Investment Opportunities in Iran Refining

Ali Forouzandeh
Director General of Public Relations

Iran’s petroleum industry is clearly full of investment opportunities in various sectors, and in the 13th administration, the Petroleum Ministry has repeatedly emphasized this issue and use of different capacities for that purpose. While paying attention to domestic investment and financial resources, the Petroleum Ministry, has always laid emphasis on the use of foreign capacities and investment, and in this way has also considered facilities. Undoubtedly, attracting investment will breathe new life into the petroleum industry after a long hiatus. Investment may be used for incomplete priority projects. To that effect, Minister of Petroleum Javad Owji has said that plans were under way to attract $145 billion in domestic and foreign investment over four to eight years.

Apart from investment potential in various sectors including development of oil and gas fields, petrochemical and gas industry, one key sector highlighted by the Petroleum Ministry is the oil refining sector. In order to reach its objectives, Iran has been pursuing qualitative and quantitative upgrading plans for its refined petroleum products. Agreements have been signed with eight investors for refining 1.5 mb/d to 1.6 mb/d of crude oil and gas condensate. That is expected to bring Iran’s refining capacity to 1.5 times its current size. Currently, maximum crude oil and condensate refining capacity at refineries stands at 2.2 mb/d, which would increase to 3.4 to 3.5 mb/d. Opportunities for investment in developing incomplete refineries and building new ones should not be lost sight of.

Construction of the Hormuz refinery in Makran coasts in the city of Jask is one of the projects that would help develop the region. According to licenses granted, the feedstock for this refinery includes ultra-heavy crude oil supplied by Soroush and Norouz, fields as well as the Forouzan blending.

The second refinery in Abadan, Caspian refinery, Anahita refinery and Siraf refineries are among the Petroleum Ministry projects to upgrade Iran’s refining capacity. Meantime, developing the country’s refining capacity is a step in favor of circumventing sanctions as imposing sanctions on refined products seem tough.

In conclusion, Iran’s petroleum industry has prioritized the refining capacity development for both scenarios of sanctions remaining effective and sanctions being lifted.

OPEC+ Agrees on 400,000 b/d December Output Hike

OPEC and its non-OPEC allies, in the midst of the coronavirus epidemic that has plagued the world for more than two years, initially prevented a sharp drop in oil prices through consensus on cutting production and then gradually increasing output. With rising global oil prices ($86 per barrel on 25 October), US President Joe Biden sought to pressure OPEC+ members to lower oil prices, but OPEC and its allies agreed at a meeting, which lasted less than 30 minutes, to stick to plans to raise oil output by 400,000 b/d from December.

Thus, at the 22nd meeting of the OPEC + held in July, the members agreed to increase their production by a total of 400,000 barrels per day each month to end the supply limit of 5.8 million barrels per day.

In response to demand collapse at the peak of the COVID-19 outbreak crisis, OPEC+ cut its production to 9.7 million barrels per day in May 2020, equivalent to about 10 percent of global demand, but following that and given improved demand has gradually facilitated supply constraints over time.

The 22nd meeting of the OPEC+ was significant because  in coincidence with crude oil prices hike on world markets, US President Joe Biden told a news conference at the United Nations Climate Change Conference in Glasgow, Scotland,: "Look at oil prices; fuel costs are high because Russia and OPEC members refuse to produce more oil. He had stated that OPEC+ refusal to further increase oil production had affected the American labor class financial issues.

Following Biden's remarks, OPEC and its non-OPEC allies, known as OPEC+, announced that they would continue to pursue a plan to gradually increase production by 400,000 barrels per day. According to “Oil Price”, Kremlin spokesman Dmitry Peskov said on Tuesday (2 November) that in response to a US request for more oil, the OPEC and its allies (OPEC+ Coalition) monthly production should not exceed the specified figure.

The remarks of OPEC members and non-OPEC members conveyed the message prior to the OPEC+ meeting that they are not going to do whatever the US president wants them to do. This is because OPEC+ continues to emphasize that maintaining market balance is of paramount importance to its members. But decisions are not supposed to be dictated to members from outside the alliance.

It should be added that the day before the OPEC + meeting, “Oil Price” announced that BP estimated that global demand for oil had already exceeded the 100 million barrels per the figure in the pre COVID-19 crisis. According to the BP forecasts, the trend of increasing oil demand will continue and in 2022 it will surpass the level in the pre-COVID period crisis.

According to the BP report, the OPEC+ coalition is doing its job well in managing market equilibrium, so oil prices will be rising.

Brent rose 7 percent in 3Q21 to an average of $ 74 a barrel, reaching $ 80 a barrel in recent weeks.

But the day after the OPEC+ meeting, US Secretary of Energy Jennifer Granholm in an interview with Bloomberg TV pointed

to the Biden administration's limited power to urge oil producers to increase production in order to lower prices. When asked what is he doing to increase US oil production? While grinning he said I wish I had a magic wand to use.

OPEC+ Statement

“The 22nd OPEC and non-OPEC Ministerial Meeting, held via videoconference, concluded on November 4, 2021.

The meeting reaffirmed the continued commitment of the Participating Countries in the Declaration of Cooperation (DoC) to ensure a stable and a balanced oil market, the efficient and secure supply to consumers and to provide clarity to the market at times when other parts of the energy complex outside the boundaries of oil markets are experiencing extreme volatility and instability, and to continue to adopt a proactive and transparent approach which has provided stability to oil markets. In view of current oil market fundamentals and the consensus on its outlook, the Meeting resolved to:

Reaffirm the decision of the 10th OPEC and non-OPEC Ministerial Meeting on 12 April 2020 and further endorsed in subsequent meetings including the 19th OPEC and non-OPEC Ministerial Meeting on the 18 July 2021.
Reconfirm the production adjustment plan and the monthly production adjustment mechanism approved at the 19th OPEC and non-OPEC Ministerial Meeting and the decision to adjust upward the monthly overall production by 0.4 mb/d for the month of December 2021, as per the attached schedule.
Reiterate the critical importance of adhering to full conformity and to the compensation mechanism, taking advantage of the extension of the compensation period until the end of December 2021. Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC Ministerial Meeting.
Hold the 23rd OPEC and non-OPEC Ministerial Meeting on 2 December 2021.”

Oil/Condensate Exports

Iran’s Minister of Petroleum Javad Owji told journalists after the OPEC+ meeting that oil and condensate exports conditions had improved under the 13th administration.

The naval forces of Iran’s Islamic Revolution Guards Corps (IRGC) have thwarted an attempt by the United States to capture Iranian oil on a tanker in the strategic Sea of Oman.

The US military forces confiscated an Iranian tanker loaded with crude oil in the Sea of Oman, which connects the Arabian Sea to the Strait of Hormuz, unloaded its shipment to another tanker and directed it to an unknown destination.

Reacting promptly, however, members of the IRGC’s Navy carried out a heliborne operation on the deck of the tanker with the stolen cargo, gained control of the vessel, and directed it toward Iran’s territorial waters.

US forces then proceeded to chase the tanker using several helicopters and warships, but their attempt at taking over the vessel was thwarted again by Iranian naval forces.

The tanker is currently in Iranian territorial waters and under the protection of IRGC’s Navy.

Owji said the US was reacting to Iran’s success in increasing oil and condensate exports. With regard to the JCPOA talks, Owji also said that the Petroleum Ministry does not suspend its decisions and negotiations and does not wait for the results of the JCPOA talks.

Energy Security Threat

Iran’s OPEC governor Amir-Hossein Zamani-Nia told the Board of Governors’ meeting in Vienna that the oil and energy market in the world was faced with numerous challenges.

He said despite ongoing anti-covid vaccination campaign across the world, inequality in access to vaccines had caused different conditions for the rich and the poor.

“Although vaccination in some countries has exceeded 80%, some countries have vaccinated less than 10% of their population. That had delayed the process of tackling the coronavirus pandemic in the world,” he said.

Zamani-Nia said that the COVID-19 pandemic in the world had built up pressure for accelerating energy transition programs and implementing environmental regulations. He said, that had led to quick changes in energy policies against fossil sources, particularly with regard to investment in fossil sources development.

Referring to the COP 26 Climate Change Summit being held in Glasgow, Scotland, Zamani-Nia stressed the importance of the impact and results of the COP 26 decisions on the future of the world oil and energy industry and said: “We are strongly worried that negative investment growth in fossil fuels would affect the energy security in the world as recent fluctuations in the gas, coal and electricity markets are simply signs of such conditions,”.

“In order to prevent any disruption in the world energy security, the energy transition process should go ahead smoothly and regularly in such a way that both producers and consumers would benefit from it,” he said.

Oil Market in Late 2021

Fereydoun Barkeshli

President, Vienna Energy Research Group

As the year 2021 draws to a close it would be more than important to review the conditions of the world oil markets in the past year, or more precisely the past two years. During the last quarter of 2019, everything was favorable to the market. The demand side exceeded for the first time the symbolic 100 mb/d mark. The demand for oil growing to a three-digit figure was surprising. Leading bodies such as the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) had forecasted that demand for oil would grow by 0.7 to 1.1 mb/d. On the supply side, the trend of investment growth sent positive signals. Global gas prices, traditionally following oil prices, recorded good rates at Henry Hub.

The emergence of the coronavirus in the last quarter of 2019, alas, overshadowed the entire energy sector. In 1H20, global demand for oil was down 27 mb/d. The supply side suffered too, but the global production trend was still going on. The oil market instability reached such level that in April 2020, WTI crude oil traded in Cushing, Oklahoma, was down to $-40, a startling situation the market had never experienced.

OPEC+ Jumps to Fray

The Cushing development pushed two longtime rivals that had been holding unfruitful talks for years came together at the OPEC Secretariat to make a collective decision to save the world oil market and stabilize it. It was an interesting experience for Iran. Since years ago, Iran had been mandated by OPEC to seek cooperation of Russia and a number of breakaway republics of the Soviet Union. The global oil market made these efforts instrumental and 23 OPEC and non-OPEC nations came together under OPEC+.

OPEC+ efforts in 2020 and then in 2021 reached good results and the OPEC basket price rose to $70 by June 2021. It was a price that satisfied most OPEC+ member states. However, Russia, which has never hidden its concern with the return of shale oil and gas, said oil prices above $70 would be a cause of concern, and informed fellow states ministers of its dissatisfaction in August.

Gas-Oriented Era

The OPEC+ cooperation and oil producers’ restraint turned out to be fruitful. Global prices reached stability. Oil storage by consumer nations was down to below the five-year average and OPEC+ reached its ideal objectives. However, despite planned hike by oil producers, oil prices kept rising. It was such that the US, which has unreasonably been calling OPEC a cartel for dozens of years now, called on it to help restore balance to the market.

The fact is that the global oil crisis began with the coronavirus. The demand crisis spilled over to the gas sector, too. The market trusts OPEC and OPEC+. OPEC’s determination for market stability has proven to be useful for dozens of years. But the Gas Exporting Countries Forum (GECF) has never faced any such test. GECF has no agenda for collective action to stabilize the gas market. Therefore, the unprecedented increase in oil prices did not spare gas. The impact was such that gas has now become the leading energy product in terms of growing prices. The global growth rate of gas prices during the third quarter of 2021 was more than three times the global oil price growth rate.

According to IEA, during 4Q21, gas price growth could reach five times that of oil prices.

In other words, in 2021, the gas consumption growth has emerged as a factor stimulating oil prices. There is no oil shortage, but there is gas shortage, thereby various sources of energy are experiencing an unprecedented growth rate.

It may be necessary to go further ahead. The accelerated gas consumption growth rate is born out of high consumption of electricity. In the table below, the share of various sources of energy in electricity production is provided:   

Oil

3.1%

Coal

36.7%

Gas

23.5%

Nuclear Energy

10.4%

Hydroelectricity

15.8%

Wind

5.3%

Solar

2.7%

As illustrated in the table, oil has a meager share of power generation. Coal and gas hold the highest share in power generation. Coal and gas are driving oil prices ahead. It is clear that European Union nations, forming the energy-poorest economic bloc in the world, are subject to highest pressure caused by energy shortages beyond the COVID-19 crisis.

European Union leaders are in talks to hold a summit to review solutions for establishment of a strategic gas reserve, similar to the Strategic Petroleum Reserve (SPR) organized by Henry Kissinger in 1975 to store oil in strategic reserves so that industrialized nations would have enough oil in case of any interruption or decline in crude oil supply.

Energy Transition Period

Although global oil prices are rising due to factors independent of oil supply and demand, concerns about shale returns have become serious. The average shale oil production in the first 1H21 was 7.77 mb/d. This figure reached 9.18 mb/d in the third quarter of 2021. Banks are more willing to pay loan to shale oil and gas producers, who are generally natural persons and small and medium-sized companies. This means that shale can take its previous position back and put pressure on OPEC+ in the 2H22 and through 2023.

The important question now is to know what the leaders of nations committed to the Paris Climate Agreement will do at the Glasgow COP26 in the next few days. The Paris Agreement commits its signatories to net zero carbon, which is mainly due to the use of fossil fuels, by 2050 or sooner in 2045. Simply put; oil, gas and coal should be permanently removed from the world's energy basket.

Can the world today find a solution to supply the thermal energy equivalent of these fuels as the world faces a steady increase in all three of these energy sources? In addition, the necessary equipment for new types of fuels, such as solar and wind, are mainly produced from petrochemical materials and products, which are the result of oil and gas use and technology. What the European Union is enduring today is the result of fusion of facts with ideals, but also with imagination. Today, Europe is as desperate for access to electricity as underdeveloped countries. Of course, these problems will not be lasting, but they are harmful and can have irreparable consequences.

Ultrastructural Factors

For many years, the structure of the global oil (and energy) market has been based on the range of supply and demand. Non-structural factors mainly include and continue to include geopolitical and geostrategic development. We are now witnessing a display of unstructured or ultrastructural events that are seriously overshadowing the global market. Countries around the world, today, owe more than $300 trillion to banking systems. Eighty-five percent of this debt is owed to the world's top10 economies. In the last two years alone, industrialized nations have injected $22.5 trillion into the economy. Money is cheap, bank interest rates are low. Governments have regularly injected unsupported money into the economy to compensate for their debts and to compensate for reduced economic activity due to the coronavirus lockdown.

As a result, falsely high purchasing power has taken shape in economies, fueling the general price growth. In fact, rising prices are not just about oil and gas and coal and energy. Most raw materials such as copper, tin and other metals have also become more expensive. In this conflict, important political tensions between different countries are forming and expanding, extending the dimensions of its impact on prices.

Concerns are mainly about the potential risk of a large debt bubble bursting and prices exploding. Such an event could lead to a dangerous large-scale stagflation.

Gas Market Developments and Alternative Fuels

The gas market has experienced myriads changes and, of course, crises over recent months. The price hike of this clean fuel by more than 100% has surprised experts, leading international firms to make new projections. Three experts have been interviewed in this regard.

Amin Shokri: Gas Still Cost-Effective

Given the rising price of gas, will this fuel still be a reliable and cost-effective source of energy?

The reliability of gas does not depend on its price. Incidentally, the high prices are partly put down to the instability of power generation systems from renewable sources due to lack of wind or drought and depletion of water behind dams. Regarding the cost-effectiveness of this clean energy, we must take into account that with the increase in gas prices, the price of alternative energy sources have also increased. For instance, the price of coal has reached its highest level in recent weeks, which if we consider the environmental benefits of gas, we can also say that it is affordable.

How much will rising gas prices increase oil and coal consumption in the long run?

US bank Goldman Sachs predicts that rising natural gas prices will increase demand for crude oil by 2 mb/d. Nigeria's oil minister has put the figure at 1mb/d, and Amin Nasser, CEO of Saudi Aramco, has said that demand for oil has risen by 500 tb/d due to rising prices of gas. The difference between these numbers, however, shows that one should look at it with skepticism. The increase in gas prices, given that its main consumption is in the power plant sector, seems to have a greater impact on coal consumption level. Coal consumption in 1H21 in the European Union, which is at the forefront of environmental discussions, reached about 197 million tonnes, while last year it stood at around 160 million tonnes. This has set a new record for carbon prices, as power plants are forced to buy carbon licenses from the market as they consume more coal.

How long should we see gas prices rising?

It is fundamentally impossible to forecast price of a commodity such as gas as it is subject to weather conditions. Forecasts made by financial institutions and banks either go wrong or they start making estimates after the price goes up, which is usually too late, but whereas investment in the gas industry upstream sector during the coronavirus pandemic has been largely affected and environmentalists are also causing many problems for oil companies it could be argued that supply and demand imbalance continues in the short and medium term. The number of operating drilling rigs in the world has not yet returned to that of the pre-COVID levels, and the time interval between drilling a well, and completing it is about 6 months. Assuming that new wells are being drilled right now, it will take several months for them to become operational. However, in the long run, due to the nature of the gas market, the situation will return to normal. I can say that the rising trend of gas prices is not over yet.

Fereidoun Berkashli: We’re on Eve of Gas Age

How effective do you think the role of large oil producers is in increasing gas prices due to limited crude oil supply?

Oil and gas are alternatives for each other, and shortage of one would affect the other. Therefore, OPEC+ limiting oil supply causes gas prices to increase, but it should be also noted that the current energy crisis at peacetime had not been experienced in this way. Currently, in addition to gas, seven minerals in the world such as oil, copper and lithium, are in short supply, and the only material that is not deficient is uranium. Unfortunately, there are fears of maximum return to nuclear energy.

Can we say that oil is deciding for gas markets in the world?

No, this cannot be said. With the events that have taken place in recent months and the price of gas having increased BTU-wise about 2.5 times of oil, in fact, it should be said that gas has decided for oil and the increase in oil prices in recent times has been due to rising gas prices. You see that there is no excess capacity in the oil market right now, and in the case of OPEC+, the excess is only on paper. The OPEC+ current compliance to the production cut agreement is reported at 117%, which means that member states have no potential to produce more crude oil, and only Iran and Venezuela have real excess capacity. As this trend continues, I believe that prices will rise sharply in the 3Q22 without the return of Iran and Venezuela to the market. With this trend, we must say that now is the golden opportunity for gas, and in fact, we are now on the eve of the gas age.

The beginning of the gas age means the end of one fossil energy, and the beginning of another fossil energy, which is in contradiction to the Paris Agreement, isn’t it?

Yes, it is absolutely true, and if they come forward with the same goals as the Paris Agreement, I believe they should face trial for crimes against humanity. It remains to be seen how this issue will be addressed at the COP 26 in

Glasgow, the results of which will undoubtedly have far-reaching implications for the oil and gas industry. Now we should wait and see.

What do you think of Russia's role in the recent gas crisis?

Obviously, in any development in the global energy market, the biggest ones are focused upon. Russia is a major player in natural gas, but I believe that the global gas price corridor, with or without Moscow, has changed. We also felt in this way in the 1990s about oil prices, a permanent farewell to single-digit prices and prices below $20. This motivated Iran to raise the idea of founding Gas Exporting countries Forum (GECF). OPEC also had no role in prices in the first decade of its existence. Now is the time for gas. It should be noted, however, that the coronavirus outbreak in early 2019 severely affected investment in the oil, gas and many other industries. Unfortunately, in many sectors, supply has lagged behind demand and the gas market has been affected, so it is safe to say that treatment of the coronavirus is more dangerous than virus itself.

And what about Russia’s role?

In the recent crisis, Russia has actually had an impact on gas prices by restricting supply level aimed at putting the United States under pressure to lift sanctions on the Nord Stream 2 pipeline. It could be argued that Russia has now taken control of Europe through gas diplomacy. Add to this the fact that 40% of Russia's foreign exchange earnings come from the sales of oil and gas.

Morteza Behrouzifar: Gas Supply/Demand Gap in Europe

How much will the increase in gas prices in the single-cargo market (spot) affect the price of gas with the pipeline, which is more long-term, and how much will the signing of long-term gas contracts be marginalized?

Before answering this question, I would like to mention that gas price is set in different markets. Gas price in the United States is a function of supply and demand, and in Europe and Asia is a function of the price of crude oil and petroleum products; however, gas prices in the spot-cargo market could lead to increase in oil prices, and as it is just seen, the price of crude oil in world markets has been affected by the change in the spot cargo market. Now, in answer to your question, I must say that long-term contracts assure suppliers and buyers. For example, for Germany, which wants to import gas through Nord Stream 1 and 2 pipelines, security of supply is so important, and for Russia, as the supplier of gas for these lines, the security of demand is important to be able to sell part of the gas which it has invested in its production. Although it can be beneficial if there are quantities that Russia can sell in the spot-cargo market in such circumstances, the benefits of a long-term contract are unimaginable for the parties and it would not be proper to imagine that prices hike lead prices not to be in the long term mood anymore or lead to disruption in long-term contracts.

How much has declining gas production in the Netherlands, Britain, Algeria and Norway contributed to the price hike of this energy carrier?

The decline in gas production in these countries is nothing now, and since long time ago the decline in gas production in these countries has begun and will continue, but what is important is that the decline in production in Europe has surpassed the decline in demand. Imports will make Europe more dependent on gas, although this has had little impact on prices, given that gas production in Europe has been declining in recent years. It is necessary to say that the demand in the European market does not have a growing trend, even in some scenarios a decreasing trend is envisaged.

Many believe that the price of gas has risen artificially and consider these figures unrealistic. Do you agree with that?

No, that is not the case. The skyrocketing price of gas in the world gas markets is due to declining production and investment. Unfortunately, due to the spread of the coronavirus, many manufacturing activities have been affected, and gas industry has been no exception.

Russia is often cited as the main culprit in the gas price hike. What do you think?

I disagree. Russia may have taken steps to restrict supply, but it has honored its gas supply contracts.

Iran to Settle Turkmenistan Gas Debt

 The current Iranian administration is determined to settle sums owed to Turkmenistan for gas supply to Iran. Therefore, one of the priorities of President Ebrahim Raeesi and Minister of Petroleum Javad Owji is to seek a solution to this issue as the Petroleum Ministry intends to expand economic relations, including in the energy sector, with the countries in the region. In the last three months, several meetings have been in presence of Iranian and Turkmen officials to discuss manner of paying off Iran's debt to Turkmenistan in return for gas exported to Iran.

In a meeting with Rashid Meredov visiting Turkmen Foreign Minister, Owji reaffirmed the Iranian government’s resolve to settle its debt. Separately, President Raeesi told the Turkmen official that increased ties between the two nations particularly in the transit and energy sector would be beneficial for the two countries.

940 mcm/d Gas

Since the inauguration of the 13th administration, Iran’s Petroleum Ministry has held meetings with Turkmen officials to deal with the gas issue between Iran and Turkmenistan. Gas supply in the winter is one of the priorities of Petroleum Ministry.

Iran currently holds more than 33 tcm of gas reserves, which ranks the country as the world’s second largest gas holder country. More than 93% of Iran’s urban and rural population is connected to the national gas grid. Furthermore, other industries and power plants use natural gas as fuel as it is a clean fuel of choice.

Mohsen Khojasteh-Mehr, CEO of National Iranian Oil Company (NIOC), has said Iran’s gas supply in the winter would be 940 mcm/d from onshore and offshore sites, noting that the giant South Pars gas field accounted for 700 mcm/d.

Over recent years, the gas supply network in Iran has expanded significantly and now more than 37,000 kilometers of pipelines and 86 gas compressors transfer gas to consumer points (including domestic consumers, industries and power plants).

According to official statistics, by the end of 2017, Iran, with a consumption of more than 214.4 tcm of natural gas and a share of 5.8 percent, was the fourth largest consumer of natural gas.

Resuming Turkmen Gas Exports

The increase in the number of gas subscribers in Iran and the arrival of cold weather in the winter, which naturally increases gas consumption, always urges the Petroleum Ministry make arrangements to supply winter gas and make required planning to prevent any disruptions in gas supply to subscribers, particularly households. But the vastness of Iran and the transfer of gas from the south of Iran, which is the main center of gas production to the north of the country, which always has a lower temperature and pressure drop, led to the signing a contract to import gas from Turkmenistan at 8 bcm/y in 1995. Gas imports from this country started in the winter of 1997. In other words, Iran signed two 25-year gas contracts with Turkmenistan at two points (Khorasan Razavi and Golestan provinces), as a result of which it imported 40 mcm/d of gas from Turkmenistan. However, due to gas disputes between the two countries over liabilities, Turkmen gas exports to Iran was halted in the winter of 2017.

Owji has said that Iran would be resuming gas imports from Turkmenistan as soon as the issue of Iran’s debt has been resolved.

Unfortunately, under the previous administration, Turkmenistan's gas exports to Iran was cut off due to non-payment of debts to Turkmenistan, and this issue was referred to the International Court of Arbitration, which was contrary to the friendly relations between the two countries, Owji said after a recent meeting with Turkmenistan's foreign minister. One of the goals of the meeting Owji held with Turkmenistan’s foreign minister was to promote all-out relations with Turkmenistan. Owji has said that with the effective planning done by the Petroleum Ministry, good events will undoubtedly take place.

Debt Talks

Owji gave a positive assessment of talks with a Turkmen high-ranking delegation led by its foreign minister. The delegation included energy and banking officials.

“Based on our previous planning, fruitful talks were held to settle debts with Turkmenistan,” he said.

Iran-Turkmenistan talks are being pursued at the level of experts from the National Iranian Gas Company (NIGC) and the Central Bank (CBI). With favorable solutions and proposals presented by both sides, it seems that the debt of the Turkmen side will be settled. “I am sure that this issue (settlement of Turkmen gas debt to Iran) can be resolved and will not overshadow the relations between the two countries,” said Owji.

According to Owji, resumption of Turkmen gas exports to Iran could be the first step in all-out relations between the two countries, as the 13th administration’s policy is to expand bilateral relations with neighbors, including Turkmenistan.

He has noted that Iran has great potential in the petrochemical industry, refinery, onshore and offshore drilling, oil and gas industry equipment, which it can transfer to Turkmenistan.

If the negotiations between Iran and Turkmenistan reach a tangible conclusion, gas imports from this country will resume in the days when Iran has entered the cold season. However, Iran’s Petroleum Ministry has not only negotiated with Turkmenistan to compensate for the gas deficit in the cold season, but also has prepared itself to supply winter fuel to the production sector by storing nearly 3 billion liters of liquid fuel in power plants and industries. When gas consumption in Iran soars, this reserve will replace gas fuel in industries so that winter can be spent in Iran without any problems.

$4.5bn Envisaged for Fars Province Upstream Gas

By Mahnaz Mohammad-Qoli

The pressure fall-off in gas fields in Iran would be natural within 6 to 8 years, but it does not dispense the need for investment in gas fields. Minister of Petroleum Javad Owji has said that roughly $22 billion had to be invested in recovery from the gas fields which are mostly jointly-owned. The bulk of the job would be in South Pars phases, as well as the Nar and Kangan fields in Bushehr Province. The Petroleum Ministry is also making efforts for $4.5 billion to be invested in developing gas fields in Fars Province as part of its major plans for development of oil and gas fields. However, this is only a small portion of Iran's macro-plans for the development of its oil and gas fields.

Fars, the second largest holder of gas reserves in the country after Bushehr Province, has a production capacity of 114mcm/d of gas, most of which lying in the southwestern areas of Aghar and Dalan, Tabnak and Shanul and Varavi and Homa. The Petroleum Ministry intends to use the untapped capacity of the country's gas refineries by pressure compression and developing gas fields, which will enhance the gas production capacity of Fars Province by 110 mcm/d.

Accordingly, the Petroleum Ministry plans to invest in the upstream gas sector, including the development plan for Phase 11 of South Pars, Aghar and Dalan, Shanul, Tabnak, Homa and Varavi fields, increasing pressure and developing new gas fields, in a bid to use untapped 140 mcm/d capacity of refineries, especially in Fars and Bushehr provinces.

Owji said that the untapped capacity of Farashband and Parsian refineries in Fars Province, as well as the gas refineries of Bushehr Province had to be used. Gas production in Fars Province currently averages at 114mcm/d, which would increase to 230-240 mcm/d once new gas fields have been developed.

With the second phase development of the Farashband gas refinery in three to four years, the Aghar natural gas production capacity would increase to 20 mcm/d in the second phase while the Farashband refinery output capacity would rise from the current 42 mcm/d to 65 mcm/d.

South Zagros Oil and Gas Production Company supplied more than 51 bcm of gas, 15.6 million barrels of gas condensate, as well as 2.1 million barrels of oil last calendar year.  It is now planning to increase output from its oil and gas fields.

The Iranian Central Oil Fields Company (ICOFC) is planning to produce oil from the Khesht field and develop the Halegan, Sefid Zakhour, Sefid Baghoun, Pazan, Dey, Gordan, Khar Tang, Madar, Eram and Phase 2 of Aghar in a bid to guarantee sustainable feedstock supply to the Parsian, Fajr Jam, Farashband 1 and Farashband 2 refineries – all located in the South Zagros area.

Productive Investment

In any case, the important point is that Iran's oil and gas industry needs huge investment to achieve its predetermined goals, in line with the development of the world's oil and gas industry.

According to experts, energy consumption level in the world is increasing rapidly and will keep on growing steadily until 2030. The main reason for the growth and demand of global energy consumption is continuation of the current trend of energy consumption in developed countries and the entry of emerging economies into the world energy market.

The amount of oil supply, in turn, depends on the production capacity of oil-producing countries. Overall, the OPEC production capacity is projected to reach 52.8 mb/d at best and 38.1 mb/d at worst by 2030. In the meantime, the production capacity of non-OPEC countries will reach 62.8 mb/d at best and 49.9 mb/d at worst. This perspective on the future of the world economy indicates a significant increase in energy demand and the role of oil and gas in global equations. On the other hand, it is predicted that in the 2030 horizon, about 37% of global oil demand will be met by the Persian Gulf states.

The important point is that of the 1,258 billion barrels of the world oil reserves, 716 billion barrels are located in five countries: Saudi Arabia, Iran, Iraq, Kuwait and the United Arab Emirates. The need to invest in Iran's oil and gas industry and increase the current production ceiling is important because in the Persian Gulf region, wherein about 67% of the world's oil resources is located, productive investments will increase the economic incomes of the countries in the region. But the need to invest in Iran's oil and gas industry is not limited to joint fields, and accordingly the petroleum industry also needs to invest in independent fields, which is pretty necessary to maintain the current production capacity level.

$500bn Investment Needed

Undoubtedly, the activity of the oil and gas sector in the past year, both in terms of production and trade, has been greatly affected by the outbreak of the coronavirus. Crude oil prices were around $70 per barrel at the beginning of 2020, but fell to less than $20 a barrel by April due to health restrictions and declining global fuel demand. The decline continued until prices fell negatively for a short time in the United States; however, with the start of the vaccination process, prices are rebounding to the pre-pandemic levels. Thus, we will see a new wave of investment and contracting opportunities in the upstream sector of the petroleum industry.

Oil explorers need to raise drilling budgets by 54% to more than half a trillion dollars to forestall a significant supply deficit in the next few years, according to Moody’s Investors Service Inc.

Crude and natural gas drillers chastened by last year’s unprecedented collapse in demand, and prices haven’t responded to the recent market rebound as the industry typically does by expanding the search for untapped fields. While international crude and U.S. gas prices have risen more than 50% and 120% respectively, this year, drilling outlays are only forecast to increase by 8% globally, Moody’s said in a report.

That’s too little to replace what those companies will pump from the ground in 2022, setting the stage for even tighter supply scenarios, Moody’s analysts including Sajjad Alam wrote in the report. Any such squeeze would come atop the current crises afflicting Asian and European economies scrambling to shore up fuel stockpiles as winter approaches and prices seemingly break records on an almost-daily basis.

“The industry will need to spend significantly more, especially if oil and gas demand keeps climbing beyond pre-pandemic levels through 2025,” the Moody’s analysts wrote.

Oil and gas companies are expected to spend $352 billion on drilling and related activities this year, Moody’s said, citing estimates from the International Energy Agency. In case they raised the figure to $542 billion recommended by this credit-rating firm that would be the highest figure worldwide since 2015.

Petchem Output Up 8% Year/Year

Petrochemicals production rose 8% in Iran in the first six months of the current Iranian calendar year (March 21-September 22), compared to the same period last year, according to an official with National Petrochemical Company (NPC).

Jalal Mir-Hashemi, NPC’s director for production control, estimated six-month petrochemical production at 32.8 million tonnes, and pointed out that petrochemical plants were operating at good capacity during this period, reported Shana.

According to the official, given the country’s current needs for the production of health products such as face masks, the petrochemical industry continues to increase production to provide feed to these areas.

With the measures taken and the sustainable supply of animals’ feed during the current year, the production of various products in the petrochemical complexes has increased and while meeting the needs of the domestic markets, the export programs have also increased, Mir-Hashemi noted.

Emphasizing that the Iranian petrochemical industry is one of the most important pillars of the country’s development and the driver of the economy, he said: “The main approach of the National Petrochemical Company is to complete the production chain to diversify the products, to supply raw materials for national industries and to increase the added value of the products of this industry.

Chemical Parks Depend on Petchem Projects

 The CEO of National Petrochemical Company (NPC) has said by implementing new projects with the aim of valuing and diversifying the petrochemical product mix, about 3.5 million tonnes of various products will be added to the petrochemical production capacity, which is a favorable stimulus for the development of chemical parks.

Behzad Mohammadi said that once 65 new projects become operational by 2027, the petrochemical production capacity would increase to 135 million tonnes from the current 90 million tonnes.

He added that petrochemical revenue would increase to $37 billion by 2025 and to $53 billion by 2027, adding that the petrochemical industry’s feedstock would increase to 2 mboe/d by 2025 and to 2.3 mboe/d by 2027.

Mohammadi said investment made in the petrochemical industry topped $80 billion, adding that the figure would reach $85 billion by next March.

“Completion of the value chain and development of downstream industry projects would be developed by using core petrochemical products as feedstock,” he said.

Gas Refining Capacity Close to 1bcm

The head of Iranian Gas Transmission Company (IGTC) Mehdi Jamshidi Dana said that with the recent increases in South Pars gas field output and new lines and pressure boosting units going on stream in the national gas network, NIGTC is ready for sustainable gas supply during the cold season.

As Iran’s major natural gas reserve, the South Pars Gas Field, which the country shares with Qatar in the Persian Gulf, is currently divided into 24 standard phases on the Iranian side and is estimated to contain a significant amount of natural gas, accounting for about eight percent of the world’s reserves, and approximately 18 billion barrels of condensate.

Despite all the external challenges like the coronavirus pandemic and the U.S. sanctions, the Iranian gas industry is developing at a fast pace and the country is passing new milestones in this industry every day.

Various sectors of Iran’s gas industry including exploration, production, processing, and distribution are all among the world’s top charts and the country is taking new steps to even further develop the industry.

South Pars Gas Platform Overhaul Over

Annual overhaul operations for the platforms of Iran’s South Pars gas field, which the country shares with Qatar in the Persian Gulf, have been completed, according to a deputy working with South Pars Oil and Gas Company (POGC).

Mehdi Tayebi, the deputy director for repair operations at POGC, which is in charge of implementing development phases of the gas field, said overhaul operation of 36 platforms was completed in 136 days.

According to the official, during the period of overhaul operations more than 100,000 hours of work were carried out without any accident.

Referring to the decrease in the average number of days for the overhaul of each platform compared to the previous year in the current year, Tayebi said: “The average duration of annual repairs in the previous year was nine days per platform, the figure has decreased to 8.3 days this year.”

He underlined the importance of this reduction in production downtime, saying: "By reducing the average number of days of major repairs to 8.3 days, on average each platform will produce about 16.5 million cubic meters of gas and 11,000 barrels of gas condensate more than the previous year.”

Petro-Refinery Development Tops Agenda

The head of National Iranian Oil Refining and Distribution Company (NIORDC) has said the current administration planned to build petro-refineries and industrial parks.

Jalil Salari said that creating strategic storage facilities, transfer of technical knowhow and building six new pipelines were being also followed up on.

“Studies have already begun at National Iranian Oil Engineering and Construction Company (NIOEC) and the Corporate Planning Division of NIORDC for building petro-refineries,” he added.

Salari said: “Construction and operation of petro-refineries is an issue on the agenda of the new administration, and I hope that by obtaining the necessary licenses through the legal framework, we can create a development model with the support of the private sector, and pay attention to areas and infrastructure in terms of transmission and distribution, and supply. Persistent and sustainable resources, are  designed in a way that this model is not anticipated to be challenged in the context in which it is to be managed, although naturally the financing of such projects will come from both the private and public sectors.”

South Pars Output Hits Peak

The CEO of Pars Oil and Gas Company (POGC) Muhammad Meshkinfam has said that gas production from South Pars has reached its peak.”

Meshkinfam said the field would face a drop in production as much as one phase of South Pars every year.

Addressing a meeting held in the presence of the CEO of the National Iranian Oil Company (NIOC) and a group of members of the Planning, Budget and Accounts Committee of the Islamic Consultative Assembly in South Pars Special Economic Zone, Meshkinfam outlined the measures taken in South Pars, and said the area of this joint field in the Iranian side is about 3,700 square kilometers.

He stated that the volume of in-place gas reserves in the Iranian section of the field is 410 trillion cubic feet, and said South Pars holds 8% of the world’s gas reserves and 50% of Iran’s gas reserves, and currently 70% of the country’s gas consumption is supplied from this field.

700 million cubic meters per day (mcm/d) of gas is produced from South Pars, while 252 mcm/d is produced from other fields and 70 mcm from is produced in the form of associated petroleum gas (APG) which means South Pars contribution in the country’s total gas production mix is 70%.

He further said that the cumulative rich gas recovery from the field has reached 1,994 bcm since the beginning of production from the field, and said the value of South Pars products in this period is estimated at $359 billion.

Meshkinfam said South Pars currently supplies about 70 percent of Iran’s gas consumption basket.

Over 37 platforms, 340 wells, and 200 kilometers of pipelines have been constructed in the field’s offshore section and the field’s average daily production currently stands at about 700 mcm.

“Some 700 million cubic meters per day of gas is produced from South Pars, while 252 million cubic meters is extracted from other fields and 70 million cubic meters from associated gases,” Meshkinfam has said describing the country’s gas production status.

“So far 15 percent (or 62 trillion cubic feet) of the field’s gas reserves has been extracted, and with the existing facilities at South Pars we can only extract 50 percent (or 210 trillion cubic feet) of the field’s total accessible reserves” he noted.

Due to the natural decline in the pressure of the South Pars field gas reservoir following its production over the last 20 years, the production rate of this reservoir will inevitably decline in the coming years.

According to Meshkinfam, Iran’s giant gas field is currently at the peak of its production and from now on, the field’s output will decline significantly every year if no preventative measures are taken

Iran Favors Constructive Cooperation in Caspian

The CEO of National Iranian Oil Company (NIOC), referring to the "constructive cooperation rather than deterrent competition" approach as Iran’s policy in the Caspian Sea, emphasized continuing exploration activities in the north and strengthening Khazar Exploration and Production Company (KEPC) to advance the goals of the oil industry in this sector.

Mohsen Khojasteh-Mehr in the ceremony honoring Ali Osouli, former CEO of KEPCO and introducing Morad Kamali as his successor, said: “Exploration is the basis of the country's 100-year development plans, so whether development is on the agenda or not, underground resources must be counted and exploration activities must continue vigorously. Production and development is a separate issue.”

“Iran's geopolitical position in the Caspian Sea requires our policies in this region to be very smart and it is necessary to strengthen the company's approaches in line with synergy with other companies and managements, including the Exploration Directorate of NIOC,” he said.

For his part, Kamali laid emphasis on the significance of requirements including exploration, overhaul and renovation of the fleet, maximum safety requirement, knowhow management, agility, higher productivity and cost reduction.

Domestic Gas Consumption to Hit 400mcm/d

The CEO of National Iranian Gas Company (NIGC) has said: "Currently, we are facing excessive gas consumption in the domestic sector and it is predicted that due to the cold weather, gas consumption level would exceed 400 mcm/d."

Majid Chegeni said: "Due to the new wave of cold that entered the country and increased consumption by 40 to 50 mcm/d (increased consumption to 380 mcm/d), now we are faced with excessive gas consumption in the domestic sector.”

He added: "It is predicted that the increase in consumption would continue in the northern and northeastern regions. Naturally, a very heavy burden will be put on the gas network, while the highest consumption would be in the northern regions of the country in the three provinces of Mazandaran, Golestan and Guilan, as well as Khorasan Razavi, North Khorasan and South Khorasan provinces.”

Chegeni said: "To deal with the cold wave, special measures have been considered and a series of measures such as repairs of production sources, refineries, transmission lines, compressor stations have already started, all of which are over and all equipment and facilities are fully operational."

ICOFC Eyes Seismic Testing

The CEO of Iranian Central Oil Fields Company (ICOFC), Ramin Hatami, has said: “Seismic operations at Rig, Shorom and Dodro oil fields and the Mokhtar gas field are envisaged in order to more accurately identify geological conditions and find access to hydrocarbon storage.”

Touching on the process of seismic testing at the three oil fields, Hatami said: “According to the decision of the Board of Directors of the National Iranian Oil Company (NIOC), the implementation of extraction, processing and interpretation of two-dimensional seismic data in these fields is on the ICOFC agenda. The bidding process for choosing the contractor and implementation stages of the project has begun.”

“Seismic operations at the Rig, Shevroom, Dodrou and Mokhtar, which are located 3,500 meters above the seal level, are under way in the provinces of Chahar Mahal & Bakhtiari and Kohguiluyeh & Boyer Ahmad. The total area is 1,200 kilometers, which would take 20 months,” he said.  

Touching on the 2D seismic testing in the Mokhtar gas field, he said: “The bidding process has begun along with the three oil fields.”

RIPI Embracing IOT

The Research Institute of Petroleum Industry (RIPI) is moving towards the Internet of Things (IOT) and digitalization with the aim of saving energy and integrating equipment.

"Considering the position of the RIPI in the country, this group has a number of responsibilities, including the development and use of information systems, infrastructure development and electronic services and addressing the needs of various companies in the field of information and communication technology in line with the latest developments of this technology in the hardware and software sectors,” Iman Ghiasi, director of the RIPI Division of Engineering and Technical Services, said.

He said that RIPI had increased its competitiveness over recent years with the aim of implementing strategic plans and breaking into global markets, adding: "One of the programs in this field in the plans of RIPI is to pay attention to the IOT and having this in mind, the position of information technology in the organization has evolved from a data provider to an important component of the organization's strategy.”

“The IOT enables the oil and gas industry to digitize, connect, optimize, and automate connection processes and mechanical and electronic equipment that were previously unconnected to save time and money and enhance safety.

International Work Requires Agility

The CEO of National Iranian Oil Company (NIOC), Mohsen Khojasteh-Mehr, has underscored the significance of the NIOC Directorate of International Affairs, saying: “The tougher the international conditions, the stronger and more agile we should become.”   

He said: “This division faces tough task which requires high precision. Since it involves various approaches for defeating and skirting around sanctions it would not be an easy task.”

“International markets’ rules necessitates us to work in harmony with it. As conditions get tougher we need to become more agile and seek solutions to circumvent restrictions. We are in special circumstances and we are surrounded,” he said.

“That depends on our own capacity in getting successfully out of these tough conditions,” added Khojasteh-Mehr.

“I hope that sanctions would be lifted, and we should upgrade this section every day,” he added.

Mohammad Mohammadipour, the new international affairs director of NIOC, said this directorate was the last chain in the economic link and it requires effort.

He said he had some solutions in mind for circumventing sanctions, adding that he would benefit from the expert views of veteran staff at this directorate.

$11bn Investment Needed for West Karoun Projects

Mohsen Khojasteh-Mehr, CEO of National Iranian Oil Company (NIOC), has said that development of the West Karoun cluster of oil fields would be a priority for the current administration. He has said that $11 billion in investment would be needed over four years to develop the jointly owned fields in West Karoun.

The oil fields located in West Karoun are currently supplying 400,000 b/d, but NIOC intends to maximize output from those shared with Iraq.

The oil fields in West Karoun start near the city of Ahvaz and stretch to the end of the Iranian border. The width and length of this oil rectangle is from the western coast of the Karoun near the Jofair region to the joint border of Iran and Iraq and from the south of Chazabeh to the west of the Darquain region, which forms the same oil region west of the Karoun. The West Karun zone is home to Azadegan (North Azadegan, South Azadegan, North Yaran and South Yaran oil fields) and Yadavaran (Kushk and Hosseinieh oil fields) zones. These fields are estimated to hold more than 67 billion barrels of oil in place.

West Karoun Projects

The first development phases of Yadavaran, North Azadegan, and Yaran came online under the previous administration. South Azadegan oil field was developed by the Petroleum Engineering and Development Company (PEDEC) and currently Petropars is handling the field. Yaran development project has been awarded to the Persia Oil and Gas Company.

Khojasteh-Mehr has said some faults with the agreement signed between PEDEC and contractors had delayed development of these fields. He has said that the shortfall in West Karoun had not been made up. The official has specifically said that in some cases the projects faced delay due to time lapse between the announcement of a tender bid and implementation of a project.

Khojasteh-Mehr has called on PEDEC’s new chief, Abuzar Sharifi, to finish the process of development of the South Azadegan field in one year time from now.

Minister of Petroleum Javad Owji said recently in a meeting with a representative of China’s Sinopec (that has developed Phase 1 of Yadavaran) that the 13th administration was open to all-out cooperation with Chinese firms for upstream and downstream oil development projects.

Owji had also expressed hope that Iran’s petroleum industry would be able to attract $145 billion in investment.

Referring to talks with the Chinese side to develop the second phase of Yadavaran, Khojasteh-Mehr said: “Currently, the production capacity of this field stands at around 110,000 b/d and unfortunately no agreement was signed for the second phase development of this field under the 11th administration.”

Return to Pre-Sanctions Levels

Iran’s petroleum industry is still under sanctions, and this has led to a decline in the oil production capacity over recent years. NIOC is now ready to restore its oil production capacity to that of the pre-sanctions levels. During a recent visit to Assaluyeh, Khojasteh-Mehr emphasized that one of the priorities of the 13th administration was to enhance the country's crude oil production capacity to the pre-sanctions level, adding: “In recent years, for various reasons, we have lost part of our oil production capacity and joint fields are lagging behind the development plan.”

Noting that the South Azadegan project had been awarded to China for an output of 320,000 b/d, he said: “Under the 11th administration this agreement did not take effect for various reasons, leading to $6 billion in lucrum cessans.”

With the development of West Karoun fields, Iran would be able to recover more than 1 million barrels form this area. NIOC has said it would use domestically manufactured commodities to fund remaining projects in West Karoun.

No Project Delay

Since PEDEC is in contact with various contractors for operating its projects, the NIOC chief has asked it to upgrade its contracting and commercial divisions in a bid to prevent loss of capital or delay in major projects.

“We believe that in order to carry out affairs better, while relying on the activities that have been done before, we need to pay special attention to strengthening the positive points and eliminating the weaknesses in the previous management periods,” said Khojasteh-Mehr.

He added that balanced development was a sign of integration in NIOC projects, adding that social development had to be taken into consideration in NIOC activities.

“In light of the missions assigned to NIOC in the economic sector, when using the keyword of development at the level of this company, it should be noted that this process should ultimately lead to economic development. In this process, it is necessary to consider time management and productivity as two basic elements,” he said.

Mission Possible

Sharifi said: “Throughout my work at PEDEC I have learned that this company has qualified human resources. I assure you that PEDEC is able to accomplish all missions assigned to it by NIOC.”

He said that PEDEC’s main mission was to develop oil fields in West Karoun. “To carry out this mission, we have plans under way. We will try to focus upon them in a bid to increase oil production by the end of next [calendar] year.”

Referring to diversity in PEDEC contracts, he said: “Just in the Goreh-Jask pipeline project, there are more than 15 EPC contracts that have been pooled.”

Iran Refining Industry Developing

Mahnaz mohammadgholi

Development of the refining industry in while regarding environmental obligations, along with growing global demand for petroleum products, is one of the issues that is severely put on the agenda of the Petroleum Ministry. Accordingly, in order to achieve its desired goals in this field, Iran is pursuing a plan to promote the quantity and quality of refined products in the country. Minister of Petroleum Javad Owji has said that contracts had been signed with eight investors for refining about 1.5 mb/d to 1.6 mb/d of crude oil and gas condensate. He added that Iran’s refining capacity was forecast to grow 1.5 times in the next three or four years.

The maximum capacity of refineries' crude oil and gas condensate treatment is now close to 2.2 mb/d, which would hit 3.4 mb/d to 3.5 mb/d.

Oil Output Hike

The refining capacity would increase when oil fields yield more oil. Currently, Iran’s recoverable oil and recoverable gas stand at 154 billion barrels and 33 tcm, respectively. When the production capacity increases in the upstream sector, the refining capacity will increase in the downstream sector, as well. Meantime, the oil export capacity would increase, and Abadan and Isfahan refinery development projects would go ahead.

Jalil Salari, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), has said that completion of refinery development projects was a solution by the refining industry to be developed. The Petroleum Ministry currently plans to enhance the country’s refining capacity to reach acceptable levels by implementation of development projects in the operating refineries and through building new facilities. Therefore, the refining development projects whose study phase is over need to be completed.

Development Chain

The Petroleum Ministry has arranged a chain of development activities with a view to increasing the value-added in the petroleum industry, developing the production capacity and improving the quality of petroleum products while increasing petroleum products exports.

By relying on these activities, the refining capacity of the country has increased from 1.8 mb/d to 2.2 mb/d, which has helped bring gasoline and gasoil production rate from respectively 49.9 ml/d and 94 ml/d to 107 ml/d and 113 ml/d. In the meantime, owing to measures taken to improve the quality of refined petroleum products, Iran’s Euro-4 and Euro-5 gasoline production capacity has exceeded 76 ml/d in recent years.

That along with a 2.5-fold increase in recovery rate from the giant South Pars gas field and expansion of gas supply across the country, which has freed up a big volume of liquid products, Iran has brought its petroleum products exports from 5.9 million tonnes to 23 million tonnes.  

Future of Refining Industry

With a view to paving the ground for the future of the oil refining industry, the Petroleum Ministry reviewed numerous options of fuel consumption in the country and adopted a document based on mathematical calculations. The document, which has been adopted by the High Energy Council, is known as “Document on Energy Supply in Transportation Sector for Horizon 2041 with Emphasis on Efficiency: Efficient Fuel Use”.

According to the document, the minimum sustainable gasoline production capacity envisaged for up to 2041 by upgrading the existing refineries and building new ones has been determined and notified to NIRODC. The idea is to supply domestic demand for petroleum products in the long term, while investment is emphasized for creating extra refining capacity to export various petroleum

products.

Refining Industry Plans

Salari touched on plans to enhance the refining capacity in the country, saying: “In building new facilities the [production] chain has been factored in and the output would not be limited to refined products.”

He said that it was impossible to convert the entire crude oil produced in the country into petrochemical products, noting that it would require high investment. Therefore, he added, studies are envisaged on building a new plant to yield the highest value-added.

For a 300,000-b/d refinery, between $8 billion and $10 billion investment is needed, he said.

Focus on Petro-Refineries

Iran pins hope on private investment to develop its refining industry. In the past some licenses had been issued, which should be now revised and re-evaluated. But the point is that public investment is needed for enhancing the refining capacity in the country. For instance, at the Persian Gulf Star refinery most government resources were fed into this project and only 15% was supplied by the private sector. NIORDC guaranteed the return of this investment, and the project went ahead.  

Salari said it was common in the world that licenses were issued based on sovereign policymaking in terms of location, supply and demand and market needs. The infrastructure is then defined, the project is located and environmental licenses are obtained. The feedstock is clear and the investor can proceed.

Energy Crisis

The growing demand for energy across the globe further pushes the refining industry to the fore.

A global energy crunch is expected to boost oil demand by 500,000 barrels per day (b/d) and could stoke inflation and slow down the world's recovery from the COVID-19 pandemic, the International Energy Agency (IEA) said.

Oil and natural gas prices have soared to multi-year highs recently, sending power prices surging to record levels as widespread energy shortages hit Asia and Europe.

"Record coal and gas prices, as well as rolling blackouts are prompting the power sector and energy-intensive industries to turn to oil to keep the lights on and operations humming," the IEA said in its monthly oil report.

"Higher energy prices are also adding to inflationary pressures, along with power outages, could lead to lower industrial activity and a slowdown in the economic recovery."

As a result, global oil demand next year is now projected to recover to pre-pandemic levels, the Paris-based agency said.

It made upward revisions to its demand forecasts for this year by 170,000 b/d, or a total addition of 5.5 million for the year, and by 210,000 b/d in 2022, or a total addition of 3.3 million.

An upsurge in demand in the past quarter led to the biggest draw on oil products stocks in eight years, it said, while storage levels in OECD countries were at their lowest since early 2015.

"Provisional August data already indicates that there is some unseasonably high demand for fuel oil, crude and middle distillates for power plants across a number of countries, including China, Japan and Pakistan in Asia, Germany and France in Europe and Brazil," the IEA said.

Meanwhile, the IEA estimated that OPEC+ is set to pump 700,000 b/d below the estimated demand for its crude in the fourth quarter of this year, meaning demand will outpace supply at least until the end of 2021.

Spare production capacity from the group is set to shrink rapidly, it warned, from 9 million b/d in the first quarter of this year to only 4 mb/d in the second quarter of 2022.

That output capacity is concentrated in a small handful of Middle East states, it said, and its decline underscores the need to increase investment to meet future demand.

"A surge in spending on clean energy transitions provides the way forward, but this needs to happen quickly, otherwise global energy markets will face a bumpy road ahead," the report said

Releasing its flagship annual energy outlook ahead of a key climate conference in Britain next month, the IEA said the economic recovery from the pandemic was "unsustainable" and revolved too much on fossil fuels.

Investment in renewable energy needs to triple by the end of the decade if the world hopes to effectively fight climate change, it said.

South Pars in Final Station

The South Pars gas field is the world’s largest gas reservoir, which is located on the joint border line between Iran and Qatar in the Persian Gulf and is one of the main sources of energy in Iran. The area of ​​this field is 9,700 square kilometers, of which the share belonging to Iran is 3,700 square kilometers. Iran’s share holds 14.2 tcm of gas plus 19 billion barrels of gas condensate. It makes up 8% of the world’s total gas and 47% of Iran’s gas reserves. South Pars totally holds 40 tcm of natural gas (21% of world total) plus 50 billion barrels of condensate. Development of the gas field has experienced ups and downs in the last three decades, and now the recovery capacity of the field has reached 700 mcm/d.

The fact is that the Iranian petroleum industry is still unable to sell as much crude oil as its market share, due to the toughest ever financial and banking sanctions, despite the new US administration taking office. Moreover, the outbreak of the coronavirus pandemic has had a negative impact on the market. Such issues have inevitably had a negative impact on the development of the industry over recent years, the most important of which having been deprivation of cutting edge technologies for enhancing the recovery rate.

In the meantime, the projects in the joint oil and gas fields, among other projects, have been and are of great importance for the petroleum industry. Over recent years, Iran has succeeded in taking important steps towards development of fields it shares with neighboring states.

First Sweetening Train in SP14 Refinery

Currently, out of a total of 13 refineries of the South Pars field in Iran’s sector, 12 refineries have been put into operation and all offshore platforms, except for SP11 platforms, are operating in this field with maximum capacity. Meanwhile, the SP14 refinery is the last South Pars refinery, which according to planning, was the last priority of development due to lack of financial resources. With the completion of the priority projects refinery, development activities in this sector began and is currently progressing. The first sweetening train of the refinery of this phase is scheduled to become operational this winter. The offshore sector of this phase is fully operational, but since the refinery of this phase is yet to be completed, the gas recovered from SP14 is carried to the SP12 refinery for processing due to the latter’s empty processing capacity.

Ever since gas production from SP14 began, more than 22 bcm of gas has been extracted from this phase. Minister of Petroleum Javad Owji has said that the three remaining sweetening trains would come online early next calendar year.

The measures taken in the onshore sector of SP14 over recent months include upgrading the steering consortium structure, reforming the management and executive structure of contracting, filing orders for all commodities for which no order has been placed and using the capacity of each member of the consortium to counter international restrictions mainly in the commodity sector. The auxiliary units of the SP14 refinery would come online by March 2022 in order to operate the first gas processing train in this phase.   

In early 2016, the 14C and 14D platforms, which were in the final stages of completion and preparation in Bandar Abbas Yard, were allocated to SP17 and SP18 projects. Due to the readiness of the offshore section of these two phases to install the platform on one side and the unpreparedness of platforms 17B and 18B in Sadra's yard at that time, the Petroleum Ministry decided to modify platforms 14C and 14D with the specifications of platforms 17B and 18B before installing them at South Pars. Finally, two offshore platforms of phase 14 were put into operation in 2018 (one in May and the other in November) and 1bcf/d sour gas output from the South Pars reservoir was achieved in this project.

The third platform of SP14 was installed in July 2019, but production from this platform did not start before January 2020.

The main reasons for the delay in the construction of the SP14 refinery were the imposition of tough international sanctions against the country for many years and the impossibility of accessing vital foreign-made items at various times, including compressors, control and instrumentation systems and turbo-expanders. European manufacturers avoided delivering or completing the manufacturing process, which led to re-ordering, while problems with transferring currency to foreign manufacturers’ accounts have not been resolved.

SP14 Completion

Mohsen Khojasteh-Mehr, CEO of National Iranian Oil Company (NIOC), recently visited SP14 facilities to learn about the latest developments there. He emphasized the important role of South Pars in Iran’s economy, gas, employment, production and export, saying: “Currently, the necessary solutions to accelerate the completion of Phase 14 of South Pars are being considered and these phases are going through the final and complementary stages.”

Khojasteh-Mehr pointed to achievement of maximum gas production from South Pars and said: “Fulfillment of obligations in the supply of gas in the cold season is of special importance, which is hoped to be achieved.”

The investment made for the completion of the offshore sector of this phase amounts to $2.5 billion, which has helped brought total recovery from SP14 to 36 mcm/d.

South Pars Ready to Supply Winter Fuel

Minister of Petroleum Javad Owji’s decision to visit the Assaluyeh region, mainly suggests the approach taken vis-à-vis the giant South Pars gas field.

The 13th administration’s petroleum minister, presenting his program of work, has emphasized completion of development of the South Pars gas field, implementation of extensive programs to maintain the production capacity of the South Pars gas field and deciding about pressure compression in the offshore reservoir. This importance is due to the fact that the South Pars gas field is the world's largest gas resource, which is located on the joint border line between Iran and Qatar in the Persian Gulf and is one of the main sources of energy in Iran.

South Pars covers 9,700 square kilometers, of which about 3,700 square kilometers is located in the territorial waters of Iran and 6,000 square kilometers in the waters of Qatar. South Pars holds 40 tcm of natural gas (21% of the world's gas reserves) and about 50 billion barrels of gas condensate.

Development of South Pars, with the aim of supplying the gas required by the country in the sectors of injection into oil fields, supply to industrial units and power plants, gas supply to domestic-commercial units, supply of feedstock to petrochemical plants as well as gas, condensate, gas liquid and sulfur exports are pursued by the Petroleum Ministry. The first exploration well was drilled in South Pars in 1990. Agreements for SP1-SP3 development were signed in 1997, while construction operations for development of South Pars began in 1998. State of Qatar started work in its own sector of South Pars, known as North Dome, in 1990.

South Pars gas field, as the country's energy hub, has a variety of value-generating resources for the country's economy and is now the largest center of industrial development and the main engine for economic development in Iran. In addition to meeting maximum gas demand, it can create hundreds of thousands of sustainable jobs and earn the country tens of billions of dollars annually.

The share of Iran’s hydrocarbon reserves in the South Pars joint gas field is estimated at 14 tcm of gas and 18 billion barrels of gas condensate in an area of 3,700 square kilometers.

The total amount of gas production from South Pars since the beginning of operation until March 2021 reached 1,867 bcm. Moreover, since the beginning of development, 2.2 billion barrels of gas condensate has been extracted from this joint field. The value of South Pars products with an investment of nearly $80 billion in this gas zone is estimated at $335 billion (18 cents per cubic meter).

Currently, out of 400 wells in South Pars, 336 wells are in production, and the rest of the wells will be completed with the arrival of CRA pipes. Of the 39 South Pars platforms, 37 are operational platforms, and the remaining two platforms of SP11 development plan, which are planned to be completed in the next two years.

Winter Awaiting SP14

The investment made in South Pars stands at about $80 billion over 20 years. There are 13 refineries in South Pars, of which eight refineries have been delivered on Site 1 and four refineries, out of the planned five, on Site 2, with the SP14 refinery being the only remaining phase. During his visit to Assaluyeh, Owji, in a meeting with managers, received a full report on the field and announced the operation of the first sweetening line of the South Pars SP14 this winter, noting that 70% of the country's gas consumption came from South Pars. He said he had received promises that the first train of sweetening in the SP14 refinery would have become operational by winter.

The consortium set up to develop SP14 comprises eight companies led by the Industrial Development and Renovation Organization (IDRO). The consortium was set up in 2010. At first, the remaining phases of South Pars were expected to become operational over a 35-month period, but insufficient technical and financial potential did not let the five megaprojects come online.

The consortium in charge of SP14 development comprises Iran Industrial Design Management Company, Iran Offshore Engineering and Construction Company, National Iranian Drilling Company, Iran Shipbuilding & Offshore Industries Complex, Iran Power Plant Project Management Company (Mapna), Payndan Company and Mashin Sazi Arak.

Key Goals

The SP14 development project aims to supply 56.6 mcm/d of rich gas, 75,000 b/d of condensate as well as 1.05 mt of propane and butane a year, 1 mt/yr of ethane to feed petrochemical plants in addition to 400 tonnes a day of sulfur.

South Pars Phase 14 offshore installations include four offshore platforms in a total of 44 wells at a distance of 105 km off the Kangan coast, two 32-inch offshore gas pipelines with a length of approximately 105 km each, and two 4-inch offshore pipelines to transport the glycol solution, each approximately 105 km long. Meanwhile, its onshore installations include gas and condensate receipt and separation units, gas condensate stabilization, four trains of gas treatment including desalination, dehumidification, dew point adjustment and mercaptan desalination units with a refining capacity of 500 mcf/d, gas compression for export, sulfur extraction and recycling units with sulfur separation and granulation unit and monoethylene glycol reduction unit, ancillary services including steam, electricity distribution, seawater and miscellaneous services including nitrogen, compressed air, industrial water and sewage treatment systems and flare systems for emergency evacuation of refinery gas and diesel fuel systems, fire water systems (tanks, pumps and networks), control rooms, power substations, laboratories, warehouse, workshop, offices, etc., as well as four tanks for storage and export of gas condensate, including storage tanks

Iran to Remunerate Investors with Oil

Iran’s petroleum industry intends to sign contracts, applying a new method under which foreign investors in Iran would be remunerated with oil rather than hard currency. The method has been official termed “oil for foreign investment in development and incomplete projects”.

Although the Iran’s Petroleum Ministry is determined to put an end to crude oil and gas condensate sales and instead plans to complete the value chain in the petroleum industry via building petro-refineries and developing chemical parks, the outcome of this approach should be seen in the long-term. Therefore, the country should adopt various measures to export crude oil and make good on its oil revenue set in the national budget bill.

Iran’s Petroleum Minister Javad Owji's plan to enhance the country’s oil export capacity indicates that he has formulated it with the assumption that sanctions would remain in place and with a view to circumventing them and enhancing oil sales using the private sector capacity. In his plan, he mentioned the three approaches of diversifying sales methods, bartering oil for goods and reviving strategic agreements with various countries to increase oil exports rate under sanctions.

To that effect, Iran intends to engage foreign contractors while compensating with a share of crude oil for their investment and services. Iran’s Petroleum Ministry intends to apply this method to development and half-finished projects.

Clearing is common in international trade. Retail clearing, inter-organizational clearing and international clearing are in effect. 

The Petroleum Ministry hopes to receive necessary licenses from the three branches of government in order to revive Iran’s oil sales capacity by March 2022.

Some oil experts believe that success of oil clearing trade would depend on the Central Bank’s cooperation with the Petroleum Ministry once they are convinced to that effect.

At present, due to the US unilateral sanctions, it is not possible for the Iranian petroleum industry to transfer fund. According to experts, the most important challenge in oil sales in recent years has been banking issues and the most important challenge in the issue of clearing is national law. Clearing could be dangerous if it is not put on the right track.

For instance, if local contractors are given full authority, it could cause market turmoil. It would be proper to use the clearing method when the CBI takes the center stage. The contractors’ entry into the oil market, when unplanned, will cause turmoil, which is more harmful than beneficial.

The Asian Clearing Union (ACU), with headquarters in Tehran, Iran, was established on December 9, 1974, at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). The primary objective of ACU, at the time of its establishment, was to secure regional co-operation with regard to the settlement of eligible monetary transactions among the members of the Union to provide a system for clearing payments among the member countries on a multilateral basis.

In October 2013, Iran unveiled a plan suggesting that members of the union – Bangladesh, Bhutan, India, Maldives, Myanmar, Nepal, Pakistan, Sri Lanka and Iran – employ a home-grown system developed by the Central Bank of Iran (CBI) to get around SWIFT called SEPAM in Persian.

As long as sanctions are in effect, clearing may prove successful should the CBI become active in this regard.

Mohsen Qamsari, former director of international affairs at National Iranian Oil Company (NIOC), said Iran exercised clearing with East Europe when it was under embargo in the 1980s. Before and immediately after the 2015 nuclear deal with six world powers, Iran could sell oil through clearing.

“It may be interesting for you to know that in some years, the money for the hajj pilgrimage and visit to holy cities [of Iraq] had been paid through oil clearing. Therefore, oil money clearing could still be effective despite sanctions,” he said.

Independent Body a Must

To prevent probable disruption in oil money clearing with local contractors, it is helpful to form an independent, centralized, competent, powerful, and agile organization that could make instant decisions. Market turmoil and some ill-considered competition are undoubtedly to the detriment of national interests. Clearing does not mean not focusing on oil exchange and creating different sources. For instance, although Shell has independent oil companies in all the oil-rich countries of the world, decides about oil sales in its headquarters based in London.

Qamsari said: “One of the reasons for the success of the Petroleum Ministry in 2015 and 2016 in getting back its market share from competitors within four months was that NIOC Board made the required decisions. Of course, the nuclear deal helped Iran increase its oil exports to 2.5 mb/d.”

For some experts, in the current situation, where due to sanctions, Iran's export markets for oil and gas condensate are restricted, the country would have no choice but to embrace clearing. On the other hand, some experts believe that such agreements should be reflected upon more deeply in order to guarantee sustainable economic stability.

An issue that is less discussed in Iran's trade structure is the difference between international trade and bilateral trade. Bilateral trade is established to guarantee and maintain the security of trade between the two countries, and it means total trade or zeroing the trade balance and equalizing import and export in the long run. However, clearing is some sort of bilateral trade.

COP 26 in Glasgow; Future of Fossil Energies

Shuaib Bahman

Since 1995, signatories to the United Nations Framework Convention on Climate Change (UNFCCC) have gathered every year to exchange views mainly on global warming. During this period, meetings have been held in various contexts, some of which were more important, such as the Kyoto Summit in 1997, the Bali Summit Action Plan in 2007, the Durban Summit in 2011, the Berlin Summit in 1995, and the 2015 Paris Summit. The issue of how to use fossil fuels has been always one of the important topics in these meetings to deal with climate change and prevent global warming. Reducing the use of fossil fuels has been often recommended as one of the most important ways to combat global warming. This idea, which was once again presented at the Glasgow Summit, is associated with its own challenges and problems.

Constant Challenges

The Glasgow Summit ended with the signing of several major contracts, the most important of which was the creation of a $100 billion fund proposed by Germany and Canada and a $130 billion fund for financial institutions and institutional investors. Bilateral and multilateral agreements between developed and emerging countries worth $35 billion can be added to these agreements. Although these figures are significant, they are different from what was expected prior to the Glasgow summit. However, the problem with the Glasgow Summit or other climate change summits is not simply economic agreements. Specifically over recent years, such summits have had several weaknesses:

First, it is not clear which of the climate investment agreements are sustainable and which are not.

Second, poorer countries would like richer countries to take the lead in tackling climate change; because they believe that a large part of the increase in global warming emanates from the industrial activities of richer countries. Rich and industrialized countries, on the other hand, often seek the support of poor countries.

Third, if the agreed investments to mitigate global warming are made properly, there is a possibility of structural inflation in raw materials and intermediate industrial goods, rupture of global value chains, or dependence on a limited number of countries to supply vital raw materials and key raw materials for “green” investments (minerals, batteries, electric cars, etc.). In this case, industrialized countries will still be in the lead and the poor countries will be left behind.

Future Perspective

Development of weak countries and their transition from fossil fuels to renewable fuels requires significant assistance from rich countries. However, global trends over recent years have shown that rich countries not only do not provide any assistance to poor countries, but also use their natural resources and primary assets in their own favor. For this reason, in a situation where developed countries have imposed a very difficult and complex model of environmental, social or governance standards; the most polluting countries in emerging economies continue with a weaker agenda.

However, unless a fair process is designed for transition from the current situation to the desired situation, there is little hope of improving the global climate. A fair process may be based on the principle that rich, industrialized countries, which have played the largest role in global warming in recent decades, provide funding to combat climate change. Of course, this budget should not be spent only on the industrialized countries themselves, but part of it should be allocated to the poor countries so that they could join the rich countries in the process of tackling climate change, as well. Until that happens, poor countries will continue to be more inclined to use fossil fuels, because they both have the infrastructure to use this energy and can access oil and gas with ease and lower prices.

On the other hand, it noteworthy that although global warming is a serious problem for the future of human life, the use of fossil fuels at high speed cannot be abandoned. Because it is impossible not to use oil and gas in a situation where clean and renewable energy cannot be replaced yet. In the meantime, it should be noted that reducing investment in fossil fuels could lead to lower global production and higher oil and gas prices. Therefore, in order to deal with the disruption of the world's energy security, the transition from fossil fuels to clean energy must be done in a calm and orderly manner; in such a way that this process benefits both producers and consumers, and does not cause huge shocks to the world economy. Undoubtedly, such a process is not possible in the short term and requires considerable time.

In addition, developing countries are struggling to maintain their economic growth with a serious paradox. For instance, efforts to achieve climate goals anywhere on earth are not as important as in Asia. Nearly 1.5 billion Asians live in the tropics, hundreds of millions of whom live off the coast. Most Asian countries, such as China, India, Malaysia and Indonesia, need more energy to continue their economic growth. However, there is a serious contradiction in this, which if not addressed, can have serious consequences.

Because if Asian countries continue to supply energy with the fossil fuels of previous decades to sustain their economic growth, they will have to pay for floods, hurricanes, heat waves and droughts before they can get rich. However, the transition of most of these countries from fossil fuels to clean energy is not possible in the short or even medium term. Because it requires a lot of capital, and the use of the current infrastructure, for which large investments have been made, must be practically abandoned. As a result, fossil fuels are still cheaper and more accessible to most countries, including Asian countries, despite all the dangers of climate change. As a result, the best way for developing countries to continue to grow is to use fossil fuels.

Therefore, although some developed and industrialized countries may take steps to combat global warming and seek to reduce investment in fossil fuels, the world should keep using oil and gas. Hence, investment in fossil fuels will continue; however, there may be more debilitating trends in this regard in the future.

Europe Gas Challenge; Russia Playing with Energy Weapon

Shuaib Bahman

This year, the gas price index in Europe has risen by about 250 percent due to declining reserves in Europe, rising demand in Asia and taxes on carbon dioxide emissions. As the post-covid economic recovery unfolds, European governments are under pressure to control the unprecedented rise in energy prices that will severely hurt ordinary people and small businesses. Because rising natural gas prices will reduce the competitiveness of the EU economy and, if it continued, it will weaken the economies of countries on a global scale.

Meantime, rising gas prices have caused problems for the markets of related industries. Europe is facing this problem, while winter is approaching with gas consumption poised to rise. Although the commissioning of the North Stream 2 pipeline is a new opportunity to import gas from Russia, it is unlikely that the Europeans would pass the winter without facing any gas challenge.

Energy, Russian Weapon

Europe’s base gas prices have risen more than 250 percent since January 2021. Factors contributing to this trend include low reserves, high carbon prices in the European Union, rising demand in Asia, low supply of Russia, low share of renewables, and disruptions related to nuclear facility repairs. Meanwhile, although the Europeans hope the Nord Stream 2 pipeline would ease the pressure on European gas markets, which are facing supply shortages ahead of the cold season and rising prices, the pipeline must receive technical certification and insurance. It could be challenging because of sanctions imposed by the United States last year. It is noteworthy that Nord Stream 2 was supposed to be launched in 2019, but it faced frequent delays due to US threats to punish companies involved in its construction.

This challenge comes at a time when Russia's move to minimize gas exports to Europe has had the greatest impact on rising gas prices in the union. Russia's action against European countries has several concurrent meanings:

First, the Europeans must accept the rise in gas prices as a fact. A 10-perecent price increase in October means that prices may rise further in the cold winter months. European consumers are therefore facing the prospect of rising heating bills due to a set of global factors and Europe’s vulnerability to fluctuations in global energy prices.

Second, the decline in Russian gas exports to Europe means that the continent will not be able to store enough gas on the eve of winter. Europe’s current gas reserves equal 72% of its storage capacity, the lowest level in more than a decade. Current estimates from Russia’s spare gas transmission capacity to Europe show that Gazprom intends to reduce its supply rate this winter compared to last year. Gazprom currently reserves about a third of the Yamal-Europe gas transit capacity. At the same time, the company has not booked any additional transit capacity through Ukraine.

Third, if Russia over recent years, due to the construction and operation of the North Stream 2 pipeline, compromised over some of the policies of European countries, now with the accomplishment of the construction process, it could use energy as a weapon in its relations with Europe.

Europe Failed

As an energy importer, Europe does not have much power to influence the process of gas exports, particularly as diversification of energy transmission routes to the continent has been one of the relatively failed strategies of Europe over recent years. While for the past two decades the European Union has focused on energy diversification and gas transmission routes, it has not obtained much success. One of the ultimate goals of the project was to reduce dependence on energy imported from Russia at a time when a strategy was being developed to diversify energy resources and transmission lines in the EU. Over recent years, however, the EU has not only failed to replace Russian gas with new resources and routes, but the actual construction of the Nord Stream 2 pipeline indicates that the bloc's dependence on Moscow energy will increase.

In the meantime, the EU's reluctance to invest in Iran's gas sector deprived the bloc of a good opportunity to diversify its resources. If in the last two decades, instead of following the US policy towards Iran, the Europeans had decided independently and based on their own national and collective interests, now the strategy of diversifying the resources and gas transmission lines to their countries would not be facing any difficulty. However, the Europeans' policy towards Iran on one hand, and the existence of sometimes challenging tensions in the relations between European countries and Russia on the other, has caused the continent to be in an energy crisis.

Outlook

The Europeans have made extensive efforts to use renewable energy over recent years, but realistic estimates show that these countries will continue to be forced to use fossil fuels during the decades to come. However, until Europe can diversify its resources, it has no choice but to bow to Russia's policies. Because any serious confrontation and tension in the relations between Russia and European countries could encourage Moscow to use energy as a weapon to ratchet up the pressure on Europe.

Russia, on the other hand, does not intend to put too much pressure on European countries in this regard. Gazprom, for example, insists on sticking to its previous long-term contracts. The company blames Europe for the crisis, citing the extraction of 66 bcm of gas in reserves between 2020 and 2021, which delayed new gas supplies for three weeks. Meantime, it should be noted that the Russians' excessive use of the energy weapon to sway prices or to put pressure on European countries to change their policies is to some extent useful. Because, if this tactic is used excessively, will cause the Europeans to pressure Moscow in other areas. Continuation of this trend could once again lead the Europeans to design new projects to find alternative sources.

Environmental, Social, and Governance

Nowadays, investment firms that follow environmental, social and governance (ESG) criteria, set priorities and use a selection of ESG factors to help identify companies positioned for strong long-term performance. In their assessment to identify qualified companies for investment, analysts recommend investment firms not to invest in companies that 1-Operate in higher-risk areas or have exposure to coal or hard rock mining, nuclear or coal power, agricultural biotechnology, tobacco, tar sands, or weapons and firearms, 2- Companies that have major or recent controversies with human rights, environmental concerns, governance issues, or product safety.

What is ESG?

ESG is often called sustainability. In a business context, sustainability is about the company’s business model, i.e. how its products and services contribute to sustainable development. It also explains how a financial entity works with ESG as part of its wealth management and gives a good understanding of ESG and why it is an important factor in business decisions. 

 ESG, while referring to a company’s risk management, i.e. how it manages its own operations to minimize negative impact, refers to using factors to evaluate companies and countries on how far advanced they are with sustainability. Once enough data has been acquired on these three metrics, they can be integrated into the investment process when deciding what equities or bonds to buy.

What Are ESG Criteria?

Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments.

Environmental criteria consider the way a company performs as an overseer of nature. Social criteria scrutinize the way it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

How ESG Criteria Work

Investors have, over recent years, indicated interest in investing where their values are. As a result, brokerage firms and mutual fund companies have started offering exchange traded funds (ETFs) and other financial products that follow ESG criteria.

ESG investing is sometimes referred to as sustainable investing, responsible investing, impact investing, or socially responsible investing (SRI). To assess a company based on environmental, social, and governance (ESG) criteria, investors look at a broad range of behaviors. Demand for ESG investments soared in 2020.

Three key parts to ESG investing—the environmental, social, and governance aspects are as follows:

Environmental

Environmental criteria may include a company’s energy use, renewable energy sources use, waste, pollution, natural resource conservation, its waste management program, how it handles potential problems of air or water pollution arising from its operations, deforestation issues (if applicable), and its attitude toward climate change issues and treatment of nature and animals. The criteria can also be used in evaluating any environmental risks a company might face and how the company is managing those risks.

For instance, there might be issues related to its ownership of contaminated land, its disposal of hazardous waste, its management of toxic emissions, or its compliance with government environmental regulations. Conservation of the natural world. - Climate change and carbon emissions. - Air and water pollution.

Social

Social criteria look at the company’s business relationships. Does it work with suppliers that hold the same values as it claims to hold? Does the company donate a percentage of its profits to the local community or encourage employees to perform volunteer work there? Do the company’s working conditions show high regard for its employees’ health and safety? Companies have a responsibility for their employees, as well as their impact on the societies in which they operate – for instance in terms of working conditions, labor rights and diversity. Consideration of people & relationships. - Customer satisfaction. - Data protection and privacy. Other stakeholders’ interests should be taken into account.

Governance

As far as governance is concerned, investors may want to know that a company uses accurate and transparent accounting methods and that stockholders are allowed to vote on important issues.

They may also want assurances that companies avoid conflicts of interest in their choice of board members, don't use political contributions to obtain unduly favorable treatment and, of course, don't engage in illegal practices.

No single company may pass every test in every category, of course, so investors need to decide what's most important to them and do the research.

Governance may serve as a control mechanism in relation to bribery and corruption, tax, executive remuneration, shareholders’ voting possibilities and internal control. We believe active corporate governance is important for the development of companies and provides long-term benefits for shareholders, employees and society. 

One way of ensuring this is to focus on enhancing transparency and openness in contacts between the company and shareholders on issues such as board composition and shareholder rights. Standards for running a company. - Board composition. - Audit committee structure.

Pros and Cons of ESG Criteria

In years past, socially responsible investments had a reputation for requiring a tradeoff on the investor's part. Because they limited the universe of companies that were eligible for investment, they also limited the investor's potential profit. "Bad" companies sometimes performed very well, at least in terms of their stock price.

More recently, however, some investors have come to believe that environmental, social, and governance criteria have a practical purpose beyond any ethical concerns. By following ESG criteria they may be able to avoid companies whose practices could signal a risk factor—as evidenced by BP's (BP) 2010 oil spill and Volkswagen's emissions scandal, both of which rocked the companies' stock prices and resulted in billions of dollars in associated losses. As ESG-minded business practices gain more traction, investment firms are increasingly tracking their performance.

ESG Factors

The goals of ESG investing are: To gain long-term returns that outperform the market by identifying companies with strong ESG performance. To insulate investments against uncertainty by selecting companies that are well-equipped to survive and thrive during turbulence.

ESG criteria refer to environmental, social and corporate governance factors that are taken into account when investing in a company. Although their origin dates back several decades, they have become a reference for socially responsible investing in recent years.

Final remarks

In investment firms’ views, as far as environmental issues are concerned; companies enjoying the following positive ESG criteria, i.e. companies that put out carbon or sustainability reports, limit harmful pollutants and chemicals, seek to lower greenhouse gas emissions, and use renewable energy sources are recommended to be prioritized in their assessments.

Taking into account social issues, companies that operate an ethical supply chain, support LGBTQ rights and encourage diversity, pay fair wages; are recommended to be prioritized.

When it comes to governance, companies that embrace diversity on their board, embrace corporate transparency, employ a CEO independent of the board chair; are recommended to be prioritized.

Whereas oil and gas companies need to attract international investment, they are recommended to pay full attention to the three above-mentioned issues, which are determinant factors in their success. They are also advised to severely take into account the growing influence of ESG on investment atmosphere, as timely and adequate investment has significant impact on materialization of their development goals.

Petrobras Starts Sale Process for Santos Basin Fields

 Petrobras has started the binding phase for the sale of its 100% stakes in the producing Uruguá and Tambaú fields in the BS-500 concession in the Santos basin offshore Brazil.

Qualified bidders will receive a letter with instructions on the divestment process, including guidelines for due diligence and the submission of binding proposals. 

Petrobras acquired BS-500 through the ANP’s Zero Licensing Round. They are in the northern part of the Santos basin, 140-160 km (87-99.4 mi) from the coast of Rio de Janeiro State, in water depths ranging from 1,000-1,500 m (3,281-4,921 ft).

Combined production in 2020, through an FPSO Cidade de Santos MV20, was around 5,000 b/d of oil and 918,000 cu m/d of gas.

More Wells at Tortue Offshore Gabon

BW Energy has started production from the DTM-7H well in the Gamba formation, part of the Tortue Phase 2 development offshore Gabon.

DTM-6H in the Dentale formation should come onstream in the next few days. Production prior to the two new wells has been around 11,500 b/d of oil.

The Tortue development comprises six producer wells, all tied back to the FPSO BW Adolo. Completion of DTM-6H and DTM-7H had to be suspended last year due to COVID-19 issues.

Carl K. Arnet, CEO of BW Energy, said: “Operationally we will now focus on stabilization of the production and wrapping up the project activities.”

PSA Concerned at Safety Deficiencies Offshore Norway

Numerous audits of facilities and projects on the Norwegian continental shelf are identifying capacity and competence issues, Norway’s Petroleum Safety Authority (PSA) has warned.

These concern operators and licensees, and both large and small companies.

Related conditions have contributed to serious incidents over the past couple of years, the PSA added, with the availability of well-qualified personnel a major challenge among suppliers.

The future of Norway’s petroleum industry will increasingly be dominated by aging infrastructure, automation, new modes of operation, and projects related to new forms of energy, the Authority continued.

CNOOC Starts Up Bozhong 19-4 Offshore China

CNOOC has started production from the Bozhong 19-4 oilfield comprehensive adjustment project in the southern Bohai Sea offshore China.

A new eight-legged central equipment platform, in 21 m (69 ft) of water, is connected to processing facilities serving the Bozhong 25-1 oilfield.

CNOOC plans to drill 18 producer and seven water injector wells, and anticipates peak oil production next year of around 11,000 b/d.

Spartan Project Offshore Western Australia

Santos has issued updates on its development projects offshore Western Australia.

Drilling and completion activities for the Van Gogh Phase 2 infill program have finished, with tie-in and start-up activities to follow for the two remaining dual lateral wells.

The Varanus Island compression and offshore Spartan gas projects are progressing, as the company seeks to developing further reserves for export to Varanus Island.

Following the recent award of the subsea transport and installation contract for Spartan, the first offshore campaign should get under way in early 2022. The compression project is on track for start-up later this year.

US Unveils Crackdown on Methane

The United States unveiled a plan to slash emissions of the greenhouse gas methane from oil and gas operations as part of its strategy to crack down on climate change, drawing cautious support from both environmental groups and drillers.

The announcement coincided with the UN climate conference in Glasgow, Scotland, where the United States, the world's second-largest greenhouse gas emitter, is seeking to reclaim leadership on the world stage by demonstrating tangible steps to curb emissions at home.

US President Joe Biden has set a target to slash greenhouse gas emissions by more than 50% by 2030 but is struggling to pass climate legislation through a deeply divided Congress, making policies by federal agencies more crucial.

His administration and the European Union are also seeking to lead a new international pact to reduce methane economy-wide by 30% by 2030, drawing participation from over 100 countries.

Methane is the second-biggest cause of climate change after carbon dioxide. Its high heat-trapping potential and relatively short lifespan in the atmosphere means cutting its emissions can have an outsized impact on the trajectory of the world's climate.

At the center of the US plan to tackle methane domestically is an Environmental Protection Agency proposal that will for the first time require oil and gas operators to aggressively detect and repair methane leaks. Oil and gas operations account for a third of methane emissions.

BP Boosts Share Buyback as Profit Surges

BP added more than a billion dollars to its share buyback program as it likened itself to a "cash machine" benefitting from higher oil and gas prices and a strong trading performance in the third quarter.

Natural gas and power prices around the world surged as tight gas supplies collided with strong demand in economies recovering from the pandemic.

BP said it expected natural gas prices to remain strong in the coming months of peak winter demand.

The company "is a cash machine at these sort of (oil and gas) prices and the business is running very well," Chief Executive Officer Bernard Looney told Reuters.

Underlying replacement cost profit, the company's definition of net earnings, reached $3.32 billion in the third quarter, exceeding analysts' expectations for $3.06 billion.

That compares with $2.8 billion in profit in the second quarter and $86 million a year earlier, when energy demand and prices collapsed because of the pandemic.

The results were boosted by "very strong trading," which helped BP weather large fluctuations in gas and liquefied natural gas (LNG) prices throughout the quarter.

Reuters reported last month that BP's trading arm made at least $500 million in the quarter.

"It's not only a trading story. We have had production growth, we have stronger reliability and availability in our businesses," Looney said.

Although the headline profit reflects a strong business, BP reported a loss attributable to shareholders of $2.54 billion because of accounting effects and hedges as a result of fluctuations in LNG prices, which are expected to balance out over time.

German Energy Demand Seen Rising in 2021

Germany's energy consumption in 2021 is likely to rise by nearly 3% and the country's carbon dioxide emissions are set to increase by at least 4% as more coal is burnt, industry statistics group AGEB said.

The rise in energy demand is mainly due to a pickup in economic growth and cold weather at the start of the year, although higher prices of energy and carbon pollution allowances have tempered growth in demand, AGEB said.

AGEB monitors data on primary energy, which refers to raw energy sources such as fossil fuels and renewable power that have not been converted into other forms.

 Iraq Eyes Energy Deals with Saudi

 The Iraqi government plans to sign energy contracts worth tens of billions of dollars with Saudi Arabia, the state newspaper Al-Sabaah reported, citing Iraqi Oil Minister Ihsan Abdul Jabbar.

Baghdad is discussing a partnership with Saudi Aramco to explore and develop natural gas fields in Iraq's western desert, it said.

The Iraqi government is also in talks with Saudi Arabia's Acwa Power to build water desalination plants and solar energy stations in Iraq, it added.

The two countries are also discussing joint petrochemical projects.

Iraq’s oil exports for October rose to 3.12 million barrels per day (bpd) from 3.081 million bpd in the previous month, the oil ministry said in a statement.

Gas Price in Europe Up 11%

The gas price in Europe gained 11% after direct gas pumping to Germany via the Yamal-Europe pipeline was halted and reverse flows started, according to ICE exchange data.

The price of gas futures for December delivery at the TTF hub in the Netherlands went up to almost $861 per 1,000 cubic meters, or 72 euro per MWh (on the basis of the current euro exchange rate against the dollar, prices at ICE are in euro per MWh) as trading opened. The total price increase surpassed 11%.

Gas pumping to Europe through the Yamal-Europe pipeline had been halted. Particularly, gas pumping decreased dramatically from 09:00 to 10:00 am Moscow time, and came to a halt from 10:00 to 11:00 am Moscow time. After that gas reverse flows started via the pipeline.

Nord Stream 2 No Threat to EU Gas Supply

Allowing Nord Stream 2 to pump Russian gas to Germany will not threaten supplies to the European Union, the German Economy Ministry said, clearing a major hurdle for the disputed pipeline.

While the pipeline is ready to start operations, it still needs to be certified by Germany's Federal Network Agency and the ministry's supply analysis is a key requirement for the regulator to continue that process.

"In its analysis the Federal Economy Ministry concludes that granting certification is not threatening security of gas supply to the Federal Republic of Germany and the European Union," the ministry said in a statement.

It said it has submitted its analysis to the regulator following discussions with neighboring EU countries. Italy, Austria, Poland, Czech Republic, Hungary, Estonia, Latvia and Lithuania had all been given a chance to consult, it added.

Refiner Marathon Warns Natgas Rally May Hurt Profits

 Marathon Petroleum Corp signaled that a sustained rally in natural gas prices could take a toll on earnings, sending the largest US refiner's shares down 4%.

The warning comes after US natural gas prices soared more than 60% in the third quarter -- translating into higher costs since natgas is used to power refining operations -- as sky-rocketing global rates keep demand for US liquefied natural gas exports elevated.

"For every $1 change in natural gas prices, we anticipate there is an approximate $360 million impact to annual EBITDA to our R&M (Refining and Marketing) segment," Chief Financial Officer Maryann Mannen said.

"Based on current prices, we estimate that in the fourth quarter, higher natural gas prices have the potential to impact our business by an incremental $0.30 per barrel," Mannen added.

Marathon said there was still some uncertainty around supply-demand dynamics heading into the fourth quarter, but lower inventories and strong holiday travel could be supportive.

"Looking at next year, if global product inventories remain tight and demand continues to recover, we would expect the refining sector to rebound in 2022," Chief Executive Officer Michael Hennigan said.

Total throughput, or amount of crude processed, rose to 2.8 million barrels per day (bpd) in the third quarter from 2.5 bpd in the year-ago period.

The refiner expects fourth quarter total refinery throughput to be 2.79 bpd.

The company also said it is pursuing strategic alternatives, which could include a sale of its 68,000 bpd Kenai, Alaska refinery.

 Aramco Quarterly Profit Surges on Oil Price

Saudi Arabian state oil producer Aramco said its third-quarter net profit more than doubled, boosted by higher crude oil prices and volumes sold, beating analysts' forecasts.

The oil giant's best quarterly earnings since its listing in December 2019 was fuelled by the strongest quarterly average crude prices since its shares began trading.

Aramco shares were up 1% in early trade after the company disclosed its results and have risen about 9% this year to a market valuation of just over $2 trillion, a goal sought by de-facto Saudi leader Crown Prince Mohammed bin Salman before the company's initial public offering.

Aramco's net income jumped to $30.4 billion for the quarter to Sept. 30 from $11.8 billion a year earlier, it said in a bourse filing. That was above the median net profit forecast of $28.4 billion from four analysts.

"Our exceptional third quarter performance was a result of increased economic activity in key markets and a rebound in energy demand, as well as our unique low-cost position," Amin Nasser, Aramco's chief executive, said in a statement.

Rita Guindy, an analyst at Arqaam Securities, said the sequential earnings growth is mainly driven by the upstream segment – with a 12% quarter-on-quarter improvement in crude oil volumes at 9.6 million barrels per day and a higher oil price.

The company's free cash flow rose to $28.7 billion from $12.4 billion. It declared a dividend of $18.8 billion for the third quarter, in line with its guidance.

"There is good potential for a special dividend at the end of this year and that looks more and more likely now, in my view," said Yousef Husseini, analyst at EFG Hermes, noting Aramco's strong free cash flow and strong de-leveraging.

Four More British Energy Suppliers Cease Trading

Four more small British energy suppliers have ceased trading, regulator Ofgem said, taking the tally of companies to have gone bust since the beginning of September to 17.

Many British energy companies, often supplying both gas and electricity to homes and businesses, have struggled in the face of soaring wholesale energy costs, because the regulator's price caps limit how much of the increases can be passed on to customers.

The latest quartet to cease trading, comprising Omni Energy, MA Energy, Zebra Power and Ampoweruk, has a combined total of about 23,700 domestic and non-domestic customers, who will be found new suppliers, Ofgem said.

"In recent weeks there has been an unprecedented increase in global gas prices which is putting financial pressure on suppliers. Ofgem is working closely with government and industry to make sure customers continue to be protected this winter," Ofgem said in a statement.

A total of around 2 million customers have been forced to change energy companies.

Customers' potential new energy costs will be covered by the regulators price cap, but if they were on cheaper fixed tariffs, they may have to pay more with their new supplier.

The cap is updated twice a year and rose by 12-13% from the start of October, but wholesale prices have risen far more since that cap was set in August.

Ofgem last said it week will examine whether the cap reflects the costs and risks facing energy suppliers and said a decision on any changes would be published in February, when the next price cap level will be announced.

Conocophillips Beats Profit Estimates

Conocophillips reported a third-quarter profit that blew past Wall Street expectations, thanks to a rebound in crude prices to pre-pandemic levels after more than a year of depressed fuel demand.

Oil prices have climbed nearly 63% since the beginning of the year, driven by a rise in global demand and on supply bottlenecks, pushing Brent above $86 to its highest in nearly three years. The rally has been accompanied by sky-high gas prices around the world.

The company, which agreed to buy Royal Dutch Shell's Permian basin assets in September, said its production, excluding Libya, rose 41.36% to 1.51 million barrel of oil equivalent (boe) per day in the third quarter.

It expects current-quarter production to stand between 1.53 million boe per day and to 1.57 million boe per day, excluding Libya as well as impacts from the pending Shell Permian acquisition.

Prices for its oil and gas averaged $56.92 per boe in the quarter, compared with $30.94, a year earlier.

Conocophillips also lowered its 2021 depreciation, depletion and amortization expense outlook to $7.1 billion from its prior forecast of $7.4 billion, citing positive revisions to proven reserves due to higher commodity prices.

The Houston-Texas based company reported adjusted net income of $2.4 billion, or $1.77 per share, in the quarter ended Sept. 30, beating expectations of $1.51 per share, according to Refinitiv IBES data.

Conocophillips shares which have risen 86% so far this year, were up 0.95% in premarket trading.

Iran Eyes Mideast Top Petchem Position

Mahnaz mohammadgholi

Laying emphasis on development of the downstream sector of the petrochemical industry, paying attention to its high added value and planning for development of the petrochemical industry is currently the most important axis of profitability of the petrochemical industry in Iran. Minister of Petroleum Javad Owji has said Iran’s petrochemical exports will reach $4.8 billion in the current calendar year.

According to official statistics, supply of petrochemical products increased from 3 million tonnes in 1978 to 83.5 million tonnes last March, and currently 50 projects in the second and third jump of the petrochemical industry are in various stages of implementation. With their full operation, Iran’s petrochemical output capacity would reach 130 million tonnes by March 2026. In this production forecast, special attention has been paid to meeting the needs of downstream petrochemical industries as the most important source of employment in the petrochemical industry chain.

With the production of 30 million tonnes of basic products of petrochemical industry, Iran has been able to take the second place in the region in this field and according to projections, implementation of the second and third jump petrochemical projects, by the end of the seventh national development plan, petrochemical production in Iran will increase to 57 million tonnes, which will not only elevate Iran to the top position in the region in this sector, but will also move the growth and development cycles of downstream petrochemical industries more rapidly and will lead to creating more job opportunities and economic prosperity. .

The result of this event is the creation of higher added value for the petrochemical industry and the production of a diverse range of different products in this industry that will meet the different needs of the country. According to Minister Owji, there are more than 65 petrochemical plants in the country with a total production capacity of 40 million tonnes. Iran is forecast to export $4.8 billion worth of petrochemicals in the current calendar year.

8% Output Hike

According to the statistics provided by the National Petrochemical Company (NPC), petrochemical plants produced 32.8 million tonnes of petrochemical products in the first six months of the current calendar year and supplied them onto global markets after meeting domestic demand.

According to Jalal Mirhashemi, NPC production control director, the priority of production is to meet domestic needs, and then exports are handled. For the same period in the last calendar year, an eight-percent increase in production has been recorded.

Iran's petrochemical industry is one of the most important pillars of development and the driving force of various sectors in the country's economy.

Infrastructure has been provided for the materialization of the production leap in the Iranian petrochemical industry, and in addition to launching and operating new projects, the untapped production capacities of some existing plants will be used to maximum capacity in the current calendar year.

According to the petrochemical industry roadmap, a total of 10 projects of the second jump are still to be put into operation, and 40 projects in the third jump are among the projects that will be put into operation in coming years. It turns out that this group of 40 projects will enhance the capacity of this industry from the current 100 million tonnes to 133 million tonnes, which would require $20 billion in investment.

Petchem Diversity

The petrochemical industry supplies a variety of products, including several main groups such as polymers, chemicals, aromatics, fertilizers (in agriculture) and hydrocarbons used as fuel and feedstock. With the current capacity available in the petrochemical industry of 35 million tonnes per year of products enter the market, which in addition to the benefit of downstream industries in the country from these products, whose surplus is exported. At present, according to the officials, what can be sold inside is not more than 30% and more than 70% of Iran's petrochemical products are exported.

Last calendar year, about 40 million tonnes of upstream sources, i.e. hydrocarbons, were absorbed in the petrochemical industry, which is equivalent to 992,000 boe/d; however, the largest volume used in upstream sources is natural gas. The use of natural gas as feedstock to produce petrochemicals would create three times more value-added, while completing the value chain would enhance the output by a factor of 30.

25% Share of Petchems

Petrochemical products have a large share in Iran’s non-oil exports, so with the decline in oil revenues due to unilateral US sanctions against Iran's oil exports, attention was paid to non-oil exports to increase foreign exchange inflow into the country. This issue became so important that the new administration emphasized it in the very first days of its inauguration, and even the issue of trade and foreign exchange policy and ways to increase and develop non-oil exports were discussed.

10% Higher Share for Petchems

Hassan Abbaszadeh, NPC director of planning and development, touching on the petrochemicals’ share of non-oil exports, said: “Non-oil exports cover a variety of products including minerals, agriculture products and petrochemicals among others.”

According to him, last calendar year, due to the fact that the price of petrochemical products in the world markets was reduced due to falling oil prices and the prevalence of the coronavirus, petrochemicals exports accounted for 25.2% of non-oil exports, up from 23.89% the year before. Accordingly, the country's total revenue from non-oil exports is estimated at $35 billion, of which $9 billion was the share of petrochemical products.

He said the $9 billion revenue was realized while Iran had forecasted $12 billion, which did not materialize due to the coronavirus and falling prices.

But at the beginning of the current calendar year, the price of petrochemical products strengthened and it is estimated that petrochemical export revenue will reach $14 billion in the current calendar year. The performance of the last 5 months also shows that it is possible to reach $14 billion in revenue in the current calendar year.

According to officials, it seems that due to the increasing trend of petrochemical production in coming years, the share of petrochemicals in non-oil exports will increase by 10%.

Mideast Share Up 2%

According to available statistics, Iran's share of the Middle East petrochemical trade in the calendar year to March 2020 was 20.2% and in March 2021 it reached 22.1%, which indicates a 2% growth.

According to experts, there are different indicators to measure the state of petrochemical production in the world. In terms of production capacity in 2019, Iran had a 2.5 percent share of the world's petrochemical production, which is due to the second jump of petrochemical industry projects.

Iran's share of global petrochemical production capacity is increasing while most countries are working to improve their capacity. Iran has had a major contribution to the Middle East’s share. Iran accounted for 24.9 percent of the petrochemical capacity of the Middle East region in 2019, which increased to 26.5 percent a year later.

At present, about 70% of Iran's petrochemical products are exported. Iran's share in the world petrochemical products trade in 2019 was about 5.3 percent and by last March, due to increased exports, it reached 5.9 percent.

Basic Products

Iran now has a production capacity of 30 million tonnes of petrochemical core products such as methanol, olefins, ammonia, and aromatics among others. It comes second only behind Saudi Arabia in the Middle East, but with the implementation of ongoing petrochemical projects, by March 2027 this capacity would increase to 57 million tonnes a year, making Iran the first in the Middle East, well ahead of Saudi Arabia with 48 million tonnes of capacity.

The importance of producing core petrochemical products is that these products are the main products in the value chain of this industry.

At present, Iran's share of petrochemical revenues stands at $17 billion. The value of petrochemical and chemical products in the world is estimated at $3.7 trillion annually, which of course includes all petrochemical and chemical products, including even pharmaceutical chemical products that have a high value per gram and are not included in the petrochemical mix. Therefore, a comparison is out of context.

At present, according to planning, the production capacity of petrochemical products will reach 95 million tonnes by next March, while it is predicted that the production capacity of petrochemical products in Iran would reach 100 million tonnes next calendar year as new projects come online.

By March 2026, the production capacity of petrochemical products will increase to 136 million tonnes with the total revenue estimated at $37 billion.

Focus on Value Chain

The fourth jump in Iran’s petrochemical sector has been decided. The focus would be on the projects to complete the value chain. These projects are classified under three categories.

The first group would add 20 new products to the petrochemical mix and would put an end the need to importing $103 billion of petrochemicals.

The other group of projects in the fourth jump of petrochemicals includes 3 combined feedstock projects. The implementation of these projects, which require $12 billion in investment, will add 15 million tonnes to the country's petrochemical capacity.

The third group in the fourth jump is to pay attention to the production of propylene. The production of propylene is followed through by converting propane to propylene and converting natural gas to propylene in the country.

Therefore, Iran would be making more than $50 billion in revenue from the petrochemical industry by 2027, up 230% from 2020.

A total of 50 petrochemical products would have come online by March 2026, which would bring the production capacity to 135 million tonnes a year.

Last calendar year, 25 million tonnes was added to the petrochemical production capacity. The same year, 34 million tonnes of final products were sold for $15 billion.

According to plans, 43 million tonnes of products would have been supplied this calendar year, 33 million tonnes of which would have been exported. For the first time, Iran would be gaining $21.5 billion from the petrochemical industry.

The next step in the petrochemical industry would cover 47 projects, which would bring the petrochemical industry revenue to $50 billion by 2027.

With the implementation of these projects, the total investment in this sector would have increased to $125 billion by 2027.

Aghar, Halegan to See Output Rise

Fars Province is the second largest province in terms of gas reserves, behind Bushehr Province. Fars Province has a gas production capacity of 114 mcm/d, mainly from the Aghar, Dalan, Tabnak, Shanol, Varavi and Homa fields.

Minister of Petroleum Javad Owji recently said the government planned to invest in the upstream gas sector in order to enhance recovery from a number of fields including those mentioned here.

There are totally 13 gas fields in Fars Province. Six fields have been developed while seven others are yet to be developed. Once new fields have been developed, the province would see its gas production capacity grow by 110 mcm/d.

The Aghar gas field is among large onshore gas fields in Iran. It is currently producing 20 mcm/d of gas. Iranian Central Oil Fields Company (ICOFC), which supplies more than 40% of Iran’s total gas, is in charge of development of the Aghar field.

The Aghar gas field is located 110 kilometers southeast of Shiraz and 35 kilometers southeast of Firouzabad in Fars Province.

Discovered in 1972, the Aghar field has now 16 wells, 13 of which are producing gas.

Gas production from Aghar began in 1999. Natural gas and condensate are separated after production to be delivered to the Farashband gas refinery for processing through two pipelines. Each pipeline is 90 kilometers long.

The second phase of the Aghar gas field is to undergo development to double production to 40 mcm/d. Planning has been done for the second phase development of the Aghar gas field.

In parallel with the plan to double the Aghar gas output, installations would be built near the Farashband gas refinery for processing.

The gas produced at the Aghar field is planned to be injected into southern oil fields, including Maroun. This gas field has wellhead facilities, four gas gathering centers, pipeline to carry gas from wells to central facilities and finally the Farashband refinery, a gathering and separating center, controlling room, pumping station, and pigging systems.

The Aghar natural gas production capacity stands at 95.22 mcm/d. It also supplied 4,300 b/d of gas condensate.

Aghar gas field was studied with a view to updating previously conducted studies, incorporating new findings and completing previous studies through interpreting and assessing petrophysical diagram, and modelling of fractures. The studies, which lasted four years, were led by the Department of Reservoirs Studies.  The main finding of these studies indicated that the field’s in-place gas deposits are up 40%.

The final recovery of over 71% of in-place reserves of this field has been done. In the natural depletion scenario, in light of wellhead pressure restrictions, the final recovery rate is set at 34.7% with a production ceiling of 22 mcm/d by 2023, when the installation of a compressor would bring the recovery rate to 71.5%.

Chief among studies conducted are: drilling operations to enhance recovery and preserve the production ceiling, carrying out periodical static tests, appraisal wells drilling, PGF output phase increase to 30 mcm/d and the optimal scenario after installing compressor and spudding six new wells to achieve production ceiling of 30 mcm/d.

Halegan Gas Field

Halegan is among Iran’s dozens of gas fields whose investment plan has been presented over recent years.

Halegan is located in Fars Province in southern Iran. It is 73 kilometers north of Assaluyeh and 25 kilometers south of the Sefid Baghoun gas field. It neighbors the Sefid Zakhour and Dey gas fields from north.

In a bid to gain a 15% share in global gas trading, Iran is implementing gas efficiency plans in the housing, commercial and industrial sectors and is firmly seeking to enhance its gas production capacity. To that effect, onshore fields are in the limelight for domestic and foreign investment due to easy access and low investment needed for their development.

Halegan was discovered in 2005 when a 2D seismic test project was carried out on 1,000 square kilometers of land a year earlier in Fars Province. The seismic test ended in the discovery of Halegan and several other gas fields.

Halegan measures 50 kilometers long and 11 kilometers wide. It holds 12.4 tcf of gas (355 bcm) of gas in place, 8.938 tcf of which is recoverable thanks to a 70% recovery rate. Such high recovery rate is unprecedented for gas fields in Iran.

Furthermore, Halegan is estimated to hold 249 million barrels of gas condensate in place, 98 million barrels of which is recoverable.

Halegan's gas and condensate deposits are estimated to be valued at $83 billion, while discovery of this gas field had cost only $36 million over 2.5 years. Development of Halegan would allow a sustainable output of 50 mcm/d of gas over a 20-year period.

The director of Exploration Directorate at NIOC has said that exploration drilling operations were very tough and slow due to stiff land composed of high-pressure layers. A 4,999-meter deep well was drilled in order to yield better results. Later on, several reservoir layers including Kangan, Upper Dalan, Nar and Lower Dalan, were appraised. In the end, the field was estimated to hold 12,400 bcf of gas. The significant point with the discovery of this gas field is that all geophysical, reservoir and petroleum engineering studies, as well as reservoir layer tests were handled by the Directorate of Exploration of NIOC.

Fars Province is a gas hub in the Middle East region. Some exploration studies in this province have proven the existence of huge gas reserves. Halegan is the latest gas reservoir whose existence was proven there. Compared with gas fields located nearby, Halegan has bigger dimensions.

Iran's efforts to return to its genuine standing among gas exporting countries herald a tough road ahead in coming years.

Pars Jonoubi Runner-Up in Beach Soccer

The Pars Jonoubi beach soccer team failed the last match of the Iranian clubs’ beach soccer league. It finally finished runner-up in the 14th round of three matches. In the last match, Moqavemat Golsa Poosh Yazd defeated Pars Jonoubi beach soccer team 10-5. In the third match of return, it had faced Moqavemat Golsa Poosh Yazd at Ardakan’s Azadi Stadium as part of the soccer beach pro league matches of Iranian clubs.

The match between the two teams has always been sensitive and attractive, especially during the past few years, the Yazdi team has been the main rival of Pars Jonoubi for the championship title. Therefore, we witnessed a full and attractive game in which 15 goals were scored, in which the share of Pars Jonoubi was 5 goals and the share of Yazdis was 10 goals. For Moqavemat Golsa Poosh Yazd, Hamid Behzadpour, Abbas Rezaei, Mohammad Ali Mokhtari (2 goals), Javad Dehghanzadeh, Mehdi Shirmohammadi, Hamidreza Dehghani, Reza Amirizadeh, Mehdi Shirmohammadi and Seyed Ali Nazem scored goals. The goals of the Pars Jonoubi beach soccer team were scored by Mostafa Kiani, Moslem Mesigar and Mojtaba Najafi (2 goals) and one of the goals was own goal.

With this victory, Moqavemat Golsa Poosh Yazd with 16 points became the champion of the beach soccer premier league for the third time and the defending champion Pars Jonoubi beach soccer team reached the runner-up position of the fourteenth round of this competition. Pars Jonoubi beach soccer team had won the tournament in the previous round. This team is the most honorable beach soccer team in Iran with 7 championships, 6 runners-up and a third place. Bushehr province had 3 representatives in these competitions, Pars Jonoubi and Genaveh Pass were in the first group, and Daryanavardan Bushehr were in the second group. Meanwhile, Pars Jonoubi team was able to reach the final stage. The final stage of this competition was held in Ardakan from 18 to 21 October with the presence of the teams of Pars Jonoubi Bushehr, Ifa Ardakan, Moqavemat Golsa Poosh Yazd and Shahin Khazar Rudsar.

Pars Jonoubi Coach:

I Take Pride in My Trainees

The head coach of the Pars Jonoubi beach soccer team said: “With the presence of experienced and young players and due to the good support from club officials, our goal was to win the league and we entered the competitions for this, but sometimes it is not possible and finally we reached the second place.”

Mohammad Mihandoust, speaking after his team finished runner-up in the beach soccer premier league of Iranian clubs, said: “Regarding the quality level of the first and second rounds and the final stage of these competitions, I must say that the first stage of the beach soccer premier league is not held as a league. It was a reciprocal tournament, and given that we played three games in four days, the players definitely endured a lot of pressure. Although some of our national team players, due to their experience, adapted to these conditions with their mental recovery, and in the first stage, we won three games and were at the top, but then, we faced some problems.”

Stating that “we had a good test against our opponents in the first round”, he added: “Three teams that played against us played with a special motivation, because they tried to play well and show themselves, and that made it difficult for us, but in the second round and the final stage, despite playing well, we were unlucky and could not continue our good trend.”

Mihandoust further referred to the young composition of his team and said: "Our goal in this year's league had two parts; First of all, succession planning. Due to the good work that has been done in basic football at this club, we have succeeded in introducing young and valuable players to beach soccer, and I have to thank each and every one of them. I am proud of these young players. We have replaced veterans with young and qualified players.”

He also described the runner-up title as good, saying: "With these young people, we did a great job. Our team had a lot of changes compared to last season. As I mentioned, we entered this competition to win, but we didn’t. Surely these guys will have a lot to say and next season will be their first chance to win.”

Regarding the quality level of the competitions, he said: "The level of competitions was good, but it is not possible to name these competitions as leagues. The league should be in such a way that you may face opponents at home. Unfortunately, the current pandemic conditions prevented this chance. I hope the virus will be eliminated soon so that the competitions could be held again in the same way as before.”

Facts on 1933 Oil Concession 

It has long been emphasized in some books, documentaries, and various multimedia products that the 1933 Oil Concession was a great victory and a national honor during the first Pahlavi era, because as a result of abandoning the D’Arcy concession, Iran managed to win privileges from Britain. Here we are verifying such allegations to know if the 1933 agreement constituted a big step for Iran to have sovereign rights on its natural reserves.

Some 30 years prior to the conclusion of the 1933 oil contract, famous British financier William Knox D’Arcy had discovered oil Iran through his intermediaries even without having set foot on Iranian soil, thereby extracting what would become the strategic product of the 21st century. Coincidentally and gradually, with the establishment of the Abadan oil refinery, Iran's petroleum industry was fully formed to win regional and international fame. The Qajar period came to its end. With the growing weakness of Ahmad Shah, the last Qajar king, the task of governing fell into the hands of Reza Mir Panj, who was backed by Britain. A few years later, with the support of his fans, he overthrew the Qajar dynasty and ascended the throne and the first Pahlavi rule began. The first Pahlavi, with its authoritarian approach, faced various problems from 1299 AH to 1311 AH. That was exactly when the 1933 Oil Concession was struck.

Legal/Oil Crisis

The release of Britain’s annual balance sheet on Iranian oil clarified many issues. Abolfazl Lisani, author of Iran’s Black Gold or Black Plague, puts it as follows: “The oil crisis of 1933 had started long before this date, when the Persian government had filed objection. However, when Anglo-Persian Oil Company (APOC) released its annual balance sheet in June 1961, it became clear that the Persian government's royalties had fallen sharply from previous years, adding to the controversy.”

As this issue became clear after the transmission of the message between the Persian government and APOC, the first Pahlavi, in consultation with its close allies, canceled the D’Arcy concession. Hassan Taqizadeh, who was then finance minister, informed the British about the cancellation of the contract and at the same time announced his readiness to sign a new contract. Britain termed the cancellation of the contract as unfounded and the matter was referred to the International Court of Justice in The Hague. Iran sent representatives to attend the meetings and the issue of canceling the D’Arcy contract took on very serious international dimensions. The Persian government has sent a delegation comprising Ali Akbar Davar, the Minister of Justice, Hossein Alaa, the governor of National Bank, and Nasrollah Entezam to Geneva, as recorded by the Foreign Ministry Documentation Center said in 1961. The British Foreign Secretary, Sir John Simon, also represented the United Kingdom at the League of Nations. Following a dispute between the two sides, the UN General Assembly elected Czechoslovak Foreign Minister Edward Bench as mediator to continue the talks. He also invited the plaintiffs to talks, and thus the talks continued in Tehran. Immediately after this, a delegation from APOC, comprising Lord John Cadman, Chairman of the Board of Directors of APOC, William Fraser, his Deputy, and Jackson, Board member and resident in Tehran, along with several high-ranking members of the company arrived on April 5, 1961. They came to Tehran to start negotiations that led to the 1933 agreement.

Answer to a Question

The fundamental question in the history of the petroleum industry is why and how the first Pahlavi surrendered to the British, and in practice the 1933 agreement with D’Arcy was no different from the first one and even its duration became more profitable for the British. Perhaps the key to this historical conundrum can be seen in the hands of Sir John Cadman, the then CEO of APOC. Javad Sheikholeslami, a veteran Iranian diplomat, writes in an article:

“During the talks, Cadman realized that cabinet ministers had no decision-making power. He noted that Taqizadeh has no desire to act

independently without obtaining prior permission from the Shah himself. That led the British to conclude that the success of negotiations depended on the direct supervision of Reza Shah; Cadman had also concluded that the only way to break the deadlock was to give Reza Shah a strong emotional shock and make him realize the importance of the issue. Therefore, in a meeting with Reza Shah, he told him: "Because there is no chance of success in the current negotiations, the British negotiating team will leave Tehran inconclusively and submit the report of the failure of the negotiations to the British Foreign Office and through them to the League of Nations." After these talks, Cadman suggested that it would be better for His Majesty to chair the meeting, which is the last chance for the two sides to prevent failure and deadlock, so that the desired result may be achieved. Reza Shah accepted Cadman's offer, but during the negotiations Reza Shah did not accept to extend the concession; Cadman therefore used a threatening language and threatened Reza Shah to refer the matter back to the League of Nations. Cadman himself wrote in a letter to John Simon: "My heartfelt prayer is that I will bring a new oil contract with me when I return to London;" Because I feel that Reza Shah is afraid of being referred back to the United Nations, and this monarchical fear should be attributed to the thumbs up that the British government and its esteemed Foreign Secretary showed to the Iranian delegation in Geneva last month and made them realize that there is hope for them through this (community of nations). He went on to say: "As soon as the name of the League of Nations and the British government came to my notice, the Shah quickly interrupted me and stated that the Iranian delegation has no intention of returning to Geneva and the issue must be resolved in Tehran itself." "I replied that in this case, it would be better for His Majesty to urge his ministers to stop making all these distortions and to speed up the end of the current negotiations a little."

Sheikholeslami's detailed analysis, documents, and information can also be conflated with Taqizadeh's notes to produce a result.

Taqizadeh “In My Turbulent Life”, writes: “Whenever the negotiations between the two sides reached a deadlock, the most effective tactic of the British was to say to the Shah, 'Very well, we have nothing to say, so leave us alone to return to the League of Nations,' and with this threat they crushed the Shah's resistance." In the continuation of the same article, Sheikholeslami has other serious analyzes about the acceptance of the British oil conditions by the first Pahlavi. He continued: "Therefore, Reza Shah's brilliant opponent, Sir John Cadman, knowing the strength of his position and the weakness of Reza Shah's position, raised the issue of extending the concession in the last days of his stay in Tehran. The British also used other methods such as threatening to sever ties and challenge the continuation of the Pahlavi dynasty or using gold bags to encourage the Reza Shah to continue negotiations with them. Finally, after a historic meeting between Reza Shah and representatives of the oil company to extend the contract, the Shah rejected Iran's offer and accepted all the essentials of the company.”

Thus, Cadman's talks with the Shah on May 8, 1933, led to the signing the 1933 agreement. This agreement was unanimously approved by the members of the National Assembly on June 28, 1933; a contract in 27 articles, which in general, was not much different from the D’Arcy contract. Although at the time and years of the second Pahlavi era, propagandistic efforts were made to show that the 1933 agreement was superior to the D’Arcy agreement, all the expert evidence showed the opposite. Studies show that the role of British negotiators, especially Cadman, was significant in concluding the 1933 agreement, given his knowledge of the situation of Iran and Reza Shah himself and the threats and fears surrounding him. The British negotiators, first recognizing the political system and the imperial tyranny, addressed themselves to the Shah, and by bypassing the Iranian negotiating team, which had no decision-making power, eased their job. Then they used a threatening language against Reza Shah. They trapped him and finally got what they wanted.”