Attracting Investment, Top Priority

Ali Forouzandeh

Director General of Public Relations

Minister of Petroleum Javad Owji recently said that Iran would welcome any foreign or local direct investment in Iran’s gas fields with the focus being on the supergiant offshore South Pars gas field.

He also said that investors would be needed to quantitatively and qualitatively upgrade refineries across the country, noting that the current administration would support investment.

Owji specifically said that Iran’s Petroleum Ministry would be open to foreign and domestic investment for developing hydrocarbon fields, particularly those shared with neighboring countries.

The minister’s remarks suggest that attracting investment, particularly from overseas, would be a top priority in the current administration.

Iran’s petroleum industry is impatiently awaiting the arrival of local or foreign investment. Therefore, the Petroleum Ministry’s openness to investment would provide potential investors with a unique opportunity. 

Under Iran’s 6^th Five-Year National Economic Development Plan, the petroleum industry would need $200 billion in investment, $130 billion of which to be spent in the upstream sector. Some estimates also show that South Pars would need between $25 and $30 billion in investment to preserve its output.

Attracting investment tops high on the agenda of the Petroleum Ministry. To that end, various instruments and incentives may be adopted. Public investment may be also used in the oil and gas sector. That indicates the petroleum minister’s long-term strategy of attracting domestic and foreign investment in a bid to neutralize sanctions.

By taking into consideration various options of investment attraction, important projects that are under way in the oil sector would pick up speed as soon as they receive the required investment. All strategic projects of the petroleum industry desperately need investment. However, while prioritizing them, jointly owned fields may not be ignored.

Owji has laid emphasis on the joint oil and gas fields as top priorities for investment. Undoubtedly, sharing offshore and onshore hydrocarbon fields with neighboring countries adds to the urgency of attracting local and foreign investment. Every single second of delay in recovery from the joint fields would lead to the migration of these resources to neighboring countries with which the reservoirs are shared, and this would in turn impose heavy costs and losses on the country.

Iran is currently faced with international sanctions and is in unequal rivalry with the countries with which it shares fields. However, Iran has always explored avenues to not lag behind. Iran always welcomes integrated management of joint fields and constructive partnership with neighbors in recovery from the joint oil and gas fields.   

The Petroleum Ministry expresses its readiness to supply fuel or feedstock to investors operating joint or independent gas fields.

$145bn Investment in 4-8 Years

Iran’s Minister of Petroleum Javad Owji said plans were under way for investing $145 billion in the upstream and downstream oil sectors over 4-8 years. He also said that the Petroleum Ministry welcomed foreign and domestic investment in the petroleum industry, noting that it was open to cooperation with foreign companies.

Owji has held meetings with Rashid Ali, advisor to Iraq’s prime minister, Adel Karim, Iraq’s minister of electricity, and representatives of China National Petroleum Corporation (CNPC) and China Petroleum & Chemical Corporation (Sinopec). During these meetings, Owji laid emphasis on expanding cooperation in the oil sector.

Owji told Sinopec’s representative in Tehran that the Petroleum Ministry was determined to broaden cooperation with Chinese firms.

Sinopec has already developed Phase 1 of the Yadavaran oil field, which Iran and Iraq share. It became operational in November 2016. Talks have since got under way for the second phase development of the field.

In his meeting with the Sinopec official, Owji laid emphasis on the significance of completing development of the Yadavaran field, adding that the Chinese firm was familiar enough with Iran and its oil and gas fields.

Noting that the current administration would welcome all-out cooperation with Chinese firms to develop upstream and downstream oil projects, he said: “We expect that many agreements would sign and partnerships would take shape between Iran and China.”  

Owji expressed hope that development of oil fields in West Karoun would pick up speed.

Yadavaran 2nd Phase

Yadavaran is one of the largest oil fields Iran shares with neighbors. It was Sinopec that embarked on its phase 1 development. It has been supplying 110,000-125,000 b/d of oil. According to the new master development plan, with the start of the second phase development of this field, the output would reach 180,000 b/d over three years and 230,000 b/d over four years. 

The Petroleum Ministry has over recent months pursued talks for the development of the second phase development of Yadavaran. National Iranian Oil Company (NIOC) hopes negotiations for the second phase development of this field would be finalized soon.

170 Wells Drilled in South Azadegan

Among oil fields in West Karoun, the Azadegan oil field is divided into northern and southern sections. South Azadegan is the largest of West Karoun cluster of oil fields. It is estimated to hold 27 billion barrels of oil in place. Petropars is currently developing South Azadegan. A total of 170 wells have been drilled here, 110 of which are operational.

In light of the creation of production capacity of 140,000 b/d in South Azadegan, Petroleum Engineering and Development Company (PEDEC) is trying to make up the shortfall in this field in order to make best use of investment in this field. That would be facilitated through accelerating the activity of drilled wells that have yet to become operational and completion of surface equipment. According to PEDEC, with gradual capacity building and completion of remaining activities by Petropars, the shortfall would be made up.

North Azadegan covers 46 square kilometers. It is located 120km west of Ahvaz and is jointly owned by Iran and Iraq. North Azadegan is estimated to hold 6.5 billion barrels of oil in place.

The agreement for the phase 1 development of this field was signed with CNPC under buyback terms, which came online in November 2016. In the first phase, the field was expected to produce 75,000 b/d, which is currently higher.

North Yaran

In June 2020, the agreement for developing Yaran oil field was signed between NIOC and Persia Oil and Gas Industry Development Company. The agreement included drilling 6 new wells (three in North Yaran and three in South Yaran), drilling one appraisal well, drilling one water injection well, workover on five operational wells, equipping 27 operating wells in the Sarvak layer with ESP pump, building and upgrading surface facilities, carrying out lab studies and designing enhanced oil recovery (EOR).

Development of the North Yaran oil field with a production capacity of 30,000 b/d was inaugurated in November 2016. But it faced fall-off some time later. Therefore, downhole pumps were installed to enhance production from the field. The first SEP was installed in June 2018, but it did not function properly. However, a floating ESP was installed successfully in August 2019. This pump was installed at the depth of 2,300 meters within a liner, adding 1,000 b/d to the field output. Currently, of the 18 wells in North Yaran, 10 have been equipped with ESP, whose installation has added 7,000 b/d to the field output.

Production from South Yaran wells is under way. PEDEC hopes to start the second phase development of Yaran as soon as possible. In order to prevent wellhead pressure fall-off, a mobile oil separator (MOS) has been installed in the wells to help improve the recovery rate from these fields. 

Sepehr/Jofair Output to Hit 21,000b/d

The agreement for the development of the Sepehr and Jofair oil fields was signed between NIOC and Pasargad Energy Development Company for a 20-year period. The project, which was launched two years ago, contains an early production phase, phase 1 and phase 2. The objective behind the early production phase or first-time production is to achieve 21,000 b/d production by March 2023. According to the timeframe set for this field, phase 1 work would begin September 2023 to supply 36,000 b/d of oil. The timeframe for the second phase development would depend on information achieved during previous phases. According to forecasts, preparations for the second phase development would start eight years after the start of the project. Then, EOR and maximum efficiency recovery from the wells would be planned.

Currently, four rigs have been installed in this field for drilling. Contractors have also been chosen for the surface activities. Necessary infrastructure seems to have been formed for the objectives to materialize. According to FTP, the activities of the project should be pursued at a higher pace in order to facilitate the production capacity of 21,000 b/d by March 2023.

West Karoun Power Plant 85% Complete

Alongside development of West Karoun fields, PEDEC plans to build a power plant there with a rated capacity of 500MW (two gas-fired units and one steam-fired unit) with a view to supply power exclusively to the Azadegan, Yaran and Yadavaran oil fields, West Karoun pumping station as well as a gas and liquefied gas plant. So far, the two gas units have been completed and launched while power supply to Yadavaran, North Azadegan and the pumping station has been done.

Construction of the steam unit, which is in fact the complementary phase of a combined cycle power plant, is 85% complete now. That would help increase the output of the power plant. According to plans, the power plant would be completed in three to four months. Of course, the power plant is already running at 310MW capacity, partly serving oil facilities in West Karoun. It also helped supply electricity to Khuzestan Province in recent months to resolve the power outage challenge.

 Iran Oil Barter Plans for Post-Covid Era

 Mahnaz Mohammad-Qoli

 According to the International Energy Agency (IEA), vaccination against the coronavirus is accelerating the recovery of global crude oil demand. Meantime, Iran has announced plans to undertake oil-for-good deals, which experts say will help circumvent unilateral Western sanctions against the country.

While Western sanctions against Iran have reduced Iran's oil production and exports, the new approach of the Iranian Petroleum Ministry under Javad Owji promises to find openings for Iran to sell its oil on global markets.

The volatile oil market and Western pressure on Iran have led to a significant drop in Iran's oil revenue. Based on available statistics, sanctions against the Islamic Republic of Iran deprived Iran of production of 1.8 billion barrels of oil (according to secondary sources) from April 2018 to April 2021, which resulted in more than $100 billion in losses. It came at a time when the country needed to deal, among other things, with the COVID-19 outbreak. Meanwhile, the issue of selling oil and using the existing capacities of the country in this field is one of the issues that Minister Owji emphasizes and considers as a way forward.

According to Owji, with the existing capacity in the Petroleum Ministry and its subsidiaries, the existence of capable and specialized manpower, the will to sell oil and use the capacities and equipment outside the Petroleum Ministry, along with authorization granted to the minister, the country is set to see good days in selling oil in the coming months, undoubtedly under the aegis of the government support and precise planning.

On the other hand, according to the Minister of Petroleum, Iran is ready to move to compensate for the heavy losses caused by the unilateral US sanctions, as soon as the unilateral and unjust sanctions imposed by the US government are lifted by increasing oil production to the highest possible level.

Barter Trade

Bartering oil with goods is a way of skirting around sanctions, but that would require establishment of bartering line with neighboring and aligned states. Under oil-for-goods deals, any country importing Iran’s oil can export basic commodities to Iran in return. Experts believe that oil-for-goods deals and investment via selling Iran’s crude oil would be envisaged as long as sanctions are in effect. Mohammad Khatibi, Iran’s former governor for OPEC, recently said that oil-for-goods deals were nothing new as some buyers preferred to supply commodities to Iran in lieu of money. That issue has varied under different circumstances.  

Currently, sanctions against Iran make money transfer difficult. Experts say bartering commodities would constitute a solution to this problem. But Khatibi believes that the government should work out a separate mechanism for oil-for-goods deals in a bid to identify and activate the existing capacities in the country for a better use of bartering with other nations. To that end, an active diplomacy is needed in the economic sector. Shortly into office, the administration of President Ebrahim Raeisi severely focused on upgrading Iran’s economic cooperation. Addressing the Shanghai Cooperation Organization (SCO) summit in Tajikistan he said his administration would focus on “economic multilateralism” and boosting “neighborliness”.

Oil Barter Experience

Khatibi said: “During the previous rounds of sanctions, we used the bartering method to sell oil, and we were able to buy some of the strategic goods that we used to buy through the banking network and the opening LC. There is experience in this work in the country, but the point is that in order to make this method more effective, a clearing room in the Iran’s Central Bank (ICB) or a special organ is needed to be set up by the government to handle it.”

In any case, sanctions over recent years have caused Iran to lose some of its traditional oil buyers. Therefore, it is natural that new customers should replace traditional customers, which is also a difficult task. However, according to plans made by the Petroleum Ministry, including export of oil products and enhancing refining capacity, it seems that the final market of Iranian oil products will be more diverse and as a result Iranian oil customers will become more diverse.

Oil Demand Projections

A review of the supply and demand of oil in world markets shows that in a short period of time, demand overtakes supply and due to rising prices and due to increased prices supply glut will again drive down the prices. However, the growing trend of demand is positive when compared to 2020.

According to the IEA, last year, economic constraints and reduced traffic caused by the COVID-19 pandemic pushed average oil demand to around 92 mb/d, pushing oil index prices to a record low, especially in April 2020. Even the WTI index fell to near minus $40 a barrel for a few days. But now, with a relative reduction in restrictions, demand has improved since 2020. This year, falling prices have reduced investment, especially in expensive oil fields, and current prices are partly due to this decline in investment.

However, oil demand is still threatened by emergence of new strains of COVID-19. But in general, the demand growth chart is upward and demand is expected to increase to an average of 97 mb/d in 2021.

Meanwhile, according to forecasts, in 2022, demand will probably reach 101 mb/d and supply will vary within the same range.

OPEC is expected to add 1.4 mb/d to its output by 2022 to bring its total production to 28.34 mb/d, implying that the OPEC+ deal would most probably be extended up to 2023 and even beyond.

In any case, it seems that the increase in demand for Asian oil, especially from China, and the impact of the COVID-19 vaccination on increasing oil demand constitute potential for Iran to take benefit from the current situation, while Iran's permanent membership in the SCO provides it with a chance to use in all sectors, especially oil sales, and to overcome the problem of sanctions on Iranian oil by buyers through bartering.

Iran Oil Refining Capacity to Hit 3.5mn Barrels

Iran’s minister of petroleum, Javad Owji, has said that the country’s oil refining capacity would increase to 3.5 mb/d from the current 2.2 mb/d over four to five years. To that end, the minister said, the existing refineries would be quantitatively and qualitatively upgraded, while new facilities would be constructed.

A 1.5-fold increase in Iran’s refining capacity would require the quantitative and qualitative development of the treatment facilities, which would need investment. Owji said potential investors would be supported by the government.

Furthermore, a plan for boosting the production capacity of existing refineries and building new capacities would be assessed. 

One may ask how the refining capacity might be increased while Iran is faced with sanctions, and attracting investment and applying new technologies would be difficult.

Owji said the Petroleum Ministry would be planning to create new refining capacity through building petro-refineries.

According to him, investors have been chosen for building and expanding refining capacity while timeframe has been set for the agreements signed with the Petroleum Ministry for the quantitative and qualitative development of the refineries. Regarding new refineries, the government would consider feedstock grace period for investors.

Current refinery construction projects include the 150,000b/d Anahita refinery, 120,000b/d Mehr Khaleej Fars, 300,000b/d Jask, 480,000 b/d Siraf, 120,000b/d Phase 4 of Persian Gulf Star and several projects in Qeshm Island with a total capacity of 150,000b/d. These refinery projects were not quick enough due to sanctions imposed on Iran. Now, the Petroleum Ministry hopes to accelerate them with a view to enhancing the country’s refining capacity.

Now, eight oil refining companies are active in Iran. Tehran and Abadan oil refining companies are state-run, while the six others – Bandar Abbas, Persian Gulf Star, Arak, Lavan, Kermanshah and Tabriz – are privately-owned.

Planning Petro-Refinery

Owji said enough investment had not been in the refining and petro-refining sector and production and consumption figures are very close. “There is also concern that travels would increase in the post-COVID era; therefore, this issue is now among the priorities and plans of the Petroleum Ministry.”

“It is possible to increase the current capacity of refineries both quantitatively and qualitatively by improving processing. The refineries are quite lucrative,” he said.

Owji touched on petro-refinery construction for fuel supply and petrochemical feedstock production, saying: “Today the world is not for oil refinery construction; rather, investment is made in petro-refineries that would not be only fuel-oriented. Rather, it would produce fuel as well as feedstock for petrochemical plants. That is also a priority of the Petroleum Ministry to put an end to raw materials’ sales.”

It’s not clear yet how many petro-refineries would be built in Iran. According to Owji, that would depend on potential investors. Owji said investors would receive good incentives for two years after operating their projects. He expressed hope that with such incentives, one or two petro-refineries would be built.

Referring to financing petro-refinery plants, Owji said: “There are several options including National Development Fund of Iran (NDFI), using banking facilities, bonds, oil-for-goods deal and attracting foreign investment.”

Petroleum Products

Another important issue highlighted by the Minister was to improve the quality of petroleum products, particularly gasoline and gasoil. “Over two to three years, we will reduce the sulfur content of fuel oil in most refineries, particularly in Abadan oil refinery.”

The gasoil currently delivered to power plants is Euro-4 grade, while in some cases it is Euro-5 grade. Owji has said that most power plants were planned to use clean gasoil for power plants.

Iran is currently producing 115 ml/d of gasoline and 91 ml/d of gasoil.

Iran Gas Trade Share 

Increasing Iran’s share of gas trade is another issue that the Petroleum Ministry in the 13th administration pays special attention to, although over recent years with the commissioning of phases of the South Pars gas field, Iran's gas production capacity from this joint field has exceeded 700 mcm/d. On the other hand, due to the increase in domestic gas consumption rate, Iran has not been able to make good use of its gas export capacity and has not been successful in increasing its share of world gas trade. Owji has said that the Petroleum Ministry intends to increase Iran's current 2% share of the gas trade, so it has put gas diplomacy with neighboring countries on the agenda to increase gas exports and trade, and is in talks with the parties. Talks will be held with Turkey, Iraq and other neighboring countries to increase exports and trade.  

He also said that in the current calendar year, considering that Iran will not see its natural gas production increase and domestic, industrial and power plant consumption will increase by 10% year-on-year, a shortfall of 200mcm/d is predicted. He said power plants would be provided with liquid fuel to avoid any gas halt, particularly in the home sector.

260mcm/d Delivery to Power Plants

Regarding the delivery of gas to power plants, Owji said that more than 260 mcm/d of gas was currently delivered to power plants.

"Last [calendar] year, in the cold season, there was a gas shortage of 140 to 150 mcm/d, which was compensated by restricting natural gas delivery to industries and the power plants and replacing it with liquid fuel."

Regarding the issue of winter fuel supply, he said: "Considering that the current level of liquid fuel storage of our power plants this year is 30% lower than the same period last year, we will do our best to transfer diesel and fuel oil by road tankers and rail transportation system."

He also referred to the issue of gas supply to some cities of Sistan and Baluchestan province, saying: “Following the meeting that the President had in Sistan and Baluchestan, he promised to discuss gas supply to the cities of Khash, Mirjaveh and Zabol. We also promise that these cities would be connected to the national gas grid by the end of the current calendar year (20 March 2022).”

Iran Open to Iraq Gas Deal Renewal

National Iranian Gas Company (NIGC) is ready to renew its gas export contract with Iraq, its CEO has said.

Majid Chegeni made the statement in a meeting with visiting high-ranking Iraqi energy officials in Tehran.

“Apart from our deep-rooted cultural and religious relations, we have strategic links with Iraq, and strengthening energy ties with the Arab neighbor is of great importance,” he said.

Chegeni called strong energy diplomacy as one of the plans emphasized in the Petroleum Ministry in the current administration of President Ebrahim Raeesi.

While requesting the Iraqi side to live up to its commitments in the current contracts and previous agreements, Iran is ready to consider new proposals from the Iraqi Ministry of Electricity to extend the gas export contract with this neighboring country.

Accordingly, Iran's Petroleum Minister Javad Owji in a meeting with the Iraqi minister of electricity had announced that negotiations with various parties to increase gas exports and trade are among the priorities of Iran in the current administration.

Tehran, Colombo Discuss Energy Ties

Iran’s Minister of Petroleum and Sri Lankan Minister of Energy Udaya Gammanpila held a meeting in Tehran to discuss energy ties.

The two sides explored ways on how to expand cooperation in the petroleum industry.

A Sri Lankan delegation headed by Gammanpila visited Iran from 24-27 September 2021 at the invitation of the Minister of Petroleum of Iran.

The Iranian Petroleum Ministry arranged site visits to Tehran Oil Refinery and Gas Station Museum. The delegation was warmly welcomed by the respective heads.

Ambassador of Sri Lanka to Iran G.M.V. Wishwanath Aponsu participated in the meetings with Sri Lankan delegation led by Minister Gammanpila, Secretary K.D.R. Olga and Deputy General Manager of Ceylon Petroleum Corporation Mahendra Gurusinghe formed the rest of delegation.

Speaking in a meeting with CEO of Tehran Oil Refining Company Hamed Armanfar, Gammanpila referred to Tehran-Colombo common interests, expressed satisfaction over bilateral cooperation, and stressed the importance of maintaining technical, engineering, and economic interactions in oil and gas field.

 €260mn Investment Eyed in KBA Province

Iran will invest about €260 million in order to maintain and increase extraction from 3 oil fields in Kohguiluyeh and Boyer Ahmad (KBA) Province, Minister of Petroleum Javad Owji said.  

The minister, who was visiting KBA Province, said one of his major plans would be to complete incomplete projects that had begun in 2011. He added that some of those projects may no longer be commercially viable or necessary at all.

Owji laid emphasis on balanced development in the upstream and downstream sectors, adding: “KBA Province is home to eight oil fields, containing 13% of national oil reserves in the province.”

He said that development of Gachsaran 1&2, Gachsaran 3&4, and Bibi Hakimieh oil fields would start with a 40,000-b/d output hike, adding that €260 million would be invested in the three fields.

He said these projects would begin soon to come online in less than three years.

He also visited petrochemical projects in the province.

The construction of Gachsaran Petrochemical Complex in KBA has registered 87% progress, the minister said.

NIOC Getting Ready for Big Job

CEO of National Iranian Oil Company (NIOC) Mohsen Khojasteh-Mehr has stressed the need for adopting large-scale approaches based on comprehensive views and special attention to be paid to productivity, efficiency and scientific management.

“Benefiting from these indicators and bringing about synergy among forces, NIOC would become ready for big job,” he said. 

He noted that upgrading the NIOC status required first and foremost developing a special approach and acknowledging facts.

“The first fact is that we should accept that NIOC is the driver of national economy,” he said.

Khojasteh-Mehr said petroleum industry activities were not limited to oil and gas production capacity.

He said human capital and power of management were other examples, adding: “When we say that NIOC bears a sovereign mission we have to take into account to what extent this capacity is unique. However, how these capacities have been utilized is another issue. The assumption is that such considerable capacity exists though.”

NISOC Rebuilds Sophisticated Equipment

National Iranian South Oil Company (NISOC) has managed to repair and rebuild sophisticated equipment of the petroleum industry despite sanctions, a top official said.

Pejman Qazaeipour, CEO of Aghajari Oil and Gas Production Company, said: “Over recent years, various and sophisticated equipment has been installed and commissioned in the operational areas of the company, which are prominent and special in the petroleum industry."

Referring to the technical capability of NIOC with regard to repair and reconstruction of sophisticated equipment and facilities of the petroleum industry under conditions of sanctions, he said a turbine had been repaired and installed, which finally held to an increased 70 mcf gas injection into the Karanj oil field.

“This turbine was sent to a neighboring country in 2017, but it refused to repair it citing unjust sanctions. Finally, it was repaired by Iranian engineers,” he said.

Qazaeipour said that 4.5 mcf/d of associated gas had been gathered.

Owji Tells West: Lift Iran Sanctions

American and European decision-makers are advised to lift the sanctions against Iran in order for the energy crisis in the world to ease, Iranian Petroleum Minister Javad Owji said.

Owji said people in the United States and some European countries have been paying for the unwise policies of their leaders who have banned crude exports from Iran as one of the world’s leading energy suppliers.

The minister made the remarks while speaking on the sidelines of an OPEC+ ministerial meeting.

He was referring to fuel, natural gas and electricity problems reported on both sides of the Atlantic amid rising prices and increasing demand caused by the global recovery from the coronavirus pandemic.

“My recommendation to the decision-makers in these countries is that they should take lesson from the current circumstances and lift sanctions from Iran so that people in all regions may benefit from cheap and accessible energy,” Owji said.

Besides its huge crude production capacities, Iran is also a leading supplier of natural gas with a current production of over 1 mcm/d.

Owji said Iran has repeatedly declared that it would be able to swiftly enhance its crude production to help alleviate the global shortage of fuel.

He said the current shortages could have larger implications on the livelihoods of people in the West in future if policymakers do not properly tackle supply issues.

“The Islamic Republic has shown several times its goodwill to help stabilize the oil market and resolve the global energy crisis, but the unjust U.S. sanctions hinder us to reach the goal,” he said.

“They imposed sanctions on us, but they were not spared either,” said the minister.

Owji also said that OPEC+ ministers agreed on increasing their output by 400,000 b/d as of November, adding that they would not raise their output in September.

Oil Products Transfer Capacity to Increase

CEO of Iranian Oil Pipeline & Telecommunication Company (IOPTC) Qasem Arab Yar-Mohammadi has said that implementation of new pipeline projects would increase the transfer volume of petroleum products.

He said that operation of the Bandar Abbas-Rafsanjan, Rafsanjan-Yazd and Meybod-Naein pipelines would significantly enhance the capacity of oil products’ transfer.

He underscored the significance of carrying refined products from the Persian Gulf Star refinery to northern Iran.

He added that with the implementation of the Naein transmission center development project and construction of a 20-inch Naein-Kashan-Rey pipeline, petroleum products would be carried through this important and main route by a 26-inch pipeline to Rafsanjan-Yazd-Naein and from this center by a 20-inch pipeline to Kashan and eventually to Tehran.

Yar-Mohammadi said that pumps in the Naien center had become operational.

“The Naein-Kashan-Rey pipeline is complete and can be delivered,” he said.

He said that another part pertains to the Kashan oil transfer center that has had 70% progress.

Chemical Parks Envisaged

Behzad Mohammadi, CEO of National Petrochemical Company (NPC), has said that a number of petrochemical projects were under way to help diversity petrochemical feedstock throughout the value chain and help launch chemical and industrial parks.

“According to planning made, through launching projects in six diverse chains, about 3.5 million tonnes of feedstock would be allocated to downstream industries,” he said.

Mohammadi said three petrochemical projects were planned to become operational by next March.

He said that Iran would have seen its annual petrochemical production capacity increase from the current 90 million tonnes to 150 million tonnes by March 2026. He added that revenue from the petrochemical industry would grow to $45 billion from the current $22 billion.

“The petrochemical industry development process is rather dependent on accessible feedstock in the petroleum industry.

Heavy Equipment Unloading Hits Record

Two 912-tonne cargoes from the Bushehr petrochemical plant have been unloaded at the Pars Port Complex by two cranes without having to use heavy equipment. With this successful operation, the unloading capacity of super-heavy equipment at Iranian ports has almost doubled.   

Ali Masoumi, director of ports and marine terminals at Pars Special Economic Energy Zone (PSEEZ), said that saving hard currency was one of the most important achievements of reliance on the equipment of the Pars Port Complex.

“Experts at the Directorate of Engineering Projects and Marine Ports and Terminals of PSEEZ were instrumental in the unloading of that super-heavy cargo. This experience will be definitely instrumental in future missions by the Pars Port Complex,” he said.

The Pars Port Complex is among specialized port complexes active in serving industries. It operates 25 jetties, 15 of which are used for exporting petrochemicals. The complex has always played a key role in the economic, industrial and energy development of the Pars energy zone.

This port complex was built by PSEEZ, on behalf of National Iranian Oil Company (NIOC), to provide arriving ships carrying commodities for refineries and petrochemicals with port services.

RIPI Projects Unfazed by Sanctions

The head of the Energy & Environment Department of the Research Institute of Petroleum Industry (RIPI) has said that despite sanctions the institute proceeded with its projects.

“Sanctions certainly caused challenges to the country in various sectors. For instance, we have faced numerous problems in carrying out projects or purchasing lab equipment with sanctions in place. But we have on certain occasions managed to turn these challenges into an opportunity,” Jaber Neshati said.

He touched on the corrosion management project handled by RIPI researchers, saying: “As far as corrosion management is concerned, RIPI and National Iranian Gas Company (NIGC) agreed upon a project four years ago. Some foreign companies were initially supposed to cooperate with us, but due to sanctions they thought twice or they offered exorbitant prices.”

“In the face of such problems, RIPI decided to go ahead with the project by relying on its own researchers. It was done successfully. In underground water purification, a foreign country offered another proposal to RIPI at very high prices. This project was finally implemented by RIPI environmental researchers at a much lower price in Assaluyeh,” he added.

Isfahan Refinery Development Projects Accelerate

CEO of National Iranian Oil Refining and Distribution Company (NIORDC) Jalil Salari has stressed the necessity of making efforts to accelerate completion of projects under way at the Isfahan oil refinery.

After visiting quality and quantity upgrade projects at the Isfahan refinery, he said: “Isfahan refinery development project group is expected to move more quickly, and projects would be certainly supported.”

“Every facility has to take into account quality and go ahead through synergy,” he said. 

Salari said NIORDC was tasked with supplying necessary energy carriers including gas, gasoline and liquid fuel.

“Regarding Isfahan refinery, it is necessary to reconsider all aspects in order to be able to resolve possible problems in the shortest possible time and complete the projects,” he said.

Morteza Ebrahimi, CEO of Isfahan oil refinery, said the refinery had considered clean fuel projects to comply with environmental obligations, manage energy consumption and protect national resources.

He said that gasoil project at Isfahan refinery has had 95% progress. He said IRR 830 billion plus €540 million in credit had been allocated to the project, which began in 2014 and would come online in 2022.

Noting that Isfahan refinery was required to produce Euro-5 gasoil, he said: “For that purpose, the sulfur content of the gasoil produced by this refinery would be reduced to below 50 ppm. Moreover, by launching the gasoil treatment project, 300 tonnes a day of sulfur would be separated from gasoil to be stored in granulated form and be delivered to customers.”

Removing sulfur from the residues of distillation towers was among projects the refinery’s director noted. He said this project had been planned to prepare fuel oil produced at the distillation tower to the RFCC unit to produce light oil products. He said this project, which would come online by 2024, would cost IRR 15,877 billion plus €683 million.

“In the water management, important projects like the Shahin Shahr wastewater treatment, reconstruction of cooling towers, recovery of super saline water and replacing cooling towers with hybrid cooling facilities have been launched,” he said.

SAED Wins IPMA Award

Following two decades of efforts made by top Iranian projects to win the Global Project Excellence Award, which is held annually by the IPMA International Institute in different corners of the world, the Iranian company Sarvak Azar Engineering and Development Company (SAED) became a finalist after IPMA (International Project Management Association) evaluation courses at the IPMA Global Award 2021 as hosted by Russia in St. Petersburg on September 23. SAED, owned by the Oil Industry Pension Fund, which develops the Azar joint field as one of the most complex oil fields in the country, won the gold medal in IPMA Global Award for Project Excellence Management.

The most important part of the world award was in the field of mega projects, and in intense competition with Finland and India, SAED won the gold medal.

Achieving a gold medal in this global competition has been achieved by SAED, a development company active in the upstream oil sector, on the grounds where the oil industry has been able to display a defensible performance in one of the most complex oil fields in the region and the world, despite Iran facing harsh sanctions.

This year, evaluation of various international projects based on the IPMA PEB model was virtually carried out by 6 international evaluators from Poland, the United Kingdom, the Netherlands, Kazakhstan, Nepal and China.

Return in 2 Years

Minister of Petroleum Javad Owji recently visited the Azar oil field in Ilam Province in western Iran.

He said the project had been developed in Phase 1, adding that talks were under way for the second phase development.

Referring to the rate of return on investment in the Azar field, he said: “Given the 60,000-70,000 b/d output, the investment made in this field would be returned in two years at the latest.”

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 person-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 may use the experience it gained in developing the Azar field in developing the Changouleh field.

Azar Operational Under Sanctions

Iran managed to invest more than $1.4 billion to the Azar oil field when the country was under toughest ever sanctions and bring production from this jointly owned field to 71,500 b/d of oil and 78 mcf/d of gas.  

It was operated by Iranian contractors while Russia’s Gazprom, Malaysia’s Petronas and one South Korean and one Turkish company were working on the Iraqi side of the field. In the Iranian sector, contractors worked on par with foreign companies.

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 the 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 because of special drilling conditions in the field and insufficient financial resources.

Finally, under the petroleum minister's instruction 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.

Tight Field

Petroleum industry experts say working conditions and geological data of each field in Iran 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.

Under OIEC management, SAED managed to carry out the performance test of the 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 subsurface and 22 subsurface projects.

The Anaran oil block in Ilam Province comprises two oil fields – Changouleh and Azar. The Azar field holds 2.5 billion barrels of oil in place. The crude oil supplied by the Azar field is light with an API gravity of 32-33. The recovery rate estimated at this field is 16%. The important point is that the Azar oil field is among the tightest and the most challenging fields in Iran and even in the world, in terms of geological structure and numerous formation anomalies.

The existence of numerous high-pressure and low-pressure layers necessitates a precise separation of non-homogenous layers. Such pressure changes in the formations in the Azar field are unique.

The Azar field’s fluid is highly corrosive and the necessity of manufacturing pipelines from corrosion-resistant alloys would be a major challenge in this joint field.

Due to its formation as well as reservoir rock, the Azar field could not produce the expected amount of oil after drilling. Therefore, hydraulic fracturing or acid injection would be required.

Iran Gas Transmission Fitted with New GIS Generation

Mahnaz Mohammad-Qoli

A new generation of geographic information system (GIS) has been installed in the pipeline projects of Iran Gas Transmission Company (IGTC), which would facilitate data storage, display and analysis. Assadollah Qanavati, director of engineering and planning at IGTC, said: “Using the system will allow for geographical data management, combining and overlapping different information sources and receiving answers from the descriptive and geographical information along with access to a variety of geographical analyses and preparation of charts, diagrams, reports and thematic maps along with three-dimensional display of information.”

GIS is a conceptualized framework that enables us to capture and analyze spatial and geographic data. GIS applications (or GIS apps) are computer-based tools that allow the user to create interactive queries (user-created searches), store and edit spatial and non-spatial data, analyze spatial information output, and visually share the results of these operations by presenting them as maps.

Geographic information systems are utilized in multiple technologies, processes, techniques and methods. They are attached to various operations and numerous applications, which relate to: engineering, planning, management, transport/logistics, insurance, telecommunications, and business. For this reason, GIS and location intelligence applications are at the foundation of location-enabled services, that rely on geographic analysis and visualization.

GIS provides the capability to relate previously unrelated information, through the use of location as the "key index variable".

Comprehensive Databank

GIS, as a system that has proved its role in geographical information management in different specialties and different levels of decision-making and execution, could be very effective in optimizing the executive and decision-making process in IGTC.

Installation of GIS in gas companies as the infrastructure for pipeline integrated management systems dates from 1992. As it often takes 10 years to come to fruition, IGTC in 2008 decided to set up a comprehensive geographical databank containing technical data of gas pipelines. That had been required under Iran’s 5th Five-Year Economic Development Plan.

Qanavati said the first phase of the process began with the creation of a spatial information infrastructure with the aim of standardizing the processes of data preparation and storage, centralizing data management, providing multi-user access to the database, and the ability to retrieve and display data in the form of a report.

Based on this, the APDM and PODS models, which are currently used as one of the PIMS infrastructures in the world, were performed by defining 195 information layers and creating location-based software as a network in 10 operational areas. During this period, an attempt was made to complete these layers of information with the plans made. What is time-consuming and costly in this system was the data and its collection, which, based on the experience of other countries, has cost 80% of the total cost of the project. During this period, by defining 3 phases, data collection, correction and completion and updating were on the agenda. “Everywhere geographical information is discussed, the first issue is the scale of the system,” Qanavati said.

Significant Progress

Qanavati said: “The first phase began with planning to complete 48 layers and is now 90% complete. The second phase was defined by planning to complete 25 layers, which is now 70% complete. Completion of data in the third phase is also being pursued for completion.”

According to the existing instructions, the GIS scale of IGTC has been changing from 1:10000 to 1:2000 scale since 1999, he said. The implementation of this process is currently underway, he said, expressing hope for achieving the desired accuracy in a 2-year process.

Qanavati said: “With the establishment of this system, now over 400 users from IGTC and National Iranian Gas Company (NIGC) are using the system.”

Referring to some of the capabilities of this system, he said: “The possibility of quick response to at least 90% of inquiries in less than a few minutes is provided.”

In pipeline repairs, the use of this information significantly enhances the speed of identifying defective points with an error of less than half a meter, which has significantly reduced the volume of drilling and subsequent operations.

Updating Software

Qanavati said: “The ability to draw a variety of boundaries and perform base location analyses and quick access to specifications of each point of the pipeline and draw pipeline profiles based on a height base in less than a few seconds and view all intrusive buildings and cathodic protection and leakage information and pipeline-related inspections is now available.”

He added; “Currently, a software update has been prepared, which is more than 13 years old, and the existing system audit from the point of view of PIMS and GIS system deployment is defined and implemented based on cadastral notification instructions in 1:2000 scale.”

“The most important concern in implementing this system is updating and refining the existing data so that its information could be used as a DSS decision support system. This has been achieved with the courage and pursuit of active and persistent GIS experts at the regional level and the cooperation of hardworking staff in the yards and zone,” said Qanavati.

Sustainable Transmission and Monitoring

Among other projects that are underway by IGTC for sustainable gas transmission and monitoring of pipelines, the seismic risk analysis project may be highlighted, which due to the establishment of GIS, the necessary infrastructure has been provided to create different modules of the base location. Due to the seismicity of Iran and in order to identify the pipelines affected by earthquakes and to prioritize the inspection of pipelines, a project was defined by obtaining consulting services from Amir Kabir University of Technology.

In this project, by defining the creation of location-based module and compatible with the existing GIS system, to investigate the impact of each earthquake on pipelines and assess the risk of each earthquake and by entering parameters such as coordinates, the strength and depth of the epicenter were envisaged. Due to the need for geological maps and high risk areas of faults, drift, subsidence and liquefaction, these maps were prepared and digitized by relevant organizations, which can be seen as GIS layers.

GIS Database

Qanavati said: “This software module was completed in April 2021 and covers all the required capabilities and in less than a few minutes identifies and prioritizes the risks of earthquake-affected pipelines and allows it to be displayed on a map, which will be developed by 20 March 2021. The possibility of creating it online by connecting to earthquake notification systems and automating it is being explored. The system is one of the first GIS-based databases. Furthermore, with this system and based on the seismic and thrust points in the country, it will be possible to take preventive measures to secure the pipelines of the national gas transmission network to be more resilient in earthquake conditions.”

He also touched on the project investigating supports and foundations, adding:   “The project was defined with the aim of identifying and prioritizing the repairs of supports and foundations in pressure boosting stations under the supervision of Civil Engineering Unit. Due to the deployment of the GIS system, this project has provided the definition of the base location and the possibility of viewing all defective supports in the existing GIS system.”

He added: “In this project, the relevant consultant was first instructed on how to collect information and take photos at a station in each area, and based on that, the individuals identified all the defective supports and foundations in the booster stations.”

Qanavati said: “The information collected includes the type of damage, photo of the fault and the exact location of the fault based on the coordinates that could be seen in the GIS system.”

Smart Pigging, Best Choice

Referring to the project of intelligent follow-up of gas transmission pipelines, he said: “Smart pigging is one of the inspection methods of pipelines largely used in the world today and its tools are constantly growing and being upgraded regularly.”

He added that smart pigging was a “non-destructive inspection method with the advantage of undisrupted transfer of fluid in the pipeline, the best option to monitor the pipelines and determine defects as well as damaged points in the pipelines.”

According to him, today, smart pigging has gained the first place among the inspection methods available for pipelines in the field of monitoring.

In order to ensure the proper performance of their pipelines, operators perform intelligent pigging based on the time periods determined in compliance with the standard and internal policy of their company, and in order to have stable and safe pipelines (physical assets) in the shortest possible time after receiving reports.

Qanavati said magnetic flux leakage was widely used in gas pipelines.

Magnetic flux leakage or Transverse Field Inspection technology (TFI) is a magnetic method of nondestructive testing that is used to detect corrosion and pitting in steel structures, most commonly pipelines and storage tanks. The basic principle is that a powerful magnet is used to magnetize the steel. At areas where there is corrosion or missing metal, the magnetic field "leaks" from the steel. In a Magnetic Flux Leakage (MFL) tool, a magnetic detector is placed between the poles of the magnet to detect the leakage field. Analysts interpret the chart recording of the leakage field to identify damaged areas and to estimate the depth of metal loss.

There are many methods of assessing the integrity of a pipeline. In-line-Inspection (ILI) tools are built to travel inside a pipeline and collect data as they go. The type of ILI we are interested in here, and the one that has been in use the longest for pipeline inspection, is the magnetic flux leakage inline inspection tool (MFL-ILI). MFL-ILIs detect and assess areas where the pipe wall may be damaged by corrosion.

Qanavati said last calendar year, IGTC managed to conduct smart pigging on 1,600km of pipeline (IGAT-3, IGAT-4 and IGAT-7). It also signed agreements for smart pigging on another 3,500km of pipeline.

Cooperation with Knowledge-Based Companies

While referring to the cooperation with academic centers in the field of smart pigging, Qanavati said: “Acquiring technical knowledge and manufacturing of 30-inch (ILI) and 56-inch smart pigs based on high resolution technology and TFI, MFL, the process of manufacturing 30-inch smart pigs based on a research project at NIGC, as well as acquisition of technical knowhow of 30-inch pigs with high resolution technology, TFI, MFL, could be mentioned in this regard.”

Meantime, acquiring technical knowledge and manufacturing of 56-inch smart pigs and manufacturing 10 items of oil commodities are on the agenda of IGTC. These measures will definitely materialize by using the potential of knowledge-based companies, academic and research centers.

NISOC Reserves’ Value up $115bn

National Iranian South Oil Company (NISOC) supplies over 80% of Iran’s crude oil and 16% of natural gas. As the largest subsidiary of National Iranian Oil Company (NIOC), NISOC runs 45 fields and 65 reservoirs covering 70,000 square kilometers stretching from Bushehr to Khuzestan provinces. Giant oil fields like Ahvaz, Gachsaran, Maroun, Aghajari, Karanj, Parsi and Bibi Hakimieh are among them.

Ahmad Mohammadi, the former CEO of NISOC, has said based on expert studies’ findings, the reserves owned by NISOC have increased $115 billion in value.

He said: “The expert studies conducted over the past two years show that Ramshir Asmari, Kupal Asmari, Kupal Bangestan, Mansouri Bangestan, Nargesi Asmari/Jahrom and Qale-Nar/Asmari are estimated to have 9 billion barrels of oil in place more than estimated before. That means 1.65 billion barrels of oil would be added to NISOC’s recoverable reserves.”

With an oil barrel hovering around $70, the newly discovered reserves are valued at $115 billion.

This volume added to NISOC’s reserves in place are not inclusive of the expected discovery of new oil fields. It is only based on identification of oil layers as well as technical studies on the data acquired from the current hydrocarbon reservoirs of NISOC.

It has to be taken into account that an oil reservoir could not be extracted entirely. The average rate of recovery from an oil reservoir stands at 28%, but new technologies and enhanced oil recovery (EOR) may increase it further.

NISOC Output Capacity Up

Mohammadi said NISOC’s production capacity had been raised despite tough sanctions, COVID-19 outbreak and unprecedentedly high inflation rate. He added that the natural pressure fall-off in production from some oil wells had also been compensated to a large extent.

He said that the latest round of sanctions against Iran’s petroleum industry, which were imposed in 2018, caused the toughest restrictions for oil production and export.

Mohammadi said the US had imposed sanctions on Iran to bring the country’s oil production down to zero. “The US failed to realize its objective due to the round-the-clock efforts made by petroleum industry staff. However, it is noteworthy that this round of sanctions is tougher than those imposed in early 2010.”

The previous round of sanctions imposed by the US were aimed at limiting Iran’s oil exports to 1 mb/d, but this time, the objective was to zero Iran’s oil exports. However, thanks to initiatives by various organs, Iran’s oil exports continued as much as possible.

Nonetheless, the current round of sanctions largely decreased Iran’s oil production and exports, thereby slashing Iran’s oil income.

As NIOC saw its budget fall sharply, the necessary financing for continued production from oil fields, household and industrial gas supply and feedstock for petrochemical and refining plants had to be provided. Therefore, some bonds were issued and sold.

Mohammadi said: “In order to maintain the status and influential role of NISOC in national economy, various initiatives and practices were employed; the most important of which were implementing EPC and EPD projects in 28 oil reservoirs that had been designed since 2017.”

Domestic Manufacturing

Due to tough sanctions, NISOC’s contractors were required to supply 80% of commodities needed for the projects from domestic manufacturing companies.

Mohammadi noted that despite the COVID-19 impact on the labor market across the globe, drilling rigs did not remain idle. Furthermore, he said, sustainable employment and local manpower hiring became a must.

Noting that the 28-reservoir project is considered a green project in the petroleum industry, he said: “In this regard, the addition of gas flares has also been prevented. The measure was seriously pursued in order to prevent the occurrence of harmful environmental

impacts, and all contractors are obliged to prepare environmental impact assessment (EIA) before implementation of their projects.”

In the implementation of the 28-reservoir project, a complete chain of work has been considered with the aim of achieving a complete result, so the result of the work of the general contractor in this project is to achieve the main goal of oil production for the country. In addition, 28 reservoir contracts were awarded to E&P contractors (exploration and production companies) and consortia of companies active in the field of EPC (engineering, production, contracting) and EPD contractors (design, production and drilling). They were all Iranians who won tender bids, which led to the growth of upstream contractors and continuation of development projects in the face of tough sanctions and COVID-19 and unprecedented inflation.

Mohammadi said that new capacity building to make up for production fall-off was a key achievement of these strategic projects.

Feeding 90% of Refineries

A number of NIOC reservoirs provide feedstock of refineries that have been constantly operating. Sustainability of oil production required by the refineries (after the tightening of sanctions) required new capacity building. The daily production capacity of NISOC enhanced compared to pre-sanctions level.

If the production plan is implemented and the production hike license is issued, it is predicted that the production level will enhance by over 220,000 b/d in the future.

This increase in the production capacity came at a time when unjust sanctions, unprecedented inflation and the COVID-19 outbreak have affected the entire world economy; nevertheless, NISOC has added to its production capacity.

470 Workover Operations

Due to the lack of credit and foreign exchange resources for extensive drilling of development wells, NISOC focused on enhancing the efficiency of mature wells by resorting to workover. To that effect, 470 workover operations were carried out last calendar year. These measures, which cost much less than the cost of drilling development wells or repairing existing wells with rigs, prevented a sharp drop in production and, in some cases, enhanced production. Furthermore, any extra drilling was avoided. In the current calendar year, about 1,000 workover operations are envisaged.

Overhauls Done 84%

Mohammadi said: “The implementation of facilities’ reconstruction and renovation plan has not been possible yet due to the difficult conditions of sanctions and the lack of investors and sufficient credit, so a special program was developed for the overhaul of the facilities and equipment.”

Last calendar year, the necessary planning for the overhaul of 1,023 different types of equipment, including factories, desalination plants and gas and liquefied gas plants, rotary machinery and pumps and diesel generators, was done in proportionate with the amount of allocated credit.

Flaring Falls Below 20%

Residents of areas close to oil installations demanded that gas flaring decline as much as possible. Owing to measures taken over the past two decades, NISOC has saw gas flaring at its facilities drop below 20%.

Under the present circumstances, oil facilities are required to reduce their gas flaring by 8 percent.

Around Ahvaz, gas flaring has fallen to below 2%, said Mohammadi.

In the meantime, two important agreements have been signed for flare gas gathering. Based on these agreements signed with the Persian Gulf Petrochemical Industries Company (PGPIC) and Maroun Petrochemical Plant, 95% of associated gas in NISOC-run areas, amounting to 800 mcf/d, would be captured.

Four gas sale projects were also defined. Three are over and the last one is under way with 90% completion.

Noting that flare gas gathering would help reduce environmental pollution, Mohammadi said: “Furthermore, associated gas would be used as feedstock for petrochemical plants, which would generate high value-added for the country.”

1,200 Items Built

Mohammadi said that the 1,200 items needed by the petroleum industry had been domestically manufactured after 54 agreements were signed between NISOC and domestic manufacturers.

He highlighted the significance of upgrading the capability of domestic manufacturers of equipment for the petroleum industry, adding that due to sanctions, this principle is pursued severely by NISOC.  

To that effect, under a cooperation agreement between NISOC and Iran National Steel Industrial Group, the production line of seamless pipes, which are widely used in the petroleum industry, has become operational. Before that, Iran imported seamless pipes from abroad. 

NISOC has signed IRR 500 billion agreement with INSIG and a contractor for seamless pipe manufacturing.

Synthetic Oil for Refineries

Another measure taken at NISOC has been the delivery of over 28 million barrels of synthetic oil to refineries by a pipeline network and pumping stations over 14 months. The delivery of synthetic oil to refineries started in June 2020 for an optimal use of surplus condensate production at the giant South Pars gas field.

NISOC receives synthetic oil from the Iran Offshore Oil Company (IOOC) and finally delivers over 20 million barrels of oil to the Abadan and Isfahan refineries and sends the remainder to Petro Omid Asia and Kharg installations.

Potential for Mansouri & Salman Development

Iran hopes to bring its oil output to over 5 mb/d under its 20-year vision plan through investing in ageing fields. Some of oil fields in Iran are already mature. Their oil has partly been recovered, but cutting edge technologies are needed to extract the remaining oil.

Thanks to existing technologies, it would be possible to raise oil recovery rate from different reservoirs to over 80%.

Bangestan in the Mansouri oil field is one of reservoirs that Iran has specifically counted on. Mansouri was among fields proposed for development under the Iran Petroleum Contract (IPC) model, the restructured model of oil contract.

Over recent years, production from Bangestan reservoir of Mansouri has been studied by Committee of Advisors at the Directorate of Reservoirs of National Iranian Oil Company (NIOC).

According to NIOC Directorate of Corporate Planning, various scenarios envisaged for enhanced recovery from this field include natural depletion, gas injection and water injection with a view to studying various parameters including output flow and downhole pressure.

This field enjoys very good potential for production and development. More studies are needed to be conducted in the future to get more information on Bangestan reservoir of Mansouri field. These studies focus on artificial lifting, hydraulic fracturing and enhanced oil recovery (EOR) methods.

Iran’s petroleum industry, particularly National Iranian South Oil Company (NISOC), over recent years, has focused on the development of Mansouri in order to enhance its crude oil output and enhance its processing capacity. The project has had 97.5% progress now. The only remaining section from phase 1 of Mansouri field development is the completion of production and desalination plant.

The high rate of recovery from Mansouri has added to the significance of this field. The findings of the latest studies indicate that the average rate of recovery from oil fields in Iran is about 28%, while the Asmari reservoir of Mansouri has a recovery rate of 47%, which is indicative of the high potential of this oil field.

Mansouri field is located 60 kilometers south of Ahvaz (the provincial capital of Khuzestan), 50 kilometers west of Mahshahr Port and 40 kilometers east of Ab Teymour field. Discovered in 1963, Mansouri field started production in 1973.

The first well in the Mansouri field was drilled in 1963 to allow for oil recovery from the Asmari reservoir. Oil production from the Bangestan reservoir began in 1974 after drilling Well No. 2.

Following the establishment of Mansouri production unit in 1979, the processing of the Bangestan oil was transferred from Ahvaz production unit to the Mansouri production unit.

Mansouri field is administered by Karoun Oil and Gas Production Company that is the largest subsidiary of NISOC with an output of over 1 mb/d.

Bangestan reservoir has a production unit with a rated capacity of 75,000 b/d, a desalination unit with a rated capacity of 35,000 b/d and a gas compressor unit with a rated capacity of 30,000 b/d.

Bangestan is estimated to hold 15 billion barrels of oil in place with an output of 60,000 b/d that may be increased to 79,000 b/d. So far, 347 million barrels of oil has been extracted from the Bangestan reservoir.

The average production rate from each onshore oil well has fallen to 2,000 b/d, down from 26,000 b/d recorded between 1970 and 1972. There were a total of 270 wells when Iran was supplying its maximum oil output. There are currently over 1,500 oil wells.

According to the official data, the average oil production rate in Iran stands at 24%, while in many countries it varies between 45% and 65%.

Iran’s Petroleum Ministry officials say the average recovery rate from oil fields in Iran stands at around 24%, ranging from 7% in Soroush oil field to 35% in Ahvaz oil field.

Iran targets Maximum Efficient Rate (MER) which means the maximum sustainable daily oil or gas withdrawal rate from a reservoir which will allow economic development and depletion of that reservoir without detriment to ultimate recovery.

If oil is extracted from a reservoir at a rate greater than the maximum efficient rate of recovery, then the natural pressure of the reservoir will decline resulting in a drop in the amount of oil ultimately recoverable.

MER is also commonly used to denote the rate of field production that may achieve the maximum financial return from the reservoir operation. However, the figures of two rates hardly coincide.

In the 1940s, the average production from Iranian oil wells was said to stand at 18,000 b/d. After so many years, the figure is down to 2,000 b/d.

As Iran's oil wells enter their second half of life, between 330,000 and 350,000 barrels per year of oil is lost in onshore wells.

Therefore, enhanced recovery from mature reservoirs like Bangestan is essential for Iran’s petroleum industry.

Output Hike Possible at Salman

Salman oil field located in the Persian Gulf is jointly owned by Iran and the United Arab Emirates (UAE). The shared offshore field has high-pressure gas layers, too. Discovered about 45 years ago, the Salman field has since been supplying oil.

It is located in Hormuzgan Province and more specifically 144 kilometers south of Lavan Island.

Due to the existence of about 70% of oil and gas layers of this oilfield in Iran’s territorial waters and its shared status, its development has always been a priority for Iran’s petroleum industry. In the 2000s, the platforms of this field that had been damaged during the 1980-1988 imposed war were renovated.

A couple of years ago in Tehran, the Iran Offshore Oil Company (IOOC) nominated Salman along with the Norooz, Dorood, Foroozan and Soroush as candidates for development under the newly developed contractual framework known as the Iran Petroleum Contract (IPC).

In compliance with the Petroleum Ministry’s policy of prioritizing development of jointly owned fields, Salman is the most important of the five fields for development.

Given the history of oil production in the Salman field, it seems that the main objective of Iran’s petroleum industry in such ageing fields as Salman has been to apply cutting edge technology for maximum efficient recovery and enhancing the rate of recovery from these fields.

Despite the high recovery rate in the Salman field, some layers of this field have yet to be depleted. Therefore, it is possible to increase output from this mature brownfield.

Salman contains light crude oil with API gravity varying between 33 and 37. Renewed development of the Salman field allows for increased output. If enhanced oil recovery (EOR) methods are applied, a much higher output is envisioned.

The Salman field incorporates an asymmetric anticline measuring 14 kilometers long and 11 kilometers wide. Geologically, it is composed of three oil production layers dating from the Jurassic and Cretaceous eras.

Salman field also incorporates a gas layer.The field was discovered in the 1960s by Lavan Petroleum Company. The first exploration well in this field was drilled in 1956 to allow for production three years later.

According to the latest data, the field has 44 oil and 10 gas wells. Based on studies currently under way, gas production from Salman could rise after making some arrangements.

The field is owned 67% by Iran and 33% by the UAE. There is not precise figure about gas production from Salman whose rate of recovery stands at 51%.

The oil extracted from Salman field is carried to Lavan Island via a 22 inch in diameter subsea pipeline for final processing on onshore facilities and then exported or stored to feed the Lavan refining facility.

Despite being ageing, Salman still has an acceptable level of deposits. A timely development of this field would boost its output. Five platforms are currently operating in this field.

Among the three reservoirs in Salman, the one located at a depth of 10,000 meters under seabed accounts for 70% of the Salman output. A layer located at a depth of 8,000 feet accounts for 20% of the Salman output and a third layer at a depth of 5,000 feet for 10%.

Salman is estimated to contain 4.5 billion barrels of oil in place. Since 1999 onwards, when a number of oil and gas fields were developed under buyback deals, studies on the Salman field were carried out under the supervision of Petroiran Development Company (PEDCO) and the Petroleum Engineering and Development Company (PEDEC).

The primary processing of crude oil is done on platform prior to being carried in a 144-kilometer pipeline for secondary processing, storage and exports to Lavan.

Gas produced from the nine wells in this field is carried to Siri Island via a 36-inch pipeline.

 Doroud, Arvand Oil Fields Up for Investment

Doroud oil field, which is located in Kharg Island and northwest of the Persian Gulf, is among developed oil fields which the Iranian Offshore Oil Company (IOOC) presented to foreign investors within the framework of the new model of oil contracts known as Iran Petroleum Contract (IPC).

Nearly 16 years have now passed since an agreement was signed for the development of Doroud field. Enhanced recovery from the field has not been achieved despite gas injection since 2008.

According to the Department for Economic and Financial Feasibility Studies of National Iranian Oil Company’s Directorate of Corporate Planning, the investment needed in the Doroud field over four years has been calculated, which would be secured through signing F, EPCF and EPDF deals. The project costs will be recouped over a six-year period from the increase in the crude oil production capacity.

The package of investment for the integrated development of IOOC oil and gas fields has been drawn up in line with Iran’s law on removal of barriers to competitive production and upgrading the fiscal system. It will take effect following the acquisition of necessary permits from NIOC Board of Directors and the Economic Council and signing agreements with investors. This investment package takes into consideration compliance with Iran’s Fifth Five-year Economic Development Plan for the prioritization of development projects including Development of jointly owned oil and gas fields.

Doroud oil field development project is along IOOC-run projects open to investment. IOOC is a leading company in applying ESP to wells and gas lifting in the country. It intends to focus on improving the rate of recovery from hydrocarbon fields nominated for investment.

Over the past four decades, Doroud has been developed twice. It is now ready to undergo the third phase of development.

Doroud is estimated to contain 7.6 billion barrels of oil in place. Due to 33-year recovery from this field and improper injection of water and gas, only 1.5 billion barrels of oil was recoverable from the field. But now due to development activities done in this field, the recoverable amount is expected to rise to 2.5 billion barrels.

Currently, Doroud is producing on average 15,431 b/d of oil from its offshore wells and 36,500 b/d from its onshore wells. In 1997, 42 wells were drilled in the oil field. Eighteen offshore wells and 23 onshore wells have been drilled and completed.

The crude oil processing installations are used for treating 100,000 b/d offshore and 110,000 b/d onshore.

About 1.6 billion barrels of oil has been recovered from this field over the past four decades. Oil production from Doroud came to a halt during the 1980-1988 imposed war.

The first wave of enhanced recovery from Doroud field started in 2002 at the rate of 15,000 to 16,000 b/d. In the following years, production increased as new wells were drilled in this oil field.

When Iran signed an agreement with France’s energy giant Total in 1999 for the development of Doroud, oil was $20 per barrel. Total acquired Elf and Agip to make good investment in Iran. The French company failed to inject gas into Doroud on schedule and the project was halted mid-way. But it must be taken into consideration that over recent years as average oil prices have been at $40 a barrel, the project has been profitable for Iran with a quick rate of return on investment.

Prior to launching the gas injection section of the Doroud oil field  in Kharg Island, due to the unprecedented high pressure gas injection (6,000 psi) into the field and its unknown consequences, many Iranian petroleum industry experts recommended the gas injection section to be transferred from Total to the client after completion of the water injection and oil production process. In the meantime, the geologically complicated structure of the Doroud field and the location of this oil field in Kharg Island slowed down the pace of drilling in the first years of development of this field, as simultaneous onshore and offshore work was tough.

Arvand Awaiting Investment

Until a couple of years ago, development of the oil and gas fields  that Iran shares with neighboring countries had been slowed due to financial and technical impediments in Iran, thereby helping neighboring nations make big gains.

Iran has shifted its focus on the development of joint oil and gas fields located mainly in South Pars and West Karoun. In the West Karoun area, Iran shares oil fields with Iraq. Three West Karoun oil fields recently started production.

The fields shared with Iraq have been proposed to foreign investors for future cooperation. Foreign companies may sign agreement with Iran based on the content of newly developed model of contract – Iran Petroleum Contract (IPC).

Arvand oil field which is located 50 kilometers south of Abadan in Khuzestan Province is one of these fields in question. The field lies at the entry of Arvandroud River and is 42 kilometers long and 13 kilometers wide.

Arvand is estimated to contain one billion barrels of oil in place with a recovery rate of 15%. Arvand also holds over 14 bcm of dry gas and 55 million barrels of gas condensate.

Discovered in 2008, the Arvand field lies along Iran-Iraq border. Drilling had started in Arvand in 2006 for the purpose of estimating the hydrocarbon potential of the formations in the Khami and Bangestan centers.

Four well logging operations were carried out in the Fahlyan formation to prove the existence of oil and gas in that formation. The Fahlyan formation holds light crude oil with API gravity at about 44.

The Arvand oil field is administered by the Arvandan Oil and Gas Production Company (AOGPC) whose production is estimated to reach 1.4 mb/d by 2025.

AOGPC is estimated to have the highest oil and gas production rate in the coming decade. A major facility inside this field is a 165,000-barrel-per-day processing unit. This treatment unit was built by National Iranian Oil Company during years when Iran was under sanctions. A variety of crude oil may be processed at this facility. Thanks to the existence of this treatment facility, the return of investment will be fast. Any investment in the development of the Arvand oil field will have a good rate of return. The short distance between the Arvand field and the treatment facility is an indicator of the fast development of the oil field.

Several years ago, an agreement was signed between AOGPC and the Iranian Offshore Engineering and Construction Company (IOEC) for the development of the Arvand oil field, but the agreement was never implemented due to financial and other problems.

The Arvand oil field is expected to produce 5,000 b/d of oil in the first phase, which would reach 20,000 b/d in the final phase. The investment needed for the development of this field stands at $135 million, which is likely to increase. The API gravity of oil contained in Arvand varies between 39 and 43. The Arvand oil is planned to be delivered to the Abadan refinery.

Iran and Iraq share eight oil fields along their joint border with combined recoverable reserves of 14 billion barrels. The eight fields are Dehloran, Naftshahr, West Paydar, Azar, Azadegan, Yadavaran, Dehloran and Arvand. These fields have different names on the Iraqi side. Nine percent of Iran’s crude oil reserves exist in the fields shared with Iraq.

As recovery from jointly owned fields leads to migration of hydrocarbon, NIOC officials are concentrating on the development of such fields.

Oil Refining Development with Petro-Refineries

Javad Asghari

Iran's growing need for fuel in the transportation sector and its need for self-sufficiency in the production of required fuel makes it more than necessary for the country to upgrade its refining sector and boost the quantity and quality of its products. This sector was instrumental in helping Iran defeat unjust sanctions imposed on Iran's petroleum industry.

Iran’s newly-appointed minister of petroleum, Javad Owji, has said his agenda included development of the existing refineries and construction of new ones, although the country has become self-sufficient in gasoil and gasoline production. That is aimed at persistence of reducing crude sales.

Due to current restrictions on Iran’s crude oil exports, the country is planning to increase its crude oil and condensate refining capacity to 3.4 mb/d from the current 2.15 mb/d. 

Shift to Petro-Refineries

Today, the world is moving towards integration of refining and petrochemical processes in petro-refinery complexes, which are more economically viable than refineries. Crude oil processing at a petro-refinery involves the crude oil through the refining processes into fuel derivatives such as gasoline, diesel, jet fuel and fuel oil; however, products such as LPG and naphtha may also be used to develop the petrochemical sector of these units while dozens of petrochemical products may be manufactured. Now, with the opening of the Persian Gulf Star Refinery, Iran has become self-sufficient in all oil products, including gasoline. Development of the giant offshore South Pars field and subsequently replacement of liquid fuel with gas as feedstock for power plants has led to availability of surplus diesel for export.

Iran has also exported its surplus kerosene and LPG after supplying gas to villages. Therefore, the petro-refineries planned to be built in Iran would not have to export their products at subsidized prices and/or the prices set by the Petroleum Ministry. These refineries can export their products at free-market rates and will not produce losses like old refineries. Many developing countries as well as petro-states have planned development of the petro-refinery industry, and have allocated required credit and facilities for the development of this sector.

Is Petro-Refinery Development Possible?

Since the petroleum industry in all its subsectors, especially the petrochemical sector has been moving forward over recent years, despite the economic problems and tough US sanctions, efforts have been made to address the issue of petro-refineries as much as possible with a view to selling products and creating value-added. It was in this direction that the plan to "build petro-refineries using public investment and the method of feedstock supply" was finally approved by the Iranian parliament. In fact, the view of the government and the Petroleum Ministry is to support construction of oil/gas refineries and petro-refineries using public capital and based on the fact that investors could provide a maximum of 30% of initial liquidity, and the rest of the capital would be provided through the issuance of bonds, capital markets and bank facilities. And over this period of time, efforts have been made to lay the groundwork for this goal.

Regarding the positive impact of this method

on the international monetary and financial issues of the country, it should be mentioned that this method would lead to further expansion of trade relations with the countries of the region, which could be materialized through utilizing methods such as bartering, i.e. receiving goods for oil. Moreover, it is an effective approach to counter the embargo on the sale of crude, and we must convert oil into domestic refineries and export petroleum refining products rather than exporting raw material. In crude oil exports, large and high volume shipments are exported, and this makes it easier to monitor, track and sanction these shipments. The number of Iranian crude oil customers is also limited due to sanctions.

Iran’s oil could be fed to 40 to 42 refineries in the world. These 40 refineries are located in seven or eight countries. These eight countries are mainly located in the geographical region of East Asia and Southern Europe. The classification becomes even more detailed. Iranian crude oil is actually transported to four regions that are energy hubs, where it is unloaded to reach these eight countries. Therefore, distancing itself from this crude sale is a major necessity in the Iranian petroleum industry.

Regarding the method of financing petro-refinery projects in the current situation of the country, it should be noted that there is IRR 16,000,000 billion of liquidity available for investment in the economy and could be a very good source of funding for such projects. For instance, the Persian Gulf Star Refinery was able to attract IRR 3,000 billion from the people's capital by issuing "salam bonds" while using its financial resources.

In addition to the Petroleum Ministry’s plans to develop petroleum refineries in Iran, the existing capacities of the Iranian refining and distribution industry would be used to enhance Iran's refining capacity. Owji has said contracts have been signed with eight potential investors in this field for refining about 1.5 mb/d to 1.6 mb/d (crude oil and gas condensate), and due to the quantitative and qualitative upgrading of existing refineries, enough capacity will be built there. He said: “We may enhance the country's refining capacity by 1.5 times in the next three or four years.”

“The maximum capacity of refineries' crude oil and gas condensate is now close to 2.2 mb/d, which we hope will reach 3.4 to 3.5 mb/d,” he added.

Good Capacity for Oil Exports

National Oil Refining and Distribution Company (NIORDC)'s plan to develop petro-refineries and reduce crude oil sales does not mean that Iran will not export its oil in the coming years, but  we would like to further focus on exporting oil products.

Asked whether the country would no longer need to export crude oil with the increase in the refining capacity, Owji said: “The Islamic Republic of Iran has proper capacity in oil reservoirs and we holds over 150 billion barrels of oil that could be extracted. If we consider maximum efficient recovery from these reservoirs we will have good production capacity. With upstream plans, oil production capacity will definitely increase over four to five years both in joint and independent fields. Enhancing the production capacity enables us to upgrade the refining capacity and guarantee the energy security while going ahead with oil exports.”

Noting that enhanced refining capacity would depend on enhanced recovery from oil fields, Owji said: “Fortunately, with God-given reserves of 154 billion barrels of recoverable crude oil and 33 tcm of recoverable gas, when the production capacity in the upstream sector increases, the refining capacity in the downstream sector would increase, too. In the meantime, we’ll need to control our oil export capacity.”

Asked if there were any plans for building a new refinery similar to the Persian Gulf Star refinery, the minister said: “A refining capacity as big as the Persian Gulf Star’s has been envisaged and the idea behind it is to neutralize sanctions. But as we look into enhancing crude oil and natural gas production and boosting refining, we also focus on efficient use.”

Oil Refineries Need Investment, Knowhow

Despite the implementation of development projects over recent years in Iranian refineries, the decrepit structure and old technology in Iranian oil refineries today cause great damage to the private sector in Iran. Iranian refineries currently receive crude oil from the government at a 5 percent discount, but they still do not make much profit from refining barrels of oil. Therefore, rebuilding and modernizing these refineries need investment and modern technology. If the refineries are not renovated and/or modernized, Iran would be lagging behind other countries and may find it difficult to make up shortfalls.

The private sector is not very interested in modernization and improvement. Therefore, the government helps the private sector in the form of loans and foreign investment guarantees to improve the country's existing oil refineries. Following signing a nuclear deal with six world powers in 2015, foreign investors, especially companies from South Korea and Japan, showed interest in upgrading Iran’s old oil refineries. Currently, one of the main problems of oil refineries in Iran is low technology and outdated equipment, as well as fuel oil production. Therefore, reducing the production of fuel oil and increasing the production capacity of value-added products in the country's oil refineries is on the agenda as the most prioritized executive program.

Over recent years, this issue has been considered with a research approach towards identifying and accessing new technologies, as well as the approach of building new refineries using new technologies.

$4bn Investment Envisaged for Ilam 

 Iran’s petroleum minister, Javad Owji, has said $4 billion was planned to be invested in Ilam Province in western Iran over 4-5 years.

He said during a one-day tour of the province that the Petroleum Ministry planned to invest $2 billion in the upstream sector and $2 billion in the downstream sector of the petroleum industry there.

Ilam Province is home to 3% of Iran’s oil reserves and 11% of its gas reserves. Therefore, the Petroleum Ministry in the new administration had extensive plans to attract investment. A large number of upstream and downstream projects have been defined for this purpose.

Oil, Gas Output Capacity

Currently, over 210,000 b/d of oil and 3.5-4 mcm/d of gas is produced at Ilam Province.  

Owji said the Petroleum Ministry had plans to develop seven fields in the province. With the development of oil fields, Ilam’s crude oil production would increase to 300,000 b/d. Furthermore, development of the Tang-e Bijar gas field would bring Ilam’s gas production to 4 mcm/d.

Changuleh oil field, which Iran shares with Iraq, remains undeveloped. The Oil Industries Engineering and Construction (OIEC) has proposed a plan for the development of the Changuleh field. The proposed plan has been reviewed by the Advisory Committee of the Reservoirs Directorate of National Iranian Oil Company (NIOC). It is now being studied by the Economic Council. Owji has said development of Changuleh was one of his priorities.

Referring to investment in Changuleh, the minister said: “There are divergent views among experts from the Planning and Budget Organization and the Petroleum Ministry in this regard. Based on the tight reservoir rock and drilling and development cost estimates, $1.6-2 billion would be needed. Some experts believe that development of this field is not commercially viable, but I promise that this issue would be studied by experts.”

He said that the experience of development of the Azar field would be helpful in developing Changuleh.

Regarding necessary investment for the development of oil fields, Owji said: “Changuleh aside more than $2 billion would be invested in developing oil fields, be it joint or independent. The process has already started.” 

He said that all jointly-owned fields would be decided upon during his term in office, adding that once the current administration ends its term, there would be no oil or gas field to have not reached maximum output.

Azar oil field has undergone phase 1 development. Talks have got under way for the second phase development.

Owji also referred to potential revenue from developing the Azar field, adding: “With an output of 60,000-70,000 b/d, investment in this field would return in two years.”

Ilam Gas Refinery

During a visit to the Ilam gas refinery, the minister said that the second phase development of the refinery would bring its capacity to 10.3 mcm/d from the current 6.3 mcm/d. This project is 15% complete now.

With the implementation of this project, the problem of feedstock supply to the downstream sector as well as gas supply to domestic, industrial and power plant sectors would be resolved.

The minister said that an upstream-downstream chain would be formed and with the construction of a polypropylene (PP) park, this chain would be completed.

PP Park in Ilam

According to Owji, the investment projects envisaged in the downstream sector include petrochemical projects and the downstream industries of the value chain. He said necessary investment would be provided by the Petroleum Ministry subsidiaries, Oil Industry Pension Fund Investment Company (OPIC) and Persian Gulf Petrochemical Industries Company (PGPIC).

In the downstream sector, the Ilam petrochemical plant, the PP unit and the value chain are considered. To that effect, a PP park would be built with IRR 3,000 billion investment.

“If investors become active, the Petroleum Ministry would support construction of parks for the downstream industries chain with the focus on methanol or PP and would consider good incentives,” he said.  

According to Owji, the first PP Park in Ilam Province would be built near the Ilam refinery and petrochemical plant.

“Iran’s Petroleum Ministry is committed to provide IRR 3,000 billion to this project,” he said, expressing hope that the park would become operational in 2 to 3 years.

Owji said launching downstream industries chain parks and generating value-added, ending crude sales and job creation would help materialize resilient economy policies in the petroleum industry.

WEP to Fetch $3.7bn by 2025

Behzad Mohammadi, CEO of National Petrochemical Company (NPC), has said that the West Ethylene Pipeline (WEP) would earn Iran $3.7 billion in revenue by 2025 when ethylene injection capacity into the strategic pipeline would reach 3.5 million tonnes. He made the remarks during a ceremony for signing agreement on WEP operation and maintenance between NPC and Oil Industries Commissioning and Operation Company (OICO).

Private Sector Engaged

According to the terms of the agreement signed between NPC and OICO, operation and maintenance of the pipeline has been fully awarded to the contractor. That would include pipes and compressor stations. The agreement runs for a period of 18 months. As far as expenditures are concerned, operation and maintenance constitute running cost while emergency conditions make up conditional expenses.

WEP has been built to develop the petrochemical industry in western Iran. With the implementation of this pipeline, the ethylene produced in Assaluyeh would be carried to northwestern Iran. As Iran’s private sector had never been awarded such a big project, this agreement is of high importance. However, it has to be noted that according to NPC officials, the new agreements pay special attention to experienced manpower and their empowerment and training.

The idea behind construction of WEP was to serve underdeveloped areas. NPC started its construction in 2004. Pilot operation of the pipeline began in 2012. In 2020, the Ministry of Economy and Finance transferred ownership of WPC to NPC. Then, NPC decided to choose a contractor for the project. The licensing round has been held in two phases and finally the project was awarded to OICO.

Of course, contractor costs will be procured by income gained from ethylene delivery to consumers. In fact, an agreement has been signed between NPC and clients for ethylene delivery for which fees have been set. The idea has been to optimize current trends.

Specifications

The 2,800-km WEP pipeline cuts through 11 provinces. It is fitted with eight compressor stations, five of which are already operational. A total of 13 petrochemical plants are connected to the pipeline. Annually, 2.1 million tonnes of ethylene is injected into WEP. So far, WEP has distributed 11 million tonnes of ethylene between subsidiaries.

The NPC boss said the products obtained from WEP were valued at $2 billion, adding the pipeline had created 15,000 direct jobs.

Currently, 13 petrochemical plants are connected to WEP, which would increase to 21 by 2025. According to Mohammadi, the injection capacity into WEP would increase to 3.5 million tonnes and revenue from the project would reach $3.7 billion while direct job creation would reach 17,000.

Currently, PVC and polyethylene are mainly produced along this pipeline, but with the expansion of the value chain, which is a major strategy pursued by NPC, polyethylene, ethylene oxide, ethanol amine and ethoxylate would be manufactured.

Value Chain

A major strategy adopted by the current administration is to expand and complete the value chain in the petrochemical industry.

Javad Owji, the minister of petroleum, has said Iran’s petrochemical industry has managed to account for the bulk of Iran’s hard currency needs. “We believe that petrochemicals exports are like half-raw sales.”

The minister expects the petrochemical industry to take action for the expansion and completion of value chain.

Noting that no investment had been made in the refining and petro-refining sectors, Owji said that travels rate would increase once COVID-19 has been contained. Therefore, the Petroleum Ministry intends to enhance the capacity of refineries both quantitatively and qualitatively prior to focusing on the construction of petro-refineries to supply fuel and to feed petrochemical plants.

He said building petro-refineries was a priority of the 13th administration, adding that crude sales were not limited to crude oil and condensate as exporting petrochemical products was like selling “half-raw” materials.

Owji has said that 30% of Iran’s petrochemical products was domestically consumed and the rest was exported. Therefore, taking the value chain seriously into consideration was an option to lower exporting raw petrochemicals.

Profitable Value Chains

Expansion of the value chain would be highly profitable for various manufacturing plants and would also help diversify products. For instance, launching a 1.65-million-tonne urea/ammonia plant or a 450,000-tonne plant for polypropylene production would require $700 million to $1 billion in investment, while in the methanol chain, polypropylene or polyethylene plants may be launched with an investment of $50 to $60 million.

There is no administrative body for value chain units in Iran and most investment in the petrochemical sector has been made in the parent industry. Therefore, the minister of petroleum has proposed to vice-president and the minister of industry, mine and trade to set up a working group comprising Ministry of Petroleum, Ministry of Industry, Mine and Trade and Ministry of Interior to focus on the construction of value chain parks for the downstream petrochemical industry.

Each park may incorporate 15-20 industrial units in various sectors including housing, car manufacturing, military and even healthcare.

According to the petroleum minister, legal mechanisms are in favor of parent petrochemical industry in this regard as they would benefit price reduction in feedstock. Furthermore, launching value chain parks for the downstream petrochemical industry would not need major technical knowhow. Owji has said that the necessary feedstock for such plants was sufficient in the country.

Downstream Petchem Generating Value-Added

Iran is currently purchasing its major petrochemical products from the United Arab Emirates, South Korea and China. The irony is that these countries buy their raw materials from Iran to manufacture petrochemicals. Therefore, investment in developing the downstream sector of the petrochemical industry is a must for this domain.

Minister of Petroleum Javad Owji has said reducing sales of raw materials and generating value-added in the downstream industries, particularly in the petrochemical industry, is a way to skirt around and defeat sanctions which target specifically crude oil.

Iran has made huge investment in producing petrochemical raw materials and is exporting it to other countries, and in return is importing consumer goods from the same countries at much higher prices. The important point is that the petrochemical industry’s total share of employment is about 1.2% of the country’s industrial employment. That is why small and medium-sized industries account for 75% of industrial jobs in the country. If petrochemicals produced with low-cost and subsidized gas are processed by small and medium-sized industries instead of being exported in the initial form to become an end consumer good, its value-added would increase after each phase to reach 3 to 4 times the initial price, thereby creating jobs widely in Iran.

The current administration plans to provide the necessary investment for the petrochemical industry through money market or new financing methods because heavy domestic and foreign investment is needed for the petrochemical industry.

Private Sector Engagement

The private sector is a key element of development in Iran’s burgeoning petrochemical industry. Enhanced cooperation between the private sector and National Petrochemical Company (NPC) and enhanced convergence between the upstream and downstream sectors may help realize targets set for economic resilience, particularly generating value in the petrochemical industry. Therefore, in order to reach the objectives set in this sector, full capacities of the private sector should be used in order to complete the value chain for the purpose of balanced development. Meanwhile, with the flow of new foreign investment along with the transfer of technical savvy and cutting edge technology, the objectives envisaged for the development of the petrochemical industry may materialize in the near future. It is noteworthy that Iran is among nations with all necessary infrastructure, tools, potential and resources to have a lucrative petrochemical industry. Iran’s petrochemical industry has long been seeking balanced development and completed value chain despite all challenges, the most important of which being sanctions.

Currently, downstream petrochemical plants are running at only 30% capacity. In light of Minister Owji’s plans, it seems that the country would see development of downstream activities in coming years.

Petchem, Entrance to No Crude Sales

According to Owji’s plans for the petrochemical sector, in addition to fresh investment absorption and completion of projects under construction, the country would distance itself away from selling raw materials and further diversify its petrochemical mix.

Meantime, in addition to making efforts for building and completing upstream projects and enhancing the production capacity in this sector, it has to be noted that the downstream petrochemical industry is the best and most suitable alternative to crude oil and upstream products’ exports. Furthermore, given its profitability, its development has to be further taken into consideration than ever.

The trend of development of the petrochemical industry based on completing the value chain began in 2020 and to that effect implementation of 33 projects was envisaged. The main idea behind these projects was to use diverse feedstock for the petrochemical industry throughout the value chain for the purpose of activating small-sized industries, as well as industrial and chemical parks. According to the planning made, the new projects defined in six diverse chains, about 3.5 million tonnes of feedstock would be provided to downstream industries.   

Behzad Mohammadi, CEO of NPC, hopes that by 2025 the median value of petrochemicals would have increased significantly and the chain of petrochemical industry development would have headed towards strategic products needed in the downstream petrochemical industry, the export capacity would have increased and hard currency revenue would have kept flowing.

Petchem Parks

Construction and development of specialized petrochemical parks, which has been pursued by NPC and Iran Small Industries and Industrial Parks Organization (ISIPO) may clear the way for the growth and development of downstream petrochemical industry although recently and based on agreements made, downstream industries would be established at industrial parks and they would no longer operate  independently. Industrial parks have all advantages to be present in the downstream petrochemical industries and through developing these parks, particularly in border provinces, development of the petrochemical industry may pick up speed in the country.

Thanks to lucrative markets and high demand on the part of neighboring nations, Iran’s border provinces can attract new investment and develop specialized petrochemical parks for the purpose of downstream industrial development. Enjoying proper regional position, Iran may export the manufactured petrochemical products to neighboring countries which constitute a 600-million-strong market. To that effect, border provinces are instrumental in the development of the downstream petrochemical sector. By upgrading border markets and establishing special export zones, the national security coefficient would increase while the trend of downstream sector’s exports may be expanded. 

Sustainable development depends on downstream industries and various industries may use the products of mid-stream and downstream petrochemical sectors for economic development.

Iran Set to End Raw Materials Sales

Iran has adopted a five-year petrochemical development plan for sustainable and balanced development. To that end, less raw materials would be sold, while specific plans have been envisaged to develop the downstream sector.

Undoubtedly, preventing raw materials sales and completing the value chain of the petrochemical industry may be considered an advantage in the developing of this sector as necessary infrastructure is already available.

The key point here is that owing to spatial planning and scattered upstream industries, there is proper ground for developing downstream industries and therefore investment in this sector may be seen as a reliable and profitable investment.

Meantime, the main mission assigned to Iran’s economy for the coming ten years would be job creation, providing public welfare and boosting national economy. In this regard, the petrochemical industry would be instrumental in both upstream and downstream sectors.

Tapping Strategic Reserves; Sino-US Policy

Shuaib Bahman

During the last extraordinary ministerial meeting of OPEC+, 400,000 b/d of oil was decided to be added to the Declaration of Cooperation (DoC) signatories’ oil output. However, evidence shows that the 400,000 b/d output hike has not been sufficient to manage oil prices over recent months.

According to countries such as China and the United States, the shortage of oil supply has led to an increase in the price of raw materials, which in turn has increased inflation in these countries. Hence, Chinese and the US government officials plan to release 20 million barrels of oil from their Strategic Petroleum Reserves (SPR) each in the coming months in response to supply shortages. In this way, Beijing and Washington hope to influence the reduction of oil prices and improve their economy in the current situation. Although such a joint policy could affect both the Chinese and US domestic economies and global oil markets in the short term, its continuation is not possible in the long run.

Moderation

Following the oil crisis in the 1970s, consuming countries, on the one hand, established the International Energy Agency (IEA) and, on the other hand, pursued the SPR plan. After the establishment of the IEA, these countries began to formulate policies to be less affected by market fluctuations. Their first step was to build SPR. According to the IEA regulations, member states must store as much oil as they can import for 90 days and consume for 60 days. The policy has been pursued by most oil consuming countries over recent years and they have always viewed oil reserves as a strategic matter that can have a significant impact on their position in crises and wars.

Although the ongoing US-China move to release some of their SPR is largely emanated from economic reasons, it has happened in the past for a variety of reasons. For instance, in the wake of drone strikes by Yemeni "Ansarallah forces" on Saudi Arabia's largest oil facility in 2019, the US announced it was ready to dip into its strategic oil reserves if necessary. India has also in the past released some of its SPR by pursuing a new policy of commercializing federal reservoirs via leasing their space. In addition, the last time the IEA SPR were tapped was in 2011. At that time, 60 million barrels of crude oil and oil products were extracted from these reserves to compensate for the cut in Libyan oil production. Earlier, after Hurricanes Katrina and Rita in the Gulf of Mexico in 2005 the same amount of oil was extracted, but not all of it was used. It also had the highest amount of SPR released during Iraq's invasion of Kuwait in 1990. At that time, the IEA released 2.5 mb/d of its SPR. The world's total SPR is currently estimated at 1.4 billion barrels, most of which belonging to China and the US.

Given all the above points, a change in the approach of countries such as China and the US, which have significant SPR, is a serious message for international markets because consuming countries intend to use new mechanisms to balance global markets. In line with their goals, these countries even sell part of their SPR, which has happened less in the past. In this regard, it should be noted that the sales of 20 million barrels from the SPR of countries such as China and the US does not harm the reserves of these countries. Because the US and China respectively hold 620 million and 220 million barrels of oil in reserve and therefore 20 million taken out would not cause any problem for them.

However, the sales of 20 million barrels could be a powerful source of funding for the governments of these countries to both mitigate the impacts of rising inflation and influence the pricing process in global markets. Of course, China and the US are both aware that for a long time they could not benefit from selling their SPR to reorganize their domestic economies. As a result, these countries have to keep both the sales of SPR level low and make up the 20-million-barrel shortfall.

Reserves Perspective

The similar behavior of the US and China in selling part of their strategic reserves shows that the world's two top economies want a return to oil price equilibrium. In fact, these countries consider the current price of oil to be detrimental to their economy, and for this reason, they are trying to influence it in various ways. However, it remains to be seen whether, in the future, pressure from China and the US will lead to a reconsideration of OPEC+ decisions or the group will continue to pursue its stabilizing policies. At the same time, it should be noted that tapping SPR is not the only strategy of consuming countries such as the US and China, and their other measure could be to reduce the level of oil purchases. In fact, these countries, due to their significant volume of reserves, have the opportunity to reduce purchases and influence supply and demand, while being able to use this parameter to influence oil prices in world markets.

Brazil to Lead Americas Crudea And Condensate Production

 Brazil is expected to contribute about 48% (1.35 MMb/d) of the Americas crude and condensate production in 2025 from upcoming projects (excluding the US L48), according to GlobalData.

The company’s latest report, ‘Americas Upstream Development Outlook, 2021–2025’, reveals that 1.164 MMb/d of crude and condensate production in Brazil in 2025 is expected from planned projects with identified development plans. While 364,000 b/d is anticipated from early-stage announced projects that are undergoing conceptual studies and are expected to be approved.

In Brazil, Bacalhau, Itapu (Florim), and Buzios V (Franco) are some of the key projects that are expected to collectively contribute about 39% of the crude and condensate production in 2025.

Espoir FPSO Taken Offline for Remediation

BW Offshore has shut down the FPSO Espoir Ivoirien at the CNR International-operated Espoir field offshore Côte d’Ivoire for two more months, said partner Tullow Oil in its latest results statement.

In mid-January, the vessel had to be shut-in for around four weeks after a hydrocarbons leak onboard led to two fatalities. The current two-month suspension will allow for further remediation work to be performed for vessel class certification purposes.

CNR and Tullow are working with BW Offshore on the optimum remediation plan, with work likely to start next year.

Saipem Rig Spuds Well offshore Norway

Saipem’s semisubmersible Scarabeo 8 has spudded the Rødhette exploration well in the Barents Sea for operator Vår Energi.

According to partner Longboat Energy, drilling could continue for six weeks, and will target prospective resources in the range 41-81 MMboe. A commercial result could lead to a 30-km (18.6-mi) tieback to the Goliat field infrastructure.

Rødhette is in a proven Jurassic play in the Hammerfest basin. The key risks are thought to be fault seal and oil column thickness.

Longboat will participate in two more wells offshore Norway this year, starting with Equinor’s Egyptian Vulture wildcat, which the semisub West Hercules should spud before the end of September.

Infill Drilling Progressing in Vietnam

 Pharos Energy has issued updates on its ongoing field development activities offshore southern Vietnam.

The producing TGT field is in 47m (154 ft) water depth in block 16-1 in the Cuu Long basin.

In July, TGT-H4-34Pl, the first of four new infill development wells, was spudded from the H4 wellhead platform at the southern end of the field by the jackup PVDII. The well reached its planned TD in early August and came onstream on Aug. 23 through the existing processing facilities.

Its initial flow rate of around 1,600 b/d of oil was as expected, and further behind pipe potential will be accessed during a second phase of perforations.

Timor-Leste Joins Bayu-Undan Carbon Capture Review

Santos has signed a memorandum of understanding (MOU) with the Timor-Leste regulator to pursue carbon capture and storage (CCS) at the Bayu-Undan gas/condensate field in the Timor Sea.

The MOU details how the Bayu-Undan partners, the Autoridade Nacional do Petróleo e Minerais, and the Timor-Leste government will jointly assess the viability of repurposing the existing facilities and use of the reservoir for CCS.

These include sharing technical, operational and commercial information, reviewing the regulatory framework and local capacity, and setting a timeline for a decision.

Shell Sets Sights on Sustainable Aviation Fuel

Royal Dutch Shell plans to start producing low-carbon jet fuel at scale by 2025, in an attempt to encourage the world's airlines to reduce greenhouse gas emissions.

Aviation, accounting for 3% of the world's carbon emissions, is considered one of the toughest sectors to tackle due to a lack of alternative technologies to jet fueled-engines.

Shell, one of the world's largest oil traders, said it aims to produce 2 million tonnes of sustainable aviation fuel (SAF) by 2025, a ten-fold increase from today's total global output.

Produced from waste cooking oil, plants and animal fats, SAF could cut up to 80% of aviation emissions, Shell said.

Shell, which at present only supplies SAF produced by others, including Finnish refiner Neste, said it wants green jet fuel, which can be blended with regular aviation fuel with little need to change plane engines, to make up 10% of its global aviation fuel sales by 2030.

SAF accounts for less than 0.1% of today's global aviation fuel demand, which reached around 330 million tonnes in 2019, investment bank Jefferies said.

Growing the market faces several hurdles, primarily due to the cost of SAF, which is currently up to 8 times higher than regular jet fuel, and the limited availability of feedstock.

Shell said it wants others to follow its lead.

"We also expect other companies to add to it with their own production plants," Anna Mascolo, head of Shell Aviation, told Reuters.

Iraq Launches Project to Reduce Flaring

 Iraq has launched a new project that aims to recover gas normally set alight during oil extraction at two oilfields in the country's south.

Flaring, or burning off excess gas during oil extraction, is a highly polluting practice but far less costly than processing it for sale.

According to the World Bank, Iraq is the second-biggest user of flaring worldwide after Russia.

The new project, signed in 2017 with oil services company Baker Hughes, will eventually allow 200 million cubic feet (around 5.6 million cubic metres) of gas a day that is usually torched on the Nasiriyah and Gharraf oilfields to be captured, according to a statement from the oil ministry sent to the media.

It seeks to "exploit the gas that escapes from all oilfields across all Iraq, consolidate national gas production" and help preserve the environment, Oil Minister Ihsan Ismail was quoted as saying in the statement.

A ministry official told AFP that the implementation of the project and exploitation of the gas would have to wait 30 months for the completion of infrastructure works.

The World Bank said the amount of gas torched in Iraq annually reached 17.37 million cubic meters last year.

Earlier, French giant TotalEnergies signed a contract to invest in oil, gas and solar production in Iraq.

The French major plans initially to invest $10 billion in infrastructure, the proceeds of which will then allow a second round of investments of $17 billion, the officials said.

One of the projects will see the construction of a complex to exploit production from the sector's gas fields.

Asian and European LNG Buyers Bid Up Prices

The spot price of liquefied natural gas (LNG) in Asia is trading at record highs for this time of year amid reports that traders across the globe are competing to secure scarce cargoes.

An analysis of global flows of the super-chilled fuel, however, shows that while traders may be bidding up prices, there is little change in where the LNG is being shipped.

Flows to Asia have been just about steady by volume since March, after the winter demand peak, and the same is true for Europe.

In other words, there is scant evidence buyers in either of the major demand regions have been able to increase their share of cargoes at the expense of purchasers in the other.

China Oil Consumption Seen Peaking Around 2026

China’s oil consumption is likely to peak around 2026 at about 16 million barrels per day and that of natural gas by around 2040, according to a top executive of Sinopec Corp.

Sinopec’s oil peak forecast echoes a prediction by consultancy Rystad Energy in April that cited rapid adoption of electric vehicles as the main cause for global oil demand to peak over the next five years.

Oil will shift eventually to become a raw material for chemicals rather than fuel, Ma Yongsheng, Sinopec’s acting chairman told a seminar in Beijing that was confirmed by a company representative.

The top Asian oil refiner will “forcefully promote” green growth of its refining and petrochemical business and remove inefficient and energy-intensive capacities.

Russia Has Gas Reserves for 100 Years

Russia's natural gas reserves will last for more than a century, Alexey Miller, chairman of the board of gas giant Gazprom, said.

"Gas reserves in Russia, Gazprom's gas reserves are the largest in the world. And we won't have any problems with our reserves for the next 100 years," Miller said at a business conference in Moscow, as carried by Russian news agency TASS.

Some of the gas fields that Gazprom is developing in the Yamal region have the potential to produce gas until 2132, Miller noted.

"The prospects for pipeline gas supplies are quite great," Gazprom's head said. 

Earlier this month, Russian Deputy Prime Minister Alexander Novak said that Russia's offshore Arctic resources alone could last for decades and even centuries.

Saudi Retains Top Spot in China Oil Supplies

Saudi Arabia, the world's biggest oil exporter, kept its ranking as China's top crude supplier for a ninth straight month in August as major producers relaxed production cuts.

Saudi oil arrivals surged 53% from a year earlier to 8.06 million tonnes, or 1.96 million barrels per day (bpd), data from the General Administration of Customs showed.

That compares with 1.58 million bpd in July and 1.24 million bpd in August last year.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, decided in July to ease production cuts and increase supply by a further 2 million bpd, adding 0.4 million bpd a month from August until December. In July, OPEC output increased by 640,000 bpd to 26.66 million bpd

Sweden Vattenfall Raises Emission Targets

  Swedish energy company Vattenfall said it increased its emission reduction goals for 2030 and brought forward its net zero target by 10 years to 2040, by phasing out coal and increasing wind and solar capacity.

“The climate crisis is for real and not only do we have a responsibility to step up and move fast, we also see many opportunities for us at Vattenfall in being a leader in this urgent transition,” Chief Executive Anna Borg said in a statement marking the start of the company’s capital markets day.

Vattenfall’s previous targets aligned with efforts to limit global warming to 2 degrees Celsius, while the sharpened set of goals will match them to a 1.5 C target, it said.

The firm now aims to reduce the emissions from its operations, so-called scope 1 and 2 emissions, by more than 77% by 2030 from 2017, up from a cut of 38%.

It also raised its ambition for absolute emissions from use of sold products, known as scope 3, from a cut of 20% to 33% over the same period.

Between 2017 and 2020, Vattenfall said it had curbed emissions by 10 million tonnes of carbon dioxide (CO2) to about 12 million tonnes in 2020 and now eyed under 6 million tonnes in 2030.

To do so, it will switch its last units powered by coal - two heating plants in Germany - to a combination of biomass, heat pumps, power-to-heat, and natural gas, Vattenfall said.

It would also lift its current 3.7 gigawatts of wind and solar operations by four times and increase its electric charging points 25-fold from 2020 levels.

Vattenfall further seeks to help curb emissions outside its own business, by supporting the wider electrification of industrial processes, including in steel, cement, heavy transport and chemicals.

Australia Steps Up Hydrogen Funding

 Australia said it would step up grant funding for hydrogen projects to boost clean energy output, as it faces international pressure to set more ambitious carbon emissions reduction targets for 2030.

Prime Minister Scott Morrison said the government would provide an extra A$150 million ($108 million), increasing grants to A$464 million for feasibility studies and the construction of hydrogen projects in seven hubs, up from five, around the country.

"We are accelerating the development of our Australian hydrogen industry and it is our ambition to produce the cheapest clean hydrogen in the world, transforming our transport, energy, resources and manufacturing sectors," Morrison said in a joint statement with Energy Minister Angus Taylor.

The announcement came as Morrison headed to Washington for "Quad" talks with U.S. President Joe Biden, Japanese Prime Minister Yoshihide Suga and Indian Prime Minister Narendra Modi, with climate policy on the agenda.

The conservative government has resisted international pressure to commit to a net zero carbon target for 2050 or deeper cuts than a plan to reduce emissions by 26% to 28% by 2030 from 2005 levels ahead of a United Nations climate summit in November.

Instead it has committed to spend A$18 billion over 10 years on a range of technology to help cut emissions, such as hydrogen, energy storage and carbon capture and storage.

The grants for hydrogen projects add to A$1.2 billion the government has allocated towards investing in hydrogen, including low-cost financing, aiming to drive down the cost of hydrogen production to less than A$2 per kg.

Trade Group Wants Restrictions on US Natural Gas Exports

A manufacturers trade group urged the Department of Energy to order U.S. liquefied natural gas (LNG) producers to reduce exports, warning of price increases and supply shortages this winter.

Natural gas prices have surged this year on strong global demand and modest production increases in the first half. The call for U.S. natural gas has more than doubled prices, with exports up 41% from a year ago. U.S. gas was trading around $5.22 per million British thermal units (mmBtu), up from $2.54 mmBtu in January.

Industrial Energy Consumers of America (IECA), a trade group representing chemical, food and materials manufacturers, said U.S. prices would have to increase to $10 per mmBtu to provide incentive to producers to pump more gas and bring stocks back to historic levels.

U.S. utilities have stored less gas than normal for the winter heating season, when demand for the fuel peaks. U.S. stockpiles are 7% below the five-year average for this time of year.

However, an LNG trade advocate said gas exports do not hurt U.S. consumers and the majority of buyers have fixed contracts with prices much lower than the spot rate.

"What we seen and proven repeatedly time and time again is that the price of natural gas has not been negatively impacted by LNG exports," said Charlie Riedl, executive director of Center for Liquefied Natural Gas.

ICEA asked the Energy Department to freeze permitting for new LNG export plants and to order producers to reduce shipments until U.S. inventories increase.

Europe Power Firms Locked Out of Record Price Bonanza

Several European power firms have been shut out of bumper revenues from record high gas and electricity prices as their sales are largely locked in at lower prices, and face extra pressure from governments acting to protect consumers.

Power generators say government intervention could prevent longer-term investment needed to drive the bloc's energy transition plans, while smaller retail suppliers without the capital to hedge could go bust - limiting choice for consumers.

Benchmark European gas prices have soared some 250% this year due to a number of factors such as low stock levels, high demand in Asia and infrastructure outages, taking power prices to record highs across Britain and Europe.

In theory it should be a profitable time for generators with nuclear or renewable wind, solar and hydro generation, able to benefit from the high wholesale prices without also needing to pay the higher coal and gas input costs.

But with most generators having already hedged their forward sales they say there has been little opportunity to benefit, while government action in Spain has prompted an outcry.

"Electricity companies forward-sold 100% of their base production (hydro, nuclear and renewable) in 2021 and more than 75% of their 2022 production months ago, at much lower prices than the spot market," Spain's electricity providers association AELEC, formed of EDP, Endesa, Iberdrola and Viesgo, said.

Endesa, a unit of Europe's biggest utility Enel blamed the impact of soaring gas prices for a 3% drop in earnings for the first half of the year.

Management Reshuffle in Petroleum Industry

 Minister of Petroleum Javad Owji, who has taken office in the administration of President Ebrahim Raeisi, has made changes at the top level of three of top affiliates of Ministry of Petroleum, i.e. National Iranian Oil Company (NIOC), National Iranian Gas Company (NIGC) and National Iranian Oil Refining and Distribution Company (NIORDC).

Foreign Firms Wooed

After months of speculation, Owji named Mohsen Khojasteh-Mehr as the CEO of NIOC, the main state-run oil firm operating key oil and gas projects in Iran.

Born in 1970 in the southern city of Dezful, Khojasteh-Mehr holds a PhD in hydrocarbon reservoirs engineering from Amir Kabir University of Technology.

Khojasteh-Mehr has already served as the CEO of Tadbir Drilling Development Company, deputy minister of petroleum for planning and supervision on hydrocarbon resources, advisor to the minister of petroleum, and secretary of the presidential task force in oil affairs.  

In his decree appointing Khojasteh-Mehr as the CEO of NIOC, Minister Owji highlighted utilizing strategies and all useful and efficient capacities to improve and upgrade oil and gas production capacity and increase the export capacity of oil and oil products, effective follow-up in order to accelerate the implementation of oil and gas field development projects with priority given to joint fields, especially the South Pars gas field and West Karoun cluster of fields, necessary planning for the implementation of priority plans to preserve and enhance oil and gas production capacity, prioritize the allocation of financial resources and use effective methods to attract domestic and foreign investors, scientific management of reservoirs through the implementation of conservation and maintenance plans to make up shortfalls.

In a speech after starting work as the CEO of NIOC, Khojasteh-Mehr said $150 billion worth of projects were already available at NIOC.

“In order to attract investment, measures have to be undertaken to diversity NIOC projects,” he said.

He added: “Undoubtedly, investing in the petroleum industry has the highest level of capital productivity; accordingly, we invite all Iranian specialized companies inside and outside the country that have the ability to do professional work in the oil industry to be involved in the implementation of oil industry projects.”

Referring to Iran’s one-trillion-barrel crude oil capacity in the country, he said: “With an average recovery rate of 25%, it would be possible to recover about 340 billion barrels of oil equivalent, which means that Iran would be able to keep producing crude oil for one century.”

“That guarantees the productivity and economic viability of the petroleum industry in addition to laying bare the significance of national development strategy,” he said.

Iran Gas Sector Attractive

Majid Chegeni has been appointed as NIGC chief, while Iran is the top holder of gas reserves in the world.

Although gas consumption in Iran has increased due to the development of the gas supply network and production from the South Pars gas field, one of the important programs of the Petroleum Ministry in the 13th administration is gas exports.

Chegeni has been asked to make effective measures for maximum processing and transfer of gas to consumers, adopting policies to reduce energy intensity and optimize gas consumption, effectively increase gas storage capacity in the country’s natural reservoirs, pay serious attention to continued increase in national revenue from gas trade (export, transit and swap) with neighbors and customers.   

Owji has already said a strong energy diplomacy would be one of his priority plans, adding: “We will hold talks with various parties for increasing exports and trading gas.”

Since taking office, Chegeni has met with Iraqi officials to discuss the export of Iranian gas to Iraq and to follow up on Iraqi debts to Iran. He also met with a number of Russian state-owned oil and gas companies, emphasizing the need to develop cooperation between the two countries in various sectors of the gas industry.

The Russian side also expressed interest in investing in gas industry projects, citing swaps and the natural gas trade as priorities for Russian oil and gas companies.

Gas Storage Tanks

Jalil Salari has been named CEO of NIORDC.

Special follow-up in order to effectively implement quality improvement plans of existing refineries and construction projects of new refining capacity (petro-refining), effective follow-up in order to supply fuel, especially in relation to fuel required by power plants and industries, planning and establishing mechanisms to ensure supply and security petroleum products, serious attention to the export of petroleum products in order to increase the country's foreign exchange earnings have been emphasized as tasks assigned to Salari.

Salari said although about 58% of distribution was being done by land, it is necessary to manage fuel supply in light of the significance of storage.

He said that all capacities available in this sector had to be used in order to guarantee sustainability and overcome challenges.

He underscored the need for building new storage facilities, noting it was a mission to be fulfilled by NIORDC.

Ministerial Shakeup

Minister Owji also named Ahmad Assadzadeh as in charge of position of deputy minister for international affairs and trading, Mohammad Sadeq Jokar as the interim head of the Institute for International Energy Studies, Mohammad Javad Bavand as assistant in oil condensate and products sales and supervision on Naftiran Intertrade Company (NICO) affairs, Abbas Beheshti as minister's special envoy for Iraq affairs, Shamsoddin Mousavi as advisor in Petroleum Ministry Projects and Ali Forouzandeh as general manager of the ministry Public Relations.

Records and Firsts

Goreh-Jask Oil Pipeline Project

The 1km-long Goreh-Jask crude oil pipeline made remarkable records and registered firsts in addition to its unique characteristics in various sectors.

RECORDS

40km Pipe-Laying in a Single Day

Transporting 6km of Pipes from Factory to Site in a Single Day

Manufacturing 100km of Pipes in a Single Month

Welding 7km of pipes in a Single Day

FIRSTS

Developing roadside control stations for the first time by Iranian manufacturers

Manufacturing NACE sheets and pipes for the first time in the country

Manufacturing 50 2.5MW BB3 electro pumps for the first time in the country

Supplying more than 95% of necessary commodities and equipment by Iranian manufacturers

Manufacturing the main 42- inch valves compatible with sour fluid for the first time in the country

Petrochemical Plants Commissioning Current Calendar Year

The petrochemical industry has become driver of Iran's economy as it has managed to achieve the status it deserves both at the national and international levels. Development plans have never been halted and a considerable number of petrochemical projects are close to operation in the current calendar year to March 2022.

Arta Energy, Phase 1 of Ibne Shina Petrochemical Plant, Phase 1 of ABS of Pad Jam Polymer, Di Arya Polymer, Hengam Petrochemical Plant, Di Polymer Aryan, Pars Fenel ethyl glycol and Dalahoo Petrochemical Plant are expected to come online shortly.  The projects are in the mix of second petrochemical jump and a new chapter is expected to open in the petrochemical industry. In the third jump, a new chapter would open with mixed stock to bring Iran’s petrochemical production capacity to 160 million tonnes by 2027 with an expected income of $50 billion.

Arta Energy

The Arta Energy petrochemical project has been implemented by the private sector for about three years, right in front of the production unit of Arta Plast plant and is the supplier of the raw materials chain of the complex. Arta Plast-based industrial units are to complete the production chain of products such as parquet and MDF, and the investor's goal in constructing the Arta Energy petrochemical plant is to supply raw materials needed to produce adhesives and other chemicals used in the production of these products. Arta Energy has been commissioned on an 8-hectare land and is expected to produce 132,000 tonnes of AA grade methanol and 283,000 tonnes of formaldehyde annually. This industrial unit needs 160 mcm of natural gas annually, for which pipelines are under construction.

Phase 1 of Ibn-e Sina Petchem Plant

Phase 1 of the Ibn Sina petrochemical project includes a butane separation unit and a maleic anhydride unit. Maleic anhydride is widely used in the production of unsaturated resins and now a large part of the country's needs in the production of unsaturated polyesters are supplied through imports.

Commissioning the project, for the first time, enables to commercially produce three products of maleic anhydride, isobutane and normal butane in Mahshahr. There are many different types of fibers. The butane separation unit is expected to be operational in the first phase and the maleic anhydride unit in the second phase.

The unit is being implemented in an area of about 3 hectares in site 2 of the Petrochemical Special Economic Zone, at Bandar Imam. The location of the unit is very suitable in terms of proximity and ease of access to Bandar Imam and high seas routes to different countries.

Di Arya Polymer

The main product of the Khomein’s Di Arya Polymer plant would be different grades of polypropylene. It was designed with an initial capacity of 175,000 tonnes of PP, which may increase to 300,000 tonnes in case the promised feedstock is provided.  

The raw materials needed for this PP project are ethylene and hydrogen, which would be supplied by Imam Khomeini refinery of Shazand. More such materials would be provided as new PP projects are to come online. 

Hengam Petchem

The Hengam ammonia/urea petrochemical project is being implemented in the South Pars Special Economic Zone and is in the final stages. The project covers an area of 25 hectares and includes an ammonia unit, a urea and granule unit, offsite and industrial and non-industrial buildings. Hengam Petrochemical Plant is a subsidiary of Persian Gulf Petrochemical Industries Company and since May last year, Hengam shares have been purchased by the Nouri Petrochemical Plant. The measure has been taken in order to diversify the product mix and reduce risk and profitability sustainability. According to the plan, the ammonia unit is to be put into operation first, and the urea unit will be ready for official operation in a few months.

Di Polymer Aryan

The Di Polymer Aryan project in Assaluyeh is one of the projects of the Bakhtar Petrochemical Company in the Assaluyeh zone.

The Di Aryan project is under construction on an area of 7.44 hectares. The feedstock and raw materials required for the project include 1,500 mcm per year of natural gas and 960,000 tonnes per year of oxygen, and ultimately the project would produce 1.65 million tonnes of methanol per year. Also, a feedstock contract has been concluded with the Damavand Petrochemical Plant for ancillary services.

Phase 1 of ABS

Phase 1 of the ABS-Rubber project of the Jam Petrochemical Company with a production capacity of 200,000 tonnes of ABS and 60,000 tonnes of rubber is under way by the Pad Jam Polymer Development Co. It is under way in PSEEZ on 15 of land.

The feedstock received by this plant include 152,000 tonnes a year of styrene via pipeline from the Pars Petrochemical Plant, 54,000 tonnes a year of butadiene via the Jam Petrochemical Plant as well as 47,000 tonnes a year of acrylonitrile. All ancillary services would be provided by Damavand Petrochemical Plant.

Pars Fenel Ethyl Glycol

Located in Assaluyeh, it covers 7.33 ha of land. The main product of this plant would be MEG at 500,000 tonnes a year along with di ethylene glycol (50,000 tonnes a year) and tri ethylene glycol (3,500 tonnes a year).

The plant is fed with 330,000 tonnes of ethylene and 380,000 tonnes of oxygen a year. Ethylene would be supplied by Bushehr Petrochemical Plant and oxygen by Damavand Petrochemical Plant. The bulk of products from this plant would be exported, which is expected to generate significant hard currency revenue.

Dalahoo Petrochemical

Phase 1 of the Dalahoo Petrochemical Plant is under way with an annual production capacity of 60,000 tonnes of expanded polystyrene. The final polystyrene production capacity of this plant would be 120,000 tonnes a year.

The raw materials needed for expanded polystyrene production at the Dalahoo plant would be styrene monomer and liquid pentane. The latter would be supplied by Nouri Petrochemical Plant and the former by Pars Petrochemical Plant.

Dalahoo project is one of the four expanded polystyrene projects which would constitute Iran’s first petrochemical park in Assaluyeh.

National Rock Climber:

My Sole Goal Is to Win World Gold

Rock climbing is a sport in which participants climb up, down or across natural rock formations or artificial rock walls. The goal is to reach the summit of a formation or the endpoint of a usually pre-defined route without falling down. Rock climbing is a physically and mentally demanding sport, one that often tests a climber's strength, endurance, agility and balance along with mental control. Knowledge of proper climbing techniques and the use of specialized climbing equipment is crucial for the safe completion of routes.

Ali Taheri Veis Shoushtari, a staff of National Iranian South Oil Company (NISOC), is active in rock climbing in Khuzestan Province. He has been invited to join the national team because of his good performance.

We have conducted an interview with him about his future plans.

Would you please introduce yourself?

I was born in 2000 in Ahvaz. I studied architecture. I also hold an associate diploma in drawing from the Shahid Chamran University of Ahvaz. My father, Abdol-Qasem Taheri Veis Shoushtari, has been working with the Maroun Oil and Gas Production Company, which is a subsidiary of NISOC for, 38 years.

Why did you choose rock climbing? When and where did you start out?

It dates back to my childhood. At the discretion of my mother, who found me to be very interested in climbing with excitement, I started climbing at the age of 6, and I entered the field professionally and heroically in 2011. I can say that I started from Ahvaz city and the provincial rock climbing and mountaineering group.

Could you tell us more about the field of rock climbing? How is it performed and how is it scored?

Indoor rock climbing is typically split into three disciplines: bouldering, lead climbing, and top roping. A competitor may choose either separately or decide to compete in all three, i.e. combined.

Which field do you compete in?

I am professionally active in bouldering and lead climbing. But in some competitions where all three of them have been held, I have participated in all and I have score points.

Could you tell us about the most important titles you have obtained so far in this discipline?

It was first in the Payam Tehran Cup in September 2015. I competed in top roping and I finished in second place. Then I competed in Kerman in April 2017, which I finished the second in combined and the second in bouldering. In December 2017, I ran in the Tabriat-e Modarres Cup and I finished the third in top roping. I finished the second in the combined match in Fajr Cup in February 2018 in Zanjan. I participated in the Asian Youth Championship and I finished in 7th place. And finally I participated in the student competitions in Tehran and came first.

What’s your sweetest and most tragic memory in rock climbing?

My sweetest moment was when I won a title and I stood on the platform. The most tragic was when I was qualified to participate in Asian or world matches, but someone else was chosen for this purpose.

What objective do you follow in rock climbing and what is your biggest wish in this discipline?

Like every other athlete, I would like to be present in world matches and win the best title. Therefore, I would like to stress that my sole objective is to win a global title.

You were recently invited to national training. Could you tell us more about the modalities and conditions of this training?

I had to undergo many hardships in order to be a member of the national team. Unfortunately, the provincial body did not even buy me a ticket and I myself had to pay for it. I even borrowed a rope to return it after competition! However, the training was held in good circumstances and everything was held regularly under trainers.

What is the biggest problem you are faced with in this discipline? What do you expect the relevant officials to do in this regard?

There is variety of problems. Rock climbing requires equipment which is costly. Unfortunately, the provincial body is not cooperative. Add to this the absence of a sponsor and a climbing club in the city of Ahvaz. I personally use our own parking lot for training. I expect provincial officials to support all athletes.

How Petroleum Industry Was Born in MIS

At the time of the discovery of oil in Masjed-e-Soleyman (MIS), i.e. at the same time when Reynolds as one of the main actors in the D’Arcy affair in Iran was basking in joy, the first oil industry installations were set up in MIS. Historically speaking, MIS hosted both oil exploration and Iran’s petroleum industry. That marked history in following years and decades. The present article is aimed at briefly reviewing the birth of Iran’s petroleum industry in MIS.

Tehran was deep in constitutionalism and the Minor Despotism period was emerging. William Knox D’Arcy was leading a team in southern Iran, near MIS. After unsuccessful oil exploration attempts in Chia Sorkh in Kermanshah, around Bushehr and several other spots, D’Arcy fully focused on MIS. The D’Arcy team expressed hope to return the money lost over years. But Tehran was deeply involved in political conflicts. Oil had no place in the capital. The revolutionaries and their opponents had no idea that the fate of the country was being decided upon in Khuzestan Province. They had no idea oil was being recovered there to affect the future of Iran and the entire Middle East, and maybe the entire world.

Ancient Signs

MIS and the spot the first oil well was drilled have a long history. Farshid Khodadadian, in Khuzestan, Civilization and Oil, puts it as follows: “The MIS area has an ancient history. Parsumash is the name of the city which archeologists estimate to have been located where MIS is situated today. Relics discovered in this region bear proof to this fact. What attracts attention more than everything else in the geography of ancient Parsumash and modern MIS is the mountainous region which has become inaccessible. The most important issue in the regional survey of Parsumash is its rich oil and gas reserves. Every researcher would immediately think of natural evidence of oil in Parsumash. The existence of petroleum seeps in MIS has long preoccupied archeologists and researchers. This natural phenomenon has most probably existed since ancient time and archeologists believe that natural gas leak kept fire temples burning permanently.”

Oil Installations

Well No. 1 became operational and news spread everywhere through nomads and tribes that the British had found oil there and were planning a long-term presence. A foreign labor camp was set up in MIS the same year. People from the Bakhtiari tribe took charge of security there. More and more British and Indian manpower arrived in MIS and Iran was witnessing the formation of its petroleum industry. Khodadaian puts it as follows: “At beginning, the facilities for living were not appropriate, but as the petroleum industry expanded its activities and Western families came to MIS, larger and more equipped houses were built to house them.”

One key point may be that unlike the public imagination, the first oil refinery in Iran was built in MIS and not in Abadan. Some oil wells in MIS contained too much sour gas which is rich in sulfur. This sulfur had to be separated to make oil usable. The first refinery built in Bibian in MIS fulfilled this task. That was when the Abadan refinery – the first industrial refinery in the Middle East – had not yet been built. The small-sized Bibian refinery was still working for years after the Abadan refinery was operational. Sour gas was transferred to the Bibian refinery to be converted into a red liquid. This liquid was taken to two pools outside the plant. Two workers spread the red materials throughout the pools and after several minutes they were mixed with air and turned yellow, becoming solid from liquid. The solid sulfur was then broken into pieces with pickaxes before being transferred in wheelbarrow into a roofed storage room.

The same year the first oil well in Iran came of age, Reynolds made two more wells operational and therefore his three exploration wells turned out to be successful in MIS. Now he needed more industrial facilities.

Khodadadian, in Brief Search Into Long History of Oil, puts it as follows: “Reynolds ordered that ditches similar to the drainage of agricultural land be dug around Well Number One, and then oil be diverted to these canals. The gas, along with the oil, was evaporated in this way, and the remaining oil could be used. This indigenous technology was perhaps the first method used to perform well separation operations in the area. A few days later, Reynolds sent a telegram to London through the Imperial Bank of Bushehr, asking for the latest news and requesting that oil storage tanks be sent to him as soon as possible.”