Tehran Oil Show against Covid-19 Background

The 25th edition of Iran annual Oil Show was held in January 2021 against the backdrop of the COVID-19 pandemic. It is one of the best known exhibitions in the energy sector in the region. In this round of exhibition, as expected due to the pandemic, foreign companies could not attend.

Rather than that, more than 500 Iranian companies, associations, engineering groups, manufacturers, universities, scientific centers, startups and other oil, gas, petrochemical and refining players put their capabilities on display for specialists, managers and experts.

The 25th Exhibition’s slogan was “National Oil, Iranian Commodity and Service”. A tour of booths in the exhibition on 25,000 square meters indicated how Iranian players had transformed threats into opportunities with a view to developing their capabilities and how they have managed to nationalize the bulk of oil, gas, refining and petrochemical needs.

During the four-day event, hundreds of memorandums and agreements were signed, showing promising days ahead about the realization of the symbolic slogan.

COVID-19 restrictions and closure of the exhibition to public turned the 25th exhibition to a place of gathering for exports and managers of the petroleum industry. They had the chance to exchange views without being influenced by marginal issues. 

Petroleum industry directors and managers of subsidiary companies were more active than ever at this year’s exhibition.

Minister of Petroleum Bijan Zangeneh visited the fairground all four days of the event to endure Iranian manufacturers, knowledge-based companies, universities and research centers that the Petroleum Ministry would continue to interact with them.

The most important aspect of this year’s exhibition may lie in the fact that the hardships of sanctions have failed to prevent Iran’s petroleum industry from developing further. In addition to huge oil and gas reserves, Iran is still endowed with industrial, engineering, research, technical and management capability that would bespeak a better future.

Bidboland Gas Refinery Started Up

Iran inaugurated the $3.2 billion Persian Gulf Bidboland Gas Refinery contrary to backdrop of tough US sanctions against its petroleum industry.

Known as the third megaproject of the kind in the world, the refinery now symbolizes the high level of technical knowledge of Iranian petroleum industry human resources.

Implementation of this project is key to reducing air pollution.

Minister of Petroleum Bijan Zangeneh said the gas refinery inauguration was a sign of full failure of US sanctions and maximum pressure policy on the one hand, and Iran’s national perseverance on the other.

He expressed hope that the Bidboland refinery would help end gas flaring by 2023. 

The Bidboland facility would help reduce environmental pollution as required by the 2015 Paris climate deal.

The startup of this historic project exactly on the day Donald Trump left the White House, symbolized Iran’s resilience to sanctions. That was also realization of the longtime dream of converting flare gas to refinery feedstock in southern Iran.

This environmentally friendly project will sustainably supply feedstock to the petrochemical industry and turn off oil field flares. With the inauguration of this project, feedstock will be supplied to downstream petrochemical units while associated gas will be gathered in the three provinces of Kohguiluyeh and Boyer Ahmad, Bushehr and Khuzestan to be turned into feedstock in the NGL 900, 1000, 1200 and 1300 for the Bidboland refinery. The first product of this refinery is methane which would be fed into national trunkline. The ethane at this refinery would be either fed into the Gachsaran petrochemical plant for new polyolefin projects or would feed olefin units of the Mahshahr area.

Refinery Startup Under Sanctions

The Bidboland refinery project was first proposed in 2000 by the Petroleum Ministry to the Economic Council. It was awarded through a tender bid to a consortium of three foreign companies and two Iranian contractors. The foreign firms pulled out of the project in 2005 due to international sanctions. The project was then assigned to Sepehr Energy, but it did not go ahead due to lack of financing. Under Zangeneh’s initiative, the project was finally assigned to the Persian Gulf Petrochemical Industries Company (PGPIC) when it had only progressed 18% in 2015.

Iran’s historic nuclear deal in 2015 with six world powers provided a chance for the purchase of the required equipment for this refinery, but after the restoration of sanctions in 2018, Iranian engineers had to rely on domestic knowledge to complete the refinery.

The refinery is estimated to earn Iran up to $1.5 billion in revenue. Aside from that, it would end gas flaring in the country, which is the more important aspect of the facility.

Objective Achieved

Iran’s President Hassan Rouhani, addressing the Bidboland gas refinery project commissioning ceremony, said gas flaring was an issue his administration dealt with seriously.

“The flaring of gas would mean the burning of our national wealth, but with the inauguration of the Bidboland gas refinery we have reached the objective we had set and I believe that implementation of such important project would pave the way for the 13th administration,” he said.

Rouhani said gas flaring would end in two years as all associated petroleum gas would be gathered rather than being flared to harm the environment.

Petroleum Products Exports Up 4%

Rouhani also said that gasoline production had more than doubled to 110 ml/d under his administration.

“Petroleum products’ exports have also increased four-fold. In 2013, our products exports reached 5.9 million tonnes in the oil and gas sector, but has now reached 22.3 million tonnes a year,” he said.

He said that Iran was experiencing the production of 1 bcm/d of gas for the first time.

Rouhani said: “We are a nation rich in oil and gas reserves and we have numerous shipping lines. Therefore, we enjoy a special place in the energy industry.”

Noting that the world depends on Iran’s oil and gas, Rouhani said: “We can become the reginal hub of gas production and exports because one component of our national power is our energy. I believe that good job has been done in gas exports, but we are still lagging behind. We need to be among the top five gas exporters in the world.”

95% Flare Gas Gathering

Minister Zangeneh said the Bidboland project inauguration had been planned to bring an end to gas flaring by March 2023, and more than 95% of associated gas would be gathered.

He said that commissioning of the Bidboland refinery was not the end of the story.

“The Persian Gulf Bidboland refinery is completing a chain ending in high-value petrochemical products,” he added.

Zangeneh said the Bidboland refinery would supply feedstock to the Bandar Imam petrochemical plant, as well as feed the olefin and polyethylene units of the Gachsaran petrochemical plant. More than 1 million tonnes of ethane would be transmitted from the refinery to Gachsaran.

Furthermore, with a $1,050 million investment, a 300,000-tonne polyethylene production plant would be built in Gachsaran and a similar one in Dehdasht. Later on, two other projects including a mini-refinery for the production of gasoline at 15,000 b/d would be built. This planned mini-refinery would be fed with pentane plus.

Zangeneh said Iran’s gas production had increased at levels equal to 2.5 phases of the South Pars gas field.

“Even under sanctions with toughest pressure on the petroleum industry, we never halted activities related to the petroleum industry in Khuzestan and the rest of the country,” he said.

Zangeneh said Khuzestan Province was a major focal point of development activities of the petroleum industry.

Along with the development of the Azadegan and Yadavaran fields, four IPC agreements worth $4.6 billion had been signed or the development of oil fields in Khuzestan Province.

“Sixteen agreements have been implemented for the development of oil fields with an investment of $2.2 billion in this province,” said Zangeneh.

65% Share of Domestic Manufacturers

CEO of PGPIC Jafar Rabiei said all sectors of this projects including designing and building of 1,000 kilometers of pipeline for the gathering and delivery of associated gas to the refinery and delivery of products to destinations in three provinces, construction of the refinery with the capacity of sweetening and processing of more than 2 bcf/d of gas and the annual production capacity of more than 14 million tonnes of ethane, methane, butane, propane and pentane plus, construction of storage facilities and export jetties in Mahshahr had all been handled by Iranian engineering companies and contractors despite sanctions. He said that the share of domestic manufacturers in the project was over 65%.

The project has been financed at $2.2 billion from annual budget and $3.4 billion from National Development Fund of Iran (NDFI). A consortium of Iranian banks served as the agent bank for allocation of fund to the project.

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Largest Gas Gathering Facility in West Asia

The Bidboland refinery is the largest gas gathering facility in West Asia with a capacity of processing more than 56 mcm/d of associated gas. The facility will be receiving 13.5 million tonnes a year of sour gas from NGL 900 and NGL 1000 and 2.25 million tonnes of sweet gas from NGL 1200 and NGL 1300.

The Bidboland refinery will supply 10.4 million tonnes of methane, 1.5 million tonnes of ethane, 1 million tonnes of propane, 0.5 million tonnes of butane, 0.6 million tonnes of gas condensate and 0.9 million tonnes of acid gas.

The produced methane will be injected into the national gas grid, while ethane would serve as feedstock to the Gachsaran petrochemical plant to feed the Dena ethylene pipeline, and other petrochemical plants in the Mahshahr special petrochemical zone. However, because the Gachsaran petrochemical plant is not ready yet, the entire ethane will be delivered to the Mahshahr zone. Propane and butane would be exported to the Mahshahr jetty for export.

Sour Gas Recovery and Processing

Even a single drop of waste will not be released from the Persian Gulf Bidboland refinery owing to special evaporation pools considered for that purpose. Furthermore, in order to prevent water from being wasted away, about 1ml/d of water entering the evaporation pools would be recovered with zero discharge liquid (ZDL) systems to be re-used.

The acid gas produced at the Bidboland refinery would not be flared to avoid environmental damage. Sour gas constitutes 85% of the feedstock supplied to the Bidboland refinery. By sour gas recovery and processing, acid gas is separated. Then, it is desulfurized. More than €65 million has been spent to sweeten the separated gas and return it to the Aghajari gas compressors for injection into oil wells.

A $1.2 billion agreement for flare gas gathering in East Karoun between PGPIC and National Iranian South Oil Company (NISOC) in 2018 for ending flaring of gas while guaranteeing and increasing feedstock supply to the refinery.

The gas condensate sweetening unit or pentane plus is another development project of the PDH unit where gas condensate would be used to produce gasoil and gasoline

Tehran Holds 25th Oil Show

Zangeneh: We’ll Return to Market More Strongly

The 25th annual Oil, Gas, Refining and Petrochemical exhibition was held in late January with the slogan of “National Oil, Iranian Commodity and Services” at the Tehran International Permanent Fairgrounds. In this edition of the exhibition, due to the problems caused by the coronavirus pandemic for foreign companies, the focus was on domestic companies and their capabilities. About 500 major companies including E&P, GC, and EPC companies, universities and academic centers, associations, accelerators and startups involved in the oil and gas sector, rotatory machinery, processing equipment, chemicals, electronic materials and instruments; put their products on display on about 25,000 square meters of land.

Throughout the event, Minister of Petroleum Bijan Zangeneh supported his ministry’s performance during years of sanctions, saying Iran would return to the oil market more strongly than before.

“The enemies intended to bring our exports level down to zero, but thanks to the sacrifice of our colleagues, we set the highest record in petroleum products exports during sanctions, and we did not let them realize their dream of Iran’s zero oil exports,” he said.

Zangeneh said the annual Oil Show had become part of Iranians’ life, adding that it should remain alive along with other branches of public life.

“We cannot cut the relations between producers and clients. This year’s Oil Show was postponed due to the outbreak of the coronavirus. But we had to keep this relationship active and therefore while thoroughly respecting health protocols we held the event,” he added.

Zangeneh said the Petroleum Ministry had determined and approved its measures for the realization of the slogan of “jump in production”.

Touching on the Petroleum Ministry policy in favor of manufacturing commodities and engineering services for the petroleum industry, the minister said: “The slogan chosen for this edition of the exhibition is purposeful; national oil, Iranian commodity and services. This year, we are celebrating the 70th anniversary of nationalization of the petroleum industry. Nationalization is not completed without perfecting potential in the pillars of strength of this industry.”

Knowledge-Based Companies

Zangeneh said special attention would be paid to knowledge-based companies in this edition of the exhibition.

“The most significant pillar in upgrading and nationalizing technology would be to hire general contractor companies. Now, I add exploration and production (E&P) companies. If these companies become active, all of their subsidiaries would become active too,” he added.

The minister said these companies would stimulate demand, adding: “The most important factor that would activate the industry and various branches of domestic production of oil and commodities and equipment which we need is demand. These companies can manufacture commodities and offer services worth tens of thousands of dollars. They can also finance projects or supervise and manage their operation. Return on their investment is largely guaranteed.”

Zangeneh said they were knowledge-based companies in the proper sense of word because knowledge-based companies must rely on technical knowhow and steering and management potential.

Innovation Centers

Zangeneh also touched on the Petroleum Ministry’s initiative to support knowledge-based companies, saying: “We have been supporting knowledge-based companies for more than a year now. Today, we are witnessing it has come to fruition and we will soon develop a roadmap for it. A sign of this is the Rey Park of Oil and Gas Technology on 25 ha of land near the Tehran refinery. All arrangements have been made, its president has been named and it is active now.”

The minister said the technology park would open a bilateral communication channel with knowledge-based companies including startups.

“We hope that it would be helpful not only in Tehran, but all across the country because we are currently cooperating with University of Tehran, Sharif University of Technology, Amir Kabir University of Technology, University of Science and Technology, Isfahan University of Technology, University of Chamran, Petroleum University of Technology and Petroleum Industry and Research Technology to establish innovation centers or plants to upgrade technology. If it is possible in other places, we will support them, too.”

200 Technology Topics in Upstream Sector

Zangeneh said more than 200 technological subjects for commodity and services in the upstream oil sector had been defined for knowledge-based companies.

The minister laid emphasis on the necessity of benefiting from the potential of knowledge-based companies and accelerators in the petroleum industry, saying: “To that end, we have planned to use this potential in two important projects; one being low-yielding wells for which $500 million is envisaged, and one being fuel efficiency in which accelerators can be instrumental.”

Laying emphasis on the significance of energy efficiency, he said: “In this regard, we have pursued the technological manufacturing of strategic and prioritized equipment for the petroleum industry in 10 groups of commodities. We have had good progress in some sectors, but we have still a long way to go in some other sectors.”

Zangeneh said that an agreement had been signed with Oil Turbo Compressor Company (OTC) for manufacturing a number of 16MW compressors to be installed in the South Pars gas field.

No Halt Over Covid

Zangeneh referred to the outbreak of the coronavirus in the country, saying tough supervision was being exercised over the petroleum industry.

“In the wake of the outbreak of covid-19 last March, we could not stop our oil and gas production and operation of refineries and petrochemical plants, because public life had to continue. If no oil, gas and fuel was produced the cycle of public life and plants would have stopped,” he said.

Zangeneh said the Petroleum Ministry set up a working group to guarantee continued oil and gas production despite the pandemic. “HSE divisions in subsidiary companies were required to implement those policies, which proved effective.”

“We also stopped petroleum industry projects during the first 20 days of the coronavirus outbreak, but as the entire work could not be halted everything was resumed in full respect of health protocols,” he said.

Lost Market Share Not Worrying

Zangeneh also told reporters on the sidelines of the Oil show that Iran was not worried over lost market share.

“I am not worried over lost market share, and oil buyers never limit themselves to one or two buyers,” he said.

Zangeneh said Iran’s oil exports had significantly declined recently, adding: “Once sanctions are lifted, we will return to the market more strongly than before, shorter than thought.”

In response to a question about the possibility of sanctions removal and measures undertaken for maximum production, he said: “We are planning and working based on possibilities, but we never make anything public because sanctions have not been lifted yet. However, we are not worried about reviving lost markets.”

“I think that the market will come towards us if sanctions are lifted because oil buyers always seek to diversify their suppliers. The market is very extensive. We have become more powerful than before in marketing and transfer of money over the past three years. If sanctions are lifted, we will return more strongly and reach maximum production in the shortest possible time,” said the minister.

When asked about his prediction of oil market developments under the administration of Joe Biden in the US, he said: “I’m not a fortune-teller. But it depends on them and our politicians have made everything clear.”

Regarding cooperation with Caspian Sea littoral states and agreement with Azerbaijan, he said: “We have had good agreements with the Republic of Azerbaijan. Sanctions have caused problems to the agreements. If sanctions are lifted the agreements are reactivated to serve both nations’ interests.”

Foreign Firms Required to Partner Iranians

Zangeneh held meetings with domestic manufacturing companies in the exhibition. He said the Petroleum Ministry would strongly support domestic manufacturers, adding: “The doors are open for cooperation. Of course, we should refrain from uneconomical work in manufacturing equipment and commodities for the petroleum industry.”

He said the manufacturers that obtain the “Petroleum Association” standard would receive guarantees for their products to be sold. He added that contractors would be required to purchase their required goods from these companies.

The minister said that foreign companies would have to partner an Iranian company to be authorized to work in Iran. “One reason for which we had no problem with gas transmission in recent years, was the use of 150 domestic turbines in the gas network,” he said.

Zangeneh said international cooperation would bring about growth if it is formed properly.

“You (domestic manufacturers) should by no means think that your only market is Iran. Definitely, you should enter other markets too,” he added.

“What I have in my mind is that we want to work with foreign companies we should demand that they guarantee our market share. Market presence is now a technology,” said Zangeneh.

Asked if foreign companies would be invited to petroleum industry projects in Iran once sanctions are lifted, he said: “They are always welcome and we have no problem.”

“The conditions would be different for each foreign company, but the main condition would be partnership with Iranian companies.”

Oil Show Showed Sanctions Ineffective

First Vice President Es’haq Jahangiri, during his visit to the Oil Show, said this year’s exhibition proved the ineffectiveness of sanctions imposed on Iran “because we implemented the largest oil projects with sanctions in place.”

“Nobody imagined that a sanctions-hit country would be able to inaugurate and launch such major oil projects as the Persian Gulf Bidboland gas refinery. But this project was implemented to become a symbol for sanctions-stricken Iran,” he said.

Jahangiri said Iran’s oil exports dropped more than $100 billion after the US restored oil sanctions on Iran in 2018.

“Under [Donald] Trump, the Petroleum Ministry set remarkable records. He who wished Iran’s oil exports would reach zero is gone, but our petroleum products exports have grown four-fold,” he said.

Knowledge-Based Companies

Mohammad Baqer Qalibaf, Iran’s parliament spokesman, said supporting domestic manufacturing should have started decades ago.

“Such need was felt for the petroleum industry in recent years. I hope that the current initiatives would pick up speed,” he said.

Qalibaf also said that the petroleum industry needed to support knowledge-based companies.

Infrastructure Ready for Gas Trading

CEO of National Iranian Gas Company (NIGC) Hassan Montazer Torbati has said Iran had the required infrastructure for gas trading.

Speaking during the annual Oil Show, he said Iran had respected all its contractual commitments.

“As far as gas trading (gas transit and swap) is concerned we have agreements which we are managing. NIGC has laid the groundwork for this purpose by extending pipelines and there is infrastructure for trading,” he said.

Montazer Torbati said Iran had increased its daily natural gas production, adding: “Iran is a major gas producer and our production has now totaled 1,000 mcm/d, or 6 million barrels of oil equivalent a day (mboe/d), which is significant.”

Treatment Capacity at 1bcm/d

Montazer Torbati said Iran’s gas treatment capacity had reached 1.031 bcm/d, while there was capacity to transmit 900 mcm/d of gas in the country.

“Something like South Pars rarely happens and we were lucky enough to have such reservoir and today we have maximized the output from this reservoir. It shows that increased production alone could not meet our national needs so we have to focus on efficiency too,” he said.

Gas Trade with Turkmenistan

Noting that Iran would welcome gas trading with other nations, the NIGC chief said: “Our negotiations with Turkmenistan are going on, but we are not dependent on Turkmenistan’s gas for domestic consumption. However, as a business activity, we have capacity to receive gas from neighboring nations and pass it on to the nations that need it. Private companies in the country are following up on this issue and we have nothing to worry about.”

Iraq Owes Iran $6bn

Montazer Torbati said Iraq owed Iran about $6 billion, part of which has been settled.

He said Iran had respected all of its contractual obligations, adding: “We have agreements with Iraq, Turkey, Azerbaijan Republic and Armenia, which have to be implemented. Pakistan is yet to receive our gas.”

“One of our perspectives was to be able to have a good share in gas trading which covers exports, transit and swap of gas. We have agreements to that effect, and we manage them and NIGC has laid the groundwork for this purpose. Pipelines have been extended across the country and there is infrastructure ready for such trading,” he added.

Knowledge-Based Business in Petchem

CEO of National Petrochemical Company (NPC) Behzad Mohammadi announced the establishment of an office to develop knowledge-based businesses at NPC.

He said: “Communications with knowledge-based companies will be upgraded in order to develop the petrochemical industry.”

Mohammadi said that this year’s exhibition was held with the focus being on domestic manufacturing and knowledge-based companies.

“There are appropriate capacities in these companies and very extensive activity has been done in small-sized companies, which could be greatly helpful for the petroleum industry,” he said.

Mohammadi also touched on the valuable capabilities of knowledge-based companies and startups, saying: “Unfortunately, there was no possibility of communications between these companies and the industry in the past, and no route was established for linking them with the industry.”

The NPC chief said linking petrochemical companies with knowledge-based companies was an important issue to focus upon, adding: “For this purpose, an Office for Development of Knowledge-Based Businesses has been launched at NPC.”

Mohammadi said the idea of the Office was to prepare the ground for communications with petrochemical firms, noting that this objective was being realized.

He assessed as highly effective the involvement of knowledge-based companies in the implementation of petrochemical projects, saying: “NPC is upgrading cooperation with these companies in developing petrochemical projects.”

Mohammadi said agreements had been signed with four universities in 2016 for the development of technical knowhow in petrochemical processes.

Refining Industry Nearly Self-Sufficient

CEO of National Iranian Oil Refining and Distribution Company (NIORDC) Ali-Reza Sadeq-Abadi said domestic companies were largely supplying the needs of the refining industry.

“We can say that this industry is nearly self-sufficient,” he said.

Sadeq-Abadi said: “Fortunately domestic manufacturing in the petroleum industry has reached big potential in Iran, and we can say that in the refining industry all necessary equipment except for compressors and processing furnaces are domestically sourced.”

“The required equipment of this industry is manufactured either entirely by domestic manufacturers or domestic manufacturers import a small portion of the equipment to produce the final product,” he added.

“More than 1,000 kilometers of pipeline has been built in a year for the NIORDC and more than 1 billion liters has been added to the product storage capacity. Our jetties have seen their capacity increase more than 50 million tonnes a year and we are ready to launch these projects,” said Sadeq-Abadi.

He said: “The Malayer oil depot with a storage capacity of 68 million liters of products, the Urmia storage facilities with a capacity of 120 million liters, the Naein storage facilities with a capacity of 300 million liters, the 420-km Naein-Kashan-Rey pipeline, the 290-km Shazand-Qom-Rey pipeline, the 220-km Tabriz-Khoi-Urmia pipeline and the 135-km Abadan-Ahvaz pipeline are among these most important projects to come on-stream.”

Maximum Oil Output Return Possible

Karim Zobeidi, director of corporate planning of National Iranian Oil Company (NIOC), said Iran’s return to maximum crude oil production was possible.

He said: “Iranian oil reservoirs and wells are ready for maximum oil production.”

Zobeidi said the annual Oil Show provided a venue for showcasing the capabilities and potentialities of Iran’s petroleum industry.

“To be fair, in recent years, Iranian companies have seen their capabilities upgraded in domestic manufacturing,” he added.

He said that the construction of the giant project of the Goreh-Jask crude oil pipeline indicated development of domestic industry. “In this project, we are witnessing the manufacturing of pumps by Iranian companies and we can describe this project as thoroughly Iranian.”

Kharg Ready for Maximum Oil Exports

Abbas Assadrouz, CEO of Iran Oil Terminals Company (IOTC), said the Kharg oil terminal was fully ready to maximize crude oil exports.

He said that after the imposition of oil sanctions, IOTC seized the opportunity to renovate its infrastructure.

He said: “Nine berths at the Kharg terminal (three in the western jetty and six in the eastern jetty) are in full readiness and IOTC infrastructure can even handle 8-10mb/d oil exports.”

Assadrouz said steering operations within IOTC required high precision and expertise and paying constant attention to human resources, equipment as well as data and financing issues.

He added: “Relying on its specialized manpower and using the potential of domestic manufacturers and the scientific capacity of universities, IOTC has taken valuable measures with regard to the domestic manufacturing of equipment particularly electronic cards. It has replaced 300 foreign items with Iranian ones.”

Assadrouz touched on the domestic manufacturing of electronic cards for metering systems in collaboration with Sharif University of Technology, saying an agreement was signed with an Iranian company for the production of governor systems.  

He said if this project proves successful, Iran would be for the first time supplying such item.              

1-53% of Bandar Imam Petchem Catalysts Homegrown

Nearly 53% of catalysts used in the production units of the Bandar Imam Petrochemical Plant are manufactured domestically.

The petrochemical plant established its Committee of Domestic Manufacturing in 2018 with a view to developing relations with knowledge-based companies, prestigious domestic universities and research centers, developing systems to create healthy competition, developing intellectual property right, developing relations with regional companies for the purpose of realization of common objectives, developing long-term and lucrative relations with best-known domestic manufacturers, upgrading and developing infrastructure associated with the process of domestic manufacturing within a corporate environment, developing relations with large-sized domestic industries with a view to upgrading innovative ideas in the sectors of spare parts, catalyst and chemicals.

The committee’s activity resulted in the identification of 41,263 parts at the Bandar Imam plant, which could be manufactured inside the country. Now more than 10,000 items have been manufactured in the country by this committee.

In the process of the manufacturing units of the Bandar Imam Petrochemical Plant, 187 catalysts are used. The manufacturing committee has manufactured 99 catalysts and chemicals in partnership with knowledge-based companies in Iran. It is part of polymer and non-polymer catalyst manufacturing efforts.

2-Persian Gulf Star Refinery Risk Drops

The risk manager of the Persian Gulf Star Oil Company has said that the rate of risk at its gas condensate refinery has declined from 1.35 to 1.2 in two years.

“If we proceed with this trend we can bring down the risk rate to 1.1 in two years,” said Mehdi Alizadeh.

He was speaking about the risk rate of the Bandar Abbas Gas Condensate Refinery, commonly known as the Persian Gulf Star Refinery.

Alizadeh said the refinery risk rate was 1.35 in 2017, which was brought down to 1.3 in 2018, adding that finally the risk was reduced to 1.25 in 2019.

Noting that risk rate decline was not based merely on the activity of the risk management division, he said: “Our job is to introduce entirely the principled measures at the refinery to the insurer and this downward trend in risk is the product of relentless efforts made by our colleagues in various sectors.”

“In light of the significance of the refinery insurance, we studied the health insurance policy of the staff and realized conflicts with the insurance bylaw. That would be harmful to the company and the staff,” he said.

Alizadeh said: “We have modified some issues, and while announcing more issues to the insurer, we signed a new agreement based on our expert views and we managed to make the contract unconditional.”

“In the property insurance policy, the insurer had noted everything for non-sanctions era and we have tried to remove any shortcomings,” he said.

Alizadeh said the risk rate was instrumental in the insurance premium, adding: “The lower the risk rate the lower the premium would be.”

3-Well Management System in South Pars

An integrated management system for wells in the phase of operation has been fully implemented for safe and sustainable gas production.

The Well Integrated Management System (WIMS) has been implemented in the form of engineering and management measures for the purpose of reducing fluid outflow risk and the entry of non-reservoir fluid into the well. That is in line with the strategic code on physical assets of the petroleum industry for safe and sustainable gas production.

Mohammad Ayouman, director of technical services of wells at the Directorate of Production and Operations at Pars Oil and Gas Company (POGC), said WIMS was the first system of its kind at the Petroleum Ministry to have been implemented after three years of activity.

“Currently all production wells at the South Pars gas field and other hydrocarbon fields including the Kish, Golshan and Belal, planned for future development, are covered by this code,” he said.

Referring to the significance of implementation of WIMS, Ayouman said: “Production wells are the most important physical assets in the upstream section of South Pars and WIMS indicates a shift from traditional management of wells to knowledge-based management based on the principles of integrated management of physical assets and engineering knowhow.”

He said the first step for the execution of the code was the drafting of a document that determined the general structure of the job and requirements for each section of the WIMS system in addition to the working process. 

“First a list of all international standards available in this field was prepared. Then, after studying and examining all documents, two years of expert work was done within the framework of the rules and regulations of the Petroleum Ministry and other internal documents to allow the for the adoption of the first draft of this code which won the approval of the Directorate of Production and Operations,” the official said.

4-No Need for Foreign Contractors in Refining Megaprojects

CEO of National Iranian Oil Engineering and Construction Company (NIOEC) Saeed Sattari Naeini has said that Iran would no longer need foreign contractors for its refining megaprojects.

“In light of reliance on the capacity of domestic experts in recent years, the petroleum industry no longer needs foreign contractors to implement refining megaprojects,” he said.

“Institutionalization of domestic manufacturing in the petroleum industry is not a mere slogan; rather today we have become fully independent of foreign contractors in refining megaprojects which require billions of dollars in investment,” he added.

Sattari Naeini said that project-oriented companies, including NIOC, have been hiring Iranian experts alongside foreign experts to learn from them in megaprojects.  

“In the past, whenever it came to designing, only some international consulting companies were approved, but today all refining projects in pipeline, pumping station and consultation are handled by Iranian engineers. We should always keep in mind where we were and where we are now,” he added.

Sattari Naeini said: “We have become self-sufficient in contracting, consultation and construction. In the commodity sector, once 20-30% of commodities were built domestically but now more than 90% of commodities are manufactured domestically and for the remaining 10%, it would not be economical. However, domestic companies are becoming active for covering the remaining 10%.”

He said compressors, turbines, electric engines, alloy pipes like CRA and some valves were largely needed in the refining industry.

“We hope that domestic companies would make the petroleum industry fully independent of foreign equipment, and we can reach full self-sufficiency in the commodity sector,” he added.

5-NIGC Honoring International Obligations

Hamid-Reza Haqbin Jahromi, director of international affairs of National Iranian Gas Company (NIGC), has said the company tries its best to honor its international obligations.

“We are doing our best to fulfill our export commitments and be able to win recognition as a reliable exporter in global markets,” he said.

He said the annual Oil Shows provided a chance for domestic manufacturers and contractors to showcase their capabilities.

Jahromi said the number of Iranian companies showing off their commodities at this year’s exhibition was indicative of their success despite all restrictions and sanctions.

“Without the coronavirus and concomitant health protocols, this exhibition would be a venue for exchange of views on gas imports, exports, transit and swap,” he said.

Jahromi said that Iran was known as a major holder and exporter of gas in the world.

6-Homegrown Equipment at GTPP Project in Eslamabad Gharb

CEO of Eslamabad Gharb Petrochemical Company Abdolazim Pelasaeedi has said that the GTPP project of this company was being inaugurated with the technology and catalyst offered by the Petrochemical Research and Technology Company (PRTC).

“We try our best to make maximum use of domestically-built equipment in commodity supply,” he said.

He added that construction of the GTPP project had started last year to produce polypropylene from natural gas. The project lies on about 54ha of land in the Zagros Special Economic Zone.

Pelasaeedi said the basic engineering unit of the GTP section has had 90% progress, adding that the polypropylene unit was complete in the PDP phase.

“In light of the completion of basic engineering documents, we are now in the phase of detailed engineering and naming detailed engineering contractor purchase and implementation. The documents have been prepared and the tender bid is being arranged,” he said.

Pelasaeedi said permits had been obtained for water, feedstock and civil defense, adding that the preliminary environmental license had been issued.

The GTPP plant would be fed by gas carried from Assaluyeh through the Iran Gas Trunkline 6 (IGAT6).

“Since Ilam refinery feeds gas into this pipeline, it is fed from two points and there is nothing to worry about probable pressure fall-off. The 1-2 kilometer distance from the location of the plant to IGAT is an advantage that would reduce costs,” he said.

He said that the GTPP plant would receive 2.1 mcm/d of gas in feedstock. “This plant has capacity to produce 960,000 tonnes of products a year with the polypropylene production capacity at 120,000 tonnes a year.”

Pelasaeedi said $545 million had been invested in this project by National Petrochemical Company (NPC).

7-Iran Open to International Cooperation

The Deputy CEO of the National Iranian Oil Company (NIOC) for Development and Engineering Affairs has said Iran welcomes international cooperation.

"We always welcome interaction with the world, and Iranian companies welcome interaction and competition with foreign companies, and regard it as a factor for growth and better performance," Reza Dehqan said on the sidelines of the 25th Iran Oil, Gas, Refining and Petrochemical Exhibition.

He said: "Iran's capabilities in the oil industry are developing rapidly."

He added: "Considering the created capacities, if the sanctions are lifted, Iranian companies can cooperate with the world without fear and use this opportunity for further synergy."

The NIOC official called the strategic plan to transfer Goreh crude oil to Jask oil terminal a complete symbol of the emergence of Iranian capabilities, and said: "The contractors of this project are 100% Iranian and the share of construction in this project is 95%."

Dehqan further stated that the progress of this project has now reached more than 70%, described the speed of progress of the construction of the Goreh-Jask oil transfer pipeline considering the volume of activities as unique in its kind.

8-South Pars Gas Recovery Up 65mcm/d

Pars Oil and Gas Co. (POGC) has refuted a report of a pressure drop impacting gas production from the South Pars field in the Persian Gulf.

CEO Mohammad Meshkinfam said gas extraction had in fact increased by 65 mcm/d since the beginning of the current Iranian calendar year (March 21, 2020).

Reasons for the increase include repairs to the South Pars Phase 16 pipeline and completion of major South Pars gas wells, he added. Current production capacity is 700 mcm/d.

“The drop in gas pressure in South Pars has not occurred to date, and forecasts indicate that in the next three or four years, the drop in gas pressure will begin gradually,” he said.

He also lauded the satisfying progress of South Pars' Phase 14 project, and said that it will start operation by spring.

“According to forecasts, the project's first operational train will become operational by spring," Meshkinfam said speaking on the sidelines of the first day of the 25th Oil, Gas, Refining and Petrochemical Exhibition.

“Engineering studies are underway for increasing the pressure of the phases and, as the Minister of Petroleum pointed out, a contract will be signed soon for building two 16MW turbochargers,” he added.

9-Goreh-Jask Pipeline Project 70% Complete

The progress of the Goreh-Jask crude oil pipeline has reached nearly 70% and it will probably be operational by the end of this calendar year to March 20.

Ali Jafarzadeh, deputy head of Goreh to Jask crude oil transmission project at the Petroleum Engineering and Development Company (PEDED), said on the sidelines of the 25th Iran Oil, Gas, Refining and Petrochemical Exhibition: "Currently, the project has had more than 70% progress. This strategic plan will be implemented on time, despite the sanctions and the conditions prevailing in the country in terms of the spread of the coronavirus."

The official announced the supply of more than 96% of the goods and equipment of the project by domestic manufacturers, and said: "This is an all-Iranian project and we can boldly say that the most of the items required for this national plan have been provided by domestic companies."

Jafarzadeh further said that the project is significant for various reasons including the use of 42-inch valves, the use of control valves with the latest world standards and many other equipment.

Iran is building the pipeline to transfer oil from Goreh to Jask oil terminal.

10-Cement Plugs Installed in NISOC Wells

Light cement plugs developed by the Research Institute of Petroleum Industry (RIPI) has been installed in five wells owned by National Iranian South Oil Company (NISOC).

Ali-Reza Nassiri, director of well completion, technology and research at RIPI, said effective measures had been undertaken over recent years on the light cement technology.

“New measures are also on the cards. Upon a proposal from the Petroleum Engineering Division and request from the Drilling Fluid Engineering Division of NISOC, ultralight cement plugs were installed in these wells to prevent the hydrocarbon flow, and facilitate repair activities,” he added.

Nassiri said that due to the lack of this technology, heavy plugs were used, which caused heavy cement waste and extra costs. He added that cement waste also damaged oil and gas reservoirs.

He said the plugs were installed in one day, adding that costs would be cut to one-fifth and damage to reservoirs would be largely reduced.

Plugging oil or gas wells is a very common operation. When required, plugs are designated for a specific place in the well though usually not at the bottom of the wellbore. Thus, the challenge is placing a relatively small amount of cement slurry above a larger volume of wellbore fluid.

As a result, a sound engineering design that addresses the major factors affecting plug success is essential. Factors include the density and rheology of both the cement and the wellbore fluid, as well as hole size and hole angle including vertical, deviated and horizontal well orientations.

The goal is to secure a seal and leave the top of cement in the location required to address the reason for the plug in the first place. Creating an artificial bottom may be required to effectively spot the plug.

11-Iran Persian Gulf Oil Reserves Raised

The Iranian Offshore Oil Company (IOOC) has conducted fast track comprehensive projects on four oil fields in the Persian Gulf, aiming to raise the estimated oil reserves by more than 740 million barrels (mmbbl).

The director of technical affairs in IOOC, said “”By conducting fast track studies on the four fields of Hendijan, Bahregansar, Abuzar and Nowruz, the total in-place crude oil in these fields compared to the last approved study increased by 742 mmbl from about 9.1 to about 9.9 billion barrels.”

“Following the policies announced by the Petroleum Ministry and the National Iranian Oil Company on defining projects for conducting fast track reservoir studies, the Iranian Offshore Oil Company outsource these studies back in 2019,” he added.

Khajavi elaborated that, according to the studies, the total recoverable oil in these four fields has increased by 217 mmbbl reaching to more than 3.2 billion barrels at a price of $45 per barrel equivalent to about $10 billion worth of extractable resources operated by IOOC.

According to the official, conducting Master Development Plan (MDP) studies is the most important tool for optimizing production, choosing the appropriate way for development of reservoir, and ultimately increasing the recovery factor of hydrocarbon reservoirs.

MDP studies typically include the processing and interpretation of seismic data, complete studies of basic geology and static modeling, complete studies of basic reservoir engineering, history matching and construction of dynamic simulation models, preparation and implementation of production scenarios, and finally complete economic studies of the reservoir development project.

IOOC, a subsidiary of the National Iranian Oil Company (NIOC), is one of the world's largest offshore oil-producing companies. The company accounts for one-third of the Iranian oil exports, operating on the Iranian side of the Persian Gulf and Oman Sea.

Azar Field Output at 65,000 b/dIran invested over $1.4 billion in the jointly-owned Azar oil field despite US sanctions to lift oil output from this field to 71,500 b/d and that of gas to 78 mcf/d of.Azar, containing both oil and gas, is one of the most challenging petroleum industry projects in Iran. Currently, Russia’s Gazprom, Malaysia’s Petronas, a South Korean company and a Turkish company are working on the Iraqi side of the reservoir (known there as Badra). On the Iran side, contractors are working alongside foreign contractors. Iran is close to Iraq in terms of development of the field which has 2.5 billion barrels of oil in place.

The first well in Azar was drilled by Hydro Zagros up to the depth of 4,900 meters at Kajdomi Formation. Then, negotiations were held with this company for two years up to 2008, but they ended inconclusively. Since the field was shared with Iraq, National Iranian Oil Company (NIOC) Board of Directors decided in September 2008 to assign the development of the field to Petroleum Engineering and Development Company (PEDEC).

However, NIOC changed strategy for financing the project. It held talks with Gazprom and Petronas in 2009 and 2010 and a master development plan (MDP) was finalized for the field. But due to international conditions, no agreement was finalized. Then, negotiations were held with a consortium of Oil Industries Engineering and Construction Company (OIEC) and Sepehr Energy. Bank Saderat was initially to finance the project, but it pulled out. Then, talks were held again with OIEC and Oil Industry Pension Fund Investment Company (OPIC), which resulted in a $1.9 billion buyback deal in October 2011. The project did not go ahead as planned,due to special drilling conditions in the field and insufficient financial resources.

Finally, as instructed by the minister of petroleum in 2014, the number of drilling rigs increased to 7. Production from this field reached 30,000 b/d in 2017. It currently stands at 65,000 b/d, which is very decisive in competition with Iraq. Nineteen wells have been drilled in Azar. Two were drilled by Persia Oil And Gas Industry Development Co., seven by National Iranian Drilling Company and 10 by Global Petro Tech Kish Company.

Petroleum industry expert say in Iran working conditions and geological data of each field are specific. For instance, one cannot compare drilling in Azar with drilling in the Azadegan oil field. In their view, drilling in Azadegan is like driving in a freeway because geological data would allow safe drilling with minimum risks. But drilling in Azar is like driving in a rugged and mountainous road because of poor available data. The geologically complicated data of these fields pose a major challenge. These realities exist in the Azar field development. The first well of this field started production in early 2015.

Oil Production Test

Gholam-Reza Manouchehri, CEO of OIEC, recently said the crude oil production tests in Azar had been done successfully.

“In light of 97% progress in development of this joint field, the first phase is in the stage of operation and will become operational soon. In buyback deals, once the activities are completed, the contractor is required to put all wells and facilities in the state of production for 21 days,” he said, adding that the Azar field had started supplying 65,000 b/d of crude oil. 

Azar’s development is estimated to cost €1.4 billion, provided by National Development Fund of Iran (NDFI) and bank loans.

Under OIEC management, Sarvak Azar Engineering and Development Co. managed to carry out the performance test of this project despite sanctions, financing restrictions and difficulty in equipment supply. The oil produced at this field has been supplied to Cheshmeh Khosh production installations.

The significance of operation of Azar is that it is the first investment project by OPIC and “Ahdaf Investment Company” in the upstream sector.

The Azar development’s 32 sub-projects include 10 surface and 22 subsurface projects.

Drilling Record Set in Azar

The share of domestic manufacturing in the Azar oil field development was 75% with local residents constituting 55% of manpower. In this project, 70 million persons-hours of nonstop work had been done without any accident. Despite all geological complications and difficulties, it is the first buyback agreement that has become fully operational by Iranian experts. Drilling was high-risk and challenging. The average time spent on drilling was 550 days, which has now been reduced to 300. OIEC now can use the experience it gained in developing the Azar field in developing the Changouleh field.

Because production from Azar is through a central processing facility, it has started production at the rate of 71,500 b/d.

A major challenge with drilling in Azar is dependence on hydraulic fracturing. To resolve this problem, acid fracturing would be used.

Azar lies in the Anaran block located between the cities of Mehran and Dehloran.

North Pars, New Gas Hub of Iran

Some 120 kilometers southeast of the southern Bushehr Province, Iran owns a gas field holding over 57 tcf of gas in place. North Pars is among fields with high potential for investment. The field is estimated to require $16 billion in investment, including $5 billion in the upstream sector and $11 billion in the downstream sector (mainly LNG plants).

North Pars was discovered in 1963 following 3D seismic testing. Then, 6 exploration, appraisal and development wells were drilled for the field development. Two foreign companies including Exxon were in charge of North Pars development. That was halted in 1979.

At the time of its discovery, North Pars was the largest gas reservoir in Iran. Investment in North Pars was accelerated until the jointly-owned South Pars was discovered to become Iran’s top priority.

Today, South Pars is in its final stages of development and it is time for North Pars to undergo development.

A brief review of North Pars shows that 17 wells have so far been drilled, while 26 offshore platforms have been installed at North Pars. However, development and production are yet to start there.

North Pars whose production capacity equals four South Pars phases, has capacity to produce 3,600 mcf/d of gas. Such recovery would require drilling 46 wells. The rate of recovery envisaged for North Pars stands at 61%.

North Pars’s gas is planned to be used at LNG plants in order for Iran to produce 20 million tonnes a year of liquefied natural gas.

A priority for National Iranian Oil Company (NIOC) after US sanctions are lifted is to finance and attract manpower for new projects, including North Pars. The North Pars development is envisaged in four phases, each phase with about 1.2 bcf/d of gas.

The LNG produced from one phase of this field would belong to Iran, while the revenue from the sales of LNG from the other two phases would belong to foreign investor. The foreign party will have authority to sell its LNG to its own buyers. The gas produced from one phase of this field would be used for domestic purposes and injection.

About IRR 12,000 billion is estimated to be required for infrastructure like utility, water, jetty, access routes, helicopter center, emergency centers and telecommunications.

Geographical integration has been done in North Pars and South Pars, covering a total area of 46,000 ha. North Pars and South Pars cover 16,000 ha and 30,000 ha, respectively.

The Exploration Directorate of NIOC and Pars Oil and Gas Company are jointly conducting studies to have a precise estimate of gas reserves in North Pars.

In case North Pars becomes a special economic energy zone, it would be possible to offer facilities to investors. This issue is currently under review.  

North Pars has also oil layers with an API gravity of 12.

NIOC and Sinopec signed a $16 billion agreement in 2007 for the development of North Pars in four phases, but the Chinese firm pulled out of the project.

Band Karkheh Investment Potential

West Karoun is a quite vast area on the western bank of Karoun River, extending up to Iran-Iraq border.

West Karoun belongs to oil-rich Khuzestan Province, but during the Iraqi war in the 1980s and post-war calamities like mined areas, oil exploration and production could not materialize.

However, the valuable oil deposits in this part of Iran are now for certain, a significant part of which lies in the Band Karkheh field which holds heavy crude oil. West Karoun’s fields are mostly shared with neighboring Iraq. National Iranian Oil Company (NIOC) has given priority to the development of these fields for oil production with a view to adding 1 mb/d of oil with an investment of more than $20 billion to national production.

Band Karkheh is an independent oil field, which was introduced by NIOC for investment a couple of years ago.

Measuring 50 kilometers long and 5 kilometers wide, this field is estimated to contain over $4.5 billion with an API gravity of 24 at Ilam and Sarvak geological formations. 

Band Karkheh is administered by the Arvand Oil and Gas Production Company, but Petroleum Engineering and Development Company (PEDEC)is assigned with its development.

2D seismic testing was conducted in the 1960s to examine the existence of oil in Band Karkheh. Later on, the field’s structural plan was identified, and a first well was drilled that proved the existence of oil in Asmari Formation. This field lacked any hydrocarbon at that time and therefore exploration operations halted.

In 2007, a well was drilled for the appraise Ilam reservoir, which proved the possibility of recovering at least 1,000 b/d of crude oil from Ilam formation. Sarvak formation is estimated to hold 2.5 billion barrels of oil in place.

In 2012, an agreement was signed between PEDEC and Armed Forces Social Security Investment Company (AFSIC) for the development of Band Karkheh, but the agreement was terminated the following year. Recently, a European company has

resumed development operations in this field. An agreement is to be signed soon on the Iran Petroleum Contract (IPC) model for the development of Band Karkheh.

A European firm had discovered oil in Band Karkheh under a deal with NIOC. The company had to leave Iran when international sanctions were imposed on Iran and the development project was halted. Once this company left Iran, PEDEC and AFSIC had signed their memorandum of understanding for cooperation.

Drilling of two appraisal wells in the northern and central parts of the field to acquire information about the second phase of development of Band Karkheh in parallel with the drilling of development wells in the southern part are envisaged.

Early production is expected to increase more than 7,500 b/d from this field, but seismic data processing and interpretation will make it clearer.

Oil is expected to be transmitted from Band Karkheh to West Karoun’s pumping station. Meantime, mobile processing facilities are available.

Ab Teimour Up for Investment

Ten giant oil fields in Iran account for the bulk of Iran's oil production, but they are all in the second half of their lifecycle as insufficient investment in them, over years, has left their recovery rate at a low level.

As pressure fall-off in these fields is highly likely, they have great potential for higher production. Ab Teimour which was discovered 50 years ago and its current output stands at 60,000 b/d, is one of these fields. Bangestan reservoir of this field was one of 12 projects offered for international investment.

Ab Teimour in Khuzestan province is located 25 kilometers west of Ahvaz. It is between Mansouri and Susangerd oil fields. Ab Teimour was discovered in 1961 following a seismic test. A first well was drilled there six years later to verify the existence of oil. However, production from Ab Teimour began in 1991. Ab Teimour measures 23 kilometers in length and 6 kilometers in width. According to primary calculations, it is estimated to hold at least 15.2 billion barrels of oil in place.

Bangestan's current production stands at 60,000 b/d from 50 wells (29 wells in Ilam formation and 21 wells in Sarvak formation).

Ab Teimour is administered by National Iranian South Oil Company (NISOC), but its production operations are handled by Karoun Oil and Gas Production Company.

In the 130th meeting of the committee of reservoir consultants of National Iranian Oil Company (NIOC), the general plan for the development of Bangestan was discussed in three phases – natural depletion, artificial lifting and water and gas injection.

Given uncertainty of some data and in the light of completing reservoir data, development of Ab Teimour was designed in pre-phase and full-phase stages.

In the pre-phase stage, necessary data is gathered and pilot tests are conducted so that the development project would be updated and finalized. Based on the existing information, the pre-phase flow is forecast at 55,000 b/d and the full-phase flow at 110,000 b/d.

Over recent years, many foreign companies have expressed readiness to develop the field, but due to international sanctions, agreements were terminated. Following the removal of sanctions, several companies including Russia's Lukoil agreed to submit the results of preliminary studies on this field to NIOC in the near future. However, foreign firms had to quit after the United States withdrew unilaterally from the Iran nuclear deal and re-imposed sanctions on the country.

Iran's Petroleum Ministry has given the Ab Teimour data to several companies in order to examine various scenarios by rivals. Each company has submitted a separate proposal to NIOC. Indonesia's Pertamina has suggested 250,000 b/d production and Lukoil 150,000 b/d. Denmark's Maersk plans different scenarios including 200,000 b/d, 300,000 b/d and 450,000 b/d production. Maersk's 450,000 b/d plateau could remain for four decades and the company must operate the field for a longer period of time.

Such output would be reached, in case the recovery rate of Ab Teimour is enhanced from the current 2.27% to 12%.

Technical studies by Iranian experts indicate that the field's output could be increased up to 95,000 b/d. Ab Teimour is estimated to contain 15 billion barrels of oil in place and so far 315 million barrels has been recovered from the Bangestan reservoir. Near this reservoir is erected a production unit with the rated capacity of 55,000 b/d, a desalination unit with the capacity of 55,000 b/d and a gas pressure booster unit with the nominal capacity of 20 mcf/d.

Experts and specialists at NIOC have processed and interpreted 3D seismic test data and identified a new reservoir structure which contains around 2 billion barrels of oil in place.

As the Bangestan reservoir pressure and the wells' stream pressure change, artificial lifting of Ab Teimour in the Bangestan reservoir was planned. The project is now in its final stages and the flow of oil wells from Ab Teimour will be stabilized after artificial lifting system is installed.

High Rate of Return in Bangestan

Iran holds around 10% of crude oil reserves in the world, but it has only recovered 20% of its oil. Reasons are various and chief among them is lack of access to state-of-the-art technologies. The bulk of Iran’s oil remains untapped underground.

Furthermore, over the past four decades, recovery from Iranian oil reservoirs has been done with natural pressure, and today downhole pumps are used for recovering oil.

Bangestan oil reservoir in the oil-rich city of Ahvaz in southwest Iran is a case in point. Currently, 26 downhole pumps are operating in this reservoir, wrote the monthly” Iran Petroleum”.

Bangestan oil field, which is considered to be the 9th largest reservoir in the world, is producing at a 10% recovery rate. Of 37 billion barrels of oil in place in this reservoir, only 1.2 billion barrels has been recovered. Given the 10% recovery rate, around 4 billion barrels could be still recovered.

Development of Bangestan oil field was assigned to Petroiran Development Company (PEDCO) in early 2005, but one year later the company announced it was not ready to develop the field. Then negotiations were started with Pars Tat Company, held by Iran’s “Mostazafan Foundation” and Russia’s Tatneft. The talks failed and the project was finally awarded to National Iranian South Oil Company (NISOC). Given the completion of comprehensive studies for this field, the most important action that must be taken seems to be enhancing recovery rate and boosting production. The current 180,000 b/d production of Bangestan could reach 231,000 b/d and total recovery from the field could grow 20%.

The huge reservoir is located beneath the city of Ahvaz. Therefore, normal drilling becomes impossible and development of this field must be done through horizontal drilling.

Higher recovery rate does not necessarily result in increased production. Furthermore, higher production may often lead to lower recovery rate. Therefore, Iran’s priority in this reservoir will be to raise the recovery rate.

Bangestan has three production units with a rated capacity of 275,000 barrels, three desalination units with a rated capacity of 220,000 barrels and three pressure booster stations with a rated capacity of 177 mcf/d.

NISOC officials have said that enhanced output is not the only objective behind the development of Bangestan reservoir, because the 10% recovery rate is low and applying new technologies to boost recovery is of high significance.

The issue of enhanced recovery from oil reservoirs has become a key issue for Iran’s petroleum industry. Some large oil fields in Iran have been producing for more than 50 years and they need to see their recovery rate increase. Such operations require specialized and high-cost technologies.

In the new framework of oil contracts- IPC- oil companies specializing in enhanced recovery will be remunerated specially. Moreover, the long-term terms of the contract will automatically encourage investment in such projects.

The issue of technical knowhow transfer and upgrading the management level of

petroleum industry is very important. The experience of other countries has shown that such transfer would not be easy unless in an environment of cooperation.

Infrastructure Ready for Gas Trading

CEO of National Iranian Gas Company (NIGC) Hassan Montazer Torbati has said Iran had the required infrastructure for gas trading.

Speaking during the annual Oil Show, he said Iran had respected all its contractual commitments.

“As far as gas trading (gas transit and swap) is concerned we have agreements which we are managing. NIGC has laid the groundwork for this purpose by extending pipelines and there is infrastructure for trading,” he said.

Montazer Torbati said Iran had increased its daily natural gas production, adding: “Iran is a major gas producer and our production has now totaled 1,000 mcm/d, or 6 million barrels of oil equivalent a day (mboe/d), which is significant.”

Treatment Capacity at 1bcm/d

Montazer Torbati said Iran’s gas treatment capacity had reached 1.031 bcm/d, while there was capacity to transmit 900 mcm/d of gas in the country.

“Something like South Pars rarely happens and we were lucky enough to have such reservoir and today we have maximized the output from this reservoir. It shows that increased production alone could not meet our national needs so we have to focus on efficiency too,” he said.

Gas Trade with Turkmenistan

Noting that Iran would welcome gas trading with other nations, the NIGC chief said: “Our negotiations with Turkmenistan are going on, but we are not dependent on Turkmenistan’s gas for domestic consumption. However, as a business activity, we have capacity to receive gas from neighboring nations and pass it on to the nations that need it. Private companies in the country are following up on this issue and we have nothing to worry about.”

Iraq Owes Iran $6bn

Montazer Torbati said Iraq owed Iran about $6 billion, part of which has been settled.

He said Iran had respected all of its contractual obligations, adding: “We have agreements with Iraq, Turkey, Azerbaijan Republic and Armenia, which have to be implemented. Pakistan is yet to receive our gas.”

“One of our perspectives was to be able to have a good share in gas trading which covers exports, transit and swap of gas. We have agreements to that effect, and we manage them and NIGC has laid the groundwork for this purpose. Pipelines have been extended across the country and there is infrastructure ready for such trading,” he added.

Knowledge-Based Business in Petchem

CEO of National Petrochemical Company (NPC) Behzad Mohammadi announced the establishment of an office to develop knowledge-based businesses at NPC.

He said: “Communications with knowledge-based companies will be upgraded in order to develop the petrochemical industry.”

Mohammadi said that this year’s exhibition was held with the focus being on domestic manufacturing and knowledge-based companies.

“There are appropriate capacities in these companies and very extensive activity has been done in small-sized companies, which could be greatly helpful for the petroleum industry,” he said.

Mohammadi also touched on the valuable capabilities of knowledge-based companies and startups, saying: “Unfortunately, there was no possibility of communications between these companies and the industry in the past, and no route was established for linking them with the industry.”

The NPC chief said linking petrochemical companies with knowledge-based companies was an important issue to focus upon, adding: “For this purpose, an Office for Development of Knowledge-Based Businesses has been launched at NPC.”

Mohammadi said the idea of the Office was to prepare the ground for communications with petrochemical firms, noting that this objective was being realized.

He assessed as highly effective the involvement of knowledge-based companies in the implementation of petrochemical projects, saying: “NPC is upgrading cooperation with these companies in developing petrochemical projects.”

Mohammadi said agreements had been signed with four universities in 2016 for the development of technical knowhow in petrochemical processes.

 

Refining Industry Nearly Self-Sufficient

CEO of National Iranian Oil Refining and Distribution Company (NIORDC) Ali-Reza Sadeq-Abadi said domestic companies were largely supplying the needs of the refining industry.

“We can say that this industry is nearly self-sufficient,” he said.

Sadeq-Abadi said: “Fortunately domestic manufacturing in the petroleum industry has reached big potential in Iran, and we can say that in the refining industry all necessary equipment except for compressors and processing furnaces are domestically sourced.”

“The required equipment of this industry is manufactured either entirely by domestic manufacturers or domestic manufacturers import a small portion of the equipment to produce the final product,” he added.

“More than 1,000 kilometers of pipeline has been built in a year for the NIORDC and more than 1 billion liters has been added to the product storage capacity. Our jetties have seen their capacity increase more than 50 million tonnes a year and we are ready to launch these projects,” said Sadeq-Abadi.

He said: “The Malayer oil depot with a storage capacity of 68 million liters of products, the Urmia storage facilities with a capacity of 120 million liters, the Naein storage facilities with a capacity of 300 million liters, the 420-km Naein-Kashan-Rey pipeline, the 290-km Shazand-Qom-Rey pipeline, the 220-km Tabriz-Khoi-Urmia pipeline and the 135-km Abadan-Ahvaz pipeline are among these most important projects to come on-stream.”

Maximum Oil Output Return Possible

Karim Zobeidi, director of corporate planning of National Iranian Oil Company (NIOC), said Iran’s return to maximum crude oil production was possible.

He said: “Iranian oil reservoirs and wells are ready for maximum oil production.”

Zobeidi said the annual Oil Show provided a venue for showcasing the capabilities and potentialities of Iran’s petroleum industry.

“To be fair, in recent years, Iranian companies have seen their capabilities upgraded in domestic manufacturing,” he added.

He said that the construction of the giant project of the Goreh-Jask crude oil pipeline indicated development of domestic industry. “In this project, we are witnessing the manufacturing of pumps by Iranian companies and we can describe this project as thoroughly Iranian.”

Kharg Ready for Maximum Oil Exports

Abbas Assadrouz, CEO of Iran Oil Terminals Company (IOTC), said the Kharg oil terminal was fully ready to maximize crude oil exports.

He said that after the imposition of oil sanctions, IOTC seized the opportunity to renovate its infrastructure.

He said: “Nine berths at the Kharg terminal (three in the western jetty and six in the eastern jetty) are in full readiness and IOTC infrastructure can even handle 8-10mb/d oil exports.”

Assadrouz said steering operations within IOTC required high precision and expertise and paying constant attention to human resources, equipment as well as data and financing issues.

He added: “Relying on its specialized manpower and using the potential of domestic manufacturers and the scientific capacity of universities, IOTC has taken valuable measures with regard to the domestic manufacturing of equipment particularly electronic cards. It has replaced 300 foreign items with Iranian ones.”

Assadrouz touched on the domestic manufacturing of electronic cards for metering systems in collaboration with Sharif University of Technology, saying an agreement was signed with an Iranian company for the production of governor systems.  

He said if this project proves successful, Iran would be for the first time supplying such item.              

Golden Days for Iran Refining

The coronavirus has given our planet a new chance to breathe. Travel rates have dropped sharply. Demand for oil and petroleum products has been falling since the outbreak of the pandemic. Oil wells and refineries across the globe are shutting down one after another. Despite the historic OPEC+ agreement for oil production cut, oil price slump has not stopped. However, there is no sign of increased demand for oil and petroleum products in the market.

In coincidence with the sharp decline in demand in the oil and petroleum products market, Iran reached unprecedented gasoil and gasoline production capacity last calendar year. Fuel imports were stopped and even Iran became an exporter of gasoline for the first time. As gasoline was rationed and its price increased, gasoline consumption level fell, preparing the ground for Iran to export gasoline amid US sanctions.

Chain of Development Activities

Iran’s Petroleum Ministry has organized a chain of development activities in order to increase the value-added of the petroleum industry, expand production capacity of petroleum products and improve their quality in addition to increasing petroleum products exports. Thanks to such measures, Iran’s refining capacity has increased from 1.8 mb/d in 2012 to 2.2 mb/d now, thereby raising Iran’s gasoline and gasoil production from 49.8 ml/d and 94 ml/d in 201 to 107 ml/d and 113 ml/d in 2019, respectively.

Due to measures undertaken to improve the quality of refined products, Euro-4 and Euro-5 grade gasoline production capacity rose from zero in 2012 to 76 ml/d in 2019.

Meantime, gas recovery from the giant offshore South Pars gas field has grown 2.5-fold and gas supply across Iran has expanded. Therefore, liquid products have been freed up to be exported. Petroleum products exports increased four-fold, going from 5.9 million tonnes in 2012 to about 23 million tonnes in 2019.

Future of Refining Industry

In a bid to set the stage for the development of oil refining industry, the Petroleum Ministry examined various options of future consumption of fuel in the country and summarized the results of mathematical calculations in the “Document on Energy Supply

to Transportation Sector in 2024 Horizon with Focus on Energy Efficiency”. The document has won the approval of High Council of Energy.

The document has set the minimum gasoline production capacity up to the 2024 Horizon, which should be achieved by upgrading the existing refineries and building new ones. The data has been communicated to National Iranian Oil Refining and Distribution Company (NIORDC). In this communication, the assumption is that long-term national needs for petroleum products be supplied while investment in creating excess refining capacities would be supported with a view to exporting a variety of petroleum products.

Gas Production Hits Record

The sweet and dreamy days of oil refining were not limited to gasoline exports instead of imports. Over the past two years, Iran’s 111-year-old petroleum industry has seen a win-win coexistence, leading to maximum production capacity from South Pars. Iran has outdone Qatar, with which it shares South Pars, in recovery from South Pars. Furthermore, Iran is extracting more than 700,000 b/d of condensate from South Pars. Increased gas production was good news for power plants, households, businesses, petrochemical plants, industries and export markets, but this record breaking also carried a big risk for Iran’s petroleum industry. What should be done with condensate which had been slapped with US sanctions?

As soon as the US imposed unlawful sanctions on Iran, some news agencies including Bloomberg and Reuters claimed that Iranian should brace for a decline in the South Pars output in winter. These projections never came true. Iran’s petroleum industry was based on an all-out coexistence. The gas condensate produced at South Pars was transferred to Bandar Abbas to feed a condensate refinery, there. The refinery made Iran independent of gasoline imports.

Golden Days

Last calendar year, gasoline consumption exceeded 100 ml/d on many occasions. However, strategic reserves never declined. Nor did gas stations faced any shortages. South Pars ran at full capacity. Meantime, the Persian Gulf Star refinery was a good consumer of condensate. The golden days of coexistence between South Pars and the Persian Gulf Star refinery continued, but as soon as the coronavirus pandemic hit Iran and social distancing and shutdown were enforced, gasoline consumption dropped 20% to 70 ml/d.

Neighboring nations experienced similar reduction in consumption. Thanks to the coronavirus outbreak, they all became exporters of gasoline. China, India, South Korea, Tajikistan and Kazakhstan decided to export gasoline and gasoil. As land borders were closed, Iran’s gasoline exports to neighboring nations were faced with challenges much tougher than US sanctions.

Some analysts did not hesitate to claim that Iran would soon experience shutdown of its oil refineries – a dream which never came true.

Naphtha, the Winning Card

As the proverb goes, life takes shape in moments. This old proverb was proven to be true for Iran’s oil refining industry. Faced with the coronavirus crisis and the subsequent decline in demand for gasoline, Iran unveiled a new card to prevent the shutdown of refineries and avoid any mandatory drop in the South Pars gas field. Naphtha was the most important winning card for Iran’s petroleum industry under the tough conditions of sanctions and covid-19. The strategic refining industry has turned Iran into a leading producer and exporter of gas-based naphtha in the region, few examples of which are seen in the market. The use of naphtha in both refining and petrochemical industries has kept demand unchanged.

Thanks to increased naphtha production from the Persian Gulf Star refinery, the Bandar Imam, Tabriz and Shazand petrochemical plants keep running.

Despite a mandatory reduction in oil production, naphtha never left petrochemical plants unfed. It was naphtha that helped increase propylene and polypropylene production at petrochemical plants across Iran. Naphtha has overcome US sanctions and defeated the coronavirus. In describing the naphtha days of Iran’s oil refining industry due to US unlawful sanctions, too much remains unsaid. But the petroleum industry will not easily forget these golden days.

 

Iran Petchem to Receive Foreign Investment

Behzad Mohammadi, CEO of National Petrochemical Company (NPC) of Iran, has described as “extraordinary” the performance of the petrochemical sector in the past one year despite US sanctions. He told "Iran Petroleum" in an interview that the diversity of products neutralized the impact of the US sanctions.

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

Two years have passed since you were named CEO of NPC. That coincided with the US’s withdrawal from the JCPOA and restoration of sanctions that had been lifted under the nuclear deal. What was the biggest challenge NPCwas faced with?

The biggest challenge which we have been faced with was the sales of our products. Fortunately, despite all hardships, we are now in good position in both sectors. We managed to find a way out of these crises. But due to sanctions we are not eager to speak about them. However, undoubtedly, we have been successful in the production sector and enhancing our hard currency revenue. During the first quarter of the current calendar year, we increased our hard currency commitments to the banking sector by 30%, which means the volume of our revenue was more than expected. Even the governor of the Central Bank of Iran Mr. Hemmati appreciated the NPC. Our success has not been in terms of revenue. On the issue of development, Iran’s petrochemical sector possesses 275 instances of technical knowhow. But whereas the petrochemical industry needs technology for catalyst production, it is necessary to be linked with the world. Furthermore, in order to attract investment, we need to be in contact with the world. However, in light of what has happened in the past couple of years, we have not been able to do what we wanted. In other words, what we could do in a shorter period of time we had to do on a longer period, costing us much higher.

Which sector was most affected by COVID-19?

The coronavirus has affected our performance in the development sector and our hard currency revenue. For instance, with the outbreak of this virus in Iran, the consumption of polymers increased, but exports rate declined at the same rate. But we should take into account the fact that with the covid-19 pandemic, demand for petrochemical products declined, while we faced problems in the sale of our products. The petrochemical prices were down 35%.

But the coronavirus also affected the implementation of our products. Particularly in spring when a number of petrochemical plants were shut down, the implementation of projects was slowed down. Of course, I have said that this year is the golden year of petrochemical industry. With all these restrictions, 11 projects have been inaugurated by Iran's President Hassan Rouhani. Our petrochemical production capacity increased from 66 million tonnes to 90 million tonnes by next March. Such 38% in the petrochemical sector has been unprecedented in recent years. It is noteworthy that the coronavirus continues to affect our activities and COVID-related restrictions, which have influenced our development, are still in effect.

These restrictions have affected the production sector, too. Have you had to shut down any plants?

Production units have not been halted yet. But our projects have had to be shut down temporarily and then resumed work with minimum manpower.

Are you happy with your one-year post-COVID performance?

Yes, the coronavirus left its impact, but we are shifting to positive now. Coincidentally, I believe that we were under sanctions and the coronavirus added to our sanctions-related problem. However, we had good performance in terms of the sales of petrochemical production and even our products. In fact, in light of a 35% decline in the global price of petrochemical products, our problems grew, but this autumn the global prices increased and we saw our revenue increase. Due to the global increase in petrochemical prices, we are reaching the point of improvement. If we go ahead with the same trend, we will see our hard currency revenue increase year-on-year. In fact, I would like to say that despite falling revenue this year, we experienced contractor conditions.

You and some of your colleagues were sanctioned by the US. The Persian Gulf Petrochemical Industries Company (PGPIC) has also been slapped with sanctions. How have these sanctions affected your work?

I don’t intend to chant slogans. But if you look at our hard currency revenue, it seems that US sanctions have not directly affected our petrochemical industry. Our products are diverse and we can easily overcome challenges emanated from sanctions. In fact, the sanctions have not been as influential as thought.

How attractive do you see foreign investment?

In my opinion, the petrochemical industry has always been attractive. The global demand for oil and petroleum products is below 1%. The annual demand for the petrochemical sector has grown 4-5%. The petrochemical industry has been attractive to domestic and foreign investors. Over the past two years, the US sanctions have been very tough and we have faced restrictions in attracting investment. But as soon as sanctions are lifted, I think that there would be much willingness for investment.

Do you think that the administration of Joe Biden in the US would send positive signals to foreign investors?

I don’t think that we would see any practical steps for the removal of sanctions at least until the end of the Rouhani administration. But in the remaining months of the Rouhani administration we may see arrangements for resuming talks.

So you are preparing arrangements?

As I mentioned nothing has been done in practice. But if we see some practical signs, we will resume some of our activities. For instance, we had a channel to receive foreign investment earlier, but it was inactivated as sanctions commenced. But we will reactivate it after sanctions would be lifted. It is noteworthy that prior to the sanctions, many investors had expressed willingness to invest in Iran’s petrochemical industry. We have reached understanding with some of them including BASF. I would like to mention that our conditions have changed compared with the past. We have defined steering projects for development and any domestic or foreign company has to work. Once we are fully aware how much investment and which technology we need, then we can look for investment on such basis. Now, if sanctions are lifted to clear the way for negotiations we will base them on clearly defined objective.

Which markets are you looking for?

We need to diversify our destination markets. We are exporting products to Europe, but the tonnage is low. We need to increase our export destinations and we plan to improve this sector through diversifying our customers.

What are Iran’s regional rivals?

Saudi Arabia is Iran’s regional rival. We hope that our production capacity would reach 130 million tonnes of products to increase our revenue to $30 billion, which would put us ahead of Saudi Arabia.

 

 

Iran to Apply New Terms to Future Foreign Deals

Eight new agreements worth $1.2 billion have been signed between National Iranian Oil Company (NIOC) and Iranian contractors for enhanced oil recovery. Once fully operational, these projects would add 95,000 b/d to Iran’s oil output. The share envisaged for domestic manufacturing in these projects is 80%. Furthermore, 4% of the value of each agreement would go to public interest services.

Iran’s Minister of Petroleum Bijan Zangeneh said at the signing ceremony that new capacities would be created in the oil sales and transfer, as well as contracting as long as sanctions are in effect.

“If foreign companies are interested, we will cooperate with them, but based on new terms,” he said.

Seven packages of agreements involved Binak, Soulabdar, LaliBangestan, Gachsaran 3, Gachsaran 4, Golkhari, Bibi Hakimieh, Ahvaz 2, Ahvaz 3 and Ahvaz 5, all run by National Iranian South Oil Company (NISOC) in Bushehr, Fars, Khuzestan and Kohguiluyeh and Boyer Ahmad provinces, and one package was for Reshadat field run by Iranian Offshore Oil Company (IOOC) in the Persian Gulf.

The agreements for Golkhari, Gachsaran 3, Gachsaran 4, Binak, Bibi Hakimieh, Soulabdar and LaliBangestan were respectively signed with North Drilling Company (NDC), Iranian Offshore Engineering and Construction Company (IOOC), Petroiran Development Company (PEDCO), MashinSazi Arak, Qeshm Oil and Energy Industry and Maroun Karan, National Iranian Drilling Company (NIDC)and Jahanpars Engineering and Construction Company. The agreements for Ahvaz 2, Ahvaz 3, Ahvaz 5 and Reshadat were signed with the Khatam al-Anbia Headquarters.

Job Creation for Contractors and Manufacturers

According to NIOC, $6.2 billion is estimated to be invested in enhanced oil recovery capacity. The figure adds up to $7.2 billion when financing costs are taken into account.

In parallel, Petroleum Ministry and NIOC are following up on striking IPC contracts for enhanced oil recovery with a view to creating jobs for Iranian contractors and manufacturers.

That includes 33 projects, including 29 onshore and 4 offshore projects. They lie in seven oil-rich provinces – Kermanshah, Ilam, Khuzestan, Kohguiluyeh and Boyer Ahmad, Bushehr, Fars and Hormuzgan. Their implementation would raise Iran’s crude oil output by 280,000 b/d.

In February 2019 NIOC put out 10 projects to tender, which resulted in 10 EPC-EPD agreements worth totally $800 million. The same year, NIOC focused on 13 tender bids for projects worth nearly $1.7 billion. Successful bidders were chosen and named. 

From early 2020, the focal issue was to hold tender bids for the eight projects whose agreements had been signed.

In total, 31 agreements have been signed for $3.7 billion, which would involve drilling 253 new wells and workover of 130 operating wells.

31 Projects for 22 Iranian Firms

or the purpose of job creation for oil contractors, domestic manufacturers of commodities and equipment, experienced and local manpower; a list of widely-used commodities which may be manufactured domestically was drawn up to be incorporated in the related agreements. Contractors are required to place orders with Iranian companies and plants. In this regard, all the 31 projects have been finalized, 22 of which have been assigned to Iranian companies. The drilling rigs needed for these projects would be supplied by Iranian contractors. Currently a total of 18 drilling rigs are operating in these projects. Given the signature of agreement for utilizing 22 more rigs, the number of operating rigs would soon reach 40.

Once the third phase of these projects becomes operational, the number of offshore and onshore rigs would reach 55.

Meanwhile, casing and pipes weighing more than 66,000 tonnes have been ordered to domestic manufacturers by contractors. The figure is expected to reach 180,000 tonnes. Orders have been also placed with domestic manufacturers for the supply of other basic commodities needed for drilling, including wellhead equipment and well completion equipment. The final share of domestic manufacturers in the projects would reach 80%.

According to NIOC officials, implementation of these projects under the current economic conditions would create jobs for local manpower in their provinces, as well as for the petroleum industry experts including contractors, service companies and consulting firms. In order to fulfill its Corporate Social Responsibilities (CSR), NIOC has allocated a 4% share of the lump sum of every single contract to implementation of public interest projects: construction of roads, schools, technical and vocational schools, clinics in villages and towns near the location of project in collaboration with provincial officials.

Capacity Building

Minister Zangeneh said new capacity had been created in oil sales, receipt of oil money and contracting during sanctions.

“If foreign companies decide to work in Iran, we will cooperate with them based on new capacities,” he said.

He said many hardships had been endured during sanctions.

“Our people has endured hardship. We learned big lessons and massive capacities have been created during this period. To secure our national interests, we cannot talk about these capacities and capabilities,” said the minister.

Sanctions-Era Oil Exports

Zangeneh said sanctions will be finally lifted, adding: “We will not forsake the capacities we have developed during sanctions and we will boost them. Our capacity today in terms of oil sales, oil transfer and oil money receipt would by no means be compared with March 2018 and the start of sanctions. We will not let these sanctions go away. We will arrange them.”

The minister touched on the capacity created in contracting and equipment manufacturing, stating that cooperation with foreign companies “would not mean that we will set aside whatever we have achieved.”

“We will negotiate based on new circumstances where we are in a higher and firmer position,” said Zangeneh.

Oil Projects Financing

The minister said these agreements would be important, adding that three decisions had been made with regard to the agreements.

“The first decision is to sign all agreements with domestic contractors. It was also decided that an addendum be attached to agreements to require the purchase of necessary equipment from domestic manufacturing companies,” he said.

Zangeneh added the third decision was to provide financing from the capital market, which would be the first time oil projects would be funded by the capital market.

“Under the present circumstances, we could not wait for National Development Fund of Iran (NDFI). 

4% for Public Interest Activities

Zangeneh said for the first time, 4% of the lump sum of each project has to be spent on social activities.

“We struck these agreements amid tough sanctions in 2018.

“Our objective was to create jobs and hope for contractors and manufacturers under conditions where the Petroleum Ministry had lost its 14.5% share of oil exports,” he said.

Zangeneh said Iran would consider field-based projects by focusing on well-oriented development, adding: “Based on this idea we will try to reclaim low-yielding wells by relying on technological and startups capacities in order to revive startups.”

The minister said creating new knowledge-based capacities would be more important than reclaiming wells.

“This idea will materialize through cooperation with production companies, and we'll reach a good point,” he added.

Zangeneh also touched on energy efficiency by relying on knowledge-based and startup companies, saying: “We are one of nations with many graduates in this sector and we can hire them. In fact, this idea may be simply energy efficiency. That is important.”

280,000 b/d Increased Capacity

Masoud Karbasian, CEO of NIOC, said at the ceremony that the new model of upstream contracts had won the approval of Economic Council in 2018. The new type of agreements had been drafted upon an initiative by Minister Zangeneh in 2017.

He said contractors and manufacturers had been identified and a tender bid had been held.

Karbasian said $800 million would be allocated in the first phase for enhanced recovery projects in seven provinces, which would add 75,000 b/d to national oil output.

“In some projects we have reached early production and that is good news, showing that we can reach acceptable results in a short period of time by relying on domestic potential,” he said.

Karbasian said the second phase was finalized in August with an investment of $1.7 billion, which would enhance national oil output by 185,000 b/d.

The third phase would get under way in the five provinces of Bushehr, Khuzestan, Fars, Hormuzgan and Kohguiluyeh and Boyer Ahmad with a credit allocation of $1.2 billion. That would add 95,000 b/d to Iran’s crude oil output.

“Of a total 33 projects approved with a credit allocation of $7.2 billion, 29 are onshore and 4 are offshore. These projects would add at least 280,000 b/d to national output. But we will definitely reach a higher figure,” he said.

Domestic Financing

Karbasian also touched on the financing of petroleum industry projects by relying on domestic potential and public capital.

“So far, about IRR 30,000 billion worth of bonds has been issued for oil projects and another IRR 20,000 billion will be issued soon. That would result in an attractive yield for both people and investors,” he said.

He said that 72% of orders pertained to domestic manufacturing, adding that the percentage would increase to 80% soon.

“In light of new oil contracts, 17 Iranian E&P companies, 16 drilling operations companies and 22 top EPC companies have been identified, all of which are national assets and will definitely handle bigger projects in the future,” he added.

 

Biggest Oil/Gas Opportunity in Iran

Oil sanctions against Iran remain effective. But the country says it would export 2.3 mb/d of oil and condensate this year. Many experts believe that Iran’s return to the oil market is unlikely to cause any shock.

Ramin Forouzandeh, oil analyst and board member at Dana Investment Group, tells “Iran Petroleum” Iran would be able to easily export 2 mb/d of oil in the short-term. He also said that thanks to its oil and gas reserves, as well as geopolitical position and low-cost oil production, Iran would remain a major oil player for years.

The following is the full text of the interview Forouzandeh gave to “Iran Petroleum”:

Is OPEC as influential as it was in the oil market?

In response to this question, we have to go back to 60 years, i.e., when OPEC was established. Historically, OPEC was formed when an oil nationalization wave, inspired by the movement of nationalization in Iran, was transpiring oil nations, pushing them to claim their rights from the so-called “Seven Sisters”. Today, the “Seven Sisters” are gone and oil producers have their own national oil companies. If I want to explain about the continuation of OPEC’s work in economic terms, I should say that a number of nations have created an intergovernmental organization to decide on oil output in a bid to make revenue. For instance, producers supply 35 million barrels of oil. Now the Organization, while deciding about 2% production cut, behaves so as to push prices up 2-3%, while production has been cut. Therefore, they gain higher revenue and this economic logic remains effective.

Does it mean that OPEC is not as influential as it was in the market?

OPEC’s influence in oil production compared with the 1970s has declined due to the emergence of new rivals like the US, Russia and Brazil. On the supply side, renewable energies have seen an increase in their share in the world energy mix. Furthermore, technological growth has boosted productivity in the energy sector, leading to a decline in demand. Three key events have transpired the oil market in recent years, during which OPEC’s oil market clout has not been spared. The first one is that shale oil production has continued. The second one was President Trump’s political pressure on oil producers. And the third one was the significant decline in US dependence on the Middle East oil. All these factors affected OPEC’s influence in the oil market.

Although following the 2016 oil price slump, OPEC+ reached a historic agreement in 2017 and this agreement remains effective, some experts cast doubt on the future of cooperation between OPEC and allies. Meantime, in light of OPEC member states’ insistence on reducing production, we see that some nations like Iraq or the United Arab Emirates (UAE) have not been fully compliant. The UAE is eying capacity building to increase production and play a bigger role in the region. The UAE is an ally of Saudi Arabia, but its recent political and economic behavior shows it is looking for an influential role among Arab nations, which would imply a lower Saudi influence. 

Regarding the UAE, I should say that this country has increased its production capacity. It also negotiated with Eastern and Western oil companies for upstream development and signed agreements. Therefore, the UAE’s compliance with the OPEC+ agreement would become harder in coming years. Meanwhile, the UAE is looking at Iraq. Iraq’s production capacity stands at 4.5 mb/d, which is twice its output 15 years ago. That is while Iraq is faced with the Daesh scourge and many domestic problems, and has to pay for reconstruction. The UAE is not willing to lag behind Iraq in oil production. For its part, Saudi Arabia has its own regional adventurism and is trying a lot to increase its regional clout.

However, Saudi Arabia remains a major OPEC and OPEC+ player. Even during the 13th OPEC+ ministerial meeting where oil producers agreed to increase 75,000 b/d their February and March output (totally 150,000 b/d), Saudi Arabia offered to cut 1 mb/d from its output, which pushed prices up to $55.

Yes, that’s true. But it is noteworthy that in the US oil game, Saudi Arabia no longer has the place it had 20 years ago and the US dependence on Saudi oil has declined with no hopeful long-term perspective in the oil market. Meantime, Saudi Arabia is fed up with its traditional role as swing producer to balance price fluctuations. If you remember well, not long time ago, as soon as oil prices soared Saudi Arabia used to supply more oil on the market in order to prevent any excessive price hike and control the market. Nonetheless, regional adventurism costs in recent years have overshadowed this role because Saudi activities’ growth depends on increased petrodollars.

Anyway, Saudi Arabia was a key player in the OPEC+ agreement and accounted for the highest output cut. The OPEC+ agreement owes its survival largely to Saudi compliance.

Yes, Saudi Arabia was a leading nation in the agreed production cut and it cut from its output several rounds. In early 2020, it totally abandoned the market and intensified a price war prior to returning to the agreement. It is worth noting that Saudi Arabia is producing 10 mb/d of oil and the OPEC+ agreement is in fact producing losses for it. Even a 5% cut from its output would be a big figure. Now imagine that this country is trying its best to remain committed to production cuts, while Iraq and the UAE are not honoring their obligations. We’ve seen over the past one year that the harmony that used to exist between OPEC traditional players has been destabilized and every nation is going its own way.

Shale extraction has become a key issue in relations between OPEC and non-OPEC. If prices fall, oil producers would face many problems due to their budget dependence and if prices go up, shale oil would become economical, thereby creating rivals for traditional producers. Meantime, we cannot ignore the renewables. Which price band would benefit OPEC?

Should oil prices exceed $50, shale production would become economical and shale producers would be revived. If prices fall below $ 40, we may hope that shale would go out of the oil market. Furthermore, there is an unwritten agreement based on which expensive oil, i.e. expensive gasoline, in the US would be in total conflict with US policy. Therefore, they would also prefer oil price at something between $50 and $60 per barrel.

Can OPEC tolerate low oil prices?

The point is that oil prices below $40 would make shale production uneconomical. I personally believe that US shale would be cost-effective event with $45 oil price. Therefore, OPEC would have to tolerate two years of oil price below $40 in order to drive shales out of market. I personally think they cannot do so because of their heavy dependence on oil revenues. The second reason is that I think shale oil is more resilient than OPEC oil and there is no guarantee that if these nations tolerate low prices for two years and the US production is cut by a third, shale would go out. Shale oil technology is likely to make significant progress.

As a new administration is taking office in the US, speculation is rife about Iran’s return to the world oil markets. Minister Zangeneh has said Iran would seek nobody’s permission for return to the oil market as it reserves its right to produce oil. In this tumultuous market, do you think that Iran would be still influential?

Iran’s oil market influence may be seen from two aspects. In the short-term, Iran can easily supply 2mb/d of oil on the market. Now if there is a consensus among OPEC member states on increased production by Iran, the country can export 1mb/d more oil without causing any shock in the market. Now, the point is that based on market perspectives, demand for oil in 2022 would not be like in 2019. Under such circumstances, everyone would naturally be willing to know how much oil Iran would be supplying on the market.

Will Iran remain as influential in the long-term, too?

But in the long term, I have to note that although over recent decades Iran has failed to benefit from its high oil and gas potential, and has taken steps in such direction during one period only, the country has not been able to use its potential in this sector due to political reasons and sanctions. However, I should note that Iran has the biggest oil and gas opportunity in the world for three reasons: First and foremost, Iran has the highest oil and gas reserves together in the world; second, a significant portion of these reserves have not been developed yet; and third, Iran enjoys a unique position in the Middle East. Iran has access to Europe, while being in connection with emergent economies with high future demand for oil, like India. No other country in the world has Iran’s position. For instance, Saudi Arabia has large oil reserves, but its combined oil and gas reserves volume is lower than that of Iran. Therefore, given its reserves Iran enjoys an unrivaled position in the Middle East. Besides, its reserves are low-cost and it can produce oil at $30-40 a barrel.

In fact, Iran can remain a key player in the oil market for years.

Yes, that’s true. Even in the 2040-2050 perspective, Iran can still be an important player in the market. Of course, if it happens all oil producers would be sidelined. Therefore, they are not happy with Iran’s return to the oil market and they would not like to see any long-term agreement be signed between Iran and leading international oil companies for increased production capacity, which would push them aside and they could no longer rival Iran.

How you do see the prospect of cooperation between OPEC and non-OPEC? The coronavirus pandemic has had a role in such cooperation in the past one year. Is this cooperation likely to be destabilized in case the pandemic ends and demand for oil increases?

OPEC is under more pressure than non-OPEC from output cut because OPEC nations depend on oil revenues to run their economy. Therefore, they are under heavy pressure. However, this agreement showed that OPEC could not control the market on its own, and it can be influential only through such cooperation. The prospect of this cooperation depends on Russia. Saudi Arabia was harmed due to its regional adventurism rather than reduced strategic reserves. Now we should wait and see how long Russia would remain committed. It would be reasonable for Saudi Arabia and Russia – both key players – to continue their political ties and cooperate in the oil market. Saudi Arabia and Russia need to continue with production, but as I mentioned, OPEC faces more problems than non-OPEC.

 

COVID-19 Slows Oil Demand Rebound

Oil demand recovery will take a hit from a spike in new coronavirus cases before vaccine roll-outs and stimulus measures help in the second half of the year, International Energy Agency (IEA) said. “Border closures, social distancing measures and shutdowns will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.

“This recovery mainly reflects the impact of fiscal and monetary support packages, as well as the effectiveness of steps to resolve the pandemic,” the IEA said.

The emergence of new strains of the virus, renewed lockdowns in China and logistical hurdles facing vaccine roll-outs contributed to the IEA’s gloomier outlook.

Noting that an improvement to global oil demand went into reverse in December, the Paris-based watchdog lowered its forecast for the first quarter by 580,000 barrels per day (bpd) and its outlook for 2021 by 300,000 bpd.

Both supply and demand are on track for recovery this year, and efforts by top producers to balance the market by reining in output helped lower stockpiles of crude and oil products worldwide, though oil stocks remained stubbornly close to a May peak.

Given an expected demand increase in the second half of the year, however, “much more oil is likely to be required”.

Cold Asian and European winters along with supply discipline by the Organization of the Petroleum Exporting Countries (OPEC) and its allies boosted crude prices, the IEA said, while the U.S. shale industry was expected to keep production flat.

“If they stick to those plans, OPEC+ may start to reclaim the market share it has steadily lost to the U.S. and others since 2016.”

2-Canada Scrambles to Salvage Keystone XL

U.S. President-elect Joe Biden’s expected move to cancel the Keystone XL pipeline prompted Canada’s main oil-producing province of Alberta to threaten to seek damages as Ottawa made efforts to save the troubled project.

Scrapping the project would threaten Canadian jobs and the U.S.-Canadian relationship as Prime Minister Justin Trudeau tries to turn the page on the Donald Trump era, though the idea drew support from environmental groups and progressive U.S. Senator Bernie Sanders.

A source told Reuters Biden will cancel a permit for the $8 billion project over concerns about fossil fuels contributing to climate change, dealing a blow to the Canadian energy sector.

“This is the 11th hour and if this really is the top priority, as it should be, then we need the government of Canada to stand up for Canadian workers, for Canadian jobs, for the Canadian-U.S. relationship, right now,” Kenney told a news conference.

He said Alberta had retained legal counsel and believed there was a “very solid” legal basis to seek damages under international free trade agreements if the pipeline is effectively killed by presidential fiat. Alberta’s financial exposure is just over C$1 billion ($783 million), Kenney said, after the province last year invested in the pipeline, also known as KXL.

KXL is intended to carry 830,000 barrels per day of oil sands crude from Alberta to Nebraska but has run into fierce opposition from U.S. landowners, Native American tribes and environmentalists. Outgoing Republican President Donald Trump had supported the project.

Diplomats in Ottawa continue to engage with their American counterparts over Keystone XL, two sources close to the Keystone XL file said, and one of them said TC Energy is still lobbying.

“We don’t have a decision from the Biden administration at this point. We should continue to work,” one source said, adding Trudeau had consistently supported the pipeline and would continue to do so. “It’s not over until a decision is public.”

3-OPEC 'Cautiously Optimistic' Oil Market Will Recover in 2021

OPEC’s secretary general said he was cautiously optimistic the oil market would recover this year from the slump in demand brought on by the coronavirus pandemic.

Monthly meetings of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia - a group known as OPEC+ - are there to stop an imbalance from re-emerging, OPEC’s Mohammad Barkindo told a virtual forum.

“We all agree that the recovery is fragile, there are still more uncertainties, but we are cautiously optimistic that the recovery will materialize this year,” Barkindo said at the Atlantic Council Global Energy Forum.

Oil prices have rallied to an 11-month high this month, helped by a Jan. 5 decision by most members of OPEC+ to hold production steady in February and a pledge by Saudi Arabia to voluntarily cut output.

India’s oil minister, Dharmendra Pradhan, said at the same event that the unexpected move to cut output by some OPEC nations had led to a price rally and was creating confusion for consuming countries.

“This kind of scenario will push us to more alternative methods of energy sourcing,” Pradhan said.

Barkindo, in response, said OPEC+ needed to be flexible and had stable markets as its target.

The energy minister for OPEC member the United Arab Emirates earlier told the same event he saw the start of the market recovery this year.

“This year the way we see it is a year of recovery, whether it’s going to be the end of the year where we are supposed to reach the balance or the beginning of 2022,” Suhail al-Mazrouei said.

The UAE minister also said he saw good oil demand growth in China and India as more countries begin their coronavirus vaccination campaigns.

4-U.S. Blacklists Oil Traders, Tankers over Venezuela

The United States sanctioned a network of oil trading firms, individuals and vessels that have helped Venezuelan state-run oil company PDVSA sell crude mainly to Asia despite Washington’s sanctions on the South American nation.

The measure targets a network that the U.S. Treasury Department says helped the administration of President Nicolas Maduro, whose 2018 re-election Washington called a sham, broker the sale of hundreds of millions of dollars in Venezuelan oil.

“Those facilitating the illegitimate Maduro regime’s attempts to circumvent United States sanctions contribute to the corruption that consumes Venezuela,” Treasury Secretary Steven Mnuchin said in a news release.

The Treasury said its Office of Foreign Assets Control, or OFAC, targeted three individuals, 14 entities and six vessels for their ties to a network attempting to evade U.S. sanctions on Venezuela’s oil sector.

It said the “principal actors” were Alessandro Bazzoni, Francisco D’Agostino and Philipp Apikian, as well as oil trading firms including Elemento Ltd and Swissoil Trading SA.

Washington first imposed sanctions on PDVSA limiting its oil sales in early 2019, which cut off its main destination for exports, the United States. The measure was followed last year by sanctions on two units of PDVSA’s main trading partner, Russia’s Rosneft, as well as shipping sanctions blacklisting tankers involved in the transportation.

The U.S. FBI started probing Elemento and Swissoil last year, along with Mexico-based LibreAbordo and Schlager Business Group, aiming to gather information for Treasury’s inquiry into possible sanctions-busting. LibreAbordo, Schlager and Mexican citizens Joaquin Leal Jimenez, Olga Maria Zepeda and Veronica Esparza, were sanctioned in June.

Venezuela’s information and oil ministries, PDVSA, LibreAbordo, Schlager and Elemento did not immediately reply to requests for comment. Reuters could not immediately reach Swiss oil, Bazzoni, Apikian, D’Agostino, Leal, Zepeda or Esparza.

The move expands on the sanctions on the Mexico-based individuals and businesses for “operating a sanctions-evasion scheme benefiting the illegitimate Maduro regime and PDVSA.”

“Today’s action targets additional orchestrators and facilitators with ties to the Mexico network who have conspired with Maduro’s oil minister, Tareck El AissamiMaddah, and indicted money launderer Alex Nain Saab Moran to broker the sale of hundreds of millions of dollars of Venezuelan oil,” the Treasury said.

5--Brazil's Ultrapar Leads Negotiation for Petrobras Refinery

Brazilian group Ultrapar Participacoes SA offered the highest price for Petrobras’ refinery Refap and is leading talks to acquire the facility in the southern state of Rio Grande do Sul, three people close to the matter said.

Brazil has been trying sell eight refineries, which would end Petrobras’s virtual monopoly in the country’s refining sector and open one of the world’s largest fuel markets to private investors. Petrobras is currently negotiating five of them with the highest bidders.

Petroleo Brasileiro SA, as the state-controlled producer is known, is trying to get Ultrapar to boost its offer before agreeing to exclusive talks, three of the people said. Offers below Petrobras’s initial price range have made the company miss its internal deadline to sign a deal by the end of 2020.

Raízen, a joint venture between Royal Dutch Shell PLC and Brazilian ethanol producer Cosan SA, has also bid for Refap, two of the people said. A second round of offers hasn’t been ruled out, the people said.

Indian conglomerate Essar Group, which had pre-qualified for the binding phase, dropped out of the competition, the people said.

Ultrapar and Raizen have also bid for refinery Repar, which supplies the relatively affluent states of Parana, Santa Catarina, Sao Paulo and Mato Grosso. Petrobras has hesitated to designate a winning bidder because it considers the prices too low, three of the people said.

Refap and Repar are located in Brazil’s southern region and have a production capacity of 200,000 barrels per day each, or about 18% of the country’s capacity.

Antitrust rules would bar Petrobras from selling the units to the same firm.

Elsewhere, Petrobras is in exclusive talks with Abu Dhabi investor Mubadala Investment Co to sell its Bahia unit RLAM. Those talks, at a more advanced stage, could bring a deal as soon as this month, two of the people said.

The producer is also negotiating the sale of its REMAN, LUBNOR and SIX refining units, one of the people said. No exclusivity was set, which allows rebids, the person said.

6-Oil Majors Cash in on LNG Price Spike

Global energy majors including Royal Dutch Shell and Total are expected to benefit most from January’s gas price spike, beating rival trading houses and non-integrated producers thanks to their access to multiple sources of the fuel.

Asian liquefied natural gas (LNG) prices have rocketed to record highs in January due to low stocks, a cold winter, global production outages and shipping delays. They have outpaced prices in much of Europe and the United States, where gas is abundant, creating an arbitrage opportunity for sellers.

Several companies and traders have rushed to meet the Asian demand, but have struggled to find volumes for quick delivery.

However, majors such as Shell and Total, with access to multiple sources of gas, have been able to re-route U.S., Nigerian and Qatari gas tankers previously destined for Europe to Asian markets.

“Some of our long-term contracts include possibilities

2020 Developments at a Glance

In 2020, the world witnessed significant ups and downs which severely impacted energy markets and economies of the oil producing countries. The following is a brief review of the relevant developments in 2020.

Geopolitical Instability

In January 2020, major incidents and further falling oil exports from Venezuela and Libya did not impact global oil markets excessively in the short-term; due to abundant supply, strategic petroleum reserves (SPR) above five-year averages, as well as weaker oil demand growth in a slowing global economy. The outbreak of the Coronavirus also intensified   market instability affected short-term demand.

US-China Trade War
China and the United States signed a Phase 1 trade deal under which the United States
reduced some tariffs on Chinese goods in exchange for Chinese pledges to purchase more
American goods that included energy products. China committed to buy at least $52
billion in additional energy purchases over the two years, from a baseline of $9 billion in 2017.

COVID-19 and Libya Oil Blockade

In February, the spread of the Coronavirus continued to impact energy markets particularly China’s energy demand. Continuing instability in Libya resulted in falling oil output due to a blockade of oil fields causing production to plunge to about 160 tb/d from approximately 1mb/d.

Canada Energy Developments
In February Canada saw blockades on strategic railway points across the country as indigenous groups protested the construction of a gas pipeline that crosses their traditional territory. Furthermore, Teck Resources, a Canadian mining company, shelved a proposed multi-billion dollar energy project citing political uncertainty about oil-and-gas development in the country.

COVID-19

In March, the global spread of the COVID-19 led to a demand shock that had already impacted fragile world energy market balances. Markets continued to assess the yet unknown risks of COVID-19 to the global economy as the disease continued to suppress economic activities across the world.

Oil Market Volatility

The absence of a production adjustment agreement at the 8th OPEC and non-OPEC Ministerial Meeting held on 6 March turned cooperation on market stability to competition for market share. This created a supply shock that added further downward pressure on oil markets that tested lower price floors due to COVID-19. Low oil prices combined with the inelastic nature of refined product supply and demand was a boon to refining margins. However, COVID-19 also impacted downstream profitability caused by shrunken demand.

OPEC+ Meeting

The meeting was held on 12 April 2020, and OPEC+ producers struck an agreement to adjust oil production by 9.7 mb/d for May and June, by 7.7 mb/d from July through December, and by 5.8 mb/d from January 2021 through April 2022.

 G20 Meeting

On 10 April 2020, G20 Energy Ministers acknowledged the instability in the global energy market and agreed to “take all the necessary and immediate measures to ensure energy market stability” and “ensure the balance of producers and consumers' interests, energy security, and the uninterrupted flow of energy.

Non-OPEC Output Shut-Ins

While OPEC+ production agreement took effect in May 2020, output from the US, Canada and other producers was set to fall further. This could lead to a historic decline of 12 mb/d and cut global supply to 88 mb/d – the lowest in nine years according to the IEA projections in May 2020.
Voluntary Production Adjustments

Kuwait and the UAE joined Saudi Arabia that had announced an additional voluntary oil production adjustment of 1m b/d beyond the OPEC+ targets on 11 May to take effect in June. The UAE pledged to reduce its output by an additional 100 tb/d, and Kuwait by an extra 80 tb/d on top of the 9.7 mb/d adjustment by OPEC+ that took effect in May.

Oil Market Recovery

A partial re-opening of economies in some countries, a greater dependence on driving as
opposed to public transportation, and non-OPEC production shut-ins led to a modest
recovery in oil market demand in comparison to the month before.

Oil Demand Recovery

According to the IEA projections, a historic demand decline of 8.11 mb/d in 2020 was expected to happen, while it forecasted recovery of 5.7 mb/d in 2021.

Voluntary Production Adjustments

In addition to reaffirming the production adjustments undertaken as part of the April agreement, participating countries from OPEC and non-OPEC agreed to extend the 9.7 mb/d production adjustment by one month. Therefore, OPEC and its non-OPEC countries agreed to adjust production by 9.7 mb/d in July rather than the scheduled 7.7 mb/d. Voluntary production adjustments by Saudi Arabia, the UAE and Kuwait that took effect in June, and were expected to end in July.

JMMC Meeting

On 15 July, OPEC + members agreed to ease production adjustments by moving forward with the planned adjustment of 7.7 million barrels a day from the market in August compared
with cuts of 9.7 million over the three previous months. Additional compensatory adjustments were expected to be made by members who were not able to fulfill earlier commitments.

First Global Inventory Draws

According to the IEA, floating storage of crude oil fell by 34.9 mb in June from its all-time high in May to 176.4 mb. A tightening crude market balance and flatter forward price curves
reduced the incentive to store oil. According to the US EIA, global markets shifted from a 21 mb/d of oversupply in April to inventory draws in June.

 COVID-19 Stimulus and Recovery Measures

To mitigate the economic impacts of COVID-19, several countries proposed a range of measures including green stimulus packages aimed at promoting sustainable energy production and policy support for renewables. This also included additional investments in electric and hydrogen vehicles.

EU Hydrogen Strategy

On 8 July, the European Commission unveiled its hydrogen strategy to help the EU achieve
carbon neutrality by 2050. The strategy was aimed to boost and gradually decarbonise
hydrogen production. This will be materialized by the rapid decline in the cost of renewable
energy and acceleration of technology developments. This “green” hydrogen can have
several applications in overall decarbonisation efforts.

OPEC and Non-OPEC Partners Lift Out

OPEC production increased by 1.2 mb/d and 0.98 mb/d in July according to IEA and OPEC reports after Kuwait, Oman, Saudi Arabia, and the UAE ended additional voluntary adjustments.
The OPEC + agreement transitioned to Phase 2 in August, when the adjustments
pledged by the OPEC+ alliance ease from 9.7 mb/d to 7.7 mb/d through December.

Jet Fuel Demand Weaker

The IEA lowered its overall oil demand forecast after three months of consecutive increases to 8.1 mb/d largely due to reduced air travel. Jet fuel demand was projected to decrease by 39 percent or 3.1 million b/d in 2020, as the recovery was “weaker than anticipated with flight schedules still well below normal levels in many regions.”

US Rig Count Falls

US shale oil production continued to be impacted due to decreased oil demand amidst the
COVID-19 pandemic. The number of active oil rigs in U.S. fields fell by 4 to 172, according to Baker Hughes – the lowest level of activity since 2005 before the shale boom started.

JMMC Reiterates Conformity
The 22nd Meeting of the Joint Ministerial Monitoring Committee (JMCC) convened on 17
September 2020. The committee welcomed the compliance of OPEC and non-OPEC countries participating in the Declaration of Cooperation (DoC) that reached 102 percent in August 2020. The JMMC also recommended to the OPEC and non-OPEC Ministerial Meeting the request of several underperforming member countries to extend the compensation period until the end of December 2020.

Oil Demand Falls

Demand sentiment weakened, according to both the IEA and OPEC, as they reported the largest drop in global demand since April and May, respectively. IEA lowered its forecast by 350 kb/d and OPEC lowered its assessment by 400 kb/d. Although the intensity of COVID-19 seemed to be slowing in some countries, it was rising in others adding uncertainty to demand outlooks.

US Gulf Coast Hurricanes Limit Supply

More than 30 percent of US Gulf crude and 25 percent of natural gas output remained offline due to "Hurricane Sally" which had impacted the US Gulf Coast. That came less than a month after "Hurricane Laura" shuttered 1.5 mb/d or 85 percent of Gulf oil production and 2.3 mb/d of refining capacity, making it the busiest Atlantic hurricane season since 2005.

Oil Inventory Data
According to OPEC, preliminary data for July showed that total OECD commercial oil stocks fell by 4.5 mb m-o-m to 3231 mb and in September was 260.6 mb above the latest five-year average.

Libya Resumes Oil Output

Libya’s oil industry, shut down since the beginning of 2020, reopened with output tripling to 300,000 barrels a day, in October, after the partial lifting of a blockade on energy facilities. Libya produced around 1.2 mb/d at the beginning of 2020, before the blockade shut down most ports and fields.

US Gulf Coast Hurricanes Limit Supply

Around 30 percent of Gulf of Mexico crude remained offline due to "Hurricane Delta". At its peak on 10 October, the storm shut-in almost 2 mb/d of crude and 2 MMcf/d of gas production, respectively, representing 92 percent and 62 percent of total Gulf output. That was the fourth hurricane which impacted Louisiana in 2020.

IEA and OPEC at Loggerheads
According to OPEC’s World Oil Outlook, global primary energy demand was forecast to continue growing in the medium- and long-term, increasing by a significant 25 percent in the period to 2045. Oil was expected to retain the largest share of the energy mix throughout the outlook period, accounting for a 27 percent share in 2045. In its World Energy Outlook the IEA reflected that, oil demand will continue to grow albeit at a slower pace and plateau in the 2030s. In the IEA outlook, Coal’s share of the energy mix was expected to fall below 20 percent for the first time, as renewables were expected to become the primary means of producing electricity by 2025.

Energy Markets Rise

As COVID-19 cases continued to climb in Europe and North America, vaccine developers announced their vaccine was found to be more than 90 percent effective in preventing COVID-19 according to first interim analysis of its phase three study. Oil prices moved higher as WTI climbed 8.5 percent and Brent was up 7.5 percent marking the largest single-session rally on a percentage basis since May and June, respectively.

Biden Offers New Energy Vision

The election of Joe Biden as the 46th President of the United States on 3 November 2020 was associated with the prospective change in the US energy policy. Beyond rejoining the Paris Agreement and a pathway to net-zero emissions by 2050, the $2 trillion spending goal set for energy transition that is focused on infrastructure could receive bipartisan cooperation. According to analysts, new policies and legislative initiatives were to affect how fast US oil and gas production, as well as job opportunities to recover from COVID-19 impacts. Taking into account his rather moderate positions, Joe Biden is expected to ease Iran sanctions. This may have significant impact on Iran's economy.

IEA and OPEC Bearish
The IEA recorded its largest drop in oil demand since April with a 420 tb/d decrease from last month to reach a total demand decline of 8.78 mb/d. OPEC’s assessment was down by 280 tb/d for an overall demand decline of 9.75 mb/d – OPEC’s largest overall decline of the year. The IEA, however, continued to be optimistic on Chinese demand which was set to increase by 80 tb/d in 2020.

JMMC

At the 24th JMMC Monitoring Committee convened on 17 November, Prince Abdulaziz bin Salman , Minister of Energy, Saudi Arabia urged all the participants in the Declaration of Cooperation (DoC) to renew their determination to abide by the terms of the agreement that had greatly contributed to the balancing of global markets.

Renewed Ambition on Energy Models

As the US President-elect Joe Biden reiterated the US commitment to rejoin the Paris Climate Agreement, and achieve net zero emissions by 2050, new climate commitments were announced at the "UK Climate Ambition Summit" that was held on 12 December 2020 co-convened by the UN and France, in partnership with Italy and Chile, marking the five-year anniversary of the Paris Climate Agreement.
• China pledged to lower its CO2 emissions per unit of GDP by over 65 percent from
the 2005 levels, increase the share of non-fossil fuels in primary energy consumption to around 25 percent, bring its total installed capacity of wind and solar power to over 1.2 billion kilowatts, and increase forest cover by six billion cubic meters from 2005 levels by 2030.
• UK announced a target to reduce its greenhouse gas emissions 68 percent from 1990
levels by 2030.
• The EU also committed to reducing greenhouse gas emissions 55 percent below 1990 levels by 2030, up from the previous pledge of 40 percent.

OPEC+ Meeting Concludes

OPEC and non-OPEC producers agreed on 3 December 2020 to increase production by 500,000 barrels per day beginning in January. This will bring the total production cuts at the start of 2021 down to 7.2 mb/d from the current levels of 7.7 mb/d. Participating countries also agreed to hold monthly OPEC and non-OPEC Ministerial meetings starting in January 2021 to assess evolving market conditions.

LNG Prices Climb to Six-Year High

A combination of outages at major productions hubs, colder weather in key importing countries, and congestion along global shipping routes have pushed LNG spot prices in Asia to the highest level since 2014. Noting that natural gas supply will not recover as fast as demand and may cause further market turbulence over the coming months at the Gastech Conference on 8 September 2020, the IEF Report on Oil and Gas Investment in the New Risk Environment released in collaboration with the Boston Consulting Group on 10 December 2020 points at greater market volatility and higher trending prices.
 

 

Zangeneh: Oil Development Never Stopped

                 ran’s petroleum minister, Bijan Zangeneh, presented a perspective of the oil market to the 6th annual Iran Petroleum and Energy Club Congress (IPEC). He said: “Over the past three years, huge capacity has been created for exporting oil and petroleum products.”

“That is while the current administration has passed the bulk of its mandate under sanctions. However, we never let oil development to stop despite all hardships and costs,” he said.

Zangeneh said sanctions created difficult conditions for Iran, which are still continuing.

The minister also spoke about the building huge capacity for oil and products exports over the past three years, saying Iran would definitely use this capacity after sanctions are removed.

Zangeneh said, he wished Iran would have a role in global oil trade. He added: “To reach this objective I tried a lot, but once and again our efforts were blocked.”

The three-year track record of Petroleum Ministry shows that this ministry has presented a brilliant record in terms of oil and petroleum products exports despite very tough sanctions.

“With facilities given to us during this round of sanctions, by which we could risk, we created good capacity to survive under any circumstances. We learned a lot. Our capacity now is much more different from our capacity in 2017 and 2018. We have high potential,” he said.

The minister touched on the manufacturing of petroleum industry equipment and development of oil and gas fields as some instances of potential created in this sector. 

He said Iran would continue to use these potentialities, adding: “On the issue of enhanced oil recovery we ourselves have to implement development projects, while using the potential of top international firms. Employing foreign companies would not be only for attracting investment; rather it would be aimed at enhancing the recovery rate and attracting technical knowhow. I believe that management is an instance of knowhow.”

Zangeneh said the necessity of increasing oil production in Iran left no room for doubt.

He added that through increasing oil production, E&P companies should be engaged.

“We have to provide necessary resources for these companies and link them with universities in order to use their studies. Currently, 80% of our fields’ capacity has been given to universities for enhanced recovery,” he said. 

Zangeneh also touched on the gas industry, saying great work had been done in this sector.

“Raw gas production in the country has now exceeded 1.030 mcmd/d, but consumption is going on much more quickly. Gas consumption has increased in Tehran 15% and across Iran 12% year-on-year. No oil or gas company can compensate for the 12-15% increase,” he said.

Zangeneh said that South Pars has reached full capacity, adding that 60-80 mcm/d of more gas might be recovered from this field.

“Even this amount of increased production would be consumed next year. Of course, we have projects for coming years. But the solution to the energy problem has nothing to do with production; rather it is related to consumption and demand,” he added.

Surplus Fuel Production

Zangeneh went on to speak about measures undertaken in the refining industry and improvement of products quality, saying: “For the first time we are faced with surplus gasoline and gasoil production.”

The significance of Zangeneh’s remarks lies in the fact that Iran was faced with surplus fuel oil, naphtha and liquefied petroleum gas production.

He said permissions had been issued for the allocation of 1.5 mb/d to major refineries for efficient energy.

Zangeneh also referred to the petrochemical industry, saying reliable measures had been undertaken to that effect. All necessary feedstock has been allocated to petrochemical plants.

He said Iran would see an annual 17mn-tonne increase in its petrochemical production capacity up to March, adding that the second jump in the petrochemical industry would happen next calendar year. The petrochemical industry would earn the country $25 billion by next year.

Downstream Sector

Zangeneh said Iran’s petrochemical revenue would reach $33 billion by 2025, adding that two new megaprojects are envisaged, each with $3 billion investment. They are expected to come online by 2027.

Noting that development of the downstream petrochemical industry was not up to the Petroleum Ministry, he said that “accelerator” projects had been defined in the four chains of propylene, methanol, benzene and ethylene with the focus being on converting methanol to propylene in light of propylene shortage in the country.

The minister also said that propylene production increase had been defined in north, south and west of Iran.

“The propylene produced for distribution and consumption in downstream petrochemical sector would be transferred from south to north of Shiraz and from north to east and northeast in order to help develop the industry and complete the value chain,” he added.

Zangeneh also touched on the gathering of flare gas, saying: “By maximizing oil production, i.e. about 4 mb/d, we will have less than 30 mcm/d of flare gas, which is currently lower due to lower oil production.”

“Plans have been made for gathering all flare gas. By March 2023, more than 95% of flare gas would have been gathered to be converted to petrochemical feedstock. That is an important project. After 110 years we can have no flare,” he said.

Zangeneh touched on Iran’s plan to transmit oil through the Goreh-Jask pipeline, adding that for the first time Iran would be able to export oil from the Sea of Oman.

“Constructing 1,000-km would be complete by the end of next calendar year. Its full operation would be a big step,” he said.

Zangeneh also spoke about quality certificate issuance bodies, saying this certificate would be issued by the Petroleum Association and supported by the National Standards Organization. He said that all equipment manufactured for the petroleum industry should obtain the IPI license.

 

 

Iran Oil Market Return Possible

Hojjatollah Ghanimifard, former advisor to the OPEC Secretary General, said in a panel discussion at the annual Iran Petroleum and Energy Congress (IPEC) that Iran’s return to the oil market was possible.

He said if shale oil production increases once more, part of Iran’s oil market that may be taken back through negotiations with Saudi Arabia, the United Arab Emirates, Kuwait and Iraq would be seized by the US.  

He touched on the results of Iranian and Venezuelan oil return to the market, saying: “Iran’s return to the oil market has already been experienced and when I was at the OPEC Secretariat, I heard senior officials of an international institute saying Iran’s ability to increase and export oil in such short period of time was unbelievable. Therefore, Iran’s return is possible”.

Noting that at stake was not Iran’s oil market share regain, he said: “Oil exports rest with the Petroleum Ministry, National Iranian Oil Company and more specifically the Directorate of International Affairs of NIOC, but at this sensitive juncture with very fragile demand and upward supply and the impossibility of an agreement between the top producers of OPEC and non-OPEC and the zero oil prices, it should not be imagined that oil exports rest merely with NIOC Director of International Affairs. Both covert and overt policies have to be implemented.”

He explained: “The covert policy is that some problems related to economy and particularly foreign trade should be resolved bilaterally or multilaterally. In such policy, you don’t need to reveal everything to media and the Ministry of Foreign Affairs, Central Bank of Iran and NIOC Directorate of International Affairs should cooperate closely and close ranks at such difficult period.”

Oil Demand Fragile

Ghanimifard said everyone knows that oil demand which was expected to go beyond 100 mb/d in 2020, for the first time in the 170-year history of oil production, has fallen.

“That showed how fragile oil demand could be. Some forecasts show that 100mb demand for oil up to 2045 is not practical. We should not think that we can increase our oil exports and other nations would decrease their production to let us enter a blossoming phase in the market,” he said.

Ghanimifard said Saudi Arabia, Russia and the US had taken Iran’s oil market share, adding that NIOC and Saudi Aramco had never engaged in a price war.

“Iran should go through a friendly and commercial way to take back its share from Saudi Arabia and Russia. Part of Iran’s oil seized by the US could not be taken back as long as shale oil production continues. US shale oil production is reportedly falling with some figures speaking about 2mb/d decline by 2020, which is not final yet. In 2021, shale oil production will not increase significantly,” he said.

Ghanimifard said that current oil prices would make many shale oil fields economical as their production would increase anew.

“If share oil production increases anew, the share of Iran’s oil market that may be taken back through talks with Saudi Arabia, the UAE, Kuwait and Iraq would be seized by the US,” he said.

Ghanimifard touched on the high growth of renewable energies, saying oil growth would be below 0.5% by 2045 at best.

“Based on rules, the 0.5% share would not be allocated to Iran. As a country sitting atop oil and gas reserves, Iran can benefit from other sources of energy like hydrogen or ammonia energy,” he said.

Saeed Khoshrou, director of international affairs at NIOC, said: “Demand for oil is likely to increase, but oil supply would definitely go up. Therefore, we should not satisfy ourselves with this level of prices. Oil prices are not subject to only supply, demand and reserves. Monetary and financial policy should be also taken into consideration.”

“Even without sanctions, it would be difficult to find room in this market,” he said.

Enough Room for Iran Oil

Mehdi Hosseini, senior energy economics expert, said analyses offered about OPEC were conservative. “I’m not disappointed with the future of oil market, and I believe that containment of covid-19 would bring about some developments,” he said.

He added that shale oil had been harmed seriously by the covid-19 pandemic and oil price fall with 2.5-3 mb/d cut from output, noting: “I am very optimistic. Next winter we will see better conditions for oil prices. OPEC has shown over the past 40 years that whenever one of its members is out; there would be room for it when it intends to return.”

He referred to Iraq, Saudi Arabia and Russia as nations that have taken Iran’s market share.

“I believe that if Saudi Arabia is not engaged in rivalry with Russia, there would be room for Iranian barrels,” he said.

Oil Price Scenarios

Afshin Javan, Iran’s National Representative to OPEC, said international oil companies with costly chain of assets would face many problems in organizational growth in the post-COVID period, but there would be good opportunity for the merger of companies.

“Refineries, as another player in the post-COVID period, would face many problems including non-homogenous assessment of demand. Some sections of small-sized refineries would not be able to preserve themselves,” he said.

Javan said: “Service companies would face asset shortages for their oil fields in the post-COVID period due to the annulment or delay of some projects and a sharp decline in production capacity and mass layoff.”

He went on to speak about scenarios for Brent in 2021, adding that Brent prices would be fluctuating between $48 and $50 by 2021.

“According to the latest report of the International Monetary Fund for 2021, the crude oil price would be above $50 a barrel,” said Javan.

He said that the global economic growth would be 4.4% of OPEC under normal circumstances, which would fall to 2.77% in stagnation.

“India and China are major players in the oil sector, which would experience respectively economic growth of 11% and 8% by 2021,” he added.

Javan said demand growth for oil would be 5.9 mb/d under normal conditions, which would be 5.6 mb/d in stagnation period.

“In 2021 and 2022, OPEC would have to choose between increasing or decreasing production and the strategy of price or market share,” he said.

Javan said after the end of the COVID-19 pandemic, world nations would shift their energy industry to cleaner energy resources.

“With a positive approach, sustainable decline in the global oil demand will encourage major oil producers with political and financial motivations to supply the market in order to create balance in the market,” he said.

Iran Production Capacity 1,600 mcm/d

During a recent panel discussion of the Iranian Petroleum and Energy Club Congress (IPEC), a group of officials presented figures about Iran’s gas production.

Mohammad Meshkinfam, CEO of Pars Oil and Gas Company (POGC), said with $30 billion investment in the South Pars gas field, the value of products from the gas field reached $500 billion.

Hassan Montazer Torbati, CEO of National Iranian Gas Company (NIGC), said Iran’s gas production would reach 500 bcm by 2041.

“Iran’s annual gas production currently stands at 280-290 bcm with the daily output at 900 mcm/d or 6 million barrels of oil equivalent,” he added.

Montazer Torbati said: “In gas supply to power plants, following ongoing trend, we will reach 225 bcm a year by 2041. We will experience the same growth rate in the household and business sector. Although we think that household gas supply has been completed, due to demographic growth we forecast that our consumption would keep rising to reach 170-180 bcm a year.

“On this basis, our production will increase from 290 bcm to 450-500 bcm by 2041. If in the future there is no alternative reservoir, so we would see fall in output,” he added.

Montazer Torbati said gas consumption in the petrochemical and major industries would stand constantly at 80-90 bcm.

“Of course, in the third petrochemical jump, our output  is forecast to reach 50 bcm from the current 20 bcm. With our current plan, the household and industrial sector is expected to consume 175 bcm of gas, up from the current 90 bcm. Power plants would see their output increase from 85 bcm to 205 bcm. It shows that we have to consume about 380 bcm of our production in the household and power generation sector, and allocate the rest to industrial purposes, exports and other sectors which would transform into value-added,” he said.

$20bn Spent on Gas Field Development

Meshkinfam said that gas recovery from South Pars has reached 220 bcm a year, from 12 bcm in 2002.

He put at 1,861 bcm rich gas recovery from this joint field, adding that total gas recovered from this field is estimated at $335 billion.

Meshkinfam said South Pars had a 10% share in national gas supply in 2002, but now the relevant share has reached 70%.

Elaborating on the volume of investment made in South Pars over the past 20 years, he said Iran’s gas production capacity would reach 141 mcm/d, with $9 billion investment.

If another $45 billion investment is made, the field would see its recovery increase again 141 mcm/d, he added.

Meshkinfam said that over the past 7 years gas recovery has been at 418 mcm/d with an investment of over $ 24 billion. “Currently, with a total investment of $90 billion, gas recovery from South Pars has reached 700 mcm/d.”

Iran has outdone Qatar in gas recovery from South Pars, he said, adding that 27 gas blocks are currently in the phase of production in South Pars.

South Par is currently supplying 600 mcm/d of light gas to national trunkline in addition to the production of 12 million tonnes a year of ethane and 11 million tonnes of propane and butane to feed South Pars refineries.

Montazer Torbati said Iran owns 420 tcf of gas in place in its South Pars zone. He added that 15% of the South Pars reserves had been recovered so far.

“If we go ahead with the same trend, the recoverability would reach 210 tcf (50% of gas in place), but to extract 75% of South Pars gas, we would have to invest $30 billion in order to raise accumulated gas recovery from South Pars to 310 tcf,” he said.

He also said with $30 billion investment in South Pars, the field would produce $500 billion in revenue.

“For the coming 20 years, the idea is focused on preserving the current production capacity and development of other gas fields run by POGC,” said Meshkinfam.

He added that the first solution for preserving the current production capacity in South Pars was to construct pressure compression facilities, both onshore and offshore.

“We are following up on this issue seriously and we will soon finalize its report because we predict to face production fall over coming 3 to 4 years,” he said.

Meshkinfam said extending pipelines, developing areas outside the current limits of South Pars and drilling infill wells would be among solutions for preserving gas production. He said that 60-70 more wells were planned to be drilled around offshore rigs.

Meshkinfam said that $20 billion was estimated to be needed for developing other Iranian gas fields over the coming 20 years. That would add 428 mcm/d of gas to national gas recovery.

Iran’s gas production is expected to reach 500 bcm annually by 2041, which would earn the country $350 billion i revenue.   

Gas Field Development a Must

Abdol-Mohammad Delparish, senior advisor for planning and development to the deputy CEO of National Iranian Oil Company for Engineering and Development, said: “Our country has significant gas reserves, expanded across southern Iran. If they are developed our gas production will increase significantly.”

Noting that demand for gas would increase significantly in coming years, he said: “We would have no option but to develop new gas fields. Twenty fields have been discovered, which may be developed.”

He said that implementation of development projects would increase gas production 1,400-1,600 mcm/d.

Delparish said in case crude oil production exceeds 5 mcm/d, which may also go to 7 mcm/d, development of gas fields would increase. But in case these development projects are not implemented we will see catastrophic drop in output and gas shortage crisis by 2022.” 

 

 

Iran to Apply New Terms to Future Foreign Deals

Eight new agreements worth $1.2 billion have been signed between National Iranian Oil Company (NIOC) and Iranian contractors for enhanced oil recovery. Once fully operational, these projects would add 95,000 b/d to Iran’s oil output. The share envisaged for domestic manufacturing in these projects is 80%. Furthermore, 4% of the value of each agreement would go to public interest services.

Iran’s Minister of Petroleum Bijan Zangeneh said at the signing ceremony that new capacities would be created in the oil sales and transfer, as well as contracting as long as sanctions are in effect.

“If foreign companies are interested, we will cooperate with them, but based on new terms,” he said.

Seven packages of agreements involved Binak, Soulabdar, LaliBangestan, Gachsaran 3, Gachsaran 4, Golkhari, Bibi Hakimieh, Ahvaz 2, Ahvaz 3 and Ahvaz 5, all run by National Iranian South Oil Company (NISOC) in Bushehr, Fars, Khuzestan and Kohguiluyeh and Boyer Ahmad provinces, and one package was for Reshadat field run by Iranian Offshore Oil Company (IOOC) in the Persian Gulf.

The agreements for Golkhari, Gachsaran 3, Gachsaran 4, Binak, Bibi Hakimieh, Soulabdar and LaliBangestan were respectively signed with North Drilling Company (NDC), Iranian Offshore Engineering and Construction Company (IOOC), Petroiran Development Company (PEDCO), MashinSazi Arak, Qeshm Oil and Energy Industry and Maroun Karan, National Iranian Drilling Company (NIDC)and Jahanpars Engineering and Construction Company. The agreements for Ahvaz 2, Ahvaz 3, Ahvaz 5 and Reshadat were signed with the Khatam al-Anbia Headquarters.

Job Creation for Contractors and Manufacturers

According to NIOC, $6.2 billion is estimated to be invested in enhanced oil recovery capacity. The figure adds up to $7.2 billion when financing costs are taken into account.

In parallel, Petroleum Ministry and NIOC are following up on striking IPC contracts for enhanced oil recovery with a view to creating jobs for Iranian contractors and manufacturers.

That includes 33 projects, including 29 onshore and 4 offshore projects. They lie in seven oil-rich provinces – Kermanshah, Ilam, Khuzestan, Kohguiluyeh and Boyer Ahmad, Bushehr, Fars and Hormuzgan. Their implementation would raise Iran’s crude oil output by 280,000 b/d.

In February 2019 NIOC put out 10 projects to tender, which resulted in 10 EPC-EPD agreements worth totally $800 million. The same year, NIOC focused on 13 tender bids for projects worth nearly $1.7 billion. Successful bidders were chosen and named. 

From early 2020, the focal issue was to hold tender bids for the eight projects whose agreements had been signed.

In total, 31 agreements have been signed for $3.7 billion, which would involve drilling 253 new wells and workover of 130 operating wells.

31 Projects for 22 Iranian Firms

For the purpose of job creation for oil contractors, domestic manufacturers of commodities and equipment, experienced and local manpower; a list of widely-used commodities which may be manufactured domestically was drawn up to be incorporated in the related agreements. Contractors are required to place orders with Iranian companies and plants. In this regard, all the 31 projects have been finalized, 22 of which have been assigned to Iranian companies. The drilling rigs needed for these projects would be supplied by Iranian contractors. Currently a total of 18 drilling rigs are operating in these projects. Given the signature of agreement for utilizing 22 more rigs, the number of operating rigs would soon reach 40.

Once the third phase of these projects becomes operational, the number of offshore and onshore rigs would reach 55.

Meanwhile, casing and pipes weighing more than 66,000 tonnes have been ordered to domestic manufacturers by contractors. The figure is expected to reach 180,000 tonnes. Orders have been also placed with domestic manufacturers for the supply of other basic commodities needed for drilling, including wellhead equipment and well completion equipment. The final share of domestic manufacturers in the projects would reach 80%.

According to NIOC officials, implementation of these projects under the current economic conditions would create jobs for local manpower in their provinces, as well as for the petroleum industry experts including contractors, service companies and consulting firms. In order to fulfill its Corporate Social Responsibilities (CSR), NIOC has allocated a 4% share of the lump sum of every single contract to implementation of public interest projects: construction of roads, schools, technical and vocational schools, clinics in villages and towns near the location of project in collaboration with provincial officials.

Capacity Building

Minister Zangeneh said new capacity had been created in oil sales, receipt of oil money and contracting during sanctions.

“If foreign companies decide to work in Iran, we will cooperate with them based on new capacities,” he said.

He said many hardships had been endured during sanctions.

“Our people has endured hardship. We learned big lessons and massive capacities have been created during this period. To secure our national interests, we cannot talk about these capacities and capabilities,” said the minister.

Sanctions-Era Oil Exports

Zangeneh said sanctions will be finally lifted, adding: “We will not forsake the capacities we have developed during sanctions and we will boost them. Our capacity today in terms of oil sales, oil transfer and oil money receipt would by no means be compared with March 2018 and the start of sanctions. We will not let these sanctions go away. We will arrange them.”

The minister touched on the capacity created in contracting and equipment manufacturing, stating that cooperation with foreign companies “would not mean that we will set aside whatever we have achieved.”

“We will negotiate based on new circumstances where we are in a higher and firmer position,” said Zangeneh.

Oil Projects Financing

The minister said these agreements would be important, adding that three decisions had been made with regard to the agreements.

“The first decision is to sign all agreements with domestic contractors. It was also decided that an addendum be attached to agreements to require the purchase of necessary equipment from domestic manufacturing companies,” he said.

Zangeneh added the third decision was to provide financing from the capital market, which would be the first time oil projects would be funded by the capital market.

“Under the present circumstances, we could not wait for National Development Fund of Iran (NDFI). 

4% for Public Interest Activities

Zangeneh said for the first time, 4% of the lump sum of each project has to be spent on social activities.

“We struck these agreements amid tough sanctions in 2018.

“Our objective was to create jobs and hope for contractors and manufacturers under conditions where the Petroleum Ministry had lost its 14.5% share of oil exports,” he said.

Zangeneh said Iran would consider field-based projects by focusing on well-oriented development, adding: “Based on this idea we will try to reclaim low-yielding wells by relying on technological and startups capacities in order to revive startups.”

The minister said creating new knowledge-based capacities would be more important than reclaiming wells.

“This idea will materialize through cooperation with production companies, and we'll reach a good point,” he added.

Zangeneh also touched on energy efficiency by relying on knowledge-based and startup companies, saying: “We are one of nations with many graduates in this sector and we can hire them. In fact, this idea may be simply energy efficiency. That is important.”

280,000 b/d Increased Capacity

Masoud Karbasian, CEO of NIOC, said at the ceremony that the new model of upstream contracts had won the approval of Economic Council in 2018. The new type of agreements had been drafted upon an initiative by Minister Zangeneh in 2017.

He said contractors and manufacturers had been identified and a tender bid had been held.

Karbasian said $800 million would be allocated in the first phase for enhanced recovery projects in seven provinces, which would add 75,000 b/d to national oil output.

“In some projects we have reached early production and that is good news, showing that we can reach acceptable results in a short period of time by relying on domestic potential,” he said.

Karbasian said the second phase was finalized in August with an investment of $1.7 billion, which would enhance national oil output by 185,000 b/d.

The third phase would get under way in the five provinces of Bushehr, Khuzestan, Fars, Hormuzgan and Kohguiluyeh and Boyer Ahmad with a credit allocation of $1.2 billion. That would add 95,000 b/d to Iran’s crude oil output.

“Of a total 33 projects approved with a credit allocation of $7.2 billion, 29 are onshore and 4 are offshore. These projects would add at least 280,000 b/d to national output. But we will definitely reach a higher figure,” he said.

 

Palayesh Naft Abadan Women’s Basketball Team Eyes Championship

The women’s basketball team of Palayesh Naft Abadan has made a strong start with a view to winning the top ranking. It has recorded 9 wins in rapid succession to remain a candidate for the championship title. “Iran Petroleum” has interviewed Shayesteh Motesharei, head coach, about the success and future plans of the team.

                                                                                                                            

You are back to Palayesh Naft Abadan. Why?

First and foremost, I am grateful to God to have managed to serve the Palayesh Naft Abadan team like last year. After the end of the season, I talked with the CEO of the Club and finally we agreed on the extension of my term for this year. Along with my colleagues in the technical division, I have arranged plans for the team. But reaching those objectives in the short-term was difficult. However, we have an opportunity this year and I hope we can reach these objectives.

How come you chose Abadan?

Basketball in Abadan enjoys good potential. Basketball first emerged in Iran in Abadan and it has made significant progress. Of course, support provided by the Palayesh Naft Abadan has been instrumental. There is good talent and the Palayesh Naft Abadan Club has been a good supporter. To put it simply, I have to say that the Club pays due attention to the team. That along with a group of young and experienced players motivated me to choose this place and team.

Can Palayesh Naft Abadan become champion once more in the basketball pro league?

Why not! The Palayesh Naft Abadan basketball has good potential. Therefore, we are looking for championship in this season. Unlike last year, when certain issues kept us from reaching this objective, this year; even under the present special circumstances we are thinking of championship only.

Did you have any problems in your trainings due to the coronavirus?

The present conditions are difficult. We need to look after our players and the technical team. But as far as exercises for presence in the basketball pro league are concerned, I have to say that our players have had technical and bodybuilding exercises and you can now see the result of those exercises. However, I acknowledge the difficulty of working under such tough conditions. Prior to every training session, we measure the temperature and blood oxygen of players to make sure about their health. Local players and others are also careful with their health as they train along with each other and they refrain from unnecessary issues.

Do you think that continuation of league matches would cause no problem?

Currently, most matches of various disciplines are held in full respect of protocols everywhere. Therefore, I favor the continuation of this league; however, it would be better to take coronavirus tests from all patients because it would guarantee the health of coplayers.

How has COVID-19 affected the quality of your team?

Unfortunately, coronavirus has had a negative impact on all leagues. It has not been as good as expected. It is not so bad though. Therefore, I can’t say that the coronavirus has not affected the quality of our team, but through planning we have managed to help players preserve their spiritual condition. I am also grateful to the club management for creating suitable conditions so that our basketballer girls would not worry about anything.

Have you incorporated any new players?

Our team has changed from several years ago. We have signed several new players. Shojaei, Khodaverdian, Taqizadeh and Haqjoo were added to our team. When you intend to achieve the best result for this season you have to upgrade your team.

Don’t you have any problems with all matches being held in Tehran?

The conditions are not normal this year and we have to comply with this certain condition. We have welcomed this decision of the federation because in the long term the matches could be held like before. We have to guarantee the health of players and their families. We have to accept to play in Tehran. There is no other choice. We have to accept the conditions. But I insist on the fact that the health of players is more important than anything else.

You started the league with wins in succession. Would you please tell us about that?

The first match is always difficult, especially when you play out of home. Before the start of matches we had camped in Tehran and we had several preparatory matches. Therefore, everyone was ready enough. My players implemented tactical plans on the ground in the first match and we had a strong win. That boosted my players’ morale and therefore we played without any stress in the second match. These two matches were very good to us and helped us play more effectively in the league. We are now at the top with 9 wins and our ascension to the playoff is certain. I’m happy with my players. That is not the end of story and we have still a long way to go. We have to get ready for the second phase.

How’s the team? You don’t spare any rival.

As I said, we are experiencing a totally different and special league this year and therefore working under such circumstances is difficult. But regarding the team I would like to say that I have been happy, so far. We have come to win and we have to defeat all of our rivals to become champion.

We are witnessing more local players this year. Is it a policy of the club?

Yes, hiring locals has always been topped our agenda and it will continue to be high on our agenda. For instance, Mazaheri, Shahinzadeh, Taheri and Sayahi are young local players who have shown good performance alongside national players. Although there is good potential in the women’s basketball team of Khuzestan Province, it is our policy to hire local players. Currently, six local players are playing along with others.

How hopeful are you to win the championship title now?

From the very beginning we stepped into the matches to win the championship title of the league. As I mentioned, we are faced with difficult conditions, but my players are excellent and I think that in case no serious problem arises the Palayesh Naft Abadan team can leave behind the play-off section and reach the finale to become champion. We have stronger rivals in the next stage, but we remain a strong team. We aim at becoming champion. Combining young and experienced players has been of help to us. I see a bright future for Palayesh Naft Abadan. Rather than mere investing in the current year; it our is our objective to reach the championship title in the following years, too.

To what extent has the club management been instrumental?

So far the women’s basketball team of Palayesh Naft Abadan has received good support, which gives us good motivation. Palayesh Naft Abadan has good reputation. In this season, the Palayesh Naft Abadan team provided full support to the women’s team and therefore we hired good players. I would like to offer my gratitude to Mr. Parou, CEO of Palayesh Naft Abadan Club. I hope that we would deserve such support.

 

1954 Consortium Agreement

The 1953 coup against the government of Prime Minister Mohammad Mossadeq proved to be successful. After that, a consortium was taking Iranian oil fields. The consortium was the product of the US-backed coup. It had one major instigator and one main opponent. In this column we try to sketch out post-coup climate.

The Consortium Agreement of 1954 was signed a year after the coup which overthrew the Mossadeq government. Subsequently, Iranians once more suffered defeat in achieving political and economic independence. However, it must be noted that the consortium was the continuation of the “Gass-Golshayan Agreement” that had been presented to the National Consultative Assembly for approval. Parliamentarians had opposed the agreement. But the “Fadaiyan Eslam” group assassinated Razmara to trigger opposition to the agreement. The “Gass-Golahsayan Agreement” was rejected, and Iran’s oil was nationalized. The British were dismissed and the Mossadeq government survived two more years. Finally, it fell due to a joint US-UK coup. Military commander General Fazlollah Zahedi, who had commanded the coup, became prime minister. He wanted to show that he would follow the Pahlavi II regime in serving the British and the Americans. The coup government intended to serve the interests of Britain and the US in order to compensate for their failures under the Mossadeq government. Zahedi tasked his minister of economy Ali Amini with putting oil fields at the disposal of foreign governments. Ayatollah Kashani opposed the consortium agreement as much as he could.

Amini in Oil Fields

Amini was born in 1905. After conducting his primary studies, he went to Paris and graduated from Sorbonne in economics. He had been appointed deputy prime minister in the government of Ahmad Qavam after Reza Shah abdicated. That was when he shot to prominence in politics. Of course, in the 1940s, he was named president of Iran’s Industrial Bank. In 1947, he was elected to parliament. Three years later, he became minister of economy in the government of Hassan Ali Mansour. Following nationalization of oil, he remained in his post until he took the consortium agreement in his hands. The consortium did not require many arrangements. Police chief Teimour Bakhtiar had imposed blackout on the country; however, everything had to go on prudently in the post-coup period.

Mostafa Alam and Mahmoud Tolouei write: “The victory of British-American coup brought joy to the British who were waiting for such moment since two years ago. Now they were willing to reach a final solution through negotiations with the Zahedi government. However, they expressed no willingness to provide financial support to his government. It was decided that a declaration be issued on December 5 in Tehran and London. The day following the issuance of the Declaration, a conference was held in Bermuda Island while US President Dwight Eisenhower and British and French prime ministers were in attendance. Prior to departing Washington to attend this conference, Eisenhower said the issue of Iran’s oil and the Suez Canal would be the most important topics of his discussions with the British and French prime ministers. The final agreement about the Iran Oil Consortium regrouped Britain, the US, the Netherlands and France. Ten days later, on December 16, 1953, the first joint meeting of Anglo-Iranian Oil Company (AIOC) officials and five American companies: Standard Oil of California /SoCal, (later Chevron), Standard Oil of New Jersey (later Exxon), Standard Oil Co. of New York (later Mobil, then ExxonMobil), and Texaco as well as British Petroleum, Royal Dutch Shell (14%), and Compagnie Française des Pétroles (later Total S.A.) came together in London to make arrangements for the consortium.”

Everything was ready to start the job so that international powers would forget about their anger with the Mossadeq government and the Pahlavi II regime would protect Western interests in Iran and the region. Iran was slapped penalties and had to pay heavy costs for independence-seeking by the Mossadeq government.

Royal Justifications

Amid frustration over the anti-Mossadeq coup and ensuing politico-social obstruction, Ali Amini, whose name was tied to the Consortium Agreement, offered interesting justifications. Pahlavi II was trying to follow in his footsteps. Both were putting on nationalist gesture in a bid to say they had nothing less than Mossadeq, and that they had managed to pursue Iran’s national interests by wisdom and realism. Nobody was there to oppose them. The parliament had already been reduced to silence, the press had been muzzled and political police had created an ambiance of intimidation. That was all in favor of the consortium agreement.

Mohammad Ali Movahed and Gholam Reza Nejati write: “Dr. Ali Amini pieced together meaningless phrases and lies in a bid to show that the agreement was the most perfect.”

Amini’s tactic was to change the subject constantly and put together meaningless words and phrases together. In a parliament whose members were mainly notorious supporters of Britain, this tactic worked. The Shah described the consortium as one of his successful initiatives, saying: “After long talks, we managed to reach agreement with a consortium comprising seven oil concerns.”

Ayatollah Kashani Opposed

While Mossadeq was in prison and most MPs were inclined to American and British interests, only one single voice was heard in opposition to the consortium. Some MPs were sporadically protesting the agreement and even Mossadeq sent a message from prison. But the voice heard loudly, was Ayatollah Kashani’s. Kashani was the man whose discrepancy with Mossadeq had become so deep, as if there were no amity between them. However, Ayatollah Kashani was the only one to call into question the consortium. He was fully aware of the historical and political circumstances to prevent people from saying later that the consortium was a result of nationalized oil industry. He was even ready to sacrifice his life for salvaging the nationalization of the petroleum industry.

Gholam-Reza Nejati writes: “Despite heavy censorship, people became aware of the agreement and raised protests. Ayatollah Abol-Qassem Kashani, the religious leader of the nationalization movement, played a special role in the nationalization of protests. He adopted a tough stance against this agreement and expressed his deepest regret and surprise over the agreement.”

 

 

 

Meybod, Most Historic Town in Iran

The scorching sun in Yazd province rises from the town of Meybod. Everyone has the feeling that the warmth and shine felt across the province come from Meybod.This densely populated but prosperous town is among the most important cities in Yazd province in central Iran. Meybod is silent in appearance, but is in fact the beating pulse of Yazd’s economy.Meybod is seven millennia old and has long been considered an economic and strategic place in Iran. The most important jobs practiced in Yazd province have been ceramic making, pottery, rug weaving and cloth weaving.Due to its prominent role in the history of Iran, Meybod houses different historic monuments. Due to the rich history of Meybod, Yazd has become the museum of Iran. One of the most ancient monuments in this province is Narin Castle which long served as fortress in Iran.Meybod, Most Historic

Due to the prosperity of agriculture in Meybod, pigeon’s dung was largely used to fertilize lands under the Qajar dynasty. A tower was built in Meybod to house pigeons. The tower is today serving as the building of Meybod governor’s office. The cylinder-shaped tower was built so as to block the infiltration of snakes. A gypsum strip covers the hatched body of this tower because snakes cannot crawl on gypsum and these strips do not let snakes into the dovecote.Inside the loft, a structure has been built in order to strengthen the dovecote and avoid vibrations. The inside structure has been beautifully adorned