Advantages of Gas Swap Deal

Ali Forouzandeh
Director General of Public Relations

A trilateral gas swap agreement was signed between Iran, Azerbaijan and Turkmenistan on November 28, overseen by heads of state, for 1.5-2 bcm/y of gas to be carried from Turkmenistan to Azerbaijan via Iran’s territory.

The signing of this remarkable agreement against the backdrop of US sanctions on Iran and amid ongoing nuclear talks between Iran and the West has had great achievements.

Iran has long had good cooperation with Turkmenistan in the gas sector. In winter, Turkmenistan used to supply gas to Iran for northern provinces. However, over recent years some financial disputes arose between the two countries.

The new administration in Iran moved to resolve the dispute. Minister of Petroleum Javad Owji took positive steps in this regard. The trilateral gas swap deal is a diplomatic achievement of the Petroleum Ministry. In the future, by making some modifications in this agreement and increasing the volume of gas transmission, it would be possible to supply gas to northern areas in Iran when conditions become critical.

Politically speaking, the agreement has been fruitful. First and foremost, a gas swap agreement in the midst of unilateral US sanctions and Western pressure would be a step ahead for the new Iranian administration in the diplomatic arena, let alone improve relations with neighboring states. Second, although some countries try to create tension between the countries in the region, a win-win agreement was achieved, irrespective of international pressure. And finally, this agreement would make Azerbaijan and Turkmenistan more dependent than before on Iran, thereby boosting Iran’s stand in global gas trading.

From an economic standpoint, the agreement has valuable benefits for all sides, particularly Iran. The reason is that in addition to receiving swap fees, Iran would supply part of its gas needs, thereby saving on the costs of gas transmission to those areas.

Last but not least, it is noteworthy that given Iran’s geopolitical condition in the region, this gas agreement can clear the way for new deals in the energy sector with neighboring states.

Tehran-Baku-Ashgabat Gas Swap Deal, a First Step  

Although US sanctions keep putting a strain on Iran’s petroleum industry by blocking all channels of foreign investment, a recent three-nation gas swap agreement between Iran, Republic of Azerbaijan and Turkmenistan on the sidelines of the Economic Cooperation Organization (ECO) Summit showed that Iran has activated its gas diplomacy, as promised earlier by Minister of Petroleum Javad Owji.

Now, less than four months has passed since the 13th administration took office, Iran has signed a tripartite cooperation agreement, without fearing any US penalties for foreign investors, which could promise to develop multilateral cooperation in the energy sector and Iran’s gas relations in the region.

Active Energy Diplomacy

Activating energy diplomacy and expanding Iran’s cooperation with neighboring countries is one of the plans of Minister Owji with gas being one of the important platforms for activating the energy diplomacy. In less than four months, the Iranian petroleum minister has had foreign meetings to expand Iran’s cooperation, and these meetings and negotiations eventually led to the signing of an agreement that few expected would be concluded so quickly. But in the past month, there have been close talks between Iran, Republic of Azerbaijani and Turkmenistan delegations on the transmission of gas from Turkmenistan to Azerbaijan, which is in fact a gas swap agreement, regardless of media controversy and hype. Finally, on 28 November, after the end of the bilateral meeting between the Iranian and Azeri presidents on the sidelines of the ECO Summit in Turkmenistan, a gas swap agreement was signed between the Iranian and Azerbaijani ministers. Under the deal, Iran would receive 1.5-2 bcm of gas a year from Turkmenistan at Sarakhs to be delivered to Republic of Azerbaijan via Astara.

Ten days after the trilateral gas swap deal was signed, Minister Owji received a delegation from Republic of Azerbaijan, headed by CEO of Azerbaijan’s oil company Socar, to discuss implementation of the deal, which is expected to take effect in winter. President Ebrahim Raeesi has said that the trilateral gas swap deal would turn Iran into a regional and transit hub.

Raeesi also told a group of Iranians based in Turkmenistan: “We can easily double Iran’s exports share in the regional market to $50 billion.”

Why Gas Exports Matter

According to the Gas Exporting Countries Forum (GECF) Secretariat, the share of gas in the world energy mix will increase from 23% to 27% by 2050, while there are a limited number of gas suppliers. The demand for this fuel, which is very popular due to its less polluting nature, is growing day by day. That has increased demand and constrained supply. Iran has also great potential in the gas industry. First, it has the world’s second largest gas reserves behind Russia. However, over recent years, it has not been able to be an active player in the global gas trade as far as R/P ratio is concerned. Second, it has an extensive network of pipelines and gas transmission, and can easily use the capacity to export gas to countries in the region. Third, Iran has access to high seas and specialized

manpower. These are some of Iran’s advantages in gas exports.

On the other hand, it is noteworthy that many of Iran’s gas fields are not yet developed. The CEO of National Iranian Oil Company has said that daily gas production is expected to reach 1.5 bcm in the next 10 years. Therefore, $70 billion should be invested in the development of gas fields during this period. The Petroleum Ministry has repeatedly stated that Iran welcomes any foreign investment in the industry.

Certainly, Iran’s view on the development of gas fields is not only its domestic market but also seeks to increase its gas exports volume. Turkey and Iraq are the countries to which Iranian gas is currently being exported. However, there are several negotiations going on with neighboring countries for gas exports, which have not been concluded due to US sanctions. However, according to the Iranian president, good negotiations have taken place in the energy sector, some of which will be announced.

Gas Trading Stimulus

Mohammad Dialami, an energy analyst, described Iran’s gas swap deal as a sign of stimulus in the country’s gas trading against the backdrop of sanctions.

“The question is: has not the US imposed sanctions on Iran? As has been the case for the past few years, such contracts should not have been made public. But what happened that made the signing of this contract public?” he asked. “We should not ignore the signing of this contract in these circumstances… we need to wait and see if Mr. Owji's team can reactivate the gas diplomacy.”

He added: “This gas swap agreement, albeit of small size, should not be underestimated. It is very important we are engaged in the game.”

Mahdieh Abolhassani Chimeh, an expert at the Institute for International Energy Studies (IIES), also said it was a win-win deal.

“Given the situation in our country and being neighbor of the five ECO member states, as well as the conditions of the sanctions we are in, we should try to at least expand our relations with neighboring countries, and this swap agreement will help us in this regard,” she said.

Geopolitics

With 35,000 km of high pressure gas transmission network, Iran has capacity to transmit 1 bcm/d of gas. Such potential may be used to transport gas to neighboring countries, including Azerbaijan, Armenia, Turkey and Iraq, and even Persian Gulf countries. Also, due to the fact that most of Iran’s gas reservoirs are located in the south and west of Iran, Iran could receive gas from Turkmenistan and supply gas to Northern provinces and transfer the equivalent to Iraq, Turkey and Republic of Azerbaijan.

Majid Chegeni, CEO of National Iranian Gas Company (NIGC), said the agreement was of economic and geopolitical significance due to its role in strengthening regional ties. He said: “Economic significance aside, it would be instrumental in the gas network stability in northern and northeastern Iran.”

It is noteworthy that Iran does not pay anything to import gas from Turkmenistan and for its swap to Azerbaijan.

Reza Noshadi, CEO of Iran Gas Engineering and Development Company (IGEDC), touched on another aspect of the agreement, saying: “Currently, two major pipelines are currently under construction in the region, both to bypass Iran; TAPI (Turkmenistan, Afghanistan, Pakistan and India) which has been held in abeyance due to insecurity in Afghanistan and parts of Pakistan, and is a rival to the Iran Peace Pipeline. The second one is “Iran, Pakistan and India pipeline” (IPI), on which we have spent about $2 billion.”

Reasonable Price

Iran needs to activate its gas diplomacy in order to use its capabilities in this market, says Dialami. “Ring boxing diplomacy is not just one way to win, it is like chess. He used different methods to achieve his goal.”

He added: “The use of gas in the fuel mix of countries is growing day by day, for instance, China and Japan need a lot of gas, we may sign long-term contracts with these countries, now gas prices are extremely high, we can also get our gas at a reasonable price. This is also possible through diplomacy and the introduction of opportunities for cooperation with Iran.”

“We are a gas seller and we need to sell our gas to whoever wants to buy it, so we need to be fully acquainted with the sales methods. On the other hand, along with the diplomatic missions that visit other countries for negotiations, we need an expert team from the Petroleum Ministry to thoroughly explain them the investment opportunities in the oil industry. For instance, if the diplomatic delegation visits Japan, they must be accompanied by gas and oil experts, people who have a thorough knowledge of the legal and technical issues of contracts, are professional negotiators, and are well able to explain investment opportunities in Iran, in which case we could hope in the activation of energy diplomacy,” the analyst said.

It seems that the Petroleum Ministry in the 13th administration is determined to expand its energy cooperation with the countries of the region, regardless of sanctions, which is one of the most important impediments to the development of Iran’s oil industry. The first step of this multilateral cooperation agreement was a gas swap deal. President Raeesi said in a televised interview that the signing agreements with other countries will be announced in the near future. Iran has over 34 tcm of gas reserves and is located in a region where gas demand is growing day by day. The swap agreement was the first step by the 13th administration.

Gas Swap Deal Highlights Iran’s Role

Shuaib Bahman

The signing of a tripartite gas swap agreement among Iran, Turkmenistan and the Republic of Azerbaijan for the Turkmen gas to be carried to Azerbaijan via Iran territory on the sidelines of the ECO Summit marked a key event that can be evaluated from various aspects. According to the agreement, 1.5-2 bcm of gas will be transferred annually from Turkmenistan to the Republic of Azerbaijan through the territory of the Islamic Republic of Iran. This not only strengthens regional cooperation, but also highlights Iran’s centrality in the gas trade at the regional level.

Swap is one of the safest and least expensive methods of energy transfer in the region and the world. Given the geographical location of the Caspian Sea littoral states and also the geographical advantage of Iran in the region, gas swap and crude oil swap between Caspian Sea states and Iran is one of the safest ways to transfer energy. Accordingly, the gas swap deal between Iran, Azerbaijan and Turkmenistan is considered a major step to improve relations with Iran's northeastern and northwestern neighbors, namely Turkmenistan and the Republic of Azerbaijan. Of course, prior to this, in 2016, a gas swap agreement was signed and implemented among these countries for a year, which earned all of them big profits.

Advantages of Swap for Iran

The current gas swap deal with Turkmenistan and Azerbaijan is significant for Iran from several aspects:

First, it can have a favorable income for Iran economically. Because the transit of Turkmen gas to the Republic of Azerbaijan will have yield significant benefits for Iran due to transit fees.

Second, Iran supplies part of its gas needs in the northeast from Turkmenistan and saves on the cost of transmitting gas to those areas. In fact, the agreement economically enables Iran to supply gas to eastern provinces, particularly the three provinces of North Khorasan, Khorasan Razavi and South Khorasan.

Third, it regionally makes Turkmenistan and Azerbaijan dependent on Iran. In other words, the swap agreement will mean the dependence of Ashgabat and Baku on Iran in the field of energy transfer, which is per se an advantage for Tehran.

Fourth, it will improve relations between Iran and Turkmenistan, which have had disputes in recent years, including over gas.

Given the above benefits, the delay in the implementation of this agreement over the past years was a great loss for Iran. Of course, the agreement also brings great benefits to the Republic of Azerbaijan and Turkmenistan. On the one hand, the Turkmen can take an important step in terms of diversifying their gas customers, while on the other hand, the Republic of Azerbaijan has the opportunity to supply its gas needs.

Iran Share

Iran has rich gas reserves, a unique feature attracting global attention. In addition to rich energy resources, what highlights Iran’s position in regional and global energy interactions is its geographical location for oil and gas transit. This geographical location is especially evident in the gas sector, whose most economical way of transmission is through pipeline. In a way, Iran itself has the conditions to export gas to its neighbors and can deliver its neighbors’ gas to certain destinations. A noteworthy point in this regard is the security in Iran compared to neighboring countries. For instance, although the TAPI pipeline is designed to run through Afghanistan, insecurity in the country will always be a challenge to energy security. Furthermore, gas transfer projects from the Caspian Sea or the Persian Gulf to other countries are associated with their own risks.

Today, however, the issue of energy transmission by pipeline is one of the most important issues in the field of energy security, which many countries pay special attention to in the export or import of energy or in meeting their domestic needs. In the meantime, Iran, as a bridge that connects east to west and north to south, can be the best, shortest, safest and most economical route for energy transfer. Iran has an extensive network of energy transmission lines due to its large size and dispersion of population in different parts, as well as the location of oil and gas fields in the south and southwest of the country. If the transit pipelines of Turkmenistan or the Republic of Azerbaijan pass through Iran, Iran may bring its surplus gas to the markets of India and Pakistan through the same transit pipelines. Iran also has a significant geographical advantage for exporting its own gas and other nations’ to Europe.

On the other hand, cross-border energy transmission lines can simultaneously include security of supply and demand. It means that in some cases Iran may deliver its surplus production to consumer markets and secure demand while in some other cases it may use part of the transit gas for domestic consumption instead of transition fees.

In order to improve Iran’s stand in the geopolitics of gas trade, the following could be considered:

1. The necessity of constructing gas pipelines and gas pumping stations based on a macro and forward-looking plan, and  based on long-term goals in favor of Iran’s role in energy distribution in the region;

2. Consultation and agreement with interested countries, and signing bilateral and multilateral agreements in the field of gas transmission;

3. Adopting well thought-out positions in the field of gas transmission lines in the region, including the Trans-Caspian Pipeline, which is to transmit Turkmen gas to the Republic of Azerbaijan through a pipeline located in the Caspian Sea.

Tehran, Baku Agree to Upgrade Energy Ties

Mahnaz mohammdgholi

Iran’s Minister of Petroleum Javad Owji on November 21 received Azeri deputy prime minister Shahin Mustafayev in Tehran.

In this meeting, the two countries’ officials emphasized long-standing relationship between Iran and the Republic of Azerbaijan in the energy sector, hinting at the signing of new documents on Tehran-Baku cooperation in the oil and gas sector in the near future. It was a few days after the news broke out that a gas swap agreement was signed between Iran, Azerbaijan and Turkmenistan on the sidelines of the Economic Cooperation Organization (ECO) Summit.

Iranian and Azeri officials said they expected to finalize several energy agreements soon, including deals on gas swap and the joint development of oil and gas fields in the Caspian Sea.

The two sides reviewed the implementation of the agreements reached on natural gas exchanges, and stressed the need to continue working in this direction. Also, the existence of great capacities for cooperation between the Republic of Azerbaijan and Iran in the oil and gas industry has been emphasized, and useful negotiations have been held regarding the expansion of cooperation in this field.

"We had a constructive meeting with the Azeri delegation, and we came to good agreements on co-operating on the gas issues," Owji said following discussions with Mustafayev in Tehran.

Owji said a "good agreement" was signed on gas swap between Azerbaijan's neighbors and Nakhichevan, an autonomous Azeri exclave bordered by Armenia, Turkey and Iran. Nakhichevan has been receiving gas from Iran under a 25-year gas swap contract signed in 2004. The deal involves Tehran importing up to 2 mcm/d of Azeri gas and delivering the same volume of Iranian gas to Nakhichevan.

"Another point in discussion … was the development of oil and gas fields in the Caspian Sea," Owji said. "Preliminary talks on this issue have been held, technical discussions are now ongoing and we are hoping to sign a final contract."

"A constructive meeting was held with the Azerbaijani delegation and good agreements were reached," Owji said.

Owji said that “in the upcoming weeks” further agreements would be signed “on oil, gas and development of Caspian oil and gas fields.”

Fruitful Cooperation

Mustafayev touched on the presence of Azeri experts in Iran, saying: “This group is expected to discuss details of Iran-Azerbaijan talks.”

Also in May 2021, Mustafayev travelled to Tehran and met with then minister of petroleum Bijan Zangeneh.

He had emphasized the expansion of mutual relations between the two countries, and said: "I agree that our relations, which was based on the political will of the presidents of the two countries have developed over recent years."

"The relations between the two countries have had significant progress in various fields, and they can be even further boosted by constructive talks," he stated.

The official further pointed to oil and gas sectors as great areas for expansion of economic relations between the two neighbors, saying: “We have a long history in cooperation on gas issues, and since 2004 the gas required by the Nakhichevan Autonomous Republic has been supplied by Iran, and we appreciate that.”

Mustafayev was accompanied by the head of SOCAR, the state oil company of Azerbaijan Republic and a number of officials and businessmen in his visit to Tehran.

Azerbaijan has undergone significant economic transformation since its independence in 1991, with its large oil and gas reserves pushing it to strong growth in the 1990s and 2000s. However, heavy dependence on extractive industries has left Azerbaijan exposed to the adverse impacts of oil price volatility.

From 2013 to 2017, growth in gross domestic product (GDP) averaged 1.4% per year, down

from 5.5% during 2008 to 12. The country’s hydrocarbon sector was responsible for the bulk of the decline, as it contributes roughly a third of GDP and makes up over 90% of total exports. The 2014 decline in global oil prices and the ensuing decline in oil production pushed this contraction. In addition, the oil price drop led to a decline in remittances from Azerbaijan’s hydrocarbon-rich trading partners. These remittances, the bulk of which support the country’s rural population, fell by one-third. In 2017, Azerbaijan’s GDP barely saw any growth, but 2018 saw an increase of 1.4%.

Azerbaijan's GDP grew by 2.3% in 2019 and is expected to fall to ‑2.2% in 2020 due to the outbreak of COVID-19 and increase to 0.7% in 2021, according to updated International Monetary Fund (IMF) forecasts from 14 April 2020.

Oil and gas account for over 90% of Azerbaijan’s exports. Oil and gas production increased significantly in the 2000s, following discovery of the Shah Deniz gas field, to reach record levels in 2010. The government and international companies have invested substantially in the energy sector, and the construction of several new power plants as well as rehabilitation and modernization of the gas and electricity networks have improved reliability and security of supply.

Azerbaijan has strong potential for renewable energy development. The country has excellent solar and wind resources and significant prospects for biomass, geothermal and hydropower. However, compared with the scale of the country’s available resources and long-term ambitions, practical deployment has been limited.

Renewables also offer the most prominent low-carbon solution to meeting Azerbaijan’s climate targets. By 2030, the country has committed to reducing its GHG emissions by 35% measured from the 1990 base year set in its nationally determined contribution (NDC) under the Paris Agreement, which emphasizes the use of alternative and renewable energy sources to achieve this target.

Despite widespread privatization of the economy since the country gained its independence, the energy sector in Azerbaijan remains predominantly government-owned. Only a handful of small hydropower plants are in private ownership, and they account for less than 1% of electricity generation.

Azerbaijan’s oil and gas production continues to support the country’s economy and energy supply and provide most of its exports and government revenue. However, many major oil and gas importing countries have recently pledged to reduce greenhouse gas emissions to net zero by mid-century, adding an extra element of uncertainty to the long term economic outlook for countries like Azerbaijan that are heavily dependent on hydrocarbon exports.

Both oil and gas have a long history in Azerbaijan, but production surged to new levels in the mid-2000s when the Azeri-Chirag-Gunashli oil block, the Shah Deniz gas field and their related export infrastructure began operations. Oil production peaked in 2010, while gas production set to continue increasing at least until 2022-2023 (Figure 2.3). Overall, total energy production in 2019 was almost three times higher than in 2000, at 60.1 million tonnes of oil equivalent (Mtoe).

Azerbaijan’s oil and gas reserves are located mainly in the South Caspian basin, split between the Kura Intermontane depression and the South Caspian depression. The former includes most of the onshore fields and the shallow-water offshore fields. The latter contains the deeper water reservoirs, which have almost all of Azerbaijan's significant remaining resources with exploration and development potential (Wood Mackenzie, 2020). The shallow waters of the Absheron-Pribalkhan trough, off the Absheron Peninsula, contain most of Azerbaijan’s liquid reserves in a few large fields. There are also some onshore resources in the Gobustan trough, but these account for around only 3% of oil reserves. Azerbaijan's gas reserves exist both as non-associated offshore gas deposits and as associated gas at offshore oil fields (onshore reserves are insignificant). Most of the reserves are concentrated in the Absheron-Pribalkhan trough and the South Caspian deep-water sub-basin.

Onshore fields (including the onshore Absheron peninsula, one of the world’s oldest oil provinces) account for around only 3% of total Azerbaijani output today. They have suffered heavy depletion over many decades of development. Nevertheless, onshore reserves offer some limited upside potential through rehabilitation and deeper exploration.

1.3% of Global Reserves

Azerbaijan's natural gas production amounted to 25.8 billion cubic meters in 2020, which is a growth by 6 percent compared to 2019, BP said in its annual statistical review of the world’s energy report.

The country’s proven natural gas reserves amounted to 2.5 trillion cubic meters at the end of 2020, BP said.

According to the report, by the end of 2020, proven global gas reserves amounted to 188.1 trillion cubic meters, and Azerbaijan’s share in it was 1.3 percent.

The natural gas consumption in the country amounted to 11.9 billion cubic meters in 2020 while total exports of natural gas from Azerbaijan by pipelines were reported at 13.6 billion cubic meters, according to the report.

Furthermore, BP reported Azerbaijan’s proved oil reserves to stay unchanged from the end of 2019 as well, and amount to 7 billion barrels at the end of 2020. The country’s proven oil reserves amounted to 1.2 billion barrels at the end of 2000.

By the end of 2020, proven world’s oil reserves hit 244.4 billion barrels, with Azerbaijan accounting for 0.4 percent.

Meanwhile, Azerbaijan’s crude oil and condensate production amounted to 702,000 barrels per day. Oil consumption in the country amounted to 92,000 barrels per day in 2020.

It is noteworthy that the countries with the largest oil reserves in the world remain Venezuela with 303.8 billion barrels, Saudi Arabia with 297.5 billion barrels and Canada with 168.1 billion barrels.

Iran’s Policy in GECF to Continue

During the 23rd ministerial meeting of Gas Exporting Countries Forum (GECF) on November 16, Algeria’s Mohamed Hamel was elected secretary-general of the Forum. Iran had nominated Hojjatollah Ghanimifard for the post.

Iran’s Minister of Petroleum Javad Owji said: “Extensive diplomatic efforts were made by Iran to obtain the post of Secretary General, but because Iran had held the post of Secretary General for two terms (four years), the conditions were more favorable to those who had not yet been nominated to the post.”

Between April and May 2021, the five countries of Iran, Algeria, Trinidad and Tobago, Libya and Nigeria, nominated their candidates for the seventh term of the Secretary General to the GECF Secretariat. In the last 12 years, Russia has been secretary general for four two-year terms, and Iran has held the post for two two-year terms.

Congratulating Algeria’s representative for being elected as the new GECF Secretary General, Owji said Iran and Algeria would proceed with their close cooperation within the framework of GECF and OPEC.

“I have had constructive talks with my Algerian counterpart on this, and I expect good results from this cooperation,” he said.

Expressing happiness that friendly and brotherly Algeria had always been cooperative within GECF and OPEC, Owji said: “I offer my sincere gratitude and best wishes to the new Secretary General for his success.”

The 23rd GECF ministerial meeting came at a time when the COP26 has been concluded and environmental concerns are calling for the use of gas as a clean fuel more than ever, although at the COP26 Summit emphasis has been laid on reducing carbon while encouraging countries to curb greenhouse gas emissions, there have been efforts to push nations towards renewable energy sources. However, fossil fuels are still highly efficient, and gas is of high importance. GECF members account for 44% of the world gas production, 67% of world gas reserves, 64% of pipeline transmission and 66% of liquefied natural gas (NLG) trading, and therefore these countries may play a key role in clean energy development. Although international sanctions have put a strain on Iran’s oil and gas industry and led to a significant reduction in capital inflows, which has had a major impact on the development of sustainable energy, Iran still has 33 tcm of reserves. Iran is the second largest country in the world in terms of gas reserves.

Iran Cooperation to Continue

Owji said: “US unilateral sanctions against Iran are in contradiction with the principles and rules of international law, and this attitude cannot ensure international peace and security, including effective treatment of climate change, investment and technology transfer in the field of energy, especially natural gas.”

Emphasizing that achieving the lofty goals of GECF establishment requires cooperation and coordination of member states more than ever, he said: “Iran, as one of the largest holders of natural gas reserves and one of the largest holders of local natural gas distribution network in the world, is ready for any cooperation in this regard.”

He stated that Iran warmly welcomes any collective or bilateral cooperation with gas producing countries and will make every effort to secure the interests of gas exporters and maintain the stability of the gas market. "I am confident that by promoting cooperation and solidarity between us, while facing the challenges of climate change, there would be a bright future ahead for GECF countries.”

Owji said: “Iran, under the administration of President Ebrahim Raeesi, the same as in the past, will continue to cooperate constructively and support effectively GECF in line with securing collective interests of member countries.”

Depoliticizing Energy Production

Owji said the recent sharp rise in natural gas prices in Europe, Asia and the United States, which has been unprecedented, shows that developed countries are vulnerable to unforeseen fluctuations in energy developments, adding: “These developments require further cooperation and depoliticization of the flow of energy production in the world.”

He added: “The key strategy for overcoming global energy security challenges is not a political approach and imposing unilateral sanctions; but a return to economic logic and multilateralism.”

“The use of US unilateral sanctions against Iran violates international conventions and multilateralism, and targets the livelihoods of masses, and is contrary to the principles and rules of international law,” he said.

He added: “This attitude cannot ensure international peace and security, including effectively addressing the issue of climate change, investment and technology transfer in the energy field, especially natural gas.”

Gas Market Instability Management

He said that over the past two years, as a result of the outbreak of COVID-19, the global economy and consequently the gas market have suffered significant damage, the effects of which will change fundamental paradigms of global energy production and consumption even in the medium term. He added: "Despite all the difficulties of the past two years, GECF member states have

been able to manage the challenges and instabilities in the gas market by adhering to the principles and goals set out in the GECF Statute.”

Owji pointed to the key role of gas in the energy transition period and said: “Natural gas has an important and key role in the transition period to a sustainable energy system with less carbon, and due to environmental and economic benefits, even with the development of renewable energy, it can enhance trust in sustainable energy supply.”

He added: “Abundant and vast resources of natural gas in Iran and other parts of the world, provide public with access to clean and cost-effective energy to achieve the seventh goal of sustainable development approved by the United Nations.”

Owji stressed: “The world should pay attention to the common but different responsibilities of developed countries compared to developing countries and provide a good opportunity for the transition of energy of these countries.”

Gas Supply/Demand Guarantee

Owji said that developing countries particularly gas exporting nations needed more than others to transfer in cutting edge technology. He added: “The new zero-carbon policies require reducing the volume of carbon produced from the natural gas production cycle process.” 

“In the long term, developed nations should consider using new technologies like CCUS and methane leakage reduction. Otherwise, attractive addresses by COP26 would not go further,” he said.

Noting that natural gas demand security constituted a key parameter in guaranteeing sufficient investment and enhancing natural gas production capacity in the long-term, the minister said: “In this regard, constructive dialogue and cooperation with all parties involved, including producers and consumers, would guarantee natural gas supply and demand, and will finally benefit both sides.”

He said: “I believe that it is more necessary to promote the cooperation between GECF member states in various fields of technology, development and stability of the gas market.”

23RD GECF STATEMENT

“The GECF Members met virtually on 16 November 2021 under the Presidency of the Plurinational State of Bolivia with the aim of continuing to uphold our common vision and strengthen partnership in difficult times of the COVID-19 pandemic, declare our determination to support resilient and inclusive recovery, protect the environment and ensure efficiency and transparency of energy markets in particular natural gas market.

While noting that high natural gas prices are not in the interest of buyers or sellers, we reiterate the fundamental role of long-term natural gas contracts and pricing based on oil/-oil products indexation to ensure stable investments in the development of natural gas resources.

We assume, that as the global economy moves from under the shadow of the COVID-19 pandemic, the resulting shortage of natural gas from Europe to Asia, demonstrates the need for further investments in natural gas an affordable, abundant, and flexible source of energy to achieve energy access for all parts of the world in a sustainable manner.

At the same time, we reiterate the concerns with regards to unilateral restrictions on economic and energy cooperation and barriers to trade and investments in energy and energy-related goods that hinder robust recovery and mitigation of climate change.

We will further promote natural gas as an efficient, abundant and reliable energy resource, develop gas infrastructure and enhance investments in the gas sector. We reiterate that the long-term outlook for natural gas despite the recent upheavals in the energy markets remains positive, natural gas is on course to become the leading fossil fuel in the world by 2050, increasing its share from 23% today to 27% in the global energy mix. The GECF is fully prepared to engage in meaningful dialogue with natural gas and LNG consumers with a view to find ways to bolster the efficiency, stability, and transparency of the gas markets.

The recent developments prove that a balanced approach to all types of energy resources and maintaining reliable and economically viable baseload electricity generation with modern natural gas power stations are essential for energy security and proper functioning of the global energy market in the face of growing energy consumption. With this in mind, we acknowledge that the decarbonisation of economies should be approached with careful consideration as hasty action may turn the climate agenda into an energy crisis.

Acknowledging the outcomes of the COP 26 Summit held in Glasgow, where several world leaders backed natural gas as the harbinger to their nations’ economic and sustainable development, we will work towards reducing carbon footprint of the energy sector. We strongly believe that the solution is the development of modern advanced technologies in the gas industry to manage and mitigate emissions, while ensuring energy systems resilience. In this regard, as an Observer to the United Nations Framework Convention on Climate Change (UNFCCC), the GECF had urged the international community in Glasgow to look at natural gas as the solution to achieve the right balance between postCOVID-19 economic and social requirements and environmental constraints.

We count on the GECF to further enhance the community’s work in the area of methane emissions reduction, as well as to explore climate-friendly ways for using natural gas for hydrogen production.

We are confident that natural gas including LNG will continue to  play a pivotal role in attaining Sustainable Development Goals (SDGs), in particular SDG 7, as well as in mitigation of climate change in line with the approvals of the  Paris Agreement. We call on countries to enhance collaboration in the gas sector on the basis of equality, economic efficiency, and mutual respect of interests.”

Iran and GECF

Fereydoun Barkeshli

President, Vienna Energy Research Group

The Gas Exporting Countries Forum (GECF) was born in Iran shortly after the initial start of the giant South Pars natural gas reservoir discovery and exploration of first phases when it was internationally recognized that Iran possessed the world’s second largest natural gas reserves. The idea of creating a gas body like OPEC was shaped up in NIOC corridors and think tank corners of the ministry. Iran’s initial objective was an OPEC style international and intergovernmental organization in order to regulate global gas market. Back then it was crystal clear in Iran’s energy strategy and vision that gas would lead the international energy markets and energy scenes for decades to come. Having said that; to put it in perspective, GECF was a product of the National Iranian Oil Company.

However, Iran’s energy policy makers were fully aware that the international community was sensitive towards an OPEC- style body that would want to starve the world with gas. As such it was decided to name the new body as the gas exporting countries forum, not even an organization which bears own meaning and concept. Iran lobbied hard to convince as many countries as possible and initially hosted the first official forum of the GECF in Tehran. For some years, GECF had no headquarters or secretariat. Iran did not get the secretariat of the Forum. It went to Qatar that was already the world’s largest LNG exporter. Power is in barrels, not just in oil but in gas, too.

GECF: Two Decades After

Phase 1

Oil and energy ministers of 11 countries attended a two-day ministerial conference in Tehran. Ministers exchanged views and agreed to meet regularly to look at various aspects of the gas market, exchange views and discuss prospects of the international energy markets in general and gas markets, in particular. In 1998, gas prices were officially quoted in New York and London Stock Exchanges and this had given a boost to further internationalization of gas markets. Although the quotes mostly referred to LNG spot prices. Ministers were keen on information sharing, research from producer’s perspectives. I call that as warm up phase.

Phase 2

GECF Statute was developed and approved in 2008. It was agreed that Doha, Qatar would be the headquarters of the Forum. Iran, Algeria and Russia also competed as candidates to host GECF headquarters but Qatar succeeded. Qatari government helped to smooth out the process of erecting a permanent secretariat and rendered generous concessions. This was considered an important milestone in that the Forum was established with a permanent secretariat and a Secretary General to look after the day to day activities of the Forum. As for OPEC, location of the headquarters was decided right from the start and Geneva, Switzerland was agreed unanimously, though it was moved to Vienna, Austria later on.

This was probably the first case of political rivalry between countries within an international and intergovernmental body.

Phase 3

On 15 November 2011, the first GECF Heads of States Summit was hosted by Qatar in Doha. In 2013, President Putin inaugurated the second GECF Heads of States Summit in Moscow. The summit was a clear indication that the Forum was here to stay and to carry on. During the summit, most heads of states signaled that gas would be the prospective energy source when oil runs short of supply. During the inauguration ceremony there were brief references to issues such as gas pricing formulas and marketing policies.

During the summit, three countries’ heads of states from Qatar, Russia and Algeria ran the show and were referred to as the three champions of global gas markets. Nevertheless, international gas market is less dynamic but still fluid. Major theme of the heads of states summit was to decouple gas pricing mechanism from crude oil.

GECF Future

Iran gave birth to GECF in 2001. Iranian energy thinking was in the direction of turning the country into one of the major players in the global gas markets. In the course of time as Iran’s gas exports ambitions began to fade due to massive domestic consumption and slowdown in production, Tehran’s interests in GECF began to marginalize. In fact, Iran’s current interest and involvement in the GECF is still quite high and powerful. Iran a leading player in all the events and activities within the forum.

GECF held71 percent of total global gas reserves in 2020. The forum was also responsible for 44 percent of international gas exports. Some 53 percent of pipeline exports and 57 percent of LNG trade is also conducted by GECF.

Most studies on gas and international gas trade, in particular is conducted by gas consuming countries. As such, several aspects of gas business remains vague when it comes to discussing GECF. There are eleven members in the Forum. There are also six observers present in the Forum. Gas has its own rules of the game that makes it different from oil. Countries may be a net gas exporter today and turn into a net gas importer in a later phase. Gas also bears a seasonal character. Countries that are exporter in the summer turn importers in cold weather.

GECF is both homogeneous, as well as heterogeneous. Market trusts Qatar, Russia and Algeria as players who are always there for them. As for others, market is often sensitive. Nevertheless, Qatar is currently the most trustworthy supplier, though in LNG only.

GECF needs to move on. As energy market changes and evolves, and important issues such Net Zero Emissions gain momentum, the Forum is required to elevate its potential to pose as a unified and reliable source of gas supply. This will help promote the international conference to the Forum as a solid and reliable supplier for a world that will need much more gas for the next couple of decades.

GECF status is currently totally irrelevant towards price and market stability. Iran opted for this notion when decided to establish GECF back in 2001. I believe that GECF still needs a fourth phase to carry out its purposeful destination.

President: Iran Oil Sales Continue Despite Sanctions

Iran’s President Ebrahim Raeesi has said the country’s oil and gas exports were continuing despite sanctions.

“Oil sales are in proper conditions despite threats and sanctions, and oil and condensate exports have increased more than ever,” the president said in a ceremony on Students’ Day.

He said that the country’s hard currency revenue were sufficient.

Meantime, Minister of Petroleum Javad Owji gave a positive assessment of the joint meeting of the parliament and government, saying: “Oil sales have increased significantly year-on-year.”

He said: “According to the statistics and Iran’s Petroleum Ministry report on the export and sales of oil, gas and petrochemical products in the last 100 days, the amount of oil sales has increased dramatically compared to last year.”

Government spokesman Ali Bahadori Jahromi also said that the Petroleum Ministry had made good revenue from selling oil.

Hadi Beiginejad, member of Majlis Energy Committee, said: “Owing to efforts made by the Petroleum Ministry, oil sales and hard currency return were acceptable.”

POGC Adds 6th Compressor to SP22-24

Pars Oil and Gas Co. (POGC) has commissioned the final (sixth) gas turbo-compressor for the refinery receiving production from South Pars phases 22 to 24 in the Persian Gulf.

The POGC spokesman Ali Asghar Sadeqi said the new investment should secure a stable supply of feedstock over the winter, the last turbo-compressor of the refinery of phases 22 to 24 was put into operation.

He noted that the gas transmission unit of the refinery of the mentioned phases includes six turbo-compressors for sending processed gas to the national network.

Production capacity of phases 22 to 24 should now reach 56 mcm/d. “With the entry of gas into the refining and gas processing lines, in addition to producing hydrocarbon products such as gas condensate, liquefied gas, ethane and sulfur, a daily capacity of 50 mcm of sweet gas will be sent through the 42-inch pipeline to the national gas transmission network.”

Upstream Oil Vision Plan to Be Drawn Up

A top official at the Office of Deputy Minister of Petroleum for Supervision on Hydrocarbon Resources has said that the country’s upstream oil vision plan was being drafted by a technical-legal-financial task force.  

Sajjad Khalili touched on the Petroleum Ministry’s plan to integrate documents, saying: “Governing documents and instructions set the basis for planning, decision-making and action by companies and subsidiaries, whose content will be revised, updated and completed based on circumstances, structural and technological changes.”

He said that an optimal management of the upstream oil industry chain would be able to accomplish its mission and realize its major objectives using governing documents.

Khalili said the documents had already won approval of the Petroleum Ministry, adding that documents had been prepared from various divisions.

He said the vision plan would include objectives, strategies, policies, plans and prioritization of activities.

RIPI to Hire Technology Brokers

The head of the Research Institute of Petroleum Industry (RIPI) has emphasized the use of technology brokers with the aim of enhancing the technology capacity of the institute.

Jafar Tofiqi in a joint meeting with the Deputy Minister of Science, Research and Technology for Technology and Innovation, which was held with the aim of developing level of cooperation between the two sides, pointed to the position of RIPI and said: “This complex is a research institute affiliated with the Petroleum Ministry, which can be considered close to industry. Accordingly, in the initial planning, we sought to determine the position of RIPI in the chain of ideas to the market and to show where this complex is located among the nine TRLs.”

He said: “In addition to the measures taken by RIPI, we also use technology brokers to enhance existing capacities.

In other words, to solve industry problems, we also use technology marketers for appropriate marketing.”

Iran’s Tallest Petchem Tower Installed

Iran is installing its tallest petrochemical tower once the main part of the facility was fitted in.

The tower, which weighs 1,200 tonnes and is 100 meters high, was built entirely by local experts and is a sign of the failure of unjust and unilateral sanctions against Iran’s petrochemical industry.

The paraxylene unit of Bu Ali Sina Petrochemical Company will reach its pre-launch stage by the end of this year, and the paraxylene and o-xylene products produced by this unit will be sent to other petrochemical plants in the country.

Meantime, with the launch of this unit, the profitability of Bu Ali Sina Petrochemical Company will increase by over $50 million annually with the production of paraxylene and o-xylene products. In addition, due to the production of paraxylene and the completion of the main cycle of PET production in the Mahshahr Special Economic Zone, it reduces the cost of logistics and consequently increases the profitability of Tondgouyan Petrochemical Company.

Solutions Proposed for EOR Challenges

Executive solutions for overcoming challenges to enhanced oil recovery (EOR) and preservation have been announced.

Referring to EPC/EPD contracts, Shamsoddin Mousavi, advisor to the petroleum minister, said: “The plan to maintain and increase oil production from operating fields within the framework of EPC/EPD contracts was approved by the Board of Directors of National Iranian Oil Company (NIOC) in 2017, and inclusive of 33 work packages from the country's oil fields in 2018, it was also approved by the Economic Council.”

He stated that the amount of investment and reimbursement related to this project was about $7.5 billion, which NIOC has guaranteed to pay, adding that the initial plan is to drill 280 new wells and work over on another 1,730, which is forecast to last two years.

He enumerated EPC/EPD projects’ objectives as maintaining the production of oil fields through reconstruction, improvement of existing surface facilities, increase production of about 400,000 barrels of oil, job creation for exploration companies and certified production and subsequent subcontractors and builders, funding the projects by relevant contractors.

Mousavi said: “Based on the goals set for the implementation of projects to maintain and increase oil production capacity, it was decided that the National Iranian South Oil Company (NISOC) will increase production of about 350,000 b/d by implementing 27 projects, Iranian Central Oil Fields Company (ICOFC) will increase production by about 15,000 b/d by implementing three projects, while the Iran Offshore Oil Company (IOOC) will see its production up 50,000 b/d by implementing four projects.

Mousavi highlighted the significance of development of fields, saying: “At direct instruction of the Minister of Petroleum, a group was formed at the very beginning of the ministry to examine the existing problems of the implementation of these plans and provide practical solutions to get out of them. Then, following conducting detailed studies to get out of the current situation, the design was developed based on three executive scenarios.”

He added: “Correction and modification of the work description of some ongoing projects with the focus on specialization of work areas and acceleration to achieve development goals, e.g. reducing the work of parts of the surface work description, according to expert evaluations and taking into account all its dimensions and centralizing each contractor. Numerous and parallel projects are based on a maximum of two projects, in such a way that each contractor has an active project and can focus more on its implementation and completion.”

Knowledge-Based Firms to Transform Oil Industry

Minister of Petroleum Javad Owji has laid emphasis on the significance of engaging qualified knowledge-based companies alongside specialized human capital for transforming the petroleum industry.

“The 13th administration’s petroleum ministry promises to provide widespread support to knowledge-based companies,” he told a knowledge-based firms’ achievements show. “The products and equipment on display at this show are so hope-inspiring.” 

Referring to the challenges of the oil industry in the upstream and downstream sectors, he added: "Today, if a change is to take place in this industry, the discussion of specialized human capital and the issue of using the capabilities of knowledge-based companies is very important."

Owji stressed that the ground is ready to use the potential of knowledge-based companies in the oil industry, emphasizing: “Undoubtedly, the Petroleum Ministry supports these companies, and God willing, we will invite these companies.”

LPG Development Procedure Submitted

 CEO of National Iranian Oil Products Distribution Company (NIOPDC) Keramat Veis-Karami has said that development of liquefied petroleum gas (LPG) in some areas would take place after government approval.

He said that the LPG development procedure had been included in the current calendar year’s annual budget law, adding that the Petroleum Ministry would be required to implement the procedures following ministerial approval.

Noting that the country’s fuel mix has been specified and that planning should be made on the same basis, he said: “However, in some areas, LPG may be used as an alternative fuel.”

“The law has also predicted that this fuel be distributed in a limited form around refineries supplying LPG to feed public transport commuters,” he added.

€280mn Gas Deals Envisaged in Parsian

CEO of South Zagros Oil and Gas Production Company (SZOGPC) Abol-Hassan Mohammadi has said that three major gas projects, worth €280 million, would be implemented in the Parsian zone.

“Currently, three projects are underway at the Homa and Varavi gas compressor station and the Tabnak gas separation center, totally worth €280 million in this area,” he told a group of lawmakers.

Noting that production from the Parsian zone had begun in 2003 from the Tabnak gas field, he said: “with seven gathering centers, one gas separation center and 800km of pipelines, this area is currently supplying 9% of the country’s gas besides feeding the Parsian gas refinery.”

Touching on manpower, he said: “Fortunately, there are no technical problems in the field of production, but supporting the human resources incentive programs in the Energy Committee is very important, because it provides the conditions so that we can advance the production front without getting help from foreigners in the country.”

SOCAR Sends Delegation to Tehran

Minister of Petroleum Javad Owji stressed the need for development of Tehran-Baku energy cooperation as he received a delegation headed by the CEO of Azerbaijan’s SOCAR.

SOCAR CEO Rovnag Abdullayev paid a visit on December 8 to Iran’s Petroleum Ministry in Tehran.

Owji and Abdullayev discussed how Iran and Azerbaijan could boost their energy ties and improve cooperation in the Caspian Sea where major oil and gas reserves are located, said the report.

The visit came just 10 days after Iran signed an agreement to transit natural gas received from neighboring Turkmenistan, located east of the Caspian Sea, with its own gas for delivery to Azerbaijan Republic to the western side of the sea.

The landmark deal has been viewed as a major success for the Iran’s administration that came to office in August on promises that it would seek better economic and trade ties with Iran’s neighbors.

Owji and Abdullayev dedicated a major part of their Wednesday meeting to discussing the trilateral gas swap deal which is expected to come into effect in late December.

Protocol Inked for 45,000 Dual-Fuel Cars

National Iranian Oil Refining and Distribution Company (NIORDC) and state-owned Iran Khodro Company (IKCO) signed a $20 million deal to co-manufacture 45,000 dual-fuel vehicles for the country’s public transportation fleet.

The signing ceremony was attended by the NIORDC managing director Jalil Salari, IKCO Managing Director Farshad Moghimi, and Deputy Minister of Industry, Mining and Trade Mohsen Salehi-Nia.

Based on the deal, of the mentioned vehicles 40,000 will be taxis and 5,000 are going to be vans.

NIORDC and IKCO had signed a memorandum of understanding (MOU) in December 2019, to add new dual-fuel vehicles to the country’s public transportation fleet.

According to that MOU, 1.46 million dual-fuel vehicles were supposed to be added to the public transportation fleet, reducing the country’s daily gasoline consumption by 10 million liters.

Back in May, the Head of NIORDC’s compressed natural gas (CNG) programs Mohammad-Hossein Baqeri said 132,000 public transport vehicles across the country, were supposed to become dual-fueled.

The mentioned vehicles would be converted to dual-fuel under the framework of a program launched back in May 2020, for the promotion of CNG consumption instead of gasoline. The program is aimed at converting over 1.46 million public vehicles into dual-fuel ones.

Iran considers CNG as the national fuel, therefore, in order to increase the share of this fuel in the country's energy basket, it was planned to turn public fleet into dual-fuel vehicles, which could increase CNG consumption by 10 mcm/d.

There are currently 2,400 CNG stations across Iran that supply 22 percent of the country’s fuel mix.

Iran’s unlocking of its vast reserves of natural gas, estimated as the world's largest, has produced a boom in supplies and driven down prices, increasing interest in the fuel.

Most dual-fuel cars plying Iran's roads are fleet vehicles such as cabs and pickup trucks, but natural gas as a motor fuel also represents a huge and largely untapped opportunity for commercial fleets and long-haul truckers.

Cars powered by natural gas feature a powertrain that switches from compressed natural gas to gasoline seamlessly. They are praised for savings on fuel, but a major drawback is driving range and reduced power anxiety associated with such vehicles.

Iranian authorities are encouraging more drivers to switch to dual-fuel systems by subsidizing vehicle conversions.

One key driver is the problem of air pollution which plagues urban areas in almost all provinces, and poses a risk mainly to those suffering from pre-existing respiratory and cardiovascular conditions, children, pregnant women and the elderly.

NIOC Boss: We Welcome Unconditional Foreign Investment

Mahnaz mohammdgholi

Mohsen Khojasteh-Mehr, CEO of National Iranian Oil Company (NIOC), has said Iran was open to negotiations to attract foreign investment for developing its oil and gas fields.

Expressing NIOC’s readiness to strike long-term agreements to sell crude oil, gas condensate and gas, he said: “We should not consider sanctions as a pretext to not fulfil our task. Therefore, we welcome unconditional foreign investment.”

The oil and gas industry is a key element of Iran’s economic strength, he said, adding: “NIOC is among top 10 oil companies in the world in terms of physical assets. In addition to physical assets, we hold 1,200 billion barrels of oil equivalent under the ground. That includes crude oil, natural gas, condensate and gas liquids. Few countries in the world enjoy such privilege.” 

He reiterated that Iran possessed the largest oil and gas reserves in the world.

“NIOC possesses 400 oil and gas reservoirs with a total of 1,200 billion barrels, 340 billion barrels of which is recoverable by primary methods without having to acquire any specific technology,” he said.

Still a Century

Iran comes second after Russia in terms of gas reserves in the world, said Khojasteh-Mehr, adding Iran’s gas reserves amounted to 34 tcm.

“Given the total oil and gas reserves in the country, we will be able to produce oil and gas in the world for the next 100 years. While we have not yet identified the exploration capabilities in the offshore and onshore sectors, there are also numerous geological layers that have not yet been explored, which will later on be added to Iran’s oil and gas reserves,” he said.

Noting that Iran had 24 gas refineries, 130 processing and production units as well as 140 onshore and offshore drilling rigs, he said: “Having vessels to carry crude oil and petroleum products, we enjoy acceptable power in the offshore transportation sector.”

He said based on NIOC plans for the next 10 years, Iran’s crude oil production capacity would reach 5 mb/d while gas production capacity would increase to 1.5 bcm/d.

The NIOC chief said the planned oil and gas output would require $90 billion investment in the oil sector and $70 billion in the gas sector. “If that materializes, we are ready to enhance the country’s crude oil export and refining capacity to 1.5 times the pre-sanctions levels.”

“Iran enjoys high underground hydrocarbon strength and it is possible for us to produce oil and gas and that is Iran’s biggest privilege in the petroleum industry,” he said.

Khojasteh-Mehr also referred to specialized human resources in petroleum industry, saying: “Our specialized manpower in the upstream sector has high standing in the world.”

He further referred to the issue of geopolitics and geography of the Iranian petroleum industry and added: “This issue has enabled us to achieve sustainable energy security in the region, the Middle East and the world, and this is Iran’s advantage.”

He stressed: “Iran’s export potential is not bound to a single route. The Persian Gulf, the Oman Sea and the Caspian Sea are Iran's export routes, and the country’s political geography is such that we will have the easiest way to transfer energy to the region, the Middle East and the world.”

Sustainable Hydrocarbon Supply

Referring to the issue of investment, the CEO of NIOC said: "We have defined various investment packages in the NIOC investment portfolio, and we have considered an important part for foreigners."

"We welcome foreign investment without sanctions," he said.

Khojasteh-Mehr also said that it was impossible to remove hydrocarbon from the energy mix in the world.

“Removal of hydrocarbon from the energy mix in the world, rather than being an economic issue is a political one. Therefore, global energy supply and demand security could be achieved with hydrocarbon energy,” he said.

If the world is looking for energy security, it should also invest in it, he said, adding: "The world should be involved in the supply of sustainable hydrocarbons. Meantime, if industries need feedstock and energy, they have to allocate part of their profits to feedstock supply and the downstream sector should be ready to invest in the upstream sector.”

Investment Packages

Khojasteh-Mehr said the downstream sector’s packages of investment in the upstream sector would be soon announced without any prejudice to ownership of oil and gas reservoirs and in compliance with effective rules and regulations and Article 44 of the Constitution.

“The Islamic Republic of Iran has the more secure corridor for energy supply to the region and the world, and we are ready to make necessary investment within the framework of effective laws. We have held several rounds of talks with foreign companies over recent months,” he said.

He added that Iran had increased its oil and condensate exports under the 13th administration, noting: “We will use all our potential and capacities to increase oil and gas condensate sales.”

Khojasteh-Mehr said: “Security, marketing and stability of oil and gas condensate exports is the strategy of NIOC and this group seeks to expand new stable and safe markets for oil sales, in accordance with the policies of the resilient economy to attract customers." .

According to Khojasteh-Mehr, NIOC is ready to sign long-term contracts for sales of crude oil, gas condensate and gas exports and products.

Value Chain Maximization

The NIOC chief also touched on exploration activities in the country, saying: “Due to the importance of domestic demand for gas, the company’s strategy is to be more active in the gas exploration sector, while the potential in the country's hydrocarbon sector is high, and according to extensive studies,

there are good reserves in the country and regardless of how much to produce and from what fields to produce, we should identify the underground reservoirs that are Iran’s wealth.”

According to him, this measure is taken to identify underground reserves to maximize the value chain and wealth creation in the field of exploration.

SP14 Onshore Refinery

Khojasteh-Mehr touched on plans for sustainable winter fuel supply, saying: “An intensive plan has been formulated since two months ago, based on which the first operational train of the onshore refinery of Phase 14 of the South Pars gas field would come online in January to feed gas into IGAT network.”

“In a bid to enhance the country’s export capacity and have optimal and better marketing, a demercaptanization project was launched recently to sweeten about 80,000 barrels of gas condensate,” he said.

He added that the demercaptanization project was the outcome a prioritized job, noting: “In order to boost the advantage of gas condensate exports, we need to allocate as much sweet condensate as possible for exports, which is fortunately happening now.”

SP11 due Next Calendar Year

Khojasteh-Mehr said that Phase 11 of South Pars would come online next calendar year, adding: “Due to a variety of reasons, the phase has not become operational after two decades. However, based on precise planning and maximum access to gas, this phase would become operational next calendar year.”

Khojasteh-Mehr, stating that development of the North Pars gas field as a new gas development hub in the Assaluyeh region had been started with the approval of the NIOC Board of Directors and under instruction of the Minister of Petroleum, added: “Development of the field with 100 mcm/d output is being done with an investment of about $4 billion.”

Regarding Kish gas field, he said: “Construction of a 200 km subsea pipeline to extract from 14 wells has been approved and basic studies are under way to that effect.”

He expressed hope that operation of Kish gas field would end in gas production in the short-term, while gas production would increase in the mid and long-term.

500mcm/d Gas Output Hike

Khojasteh-Mehr said currently Iran’s gas production capacity stood at 1 bcm/d, adding: “Gas production capacity in the country should be increased to 1.5 bcm/d, for which in addition to launching the first phase of Kish gas field, production from SP11, the North Pars gas field as well as 100 mcm/d from the fields run by the Iranian Central Oil Fields Company (ICOFC) are envisaged. That would add 500 mcm/d to national gas output.”

Talks with Foreign Parties

Khojasteh-Mehr said NIOC had formulated investment packages, adding: “Currently, NIOC plans and packages of investment in the oil and gas sector are quite clear. Negotiations with foreign companies have also begun, and on the other hand, the professional, executive and financial capacity of Iranian companies has reached such a level that part of the investment and development of oil and gas in the upstream sector can be provided to this very important capacity.”

While welcoming foreign investment in the petroleum industry, he stated: "If for any reason whatsoever, foreign investment is not realized in the country, various scenarios are on the table and we will not waste time at all."

According to Khojasteh-Mehr, NIOC seeks to turn the country’s financial, executive, human resources potential and other components needed for development from potential to actual.”

Local Investment

Regarding the sources of financing for the implementation of oil and gas projects, he said: “One of these sources is to use the capacity of Article 12 of the Law on the Elimination of Barriers to Production, in which 50% of the revenues generated by the field could be used for reimbursement. Issuing various types of bonds, benefitting from the power of private companies, tapping National Development Fund of Iran, and using foreign capital are other options.”

South Azadegan

The deputy minister of petroleum stated that another priority for NIOC was to accelerate completion of the South Azadegan development project, which Iran shares with Iraq. He said: “In this regard, an intensive program has been planned, according to which a significant part of the program will be completed by the end of next year to allow for production."

According to him, development of joint field projects, especially the integrated plan for the development of joint fields in West Karun, was being followed up on by NIOC.

Oil Output to Pre-Sanctions Levels

Khojasteh-Mehr touched on NIOC’s plan to restore Iran’s oil production capacity to pre-sanctions levels.

“Now, with planned and intensive work, subsidiaries have been required to bring back their oil production capacity to pre-embargo levels by next March. In addition, the required financial resources have been identified and there is no problem in financing.”

Regarding NIOC plans for the Caspian area development plans, he said: “The policy of Islamic Republic is to establish a very friendly relationship with our neighbors, and our slogan is constructive interaction instead of deterrent competition.”

Asked about IPC plans, he said: “In general, oil contracts undergo evolutionary process in different periods. Once we had so-called first-generation and second-generation contracts, and at other times buyback contracts were used. The current so-called IPC contracts are in fact a modified version of buyback deals. Therefore, it cannot necessarily be without flaws, and our plan is to improve these contracts and increase their advantages and attractiveness, and eliminate its disadvantages in the new version.”

Talks with Chinese Firms

Khojasteh-Mehr said talks were under way with Chinese firms for the second phase development of the North Azadegan field, adding: “Chinese companies were among the first to enter the development of West Karun fields in the late 2000s, and negotiations are under way with the Chinese side to develop the South Azadegan field.” 

Asked if any investment offers had been submitted by foreign firms or any talks had been held with Chinese firms, the NIOC chief recalled: “In the North Azadegan, CNPCI invested $1.7 billion to produce 75,000 b/d. Updated and now they have the operation of this field so it is natural for them to implement the second phase of this project and we are negotiating with them.”

He added: “The company had a contract with Iran to develop the South Azadegan field with an investment of $5.6 billion to increase production to 300,000 b/d, but unfortunately in the previous administration, they were left out of the project. As a result, given the Chinese experience in the past, it is natural that their potential could be used.”

Khojasteh-Mehr said the Yadavaran oil field was initially awarded to China’s Sinopec, adding: “The company is also prioritized for the implementation of the second phase of this field. We are in talks with the Chinese in the west of Karun, which will be informed as soon as the result is reached.”

Strategic Customers Sought

Asked about Iran-Venezuela gas condensate swap, he said: “There are no geographical restrictions on the sales of crude oil and gas condensate. South America is also one of the markets of NIOC. We seek to attract strategic customers and strengthen relations with them. Venezuela is one of these countries with which we have good trade relations.”

Untrue Indian Allegations

Khojasteh-Mehr also dismissed Indian media reports that India would have a 30% share in revenue from the development of the Farzad B gas field.

“Our plan is to develop this field as soon as possible by installing jackets because of its priority for NIOC. The Indian media allegations unacceptable and lack any legal standing. It’s just illogical media reporting,” he said.

Potential for Mansouri & Salman Development

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

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

One of reservoirs that Iran has specifically counted on is Bangestan in the Mansouri oil field.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Output Hike Possible at Salman

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

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

Due to the existence of about 70% of oil and gas layers of this oilfield in Iran’s territorial waters and its shared status, its development has always been a priority for Iran’s petroleum industry.

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

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

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

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

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

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

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

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

300,000 b/d Petro-Refinery Planned

Iran’s Minister of Petroleum Javad Owji has said that plans were under way to enhance the crude oil refining capacity and develop petro-refineries in a bid to complete the value chain in the sector.

Jalil Salari, CEO of National Iranian Oil Refining and Distribution Company (NIORDC), has said a 300,000-b/d petro-refinery was planned to be constructed, adding that the project would require $8 billion in investment.

The current refining capacity, including Iran’s crude oil and gas condensate, is 2.2 mb/d, and Owji has said that the capacity is set to increase to 3.5 mb/d. He also said that Islamic Republic of Iran has good potential in oil reservoirs with more than 150 billion barrels of recoverable oil, which if it builds on maximum efficient recovery from these reservoirs it will have a good capacity in the field of production. And the plans of the upstream sector, oil production capacity will increase over the next four to five years; and by enhancing the production capacity, the country's refining capacity can be increased.

Petro-refinery construction is pursued by the current administration with a view to enhancing the oil refining capacity.

Salari said that in order to build this refinery, “first of all we need to obtain the relevant permits, but to build it, while we will use the local sector, there is no ban on the presence of foreign investors.”

Salari said that in the seventy days since appointment as the CEO of NIORDC, several foreign investors had expressed their willingness to participate in petro-refinery projects and meetings had been held with no concrete results yet.

Transfer Capacity Up 10%

Nearly 58% of the transmission of petroleum products is done by land. Therefore, for sustainable transmission, intermediate capacities and tanks must be used in order to achieve sustainable transportation.

Salari also announced the necessary planning to increase the country's transmission capacity by 10% by land and said: "Completing the development plans of Isfahan and Abadan refineries is a priority for refining and distribution industry plans."

Salari also referred to energy exchange through swap and added: "In the provisions of the law, we have proposed to use the swap method in energy exchange. Because we would like to have an active presence in the markets of the region.”

Emphasizing that due to the sanctions imposed on Iran, there are more possibilities for exporting products compared to crude oil, he said: "Fortunately, there are very good export capacities in the region and even the Far East to export products from the country. By completion of incomplete projects and modification of fuel consumption pattern with the development of automotive industries and the production of quality vehicles, this freed-up capacity will be used to increase product exports and create more added value.”

Gasoline Consumption at 90ml/d

Referring to fuel consumption, Salari said: “Gasoline consumption in the country averaged 75 ml/d, which has increased by 15 ml/d to 90 ml/d following partial removal of COVID-19 restrictions.”

Salari said that gasoil consumption in Iran average 100 ml/d, adding: “At present, on average, about 102 million liters of gasoline and 103 million liters of gasoil are produced daily in the country's refineries, and the gap between production and consumption in the country is widening day by day.”

He said: “In the second half of the current calendar year (to March 20), our first problem was the issue of winter fuel, which unfortunately has not been addressed in this area. Our reserves are down 20% compared to the past, and it was necessary to establish a working group in the presence of the Petroleum Ministry to supply winter fuel to power plants.”

“Fortunately, our winter fuel capacity has reached an acceptable level in the gasoil sector and nearly 70% of the power plants’ storage capacity is full,” he said.

Salari said Iran consumed 16 billion liter of liquid fuel last calendar year, noting it was a big volume.

Iran to Develop Refining by Petro-Refineries

The head of corporate planning of National Iranian Oil Refining and Distribution Company (NIORDC), Ali Reza Arman-Moqaddam says Iran will have to opt for petro-refineries in order to develop its refining industry. Although a 300,000-b/d petro-refining facility with crude oil feedstock would require $10 billion in investment, incentives are expected to draw in both local and foreign investors.  

Arman-Moqaddam told “Iran Petroleum” that petro-refineries would aim to diversify petrochemical feedstock and generate more revenue from Iran’s oil resources, not to mention profits from the conversion of crude oil and gas condensate to valuable products.

Here is the full text of the interview Arman-Moqaddam gave to “Iran Petroleum”:

What are the development scenarios of Iran's refining industry, considering the energy intensity in the country, as well as plans to enhance crude oil refining capacity?

In the development of the refining industry, several issues are considered as key requirements, such as prioritization based on available resources, balancing export and domestic production programs to prevent the sales of raw materials and promote production of higher value products and sustainable supply of fuel needed by the country. In addition, how to implement consumption management programs is also of particular importance. In the case of gasoline, the current balance of production and consumption is positive, but if consumption keeps growing, in the near future, this balance will become negative and in other words, we will become gasoline importer. According to the documents and regulations of the High Energy Council, the consumption of energy carriers in the country should be managed in accordance with the requirements of efficient use. To that effect, the transport sector’s energy supply document up to horizon 2041 has been drawn up so as to take into consideration the fundamentals of energy efficiency and upgrading energy output, and hybrid fuel and electricity would constitute a 6% share of the transport mix by then. The gasoline consumption is expected to reach 94 ml/d by that time. Constructing petro-refineries is expected to meet such objective.

For instance, should we fail to find a reasonable solution to contain the gasoline consumption now, the gasoline consumption would reach 160-170 ml/d by 2041, in which case petro-refinery construction would make no sense and all refineries in Iran would have to run at full capacity for supplying gasoline and no feedstock would remain for petrochemical plants. Therefore, now, based on the assumption that energy efficiency policies would be implemented in coming years, construction of petro-refineries in Iran is economically viable. If we fail to exercise efficient energy use, development of the refining industry would be exclusively based on fuel supply. In the near future, petro-refineries would be no longer economically viable in terms of energy supply priority.

Now that all eyes are fixed upon renewable energies, while the future of investment in fossil energies is faced with buts and ifs, is it economically viable to invest in petro-refineries?

The extensive petroleum products and petrochemical markets, the facility of exporting such products compared to crude oil and its immunity to sanctions are among the advantages of development of the refining and petro-refining capacity in the country and leaving behind selling raw materials. Building petro-refineries is not merely an economically viable project with job creation advantages; rather, it is a strategic solution for blunting the impact of sanctions. Many nations have already planned to increase the share of renewables in the energy mix and therefore fossil resources are directed to development of petrochemical products with a burgeoning market. Under these conditions, competitive markets will take shape and the cost price of products will be the key decision-making element in the competitive market. Integrating refineries and petrochemical plants would enable us to reduce expenses. Therefore, petro-refineries would diversify products of higher value-added, reduce the cost price of products, boost output and profitability and reduce energy consumption. That is why they are considered a suitable strategy for economic development. Despite the economic viability of petrochemical megaprojects, the main challenge for implementing these projects would be financial restrictions, as is the case with any other megaproject.

How are we going to build a petro-refinery under the present circumstances?

Establishing a petro-refinery as a megaproject, worth billions of dollars, would require a large number of fundamentals. One of these requirements is protective law to facilitate the process of implementation of the project. In this regard, the Law on Protecting Crude Oil and Gas Condensate Downstream Industry with Public Investment, adopted in 2019 by the Iranian parliament, and the amendment to this law along with its executive bylaws provide good support to such projects. Using the incentive of feedstock supply would guarantee reimbursement of facilities throughout construction, which is unique. As far as the process of using the facilities of this law is concerned, I have to recall its history.

In 2019, Iran’s Petroleum Ministry called for the establishment of refinery. A total of 74 companies bade for this project, 42 of which uploaded their documents on the NIORDC website. Following the implementation of formal, technical and financial assessments, finally 19 projects including 8 new refineries and 11 qualitative upgrade projects in current refineries were approved. Another key requirement for implementing this project under the present circumstances is precise and expert planning for financing through diverse resources including equity provision, absorbing resources from the capital market as well as banking facilities. Of course, we recommend that those applying for these projects set up syndicates and unions under the present circumstances to integrate their capital for projects of higher priority.  

Are any refineries expected to be repurposed to petro-refineries?

Some of existing refineries, after undergoing quality upgrading, would be able to supply products which could serve as feedstock for petrochemical plants. However, as the main processes are fuel-based

they would be still known as refinery. Regarding new projects, although the initial permit has been given to most of them under the title of refinery, the main projects are in the process of changing their license to petro-refinery owing to the feedstock supply incentive enshrined in the law. It seems that of 8 new projects, 6 would be looking for license for petro-refinery.

How much is needed for building a petro-refinery?

To build a 300,000-b/d petro-refinery with a 35% conversion ratio of petrochemical products, $10-11 billion investment would be needed. Such figure is big enough when compared to normal projects under way in the country. But attracting such investment would be possible during a four-year period. That is why we have recommended that applicants integrate their investment with a view to providing more suitable conditions for implementing a full project. Meantime, changing the processing paradigm by reducing the ratio would reduce investment needs.

How much do we need for building the eight refineries whose licenses have been granted?

In case applicants look for building refineries based on the initial licenses, totally $40 billion would be needed, inclusive of financing expenses. If we assume that some of these projects would shift to petro-refineries, more than $60 billion in investment would be needed.

Is this industry attractive enough to draw in foreign investors?

Given the fact that the economic incentive of feedstock supply, which guarantees investment return, has been implemented as a supporting solution for reimbursement of investments, sufficient attraction has been created for both local and foreign investors from an economic standpoint. However, in addition to economic attraction, absorbing foreign investment would largely depend on Iran’s external political and economic relations with the financial and commercial bodies of other nations. In terms of investment viability in the petro-refining sector, we have to take into account its processing pattern, too. For instance, one of the major crude oil fractions is naphtha which is widely used at refineries for producing gasoline. That is while at petro-refining plants, the bulk of naphtha is used for producing aromatic petrochemicals and olefin. In light of the significant price difference between gasoline and petrochemicals, creating significant profitability, the burgeoning petrochemical market, particularly in regional and global markets, would create the necessary incentive for investment under normal international circumstances.

Are you currently focused on building petro-refineries?

As undeniable fact, development of the refining industry in Iran is inevitable. This industry is required to be developed by prioritizing the qualitative upgrade of current refineries. As part of the Ministry of Petroleum’s strategy to increase the refining capacity, construction of petro-refineries is on the agenda. Therefore, the focus of NIORDC, as the administrator of development in the refining industry, lies on preparing the ground for implementing projects to upgrade quality of the current refineries and enhance the refining capacity through developing petro-refineries with sufficient financing in the mid-term and long-term. Meantime, development planning in this industry mainly relies on financial and management capabilities of the private sector.

Where does Iran’s refining industry stand currently?

Currently, 10 refineries are operating in Iran with a total crude oil and gas condensate refining capacity of 2.2 mb/d. In case there is no abnormal consumption of fuel in the country, the refining industry could ensure the country’s fuel need supply and even facilitate petroleum product exports. Iran’s ten refineries are producing 105 ml/d of gasoline and 110 ml/d of gasoil. In addition to that, over the past two years, due to restrictions caused by the coronavirus and long lockdowns, gasoline consumption rate had declined to some extent. But as soon as the vaccination campaign accelerated, gasoline production in Iran has been increasing. Under such circumstances, the key point is the risk of growing consumption in various sectors for various reasons including inefficient use of energy commodities due to low-cost fuels and non-application of effective mechanisms in management, in which case, the production-consumption balance would face a challenge.

How many refining projects are currently under operation?

We’re currently witnessing new projects in all refineries across the country. In the Persian Gulf Star refinery, operational debottlenecking for enhancing capacity is in its final stages, while in the nine other refineries, mainly quality upgrade projects are under way in different phases. For instance, at the Abadan refinery, capacity development and stabilization project is under way in addition to the renovation of older sections and upgrading the quality of products. It has been financed by China. At Shiraz, Isfahan and Tehran refineries, there are also quality upgrade projects under way at various stages. In other refineries, there are also projects under way aimed at upgrading the quality of heavy products. 

How are they financed?

The projects under way in current refineries are divided into two categories in terms of necessary investment. The first category consists of projects pertaining to optimization and quality upgrade of light and middle distillate products, which are financed by domestic resources of refineries, as well as financing instruments based on the capital market. Examples are gasoline manufacturing or gasoil hydrotreating projects. The second category includes refinery projects pertaining to the quality upgrade of heavy products, which would require much higher investment due to the technologies needed in them and the necessity of using a large number of processing units and sophisticated equipment. 

Regarding these projects, a combination of the financial resources portfolio, including the investor’s income, domestic banking facilities, capital market capacity and financing, is used. Of course, financing is faced with challenges now. As for new refining and petro-refining projects, the necessary investment depends on the capacity and the process of the project. For instance, the capital needed for a crude oil petro-refinery of 300,000 b/d is about $12 billion. For these projects, due to the high volume of investment needed for them, a portfolio similar to what was described is used for financing.

Have you held any negotiations for attracting foreign investment?

Before this new phase of sanctions became operational, in 2015 and 2016, financing of most quality projects at current refineries had become nearly finalized. For instance, we had reached good agreements with Japan for financing and technology at two refineries and we had made good progress in technical

and contractual issues, but after the US unilaterally pulled out of the JCPOA (the 2015 Iran nuclear deal with six world powers), our talks came to a halt and we lost the chance of development. We had also struck preliminary agreements with South Korea, which were halted, too. Even for financing new projects at Jask and Siraf, Japanese and Korean consortiums were expected to provide necessary finance. At that time, we needed about $15 billion in investment for quality upgrade projects at five operating refineries. Implementation of those projects could practically boost the quality of all products in the country, while helping convert fuel oil to high-value products such as gasoline and gasoil. But that did not happen due to the US pullout of the JCPOA.

Have you halted development projects?

No, we haven’t. We have redesigned the refinery development projects by making some modifications in the processing patterns with the help of local contractors. Currently, some of them are close to operation. For instance, after we failed to go ahead with the Japanese the project envisaged at the Bandar Abbas oil refinery, we considered a new method for development. We reached agreement with the Research Institute of Petroleum Industry (RIPI) for technical savvy provision. The design phase has made very good progress. After this phase, we will go into the investment phase. Based on a new project for the Bandar Abbas oil refinery, we would need $1.3-1.5 billion in investment. If we wanted to go ahead with the Japanese, we would have needed $4 billion in investment.

How many refineries are expected to be built under new development projects?

A relatively high number of licenses have been issued for building refineries, 11 of which are being pursued more seriously. It is noteworthy that for the purpose of making investment attractive for the construction of refineries and petro-refineries, the Iranian parliament adopted a law on feedstock supply. Of the said 11 projects, 8 have been defined within the framework of this law. These projects include five running on crude oil with a total capacity of 1.22 mb/d are under way in southern coasts. Moreover, three refining projects with condensate feedstock are under construction in the Siraf area with a total capacity of 240,000 b/d.   

Is it clear which of them would become integrated refinery and petrochemical plant?

The initial license for most of these projects, except for two, pertains to refining. But recently, most of these projects are expected to become petro-refinery in a bid to benefit from the incentive provided for in the parliamentary law and financing advantages.

Once these projects have been implemented, how much would be Iran’s refining capacity?

Currently, Iran’s crude oil and gas condensate refineries treat about 2.2 mb/d. Regarding enhanced capacity through new projects it is clear that due to the high volume of investment, implementing all these projects simultaneously would not be possible. However, with the assumption of setting a timeframe for the implementation of these projects and the startup of a total of 11 refining projects, Iran’s refining capacity would have increased by more than 1.7 mb/d, but as I mentioned before, it is not possible under the present circumstances. However, if the projects are prioritized and with the assumption of creation of suitable conditions in the international and economic sectors, increasing the refining capacity by about 750,000 b/d would be possible.

Where does the refining renovation stand now?

All sectors of the petroleum industry need improvement and reconstruction on a regular basis. That is done in refineries, like similar industries, through technical inspection monitoring and decrepit parts are handled through overhauls and some installations are practically renovated. It is noteworthy that in the economic feasibility phase, the useful life of a refinery is considered between 25 and 30 years, but the real life of refineries in Iran and other nations is much higher due to overhauls and implementation of numerous improvement and reconstruction projects. For example, the Abadan oil refinery was initially built more than a century ago. The useful life of the Tehran refinery is more than 50 years and that of Isfahan refinery is more than 40 years. Regarding the Abadan refinery, we have defined a development project, which is currently under way by the Chinese. Coincidentally, this is one of the projects that had been planned when the JCPOA was effective. The first phase of this project would come online during the first half of next calendar year.

How much was the average gasoline production and consumption recently? To what extent did covid-19 affect Iran’s gasoline consumption?

Iran’s gasoline production recently averaged 95 ml/d and its consumption reached 85 ml/d on average. Regarding the impact of the coronavirus outbreak on the gasoline consumption, it was affected by covid-imposed lockdowns last calendar year, which reduced it to 75 ml/d, down from 90 ml/d year-on-year. For the current calendar year, if we divide it into pre-vaccination and post-vaccination periods, we can clearly see the impact of eased restrictions on the gasoline consumption. Vaccination accelerated in September. Before that, the gasoline consumption had averaged 83 ml/d. In September, it was up 7% to 89 ml/d.

How can we control the growing trend of gasoline consumption now so that we would not have to import in coming years?

An important issue in the energy sector is sustainable fuel supply all over the country. This issue is being pursued through developing refineries. However, in my view, the more important part would be to implement consumption management plans. In case the objectives of efficient energy use, reduced energy intensity do not materialize, in the near future, we would experience the negative production-consumption balance even if the refining capacity is developed constantly. Planning and implementing consumption management plans would entirely depend on coordination between all legislative and executive organs and collective cooperation. That is only in such case that development of petro-refineries would make sense and instead of fuel production, part of products may be directed to valuable petrochemicals.

US and Transition from Fossil to Clean Energies

Shuaib Bahman

US President Joe Biden has stressed that ratcheting up pressure on energy-producing countries to increase fossil fuel production while urging countries to commit to the energy transition phenomenon is not inconsistent. At the G20 summit, meanwhile, he called on the group's largest energy-producing countries with excess capacity to increase production to ensure a stronger global economy. Such remarks by the President of the United States mean the White House not only does not intend to reduce the production of fossil fuels, but also considers it effective for the global economic growth. In the meantime, two basic questions arise, answers to which may largely reflect the prospective situation. First is to now whether increasing energy production is contrary to environmental goals. And second, should oil-rich countries pay for clean energy production for developing countries? Answering these questions may largely determine the prospective conditions of global markets and the extent of inclination towards renewable energy at the global level.

US Contradiction

The US, along with China, Russia, India, and the European Union, is one of the world’s largest emitters of carbon dioxide. The US has the highest GHG emissions per capita, but has a relatively contradictory policy toward this phenomenon. On the one hand, the US has announced that it intends to mitigate carbon dioxide emissions by at least 50 percent of its annual level by 2030 and reach zero carbon emissions by 2050. To achieve this, the US must electrify half of its new vehicles by 2030. However, the issue has its own complexities. Because, despite the fact that US renewable energy sources have been increasing in recent years, more than 80% of the US energy is still supplied by fossil fuels. At the same time, the plan to reduce the use of fossil fuels has been opposed by some US lawmakers who are concerned about its impact on the coal industry. Similar conditions are seen with the oil and gas industry, as the closure of oil and gas production is facing very serious opposition in the US.

As a result, President Biden's assertion that increasing energy production does not run counter to environmental goals has a political dimension rather than a scientific one. It should be kept in mind that the issue of energy production inside the United States has become one of the driving forces of the US economy. Given the vast challenges the US has faced over recent years in the economic sphere, the energy sales have a huge impact on the country's economic and political equations. As in many states, the outcome of a crucial election depends on the energy policies of presidential candidates and their parties.

In addition to domestic issues, the US sees energy as a viable opportunity to maintain and expand its influence around the world. For instance, US energy policy toward Europe and the pressure it exerts on Russia, or its efforts to impose sanctions on major energy producers such as Iran and Venezuela, all indicate that the US is determined to expand its global markets. It is noteworthy that the US, after years of export bans, has reconsidered its energy strategy and intends to act as an active player in this field. However, despite the political gestures of US officials at international summits, the country will not back down from its level of production or its export policy in the field of energy.

US Tasks to Climate Changes

Undoubtedly, there is a direct relationship between fossil energy production and climate change such as GHG emissions and global warming. In fact, the main source of global warming is GHG emissions and the main cause of emissions is energy consumption. Therefore, reducing energy consumption leads to reduced emissions. However, moving toward the Kyoto Protocol targets to reduce emissions could also slow down economic growth. In other words, economic development and energy consumption are interdependent because with increasing energy consumption, if productivity increases, economic development increases, too. On the other hand, increasing efficiency, which leads to energy savings, is the result of economic development. Therefore, examining the relationship between carbon dioxide emissions, energy consumption and economic growth has always been one of the most important challenges in different countries.

To that effect, countries can be divided under two categories of energy producers and consumers, each of which has a significant share in GHG emissions. However, in answer to the question, "Should oil-rich countries pay for clean energy production for developing countries?" it is noteworthy that many oil-producing countries sell this energy raw to consumer countries. In fact, the main consumers of oil and gas are industrialized countries, not producing countries. Hence, most of the environmental damage has been caused to the world by consuming countries, not producing countries. That is why industrialized countries such as the US, China, Russia, India and European countries are at the top of the list of GHG producers.

As a result, if countries are to act as pioneers in tackling climate change, it is the oil and gas consuming countries that must do so. Of course, some countries, which are both large producers and consumers, are exempt from this rule. In fact, countries such as Russia and the US, which are leading consumers, have impact on climate change while being producers, should also be at the forefront of the process of paying for clean energy production. Thus, President Biden's statement that “there is no contradiction between increasing fossil fuel production and the transition to renewable energy” is honestly making the US one of the leading countries in tackling global warming. Because this country, as a major producer and consumer of energy in the world, has been one of the most important factors in GHG emissions and global warming. Therefore, the US must show the highest level of commitment to GHG emission policies and fossil energy use.

Petrobras Outlines Investment Plans

Petrobras’ board has approved a Strategic Plan for the five-year period 2022-2026.

This calls for total investments of $68 billion, 24% higher than that of the same period under the previous plan.

In E&P segment, the company plans to spend $57 billion over the next five years, during which 15 new platforms will start operating in six fields off Brazil.

All the projects are designed to be viable at an oil price of $35/bbl in both the mid and long term.

Petrobras anticipates oil and gas production in 2022 and 2026 respectively of 2.7 and 3.2 MMboe/d.

The company also plans to develop new solutions for de-carbonization, and will allocate around $1.6 billion for this purpose in the Digital Transformation and Innovation area.

Gas-Lift Restricting Production in Gabon

BW Energy is optimizing production from the final two wells of the Tortue Phase 2 field development offshore Gabon, according to partner Panoro Energy.

Wells DTM-6H and DTM-7H came onstream last month; however, a shortage of gas-lift capacity is currently impacting performance of all the wells.

The Hibiscus/Ruche Phase 1 development, on the same Dussafu Marin permit, is progressing on schedule for first oil anticipated in 4Q 2022, Panoro added.

Procedures for Wind Farms Offshore Finland

OX2 is preparing to start the environmental impact assessment (EIA) process for two offshore wind power projects in the Gulf of Bothnia Exclusive Economic Zones (EEZ).

Both are in the Finnish EEZ close to the border with Sweden. Project Halla is west of the island of Hailuoto, while project Laine is west of the city of Pietarsaari.

OX2 plans large-scale offshore wind farms of up to 160 wind turbines. However, the projects are currently in a very early stage, so electricity production would only start at the end of this decade.

Halla’s location close to Raahe could provide opportunities for cooperation with SSAB, a manufacturer looking to produce fossil-free steel and currently planning for a new reinforced connection to the national grid for its mill in Raahe.

ExxonMobil, Petronas Enter CCUS Collaboration

ExxonMobil and Petronas have signed a memorandum of understanding to jointly explore potential carbon capture and storage technology projects in Malaysia.

They will assess the viability of projects in locations offshore Peninsular Malaysia, and will share subsurface technical and infrastructure data for pipelines, facilities and wells for potential schemes involving storage, transport, and re-use of captured CO2.

EOG Acquires Offshore Australia Permit

Melbana Energy has completed the sale of exploration permit WA-488-P offshore Western Australia to EOG Resources.

The deal involves an initial payment of $7.5 million plus conditional future payments that could include $10 million per 25 MMboe that may result from a future development on the permit.

WA-488-P contains the Beehive prospect, estimated by McDaniel & Associates to hold potential resources in the range of 388 MMboe to 1.6 Bboe.

Melbana retains a 100% interest in adjacent permit areas WA-544-P and NT-P87, which include the undeveloped oil discoveries Turtle and Barnett. The company is presently conducting geoscientific studies over the acreage.

International oil market and OPEC

Fereydoun Barkeshli

President, Vienna Energy Research Group

President Biden declared America is now in its hardest days as Corona virus gained momentum in the country last year, this time. One year on, he calls US at its hardest days again this time because of gas shortage and that OPEC isn’t ready to open tabs and pour enough oil into the market.

Gas prices have surged some 80 percent since Biden took office in January 2020. He has now decided and officially announced the release of 50 million barrels of crude oil from the strategic petroleum reserves, SPR. This release though comes in phases and as loan from SPR that is owned by the government to the market to be returned in six months’ time. 32 million in phase one and 18 million at a later date.

President Biden has actually formed an Alliance of the Willing or consumer club consisting of Japan, India, China, South Korea, and Britain which will jointly release 60 to 75 million barrels during winter. Markets expected to witness 100 to 120 barrels of SPR release after lots of fanfare by the US president.

OPEC Reacts

I have repeatedly said that there’s no oil supply shortages in the market. International market is sufficiently  supplied. The United States is a net oil exporter. As such how and why the country that is a net exporter digs into SPR to cool down prices.

Based on initial observations made by OPEC delegates, the expectation for SPR drawdowns was 100 million barrels plus. In reality what is currently under discussion is nowhere near that figure. To be precise, the following is the official figures of SPR release by the members of consuming alliance:

United States of America:

50 million (32+18 million barrels)

India: 5 million barrels

Japan: 4.2 million barrels

Britain: 1.5 million barrels

China and South Korea, have not specified any numbers yet.

Amongst the consumers’ club members, no country other than the US have provided any time schedules, crude specifications or refining destinations for the crude that’s going to be released from SPR.

OPEC quarters were initially somewhat politely amused by the move and then decided to pretend that they were concerned. However, markets didn’t react quite politely and prices rose, though modestly to $ 86.15 for Brent on Wednesday November 24. 2021.

US total SPR volume is 606 million barrels. European Union total SPR volume stands at 825 million barrels and that of Asia alltogether is 758 million barrels. However, most of the stocks in US SPR consist of light WTI grade crudes that is used in the country. This has led to narrowing of differentials between WTI and Brent from $ 2.6 to $1.5.

Strategic Petroleum Reserves was initiated by Henry Kissinger back in 1974 when some OPEC members decided to impose an oil embargo on the US and three other countries. Based on Kissinger’s recommendations the International Energy Agency, IEA was formed and explicitly asked OECD countries to build reservoirs and stock a volume of oil not less than 60 days of their consumption. SPR was meant for emergency situations such as wars or unprecedented disasters. Strategic petroleum reserves is not meant for market regulations by the consumers. In this context, President Biden seems to be feeling himself at war with OPEC countries and he’s virtually using war language and rhetoric.

OPEC+ Conference

OPEC+ ministers will take up the matter when they meet for the Ministerial Conference on December 2. Couple of options are open to discuss in the regular monthly meeting of OPEC+ ministers.

1- Ministers may ignore the club members’ decision to release from SPR.

2- OPEC+ may totally discontinue to add another 400,000 barrels per day which agreed to since September, or

3- Ministers may cut and adjust on 400,000 barrels per day of addition to the market, probably to 200,000 per day. There’s enough time to December 2 for OPEC+ to have a better picture of the market.

It is needless to note that OPEC+ is vigilant and watchful of the international oil market. The Organization has experienced bitter days back in 2020 when prices moved to a negative territory, and producing countries were mostly hit by financial drawbacks and shortfalls. As such the mood in OPEC and non-OPEC is cautious and well calculated.

Nevertheless, OPEC+ is also watchful of non- market fundamentals. Most OECD member countries pumped a large volume of cash into the economy. United States has virtually printed some $6.7 trillion since pandemic started and spread late 2019. As such inflationary pressures is now worrisome and can’t be ignored. In fact, some economists have gone as far as to acknowledge the possibility of 2008 financial meltdown that nearly crippled the world economy. This would mean a severe blow to global oil demand and fall in oil prices.

Any decision on OPEC+ side will be for first quarter of 2022. Decisions related to production policy for the rest of the year has already been concluded. Contracts have been signed and refiners have placed their orders. In any case, OPEC+ might need to wait a little longer and watch the market’s reaction. Once sky is cleared, producers will most probably decide to compensate for the crude from the SPR. The re-emergence of COVID-19 in most of the European Union and threat of a possible slowdown in economic growth and cut in demand forecasts by IEA and now OPEC Secretariat, will affect ministerial conference decision to watch the market more closely.

Shale Oil Remains Numb

As mentioned earlier producers watch the market with caution. Back in Texas and US oil producing states, shale producers take no chances with President Biden’s inconsistencies. They said that the president allows the US to export oil when price is high and then asks OPEC to produce more to remedy higher price at gas stations. Washington’s main concern and worries is about price of gasoline at gas stations where the voters decide the mid-term elections in 2022.

Having said that, shale oil producers take no or little chance to borrow from banks and venture for investment to produce more shale oil and ramp up production. US administration is visibly without any energy policy neither domestic nor international.

There’s no coherent energy policy in The White House, carte blanche is shown in COP26 and using pressure tactics against OPEC and non OPEC members. Biden has personally spoken to Saudi Arabia’s Mohammad bin Salman, the UAE’s Sheikh Za’ed and President Putin to raise output. Some countries with small excess capacity have recently sounded soft on easing output and pleasing the US.

US Energy Doctrine

However, the reality is different. OPEC+ has remained committed to the organization’s ceiling by over 110 percent. What we drive from this level of adherence is that producers cannot produce. Traditionally, OPEC producers tend to lift output when price is high and members compete for higher market share. There are small pockets of spare capacities here and there within OPEC+, but there’s not much oil left anywhere to produce. This is exactly what makes the markets nervous. Market does need oil now, market wants to see excess capacity in the producing countries.

Of course, excess capacity is still there but mainly in Iran and Venezuela. Two giant and powerful producers are left out of the market and Mr. Biden cries and begs for more oil from other countries. For the international oil market, the red line is where every producer supply all it can. When excess capacity is flat. Nothing is left for rainy days. Market tradition and culture want to make sure of a minimum of 10 percent spare capacity. Market is pretty convinced that such spare capacity doesn’t exist due to US malicious energy sanctions against important producers with huge volumes of reserves. United States must cease weaponization of oil and refrain from using oil as a foreign policy tool.

To be more precise, president of the United States of America begs for little more oil from producers in order to combat price escalation, while so much oil isn’t reaching up to the consumers. Blame game is in rampant. Biden versus the Congress. Consumers versus producers, COP26 versus Texas. This has gone very far.

“Win-Win” Coexistence in Iran Gas

Mahnaz mohammadgholi

The sweet adventures and dreamy days of the Iranian petroleum industry was maximum gas recovery from the South Pars gas field, which materialized as Iran outdid Qatar in extracting gas from the offshore reservoir they share in the Persian Gulf. According to Petroleum Ministry officials, due to the effective measures taken in the South Pars gas field, Iran’s gas production reached 900 mcm/d, which is 5 mboe/d.

The manner of using energy carriers and supplying them plays a key role in the country's development plans and process. One of the most important sources of energy for Iran is natural gas. It turns out that in the 21st century, gas will play an important and growing role. The continued growth of global economy requires energy resources, and various studies show that hydrocarbon resources will remain the world's major energy source until 2050. A study of the trend of these resources and their geographical distribution shows that by 2025, only five countries in the Persian Gulf, including the Islamic Republic of Iran, Saudi Arabia, Kuwait, Iraq and the United Arab Emirates would remain as the main oil producers while Iran, Russia, Qatar, Saudi Arabia and the United Arab Emirates will be the top five gas producers.

2nd Gas Reserves

According to the latest official statistics available until the end of 2017, Iran, with about 33.2 tcm of known world gas reserves and a share of 17.2 percent, holds the second largest gas reserves in the world. Iran's gas reserves are such that in the foreseeable future, it will meet domestic demand as well as exports. According to experts, Iran’s annual gas production in the horizon of 2041 reaches 500 bcm, which is consumed in various sectors: power plants, industry and households.

Investment in the gas supply sector, a 2.5-fold increase in gas recovery from the South Pars gas field, and the connection of 96% of Iran's population to the gas network are among the most important aspects of development of gas industry in Iran. Such development has picked up speed thanks to saving liquid fuel, as well as increasing the country's gas production capacity. On the other hand, with more than 37,000 kilometers of pipelines and 86 gas compressor stations, Iran's gas transmission industry is ranked first in Asia and the Middle East and fourth in the world behind the United States, Russia and Canada.

Annual transmission of more than 280 bcm of gas is one of the gas transmission potentialities in Iran. According to official statistics, last calendar year about 852 mcm/d of sweet gas was fed into the network in a single day in March. It was easily transferred to consumers thanks to infrastructure.

Gas Transmission

Whereas about 75% of the country's gas consumption is supplied from South Pars, expansion of gas transmission capacity prevented the gas from being trapped in this joint field, and Iran was able to extract more gas than Qatar, not to mention sustainable production from this shared field. This has led to the fact that 95% of the population of Iran is now connected to the gas network and the main goals for development of this industry have been achieved, but development of gas supply continues, especially in various domestic and industrial sectors.

Safe & Uninterrupted Supply

Safe, clean and sustainable transfer of gas to consumer points is always one of the most important concerns of officials in the Iranian gas industry. To that effect, one may point to the existence of 10 gas transmission operation zones in Iran as a winning card in the development of this industry, which has enhanced its operational capacity to enhance the country's gas transmission capacity by operating new facilities, upgrading the existing gas transmission network and establishing support systems in various areas.

Among these areas, we can name District 3 of Iran's gas transmission operation as one of the old and strategic gas zones in the country, which supplies gas to Tehran as well as the six provinces: Qom, Qazvin, Zanjan, Alborz, Markazi and Semnan. Eleven compressor stations and Sarajeh gas storage facilities are located in this district. This is a unique and unprecedented feature in other areas. In the compressor stations of this district, 37 turbines have been installed. This center has four pipeline operation centers and 3,577 km of high-pressure gas transmission lines.

Rasoul Davoudinejad, director of District 3 of Iran's gas transmission operations, considers one of the most important reasons for the importance of this transmission line to be the continuous and reliable supply of gas to Tehran, the capital of Iran. If the gas consumption of these provinces increases, the gas transmission network of District 3 will use the gas stored in Sarajeh storage facility. The head of District 3 of the gas transmission said in this regard: “Sarajeh storage facility consists of two parts: injection and treatment. In the injection section, 7 months of the year, gas is stored under more than 300 bar pressure, and in the cold season, the refining section is activated, where recovery lasts five months.”

Noting that more than 104.5 bcm of gas had been transferred from this district last calendar year, he said pigging was carried out on 1,664 kilometers of pipeline in the district.

Regarding overhaul for the current calendar year he said that except for such cases as turbocompressors, the overhaul would be done soon.

Domestic Manufacturing

Referring to the domestic manufacturing of equipment and self-sufficiency, he said: “The difficult conditions faced by the country's gas transmission industry in recent years and the lack of commitment of foreign companies manufacturing parts led to the domestic manufacturing of industrial equipment and tools in cooperation with domestic companies.”

Ali Mohammad Oroujji, director of logistics and operation in District 3, said that most equipment was being purchased on local markets.

Mohammad Khorrami Neyshabour, another official, said the approach adopted in the District 3 gas transmission zone was to use new methods of overhaul, which would comply with international standards.

He added: “In all parts of planning, inspection and implementation of overhaul, we have reached a level of maturity and evolution that most mechanical activities of pipeline overhaul are performed at minimum price and with minimum time in the gas transmission network.”

Siemens Compressors Repaired

Reza Emami, deputy head of District 3, said overhaul was being done entirely in the country. He said that for the first time 10 Siemens compressors had been repaired in District 3.

Petchem Catalysts Change Global Equations

Catalysts are among the main requirements of various sectors of the petroleum industry, including the petrochemical sector. Since decades ago and during different periods of time, shortage of these materials has created many problems. The production of catalysts is directly related to the internal conditions of industry and development of technology and modern technologies, and as soon as our petrochemical industry was able to reach standard and balanced conditions in its domestic development, production of required catalysts and even expensive and strategic ones started.

Over the past few decades, the petrochemical industry has relied on a variety of imported catalysts, which even if not strategic, were difficult, expensive, and time-intensive to import due to sanctions. In the past few years, the process of domestic development of high-consumption and strategic catalysts of the petrochemical industry has accelerated with the cooperation of the National Petrochemical Company (NPC), private investors, and knowledge-based companies and start-ups. What is being produced today as domestic capacity to supply the fundamental and strategic catalysts of the petrochemical industry has been implemented under difficult economic conditions and direct and comprehensive sanctions, and now, regardless of domestic demand, Iran is seeking to outdo rivals and win a bigger share of regional and world markets.

Long Monopoly Ends

Although during the decades of dominance of Western technology and sanctions pressure, a large portion of Iran’s oil and petrochemical industry depended on large companies owning cutting edge technology in the world, these sanctions and pressure finally led us towards domestic manufacturing to meet our needs. Now, after years of efforts to produce catalysts needed by the petrochemical industry, the industry seeks to build trust and replace the products inside the catalysts with old foreign products.

Many petrochemical companies still receive the required licenses for different parts of their portfolio from foreign companies, and these foreign companies consider costs and ancillary requirements for Iranian companies, and the purchase of catalysts is one of them. Domestic petrochemical companies, on the other hand, are accustomed to and trust old foreign products due to the high risk of production, and the process of product replacement and trust in serious catalysts requires time and new changes.

However, this process started a few years ago and today a significant portion of petrochemical companies supply their required catalytic products from inside the country with minimum cost, risk and time, and in this process, a significant outflow of currency from the country is prevented. In addition to all this, the most important thing that has happened is that domestic knowledge-based companies active in the field of catalysts have entered a technological competition with several exclusive manufacturers of these products. According to the petrochemical industry, as of March 2022, about $100 million of catalysts are to be produced in the country, and every day a new list and names of catalysts would be included in the indigenization list.

Over recent months, we have witnessed the signing of commercialization and production of new catalysts on many occasions. Currently, 40 frequently-used catalyst groups are consumed in the petrochemical industry, and the more catalysts produced domestically, the more cost-effectiveness and currency-saving will follow.

Good News

The good news is that the field of catalysts has become a well-known and important sector of the petrochemical industry. Every day, news of the revenue generation of the petrochemical industry with the focus on the production of new catalysts is at the top. The latest news was the $70 million savings with the domestic development of two strategic catalysts for the dehydrogenation of ethylbenzene to styrene and the catalyst for ammonia synthesis.

The ethylbenzene to styrene dehydrogenation catalyst is used in Pars Petrochemical and Tabriz Petrochemical plants and ammonia synthesis catalyst is also used in urea and ammonia plants. Urea and ammonia plants consume ammonia synthesis catalysts. They include Razi, Pardis, Khorasan, Hengam, Lordegan, Kermanshah and Masjed-e-Soleiman petrochemical plants. Five new ammonia petrochemical projects are currently under construction.

The production of ethylene benzene dehydrogenation catalyst to styrene would spare the country $20 million and the ammonia synthesis catalyst would save the country $50 million, and there is no need to import these catalysts anymore. The whole process of making ethylene benzene dehydrogenation catalyst to styrene and ammonia synthesis catalyst has been done based on local knowledge and the efforts made by local researchers.

Currency Inflow

Of the total 85 catalysts used in Iran’s petrochemical industry, 22 have been indigenized, the NPC director for investment said.

“The domestically-produced catalysts are worth $123 million,” Shahram Rezaei said.

“The indigenization of 17 catalysts worth $70 million are underway,” he added.

The new products include ammonia synthesis, ethylene oxide and methanation catalysts, as well as catalysts needed for natural gas dry reforming. Studies are also underway to produce the remaining catalyst groups.

Catalysts speed up chemical reactions but are not consumed by it. Most solid catalysts are metals or oxides, sulfides and halides of metallic elements and semi-metallic elements such as boron, aluminum and silicon.

Domestic petrochemical plants and oil refineries use $400 million worth of catalysts a year, a part of which is produced locally and the rest is imported. Iranian companies annually use at least 23,000 tons of catalysts.

Catalyst consumption is rising and local companies are improving their R&D in the race to not fall behind foreign competitors.

“Referring to efforts made by NPC to support and expand domestic technological platforms for promoting the development of petrochemical industry, and reducing imports by increasing domestic production needed by downstream industries in the country is a special strategy of NPC,” Rezaei said.

“Knowledge-based companies may play an important role in the future of Iran's petrochemical industry and the Knowledge-Based Business Development Office at NPC is ready to cooperate with those interested in participating in the industry,” he added

Oil Industry Has Good Potential in Wrestling

Arash Jafari

Hamid Bavafa, Iran’s Greco-Roman wrestling champion, has won several Asian and international titles. He is currently working with the Khorasan Province Gas Company’s Physical Exercise and Sport Affairs. He was recently appointed head coach of the National Greco-Roman Youth Team. In an interview with “Iran Petroleum”, he says Iran’s petroleum industry enjoys good potential in wrestling, noting that qualified wrestlers may be selected from among them.

The following is the full text of the interview with Bavafa who has won two medals in the Asian championship.

Would you please start with your own biography?

I was born in the city of Fariman in 1983. We are nine siblings. Everyone in our family is fond of sport, but I’m the only one to have pursued professional sport. I’m currently studying sports management at the PhD level and working at the Khorasan Razavi Gas Company. I’m married with a daughter, Nika. 

How come you were interested in wrestling? When did you start wrestling?

When I was young I used to watch wrestling competitions and I became interested in this discipline. That is why I started wrestling when I was 12. I gradually came up and I am currently wrestling trainer.

In what weight categories did you wrestle and what titles have you achieved?

I wrestled in the weight of 60 kg. I have won many titles in national competitions and in various categories; but in 2003 I won the World Youth Championship and also twice runner-up at the Asian Championships in 2003 in New Delhi and 2007 in Bishkek. I have also won several international cups such as Aliyev of Azerbaijan.

When did you start working in the oil industry?

In 2004, I was hired by the Petroleum Ministry as a national hero. At first, I worked in Sports and Physical education of National Iranian Oil Company (NIOC). But then I was transferred and joined Khorasan Razavi Gas Company.

What’s your job there?

I’m with the Sports and Physical Education Affairs of Khorasan Razavi Gas Co. in the city of Mashhad.

How do you assess the petroleum industry potential in sports, specifically in wrestling?

First and foremost, I’ve got to say that there are talented athletes and wrestlers among children of oil and gas employees. Therefore, I can say that oil enjoys high potential in wrestling. For this reason, if the ground is prepared, we would be able to find famous wrestlers.

Given this potential, can oil or gas companies have a wrestling team in the league?

Yes, they can have a wrestling team in the league. It is important to first pave the ground and then start the activity. I believe that we can have a very good team in the wrestling league to win.  

When did you become a trainer?

From 2012 to 2014, I was the coach of the youth national team. In 2015, I also coached the adults’ national team. For a while, I was a member of the technical council of national teams. Using these experiences helped me a lot so that I would not have any problems in guiding the youth as a head coach. Then I was not there for a while and I became the head coach again from 2017 to 2019 and then I quitted and now I am still the head coach of the national youth wrestling team.

Why did you become youths’ coach? Do you like working with this age group?

I knew the youth well. In this category, I wrestled and good communication with young people made it easy for me to guide them. Of course, I must also mention that discipline is my first priority, and from the very beginning we clarified our task with this issue. Now all children know how to behave. We are friends with all children; but it is not possible for a wrestler to show up late for training or leave early or do some other things violating order, we have no idea about that at all.

What titles have you won in coaching?

As coach, I have participated in many competitions. We became world champions for the first time in 2017, which was the first world championship in the history of our country's national youth wrestling teams. Following that, once more we won championship in 2018 and became the world runner-up in 2019. We won the control cup, the Asian championship and the world championship. In two overseas tournaments, Georgia (youth) and Serbia (adults), which did not have a team ranking, we won 14 medals. This was in a situation where, for example, we participated in Serbia with 4 wrestlers and two of the same people sent to Serbia won gold in the Finnish Youth World Cup.

Which one is more difficult? Coaching or wrestling?

Certainly coaching is harder because you have a lot of responsibilities. I wrestled for 12 years. I also worked as a coach for several years with different coaches. I have imitated freestyle and western wrestling coaches and learned many lessons from their strengths and weaknesses. I try to make them not to repeat their mistakes, and rather than that concentrate on their strengths well. I have seen many domestic and foreign coaches, and I believe that colleagues and assistants can be very helpful to the coach. But if a coach is not coordinated and like-minded, rather than helping the team and the head coach, he takes more time and energy of the set and hinders progress and success. So, I would like to say that coaching is harder because you have a lot of responsibility, and you have to move forward with it.

Are you also interested in a particular team in football?

I like the Iranian national football team first and then the Spanish Real Madrid team, and I follow the results of these two teams.

It is said that the stars of today’s national wrestling team are the same young people that you made world champions, that is, they were all your trainees?

Yes. That’s right. Hadi Saravi, Akbar Yousefi, Ali Nejati, Amin Mirzazadeh and Meysam Delkhani. Many of those stars are today world and Olympic champions who had brilliant performance with the national teams in Norway and Tokyo.

Anything for conclusion?

I hope they have a good view of sports in the oil industry. In fact, the view of sports in oil industry should be national and sports, and athletes should be supported. Oil industry sports has high potential and we can introduce many athletes to the country’s sport and even national teams to raise the Iranian and oil industry flags. I also ask Minister of Petroleum Mr. Javad Owji to prepare suitable conditions for championship sports, considering the sports capacities in the oil industry, so that we can witness the success of our colleagues and children.

A Review of Pre-D’Arcy Oil Concessions

Iran’s petroleum industry is known with William Knox D’Arcy. But before his confidant, Reynolds, drilled the first Middle East well in Masjid Soleyman, extensive efforts had been made for the discovery of oil in Iran. The following is a brief review of the history of oil discovery attempts preceding D’Arcy.

D’Arcy reached an agreement with the Qajars in 1901 AD, exactly one year after the world entered the twentieth century. This year was equivalent of 1280 on the solar calendar, i.e. five years before the Persian Constitutional Revolution. Reynolds, D’Arcy’s agent in Persia, found oil in Masjed Soleyman and Iran seven years later, in the year 1287, in the midst of wars and constitutionalist disputes during the period of petty tyranny, and the history of Iran's oil industry began, but before that and in the late nineteenth century, several other attempts were made by the colonialists to gain access to Iran’s oil reserves, each of which failed. The most known of these efforts are: 1. The Reuter Concession; 2. Hotz Concession; and 3. The Imperial Bank of Persia Concession.

Hotz Concession

One of the earliest concessions granted to foreigners in the 19th century, was given to M. A. Hotz (Albert Hotz), an English company. The Hotz Company was an export and important firm, operating throughout the Persian Gulf, based in Bushehr. The concession granted to it in 1884 gave the company the right to extract oil from Dalky and Qeshm Island. Drilling was commenced by the company, but no oil was found. In 1890, the company transferred its rights pertaining to oil to the Persian Bank Mining Rights Corporation50 and this corporation, between 1891-1893 drilled for oil but found nothing in the region. In an 1899 announcement, the Persian Government annulled all mining concessions, including the Hotz Concession. The Persian Bank Mining Rights Corporation, to whom the concession was awarded, was dissolved in 1901. No major considerations requiring discussion exist in relation to this concession, as no oil was discovered and the concession died away. Dr. Lawrence Lockhart, in an article published in 1938 titled "History of Oil in Iran", commented that Hotz earned the Dalky and Salakh oil concession in Qeshm Island and drilled a number of wells, 270 meters deep. As they did not find any oil they did not persist with their activities and their consortium was abolished in 1901.

Reuter Concession

The Middle East’s first petroleum agreement, between the British Baron Julius de Reuter and the Persian Naser-ed-Din Shah, was signed on 25 July 1872.

Reuter, of German-Jewish origin, had as a result of the power of his agency acquired considerable influence over the government and financial circles throughout Europe, Britain and especially in Iran. He is likely to be remembered by Iranians mostly for his accomplishment of securing a concession which, despite the context of extensively exploitative concessions, was the broadest and most

demanding of all.

In 1870 the Persian minister in London, Mohsen Khan, met de Reuter and was successful in persuading him to fund ventures in Persia. At this time Naser-ed-Din Shah, was planning a tour of Europe, the first time that a Persian sovereign would have visited a foreign state since Nader Shah invaded India in 1738.

Consequently, when Baron de Reuter's agent, M. Cotte, showed up in Tehran in 1872 with a proposal of cash for a concession, was well timed. In 1872 no doubt the Baron was not thinking particularly of oil; his concession nevertheless was worded broadly enough to cover all possible contingencies. In addition to a monopoly of the construction of railway and tramways, canals and irrigation works, the exploitation of forests and all uncultivated land, and the operation of a bank and public works of every description, the concession handed over the exclusive rights of all Persian mineral resources for a period of seventy years, with the exception of silver, gold and precious stones.

According to comments made by Lord Curzon, this concession was the most complete and "extraordinary surrender” by Persia to foreign interests. He stated that “this is the most complete concession which a nation can ever grant, giving up all its possession to foreigners.” This concession, however, only existed for 15 month before it was withdrawn due to internal public pressure and Russian objections.

Even the British government, scared by the hornet's nest it had allowed to be stirred up, withdrew its support from the Baron, and the Shah soon found an excuse to cancel his rash undertaking, with the effect of confiscation Reuter's deposit of £40,000 by the Persian government, from the Bank of England, where it was being held in trust. This concession, however short-lived, may be seen as the epitome of Iranian fears of foreign exploitation of national resources.

Imperial Bank of Persia Concession

Following the annulment of the Reuter Concession, for seventeen years the company attempted to breathe new life into their Iranian investment. The British Authorized Minister, Sir Henry Drummondolf, decided in 1889 to use his affable relationship with Amin al Soltan Atabak, the Iranian Chief Minister, in order to enact parts of the Reuter Concession.

Following a long negotiation by the parties, the terms of a new concession agreement were agreed on, dictating the establishment of the “Imperial Bank of Persia”. According to the agreement’s terms, Reuter pledged to pay one million Francs, the equivalent of £40,000, at an annual interest of 16%, in the form of a loan to Naser-ed-Din Shah.

The Iranian government, for their part, agreed to release the confiscated £40,000 deposit, and the money was used as the starting capital for the Imperial Bank.

The Concession consisted of fourteen articles and extended many rights to the foreigners, including the monopoly over minting banknotes. A section was devoted to the exploitation of minerals, including oil.

Under Article 11 on Minerals, “As the Imperial Bank declares that they are ready to exploit all of the natural minerals, everywhere in the country, immediately, the government will give a concession to this bank to exploit all minerals, including iron, copper, lead, coal, oil, and manganese; provided that the government had not granted this to others in the past. If the bank does not start to exploit any particular resources within ten years from the time that the bank was established, the government would assume that they had abandoned their title to those minerals.”

After seventeen years, Reuter resolved its conflict with the Iranian government over the concession, and additionally, obtained a new advantage in relation to oil deposits.