the signs that any of them represents Iranian beliefs and regulations in each period.

 The First Iranian pool

On the way back from the mosque, we visited Ardabil traditional bath which belonged to the Ilkhani period. From architectural point of view, the bathroom was completely similar to other Iranian bathrooms, but unlike the other bathrooms, there were no sign of splendid tileworks. The walls were decorated with simple plaster and from the entry door, the simplicity was immediately conceivable. The first Iranian swimming pool was in this bathroom and now turned to a museum of Ardabil old photographs and Safavi tools and implements of war. The bath visit time was running out and we were forced to leave this historic monument.

Ardabil, the City of Mystical simplicity

On the way back from the bathroom, we passed through historical texture which includes Ardabil traditional bazaar. I have tried all the time to find a reason to justify the simplicity and yet the glory of Ardabil historic monuments. Glory and greatness along with simplicity was a paradoxical situation that can only be reconciled in Sufi. Sufis live simply but enjoy moral glory.  Disposition of Sufism can be found in Ardabil historic monuments where is the birthplace of Sufism and provided the ground for connection of two contrasting features like simplicity and glory.    

 

Ardabil Province Gas Company

Our two-day journey to Ardabil province was hosted by the Gas Company of this province. Ardabil Gas Company is one of the leading companies among other provinces. Because of the cold Ardabil Province, this company has supplied the gas to all Ardabil cities in cold days well and has imparted all cities of Ardabil from the blessings of natural gas. Khodaie, CEO Ardabil Gas Company, confirms that, in order to save and reduce the energy consumption, for the first time in 2010, a research project of applying burner blowers in the heater of Arjestan CGS station was defined and adopted.   

He continues that, after the approval of this massive project, research section of the Ardabil Province Gas Company commenced the engineering operations and in 2012 completed the project. By using burner blowers in Ardabil CGS stations, at least 30% the fuel consumption was saved and by continuing this process, it is expected 132400 cubic meters annual gas consumption will be saved.

Khodai adds that, this new technology has many advantages such as high combustion efficiency, proper tuning range, optimal thermal capacity and the simple function and more importantly, application of that makes the company able to achieve significant saving in gas consumption.